<PAGE>
As filed with the Securities and Exchange Commission on August 20, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Stater Bros. Holdings Inc.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 5411 33-0350671
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
21700 Barton Road
Colton, California 92324
(909) 783-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
JACK H. BROWN
Stater Bros. Holdings Inc.
21700 Barton Road
Colton, California 92324
(909) 783-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
---------------
Copies to:
ANDREW E. BOGEN, ESQ.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
(213) 229-7000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the exchange offer pursuant to the registration rights agreement
described in the enclosed prospectus have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed Proposed
Title of Each Class of Amount Maximum Maximum Amount of
Securities to be to be Offering Price Aggregate Registration
Registered Registered Per Security Offering Price(1) Fee(1)
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<S> <C> <C> <C> <C>
10 3/4% Senior Notes due
2006.................. $450,000,000 100% $450,000,000 $125,100
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f) of the Securities Act of 1933, as amended.
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
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<PAGE>
Subject to Completion Dated August 20, 1999
PROSPECTUS
$450,000,000
Stater Bros. Holdings Inc.
[LOGO OF STATER BROS.]
Offer to Exchange its 10 3/4% Senior Notes due 2006
Which Have Been Registered Under the Securities Act of 1933
for
Any and All of its Outstanding
10 3/4% Senior Notes due 2006
-------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1999, UNLESS EXTENDED
Stater Bros. Holdings Inc. is offering to exchange its 10 3/4% Senior Notes
due 2006, which have been registered under the Securities Act of 1933, as
amended, for any and all of its outstanding 10 3/4% Senior Notes due 2006
issued on August 6, 1999.
The Exchange Notes
. The terms of the registered exchange notes to be issued are
substantially identical to the terms of the outstanding notes that
Stater Bros. issued on August 6, 1999, except for transfer restrictions,
registration rights and liquidated damages provisions relating to the
outstanding notes which will not apply to the exchange notes.
. Interest on the exchange notes accrues at the rate of 10 3/4% per year,
payable in cash every six months on February 15 and August 15, with the
first payment on February 15, 2000.
. Stater Bros. may redeem any of the exchange notes beginning on August
15, 2003 at an initial redemption price of 105.375% of their principal
amount plus accrued interest. In addition, before August 15, 2002,
Stater Bros. may redeem up to 35% of the exchange notes at a redemption
price of 110.750% of their principal amount plus accrued interest using
proceeds from sales of its capital stock.
. The exchange notes will be general unsecured obligations of Stater Bros.
and will rank equally with the existing and future unsubordinated,
unsecured indebtedness of Stater Bros.
. Stater Bros. does not intend to list the exchange notes on any
securities exchange.
Material Terms of the Exchange Offer
. The exchange offer expires at 5 p.m., New York City time, on ,
1999, unless extended.
. All outstanding notes that are validly tendered and not validly
withdrawn will be exchanged for an equal principal amount of exchange
notes which are registered under the Securities Act of 1933.
. Tenders of outstanding notes may be withdrawn at any time prior to the
expiration of the exchange offer.
. The exchange offer is not subject to any minimum tender condition, but
is subject to the terms of the registration rights agreement that Stater
Bros. entered into on August 6, 1999 with the initial purchaser of the
outstanding notes.
. Stater Bros. will not receive any proceeds from the exchange offer.
Stater Bros. will pay the expenses of the exchange offer.
-------------------
For a discussion of risks that should be considered in connection with the
exchange offer, see "Risk Factors" beginning on page .
-------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
The exchange offer is not being made to, nor will Stater Bros. accept
surrender for exchange from, holders of outstanding notes in any jurisdiction
in which the exchange offer or the acceptance thereof would not be in
compliance with the securities or Blue Sky laws of such jurisdiction.
-------------------
The date of this prospectus is , 1999
<PAGE>
This prospectus incorporates important business and financial information
about Stater Bros. that is not included in or delivered with this prospectus.
This information is available without charge to investors upon written or oral
request. Requests should be made to:
Stater Bros. Holdings Inc.
21700 Barton Road
P.O. Box 150
Colton, California 92324
Attn.: Corporate Secretary
(909) 783-5000
The exchange offer is expected to expire on , 1999 and investors
must make their exchange decisions by this expiration date. To obtain timely
delivery of the requested information, Stater Bros. must receive requests from
investors by , 1999, or the date that is no later than five
business days before the expiration date. See "Additional Information."
<PAGE>
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TABLE OF CONTENTS
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Page
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FORWARD-LOOKING STATEMENTS................................................ ii
ADDITIONAL INFORMATION.................................................... iii
SUMMARY................................................................... 1
RISK FACTORS.............................................................. 15
THE EXCHANGE OFFER........................................................ 19
CAPITALIZATION............................................................ 28
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA................. 29
SELECTED CONSOLIDATED FINANCIAL DATA...................................... 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 38
BUSINESS.................................................................. 45
MANAGEMENT................................................................ 57
</TABLE>
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Page
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........... 59
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................... 59
DESCRIPTION OF CERTAIN INDEBTEDNESS...................................... 60
DESCRIPTION OF THE EXCHANGE NOTES........................................ 62
MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES FOR UNITED STATES HOLDERS
AND NON-UNITED STATES HOLDERS........................................... 97
PLAN OF DISTRIBUTION..................................................... 102
LEGAL MATTERS............................................................ 102
EXPERTS.................................................................. 103
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................... F-1
</TABLE>
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i
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of
the securities laws. Statements regarding Stater Bros.' expected financial
position, business, strategies and financing plans under the headings
"Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere in this
prospectus are forward-looking statements. In addition, in those and other
portions of this prospectus, the words "anticipates," "expects," "plans,"
"intends" and similar expressions, as they relate to Stater Bros. or its
management, indicate forward-looking statements. Although Stater Bros.
believes that the expectations reflected in such forward-looking statements
are reasonable, and has based these expectations on its beliefs as well as
assumptions it has made, such expectations may prove to be incorrect.
Important factors that could cause actual results to differ materially from
such expectations are disclosed in this prospectus, and include the following:
. Stater Bros.' substantial leverage and debt service requirements;
. challenges posed by the acquisition and integration of supermarkets
acquired from Albertson's;
. pricing, market strategies, expansion, consolidation and other
activities of competitors;
. Stater Bros.' relationship with Santee Dairies, LLC and Santee Dairies,
Inc.;
. the effect of economic conditions in Southern California;
. customer demand;
. Stater Bros.' relationship with unions and unionized employees;
. the effect of seasonal and weather fluctuations;
. the ability of third party vendors to provide products and services that
are Year 2000 compliant; and
. the ability of Stater Bros. to retain key personnel.
Potential investors in the exchange notes are urged to consider these
factors carefully in evaluating the forward-looking statements contained or
incorporated by reference in this prospectus.
All subsequent written and oral forward-looking statements attributable to
Stater Bros. or persons acting on its behalf are expressly qualified in their
entirety by Stater Bros.' cautionary statements. The forward-looking
statements included or incorporated herein are made only as of the date of
this prospectus (or as of the date of the document incorporated by reference).
Stater Bros. does not intend, and undertakes no obligation, to update these
forward-looking statements.
Investors should read carefully the factors described in the "Risk Factors"
section of this prospectus for a description of certain risks that could cause
actual results to differ from these forward-looking statements.
ii
<PAGE>
ADDITIONAL INFORMATION
Stater Bros. Holdings Inc. files annual and quarterly reports and other
information with the Securities and Exchange Commission. Investors may read
and copy any document filed by Stater Bros. Holdings Inc. at the Commission's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Investors can obtain copies of these materials from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission also maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission
(http://www.sec.gov).
Stater Bros. Holdings Inc. is "incorporating by reference" into this
prospectus the information it has filed with the Commission. This means that
Stater Bros. Holdings Inc. is disclosing important information to investors by
referring to those documents. Stater Bros. Holdings Inc. incorporates by
reference the documents listed below and any future filings made with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this prospectus and before the exchange of the outstanding notes
for the exchange notes:
. Annual Report on Form 10-K for the fiscal year ended September 27, 1998;
. Quarterly Report on Form 10-Q for the fiscal quarter ended December 27,
1998;
. Quarterly Report on Form 10-Q for the fiscal quarter ended March 28,
1999;
. Current Report on Form 8-K dated July 16, 1999; and
. Quarterly Report on Form 10-Q for the fiscal quarter ended June 27,
1999.
The information incorporated by reference is an important part of this
prospectus and information that Stater Bros. Holdings Inc. files later with
the Commission is a part of the prospectus from the date of filing those
documents. Investors may request a free copy of these filings by writing or
telephoning Stater Bros. at the following address:
Stater Bros. Holdings Inc.
21700 Barton Road
P.O. Box 150
Colton, California 92324
Attn.: Corporate Secretary
Telephone: (909) 783-5000
iii
<PAGE>
SUMMARY
Because this is a summary, it does not contain all the information that may
be important to investors. Investors should read this entire prospectus
carefully. In this prospectus, "Stater Bros." refers to Stater Bros. Holdings
Inc., a Delaware corporation, and its subsidiaries, Stater Bros. Markets and
Stater Bros. Development, Inc., unless the context otherwise indicates.
Stater Bros.
Stater Bros., founded in 1936, is the largest independently-owned supermarket
chain in Southern California, operating 112 supermarkets, of which 81 are
located in the Inland Empire, one of the fastest growing areas in the United
States. The Inland Empire is comprised primarily of San Bernardino and
Riverside counties. Stater Bros. also operates supermarkets in Orange, eastern
Los Angeles and Kern counties. Stater Bros.' supermarkets offer a high level of
customer service, a broad selection of brand-name merchandise, and quality
meats and produce. All of Stater Bros.' supermarkets have full-service meat
departments and a broad selection of produce. In addition, many of the
supermarkets have service delicatessens and service bakery departments. For the
latest twelve months ended June 27, 1999, Stater Bros. generated sales in
excess of $1.76 billion.
Stater Bros. operates all of its supermarkets under the "everyday low price"
format and management believes that Stater Bros. is recognized as a low price
leader in its primary operating territory. Substantially all of Stater Bros.'
supermarkets are located in neighborhood shopping centers in well-populated
residential areas. The average Stater Bros. supermarket is approximately 30,000
square feet, while newly constructed supermarkets range from approximately
35,300 to 43,500 square feet. Stater Bros.' supermarkets carry an average of
35,000 items and are similarly designed and stocked for ease of shopping.
Approximately 84% of the merchandise sold in Stater Bros.' supermarkets is
processed through Stater Bros.' centralized warehouse and distribution
facilities located an average of 31.5 miles from Stater Bros.' 112 supermarket
locations. Due to the close proximity of Stater Bros.' distribution facilities
to store locations, Stater Bros.' supermarkets operate with minimal back-room
storage space. Management believes Stater Bros.' ratio of retail selling space
to total store square footage of approximately 72% is one of the highest in the
industry.
Since 1980, the Inland Empire's population has more than doubled, increasing
from approximately 1.5 million to 3.1 million. Several factors have contributed
to the Inland Empire's significant growth, including affordable housing,
availability of land, affordable industrial and commercial office space, and
the region's favorable geographic location and quality of life.
Stater Bros. believes that its 62 years of continuous service in the Inland
Empire, its commitment to everyday low prices and the involvement of members of
its management team in community activities have contributed significantly to
Stater Bros.' leading market position. To foster continued growth in sales and
EBITDA and help Stater Bros. maintain its strong market share, Stater Bros.'
operating strategy is to:
. maintain its commitment to "everyday low prices";
. offer its customers quality products and breadth of selection combined
with a high level of customer service; and
. enhance margins through a variety of merchandising strategies and cost
control measures, including productivity-related initiatives in Stater
Bros.' warehouse and distribution operations.
1
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Stater Bros. has an experienced management team led by Jack H. Brown, its
Chairman of the Board, President and Chief Executive Officer, who has 47 years
of experience in the supermarket industry and has occupied his position as
Stater Bros.' President and Chief Executive Officer since 1981. In addition,
the five members of the Stater Bros. senior management team have an average of
40 years of experience in the food industry and an average of 20 years with
Stater Bros.
The Acquisition
On May 7, 1999, Stater Bros. entered into an agreement with Albertson's, Inc.
to purchase 43 supermarkets and one future store site in Stater Bros.' existing
and contiguous market areas. The stores were formerly operated by Albertson's
or Lucky Stores and are being divested in connection with the merger of
Albertson's and the parent of Lucky Stores. The purchase price is estimated to
be $147 million for land, buildings and equipment plus the value of inventories
on hand at closing, estimated to be $39 million. Acquisition of the stores will
take place sequentially over a thirty-day period which commenced on August 8,
1999. The acquired stores will be operated under the Stater Bros. name as fully
integrated units within the Stater Bros. system. It is expected that each
acquired store will be reopened under the Stater Bros. name within two days of
acquisition.
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Existing Stores
Stores After Acquisition
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Inland Empire
San Bernardino County......................... 46 46
Riverside County.............................. 35 40
--- ---
81 86
Orange County................................... 16 30
Los Angeles County.............................. 13 27
Kern County..................................... 2 2
San Diego County................................ -- 10
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Total stores................................ 112 155
=== ===
</TABLE>
Benefits of the Acquisition
Management believes that the acquisition will provide a number of key
benefits, including the following:
. Increase Leading Market Share in the Inland Empire. Stater Bros.
currently is the largest supermarket chain in both San Bernardino and
Riverside counties. The acquisition will increase Stater Bros.' presence
in these counties from 81 to 86 supermarkets and, more importantly, will
provide Stater Bros. with a strong presence (three supermarkets) in the
Palm Springs area, where Stater Bros. does not have any existing
supermarkets.
. Enhance Presence in Existing and Contiguous Market Areas. Stater Bros.
will enhance significantly its market presence in Orange County and the
eastern and Palmdale areas of Los Angeles County, where it presently
operates. Stater Bros. will increase its presence from 16 to 30
supermarkets in Orange County, a region where Stater Bros. has
experienced its strongest sales volume increases for the most recent two
fiscal years. Stater Bros. will also increase its presence in eastern
Los Angeles County from 13 to 27 supermarkets including establishing a
presence in the Palmdale area with three stores. In addition, Stater
Bros. will enter northern San Diego County with 10 supermarkets and
one future store site. Management believes that northern San Diego
County is an attractive market based on its strong demographic trends
and proximity to Stater Bros.' headquarters and warehouse/distribution
facilities.
2
<PAGE>
. Leverage Stater Bros.' Market Presence. Stater Bros. currently operates
in market areas which are overlapping or contiguous to all of the 43
supermarkets being acquired. Since Stater Bros. has been advertising
within these areas for many years, management believes Stater Bros.'
prospective customers are familiar with the Stater Bros. name and
understand Stater Bros.' market position as the low price leader. In
connection with the acquisition, Stater Bros. plans to direct the
advertising expenses of the acquired stores towards a "direct-mail"
strategy. As such, management believes that Stater Bros. can leverage
its advertising expenses to achieve greater awareness among potential
customers within its operating territories.
. Increase Purchasing Leverage. Management expects that Stater Bros.'
merchandise purchases will increase by approximately 34% following the
acquisition. As a result, management believes that Stater Bros. should
be able to negotiate more favorable terms with its vendors.
. Improve Warehousing and Distribution Efficiencies. Stater Bros.
currently leases approximately 1.3 million square feet of warehouse and
distribution space located in Colton, California, which is central to,
and can efficiently supply, Stater Bros.' existing 112 supermarkets.
Management believes that its existing warehouse and distribution
facilities will be adequate for its currently identified needs,
including supplying the 43 supermarkets to be acquired in the
acquisition. During the first quarter of calendar 1999, Stater Bros.
implemented productivity-related initiatives in its warehouse and
distribution operations. Stater Bros. is currently realizing cost
savings from these initiatives and expects to realize additional
economies by distributing the added product requirements for the
acquired stores.
Related Transactions
This exchange offer is one of a series of related transactions designed to
provide financial flexibility to Stater Bros. in connection with the
acquisition. In addition to the acquisition, the related transactions include
the following:
. The Tender Offer and Consent Solicitation. On July 1, 1999, Stater Bros.
commenced a tender offer for all $165.0 million principal amount of its
11% senior notes due 2001 and all $100.0 million principal amount of its
9% senior subordinated notes due 2004. On July 1, 1999, Stater Bros.
also commenced the solicitation of consents to amend the indentures
governing the 11% senior notes and the 9% senior subordinated notes to
eliminate most of the financial and restrictive covenants.
On July 15, 1999, Stater Bros. received the required consents to the
proposed amendments from holders of approximately 97% and 100% of the
outstanding principal amount of the 11% senior notes and the 9% senior
subordinated notes, respectively. The amendments became operative when
Stater Bros. consummated the tender offer on August 6, 1999.
. The Offering. Stater Bros. issued an aggregate of $450.0 million
principal amount of the outstanding notes on August 6, 1999. The
proceeds from the issuance of the outstanding notes, together with cash
on hand, were used to (i) retire approximately 97% of the 11% senior
notes and all of the 9% senior subordinated notes pursuant to the tender
offer; (iii) consummate the acquisition, including capital expenditures
related to the acquisition that will be incurred post-closing; and (iv)
pay fees and expenses.
. The New Credit Facility. On August 6, 1999, Stater Bros. Markets
entered into an unsecured bank credit facility with Bank of America,
N.A. The new credit facility consists of a $50.0 million revolving
credit facility with an additional $25.0 million facility available for
the issuance of commercial and standby letters of credit. The term of
the new credit facility is three years. It is expected that borrowings
under the new credit facility will be used for certain working capital
and corporate purposes. At August 17, 1999 there were no revolving
borrowings outstanding thereunder and the
3
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aggregate amount of all letters of credit issued thereunder was
approximately $10.0 million. See "Description of Certain Indebtedness."
In this prospectus the acquisition and related transactions are referred to
collectively as the "Acquisition Transactions."
---------------
The principal executive office of Stater Bros. is located at 21700 Barton
Road, Colton, California 92324 and its telephone number is (909) 783-5000, and
its mailing address is P.O. Box 150, Colton, California 92324.
4
<PAGE>
The Exchange Offer
The Exchange Offer.......... Up to $450,000,000 aggregate principal amount of
exchange notes registered under the Securities
Act are being offered in exchange for the same
principal amount of the outstanding notes. The
terms of the exchange notes and the outstanding
notes are substantially identical except for
transfer restrictions, registration rights and
liquidated damages provisions relating to the
outstanding notes which will not apply to the
exchange notes. Outstanding notes may be tendered
for exchange in whole or in part in any integral
multiple of $1,000. Stater Bros. is making the
exchange offer in order to satisfy its
obligations under the registration rights
agreement relating to the outstanding notes. For
a description of the procedures for tendering the
outstanding notes, see "The Exchange Offer--
Procedures for Tendering Outstanding Notes."
Expiration Date............. 5:00 p.m., New York City time, ,
1999, unless the exchange offer is extended, in
which case the expiration date will be the latest
date and time to which the exchange offer is
extended. See "The Exchange Offer--Terms of the
Exchange Offer."
Conditions to the Exchange The exchange offer is subject to customary
Offer....................... conditions described under "The Exchange Offer--
Conditions to the Offer," some of which Stater
Bros. may waive in its sole discretion. The
exchange offer is not conditioned upon any
minimum principal amount of outstanding notes
being tendered. Stater Bros. reserves the right
in its sole and absolute discretion, subject to
applicable law, at any time and from time to
time:
. to delay the acceptance of the outstanding
notes for exchange;
. to terminate the exchange offer if one or more
specific conditions have not been satisfied;
. to extend the expiration date of the exchange
offer and retain all outstanding notes
tendered pursuant to the exchange offer,
subject, however, to the right of holders of
outstanding notes to withdraw their tendered
outstanding notes; or
. to waive any condition or otherwise amend the
terms of the exchange offer in any respect.
See "The Exchange Offer--Terms of the Exchange
Offer."
Withdrawal Rights........... Tenders of outstanding notes may be withdrawn at
any time on or prior to the expiration date by
delivering a written notice of withdrawal to the
exchange agent in conformity with the procedures
discussed under "The Exchange Offer--Withdrawal
of Tenders."
Procedures for Tendering
Outstanding Notes..........
Tendering holders of outstanding notes must
complete and sign a letter of transmittal in
accordance with the instructions contained in the
letter of transmittal. Tendering holders must
forward the completed letter of transmittal by
mail, facsimile or hand delivery, together with
any other required documents, to the exchange
agent,
5
<PAGE>
or must submit to the exchange agent the
outstanding notes they are tendering or comply
with the specified procedures for guaranteed
delivery of outstanding notes. Brokers, dealers,
commercial banks, trust companies and other
nominees may also effect tenders by book-entry
transfer. Investors whose outstanding notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee,
must contact their nominee holder promptly if
they wish to tender outstanding notes pursuant to
the exchange offer. See "The Exchange Offer--
Procedures for Tendering Outstanding Notes."
Letters of transmittal and certificates
representing outstanding notes should not be sent
to Stater Bros. Those documents should be sent
only to the exchange agent. The address, and
telephone and facsimile numbers, of the exchange
agent are set forth in "The Exchange Offer--
Exchange Agent" and in the letter of transmittal.
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes............. Upon consummation of the exchange offer, Stater
Bros. will accept any and all outstanding notes
that are properly tendered in the exchange offer
and not withdrawn prior to 5:00 p.m., New York
City time, on the expiration date. The exchange
notes issued pursuant to the exchange offer will
be delivered promptly after acceptance of the
outstanding notes. See "The Exchange Offer--Terms
of the Exchange Offer."
Resales of Exchange Notes... Stater Bros. believes that investors will be able
to offer for resale, resell or otherwise transfer
exchange notes issued in the exchange offer
without compliance with the registration and
prospectus delivery provisions of the federal
securities laws, provided that:
. they are not a broker-dealer;
. they are not participating in a distribution
of the exchange notes; and
. they are not an "affiliate" of Stater Bros.
Holdings Inc., as the term is defined in Rule
144A under the Securities Act of 1933.
Stater Bros.' belief is based on interpretations
by the staff of the Commission, as set forth in
no-action letters issued to unrelated third
parties.
6
<PAGE>
Each broker-dealer that receives exchange notes
for its own account in exchange for outstanding
notes which were acquired by the broker-dealer as
a result of market-making or other trading
activities must agree to deliver a prospectus
meeting the requirements of the federal
securities laws in connection with any resale of
the exchange notes. See "The Exchange Offer--
Resales of the Exchange Notes."
Exchange Agent.............. The exchange agent with respect to the exchange
offer is IBJ Whitehall Bank & Trust Company. The
address, and telephone and facsimile numbers, of
the exchange agent are set forth in "The Exchange
Offer--Exchange Agent" and in the letter of
transmittal.
Use of Proceeds............. Stater Bros. will not receive any cash proceeds
from the issuance of the exchange notes offered
hereby.
Material United States
Federal Income Tax
Consequences............... Investors should review the information set forth
under "Material United States Federal Tax
Consequences for United States Holders and Non-
United States Holders" prior to tendering
outstanding notes in the exchange offer.
Accounting Treatment........ No gain or loss will be recognized by Stater
Bros. upon the consummation of the exchange
offer. See "The Exchange Offer--Accounting
Treatment."
Terms of the Exchange Notes
The exchange offer applies to an aggregate principal amount of $450,000,000
of the outstanding notes. The form and terms of the exchange notes will be
identical in all material respects to the form and terms of the outstanding
notes, except:
. the exchange notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer;
. holders of the exchange notes will not be entitled to any liquidated
damages under the registration rights agreement relating to the
outstanding notes; and
. holders of the exchange notes will not be, and upon consummation of the
exchange offer, holders of the outstanding notes will no longer be,
entitled to specific rights under the registration rights agreement for
the outstanding notes intended for the holders of unregistered
securities.
The exchange notes will be obligations of Stater Bros. entitled to the
benefits of the indenture. See "Description of the Exchange Notes."
Exchange Notes Offered...... $450.0 million in principal amount of 10 3/4%
Senior Notes due 2006.
Maturity.................... August 15, 2006.
Interest.................... Annual rate: 10 3/4%.
Payment frequency: every six months on February
15 and August 15.
First payment: February 15, 2000.
7
<PAGE>
Ranking..................... The exchange notes will be general unsecured
obligations of Stater Bros. and will rank equally
with Stater Bros.' existing and future
unsubordinated, unsecured indebtedness.
The exchange notes will rank junior to Stater
Bros.' secured indebtedness to the extent of the
value of the assets securing such indebtedness.
The exchange notes will effectively rank junior
to indebtedness and other obligations of Stater
Bros.' subsidiaries, including Stater Bros.
Markets' obligations under the new credit
facility. At June 27, 1999, the exchange notes
would have been effectively subordinated to
approximately $18.1 million of indebtedness.
Optional Redemption......... On or after August 15, 2003, Stater Bros. may
redeem some or all of the exchange notes at any
time at the redemption prices described in the
section "Description of the Exchange Notes" under
the heading "Optional Redemption."
Prior to August 15, 2002, Stater Bros. may redeem
up to 35% of the exchange notes with the net cash
proceeds from sales of equity of Stater Bros. at
the redemption price listed in the section
"Description of the Exchange Notes" under the
heading "Optional Redemption." However, Stater
Bros. may only make such redemptions if at least
65% of the aggregate principal amount of exchange
notes issued under the indenture remains
outstanding after each redemption.
Mandatory Offer to If Stater Bros. experiences specific kinds of
Repurchase................. changes in control or, under certain
circumstances, if it sells assets, it must offer
to repurchase the exchange notes at the prices
listed in the section "Description of the
Exchange Notes" under the heading "Repurchase at
the Option of Holders."
Basic Covenants of
Indenture.................. The indenture under which the exchange notes will
be issued will, among other things, restrict the
ability of Stater Bros. and certain of its
subsidiaries to:
. borrow money;
. pay dividends on stock or repurchase stock;
. make investments;
. use assets as security in other transactions;
and
. sell certain assets or merge with or into other
companies.
For more details, see the section "Description of
the Exchange Notes" under the heading "Certain
Covenants."
Investors should refer to the section entitled "Risk Factors" for a
discussion of factors that should be considered in connection with the exchange
notes.
8
<PAGE>
Summary Unaudited Pro Forma Condensed Consolidated Financial and Other Data
The following table shows summarized pro forma financial data for Stater
Bros. reflecting the completion of the Acquisition Transactions. The pro forma
earnings and operating information for the 52 weeks ended September 27, 1998
give effect to the Acquisition Transactions as if they had occurred as of
September 30, 1997. The pro forma earnings and operating information for the 39
weeks ended June 27, 1999 give effect to the Acquisition Transactions as if
they had occurred on September 28, 1998, and the pro forma balance sheet
information gives effect to the Acquisition Transactions as if they had
occurred on June 27, 1999. This pro forma information, while helpful in
illustrating the financial characteristics of Stater Bros. after the completion
of the Acquisition Transactions under one set of assumptions, does not attempt
to predict or suggest future results. It also does not necessarily reflect what
the historical results of Stater Bros. would have been had the Acquisition
Transactions actually occurred as of or on the dates stated above. For a
discussion of factors that could impact the accuracy of the pro forma financial
information, see "Risk Factors--Risks Related to the Acquisition." The
information in the following table is based on historical financial information
that Stater Bros. has presented in its prior filings with the Commission and
historical financial information for the acquired stores contained elsewhere in
this prospectus. Investors should read the following table in connection with
the historical financial information filed with the Commission and with the
more detailed financial information Stater Bros. has provided in this document.
<TABLE>
<CAPTION>
52 Weeks Ended 39 Weeks Ended
September 27, June 27,
1998 1999
-------------- --------------
(In thousands)
<S> <C> <C>
Statement of Earnings Data:
Sales............................................ $2,395,353 $1,823,992
Cost of goods sold............................... 1,818,039 1,375,606
---------- ----------
Gross profit..................................... 577,314 448,386
Operating expenses:
Selling, general and administrative expenses.... 500,158 374,848
Depreciation and amortization................... 28,391 21,526
---------- ----------
Total operating expenses......................... 528,549 396,374
---------- ----------
Operating profit................................. 48,765 52,012
Interest income.................................. 2,412 1,903
Interest expense................................. (52,941) (39,731)
Equity in earnings (loss) from unconsolidated
affiliate....................................... (2,941) 924
Other income (expense)--net...................... 2 (319)
---------- ----------
Income (loss) before income (taxes) benefit...... (4,703) 14,789
Income (taxes) benefit........................... 1,928 (6,063)
---------- ----------
Net earnings (loss)(1)........................... $ (2,775) $ 8,726
========== ==========
Other Operating Data:
EBITDA(2)........................................ $ 79,568 $ 75,441
Depreciation and amortization.................... 28,391 21,526
Ratio of net debt to EBITDA(3)................... 5.6x 5.7x
Ratio of EBITDA to cash interest expense(2)(4)... 1.5x 1.9x
Ratio of earnings to fixed charges(5)............ -- 1.3x
Balance Sheet Data:
Cash and cash equivalents........................ $ 50,948
Working capital(6)............................... 66,923
Total assets..................................... 587,726
Total debt....................................... 473,265
Total stockholders' (deficit).................... (41,908)
</TABLE>
footnotes on following page
9
<PAGE>
- --------
(1) Excludes extraordinary charges, net of taxes, associated with the write-off
of deferred financing fees ($6.0 million) and the tender premiums related
to the tender offer ($11.1 million).
(2) EBITDA, as calculated per the definition of "Consolidated Cash Flow"
contained in the indenture governing the exchange notes offered hereby,
represents the sum of net loss, extraordinary (charge), income taxes,
interest expense, depreciation and amortization and non-cash expenses
(income). Stater Bros.' non-cash expenses (income) are reflected in other
income (expense)--net and equity in earnings from unconsolidated affiliate.
Stater Bros. has included information concerning EBITDA as it is relevant
for covenant analysis under the exchange notes and because it is used by
certain investors as a measure of a company's ability to service its debt.
EBITDA should not be used as an alternative to, or be construed as more
meaningful than, operating income or cash flows as an indicator of Stater
Bros.' operating performance.
(3) For purposes of the ratio of net debt to EBITDA, EBITDA is calculated as
the sum of operating profit and depreciation and amortization. For the 52
weeks ended September 27, 1998 and 39 weeks ended June 27, 1999, these
amounts would have been $77.2 million and $73.5 million, respectively.
(4) Cash interest expense represents interest expense on the exchange notes and
the imputed interest associated with capital lease obligations.
(5) For purposes of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes and extraordinary charges,
amortization of previously capitalized interest and undistributed earnings
or loss from less than 50% owned subsidiaries and includes fixed charges.
Fixed charges consist of interest expense whether expensed or capitalized,
amortization of deferred debt expense, preferred stock dividends adjusted
to represent pre-tax earnings requirements and such portion of rental
expenses as deemed by management to be representative of the interest
factor in the particular case. Earnings were insufficient to cover fixed
charges for the 52 weeks ended September 27, 1998 by approximately $7.0
million. However earnings included non-cash charges relating to
depreciation and amortization of approximately $28.4 million.
(6) Working capital excludes cash and cash equivalents and current portion of
capital lease obligations.
10
<PAGE>
Summary Historical Financial and Statistical Data of Stater Bros.
The following table shows summarized annual historical financial and
statistical data derived from the audited financial statements of Stater Bros.
and the related notes which, except for 1994 and 1995, appear elsewhere in this
prospectus. The summary data for the 39-week periods are derived from unaudited
financial statements which are included in this prospectus. In the opinion of
management, such unaudited financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of this data. The results for the 39 weeks ended June 27, 1999 and
June 28, 1998 are not necessarily indicative of the results for a full year or
for any future period. Investors should read the complete historical financial
statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Unaudited
----------------------
Fiscal Years Ended 39 Weeks Ended
--------------------------------------------------------------------- ----------------------
September 25, September 24, September 29, September 28, September 27, June 28, June 27,
1994 1995 1996(1) 1997 1998 1998 1999
------------- ------------- ------------- ------------- ------------- ---------- ----------
(In thousands, except for other operating and financial data and store data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Earnings Data:
Sales............ $1,539,717 $1,579,895 $1,705,332 $1,717,924 $1,726,107 $1,285,048 $1,324,358
Cost of goods
sold............ 1,199,794 1,227,355 1,315,726 1,326,410 1,323,522 987,172 1,011,542
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit..... 339,923 352,540 389,606 391,514 402,585 297,876 312,816
Operating
expenses:
Selling, general
and
administrative
expenses....... 297,474 308,332 328,242 333,199 353,075 261,216 265,907
Depreciation and
amortization... 11,656 11,756 12,583 13,265 15,434 11,345 11,813
Consulting
fees(2)........ 830 1,500 1,525 1,458 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses........ 309,960 321,588 342,350 347,922 368,509 272,561 277,720
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating
profit.......... 29,963 30,952 47,256 43,592 34,076 25,315 35,096
Interest income.. 384 952 1,929 3,034 3,059 2,371 2,388
Interest
expense......... (15,501) (20,076) (20,258) (21,563) (30,206) (22,641) (22,699)
Equity in
earnings (loss)
from
unconsolidated
affiliate....... (592) (980) (1,624) (2,313) (2,941) (2,692) 924
Other income
(expense)--net.. 391 97 (172) 76 2 42 (319)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
income taxes,
extraordinary
charge and
cumulative
effect of a
change in
accounting for
income taxes.... 14,645 10,945 27,131 22,826 3,990 2,395 15,390
Income taxes..... 5,856 4,218 11,120 9,359 1,459 982 6,156
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
extraordinary
charge and
cumulative
effect of a
change in
accounting for
income taxes.... 8,789 6,727 16,011 13,467 2,531 1,413 9,234
Extraordinary
(charge)(3)..... (8,036) -- -- -- -- -- --
Cumulative effect
of a change in
accounting for
income
taxes(4)........ 372 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income....... $ 1,125 $ 6,727 $ 16,011 $ 13,467 $ 2,531 $ 1,413 $ 9,234
========== ========== ========== ========== ========== ========== ==========
Balance Sheet
Data (end of
period):
Cash and cash
equivalents..... $ 21,289 $ 26,308 $ 45,279 $ 59,086 $ 57,281 $ 48,000 $ 55,427
Working capital.. 41,422 45,014 63,473 92,013 90,725 87,039 75,647
Total assets..... 306,489 314,082 338,294 358,477 364,318 361,615 382,252
Total debt....... 175,342 174,186 173,099 271,917 270,660 270,976 269,688
Total
stockholders'
equity
(deficit)....... 6,851 13,578 (43,887) (36,586) (34,055) (35,173) (24,821)
Other Operating
and Financial
Data:
EBITDA
(000s)(5)....... $ 42,003 $ 43,660 $ 61,768 $ 59,891 $ 52,569 $ 39,031 $ 49,297
Capital
expenditures
(000s).......... 19,409 13,178 22,415 20,268 26,278 20,287 34,382
Gross profit as a
percentage of
sales........... 22.08% 22.31% 22.85% 22.79% 23.32% 23.18% 23.62%
Selling, general
and
administrative
expenses as a
percentage of
sales........... 19.32% 19.52% 19.25% 19.40% 20.46% 20.33% 20.08%
EBITDA as a
percentage of
sales........... 2.73% 2.76% 3.62% 3.49% 3.05% 3.04% 3.72%
Ratio of earnings
to fixed
charges(6)...... 1.47x 1.36x 1.53x 1.23x 1.03x -- 1.42x
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Unaudited
-------------------
Fiscal Years Ended 39 Weeks Ended
--------------------------------------------------------------------- -------------------
September 25, September 24, September 29, September 28, September 27, June 28, June 27,
1994 1995 1996(1) 1997 1998 1998 1999
------------- ------------- ------------- ------------- ------------- -------- --------
(In thousands, except for other operating and financial data and store data)
<S> <C> <C> <C> <C> <C> <C> <C>
Store Data:
Number of stores (at end
of period)............. 111 110 110 110 112 112 112
Sales increases
(decreases):
Total stores........... 0.9% 2.6% 7.9% 0.7% 0.5% (0.6)% 3.1%
Like stores............ (0.7) 1.2 6.3 2.6 (1.0) (1.8) 2.5
Average sales per store
(000s)................. $13,997 $14,298 $15,503 $15,617 $15,551 $11,474 $11,825
Average store size:
Total square feet...... 28,617 28,717 28,809 28,809 29,061 29,061 29,177
Selling square feet.... 20,708 20,773 20,845 20,845 20,991 20,991 21,047
Total square feet (at
end of period) (000s).. 3,177 3,159 3,169 3,169 3,255 3,255 3,268
Total selling square
feet (at end of period)
(000s)................. 2,299 2,285 2,293 2,293 2,351 2,351 2,357
Sales per average total
square foot............ $ 492 $ 499 $ 538 $ 542 $ 537 $ 395 $ 405
Sales per average
selling square foot.... $ 680 $ 689 $ 744 $ 749 $ 743 $ 547 $ 562
</TABLE>
- --------
(1) The year ending September 29, 1996 was a 53-week year, whereas fiscal 1994,
1995, 1997 and 1998 were 52-week years.
(2) Effective 1994, consulting fees were paid to Craig Corporation pursuant to
consulting agreements with La Cadena Investments and Craig Corporation.
These consulting agreements were terminated on July 31, 1997.
(3) Extraordinary charge in 1994 represents the after tax charge from early
retirement of debt.
(4) Stater Bros. adopted SFAS No. 109 ("Accounting for Income Taxes") effective
the beginning of fiscal 1994 as a cumulative effect of a change in
accounting principles.
(5) EBITDA, as calculated per the definition of "Consolidated Cash Flow"
contained in the indenture governing the exchange notes offered hereby,
represents the sum of net income, income taxes, interest expense,
depreciation and amortization and non-cash expenses (income). For each of
the periods presented above, Stater Bros.' non-cash expenses (income) were
reflected in other income (expense)--net and equity in earnings (loss) from
unconsolidated affiliate. Stater Bros. has included information concerning
EBITDA as it is relevant for covenant analysis under the exchange notes and
because it is used by certain investors as a measure of a company's ability
to service its debt. EBITDA should not be used as an alternative to, or be
construed as more meaningful than, operating income or cash flows as an
indicator of Stater Bros.' operating performance.
(6) For purposes of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes and extraordinary charges,
amortization of previously capitalized interest and undistributed earnings
or loss from less than 50% owned subsidiaries and includes fixed charges.
Fixed charges consist of interest expense whether expensed or capitalized,
amortization of deferred debt expense, preferred stock dividends adjusted
to represent pre-tax earnings requirements and such portion of rental
expenses as deemed by management to be representative of the interest
factor in the particular case. Earnings were insufficient to cover fixed
charges for the 39 weeks ended June 28, 1998 by approximately $1.1 million.
12
<PAGE>
Summary Historical Financial and Statistical Data
of the Acquired Stores
The following tables show summarized historical financial and statistical
data for the stores to be acquired from Albertson's. This information is
derived from the audited financial statements for stores to be acquired from
Albertson's and the related notes which appear elsewhere in this prospectus.
The summary data set forth below for the 13-week periods are derived from
unaudited financial statements which are included elsewhere in this prospectus.
In the opinion of management, such unaudited financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of this data. The results for the 13-week periods are not
necessarily indicative of the results for a full year or for any future period.
The other operating data information contained below are unaudited and are
derived from their respective financial data. Investors should read the
complete historical financial statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Unaudited
-------------------
Fiscal Years Ended 13 Weeks Ended
----------------------------------- -------------------
January 30, January 29, January 28, April 30, April 29,
Albertson's Stores 1997 1998 1999 1998 1999
----------- ----------- ----------- --------- ---------
(In thousands, except store data)
<S> <C> <C> <C> <C> <C>
Statement of Store Level
Earnings:
Sales................... $474,928 $507,088 $519,684 $129,845 $130,612
Cost of sales(1)........ 354,723 375,988 381,448 96,326 94,093
-------- -------- -------- -------- --------
Gross profit............ 120,205 131,100 138,236 33,519 36,519
Store operating
expenses(2)............ 105,685 115,832 122,972 29,902 30,292
-------- -------- -------- -------- --------
Store level earnings.... $ 14,520 $ 15,268 $ 15,264 $ 3,617 $ 6,227
======== ======== ======== ======== ========
Other Operating Data:
EBITDA(3)............... $ 23,005 $ 24,769 $ 25,300 $ 6,092 $ 8,660
Interest expense........ 966 929 886 226 214
Depreciation and
amortization........... 7,519 8,572 9,150 2,249 2,219
Store Data:
Number of stores (at end
of period)............. 32 33 33 33 33
<CAPTION>
Unaudited
-----------------
Fiscal Years Ended 13 Weeks Ended
----------------------------------- -----------------
Lucky February 1, January 31, January 30, May 2, May 1,
Stores 1997 1998 1999 1998 1999
------ ----------- ----------- ----------- -------- --------
(In thousands, except store data)
<S> <C> <C> <C> <C> <C>
Statement of Store Level
Earnings:
Sales................... $150,714 $144,510 $149,562 $ 37,904 $ 36,579
Cost of sales(1)........ 111,313 108,073 110,340 28,668 26,964
-------- -------- -------- -------- --------
Gross profit............ 39,401 36,437 39,222 9,236 9,615
Store operating
expenses(2)............ 30,347 31,413 33,003 7,791 8,037
-------- -------- -------- -------- --------
Store level earnings.... $ 9,054 $ 5,024 $ 6,219 $ 1,445 $ 1,578
======== ======== ======== ======== ========
Other Operating Data:
EBITDA(3)............... $ 12,123 $ 7,953 $ 9,476 $ 2,215 $ 2,388
Interest expense........ 563 545 523 132 127
Depreciation and
amortization........... 2,506 2,384 2,734 638 683
Store Data:
Number of stores (at end
of period)............. 9 10 10 10 10
</TABLE>
footnotes on following page
13
<PAGE>
- --------
(1) Includes an allocation for warehouse and transportation expenses.
(2) Includes depreciation and amortization and interest expense related to
capital lease obligations.
(3) EBITDA represents the sum of store level earnings, interest expense and
depreciation and amortization. EBITDA should not be used as an alternative
to, or be construed as more meaningful than, operating income or cash flows
as an indicator of operating performance.
14
<PAGE>
RISK FACTORS
Investors should consider the following risk factors:
Risks Related to the Acquisition
There are Significant Business Risks in Integrating and Profitably Managing
the Acquisition
As a result of the acquisition of stores from Albertson's, heavy demands
will be placed on Stater Bros.' management, store operations, warehousing,
distribution systems, data processing and other resources. While management
believes that Stater Bros. has adequate resources to support the increased
scale of operations, any acquisition of such magnitude involves substantial
risks. Effective integration and management of the stores being acquired in
the acquisition will require the successful completion of numerous major
tasks, including the following:
. hiring and training large numbers of new employees;
. conversion of acquired stores to Stater Bros.' format;
. inclusion of acquired stores in Stater Bros.' information systems;
. integration of acquired stores in Stater Bros.' purchasing, warehousing
and distribution systems;
. substantial increases in the scope and demands on management and financial
controls; and
. development of customer loyalties in markets where Stater Bros. has not
heretofore been well known.
During the fiscal quarter ending September 26, 1999, Stater Bros. expects to
incur up to $5.0 million of costs associated with the acquisition and related
integration activities. Delays or unanticipated costs in meeting these
challenges, or failure to do so, could have a material adverse affect on
Stater Bros.' results of operations.
The pro forma financial statements contained in this prospectus reflect
estimates of increased warehouse and distribution costs, additional selling,
general and administrative expenses and other estimated costs related to the
acquisition. The actual costs and expenses could differ significantly from,
and there may be additional costs not reflected in, the estimates used in the
pro forma financial statements.
Results of Operations Following the Acquisition Could be Worse than
Anticipated
Stater Bros. is proceeding with the acquisition based on expectations as to
its effect on revenues and EBITDA, which may not be realized. These
expectations include, among other things:
. additional selling, general and administrative expenses required to
support the acquired stores;
. warehouse and distribution costs associated with the acquired stores; and
. the impact of discontinuing pharmacy departments and other merchandise
previously operated and sold in the acquired stores.
These expectations are not based on actual experience, and actual costs could
be materially higher. Certain of these expectations, pertaining to the costs
of integrating and operating the acquired stores, are reflected in the pro
forma financial information presented elsewhere herein.
The results of operations of the stores to be acquired, presented elsewhere
herein, reflect higher gross profit and operating profit margins than those
realized in Stater Bros.' existing operations. There can be no assurance that
the results of operations for the acquired stores will continue at their
historic levels. To this extent, profitability of the acquired stores
reflected in the pro forma financial data may be overstated.
15
<PAGE>
Profitability of the acquisition could also be adversely affected if
unplanned delays are encountered in completing any of the store acquisitions
and reopenings, or in integrating the acquired stores into the Stater Bros.'
system. Failure to acquire one or more of the stores would also affect the
anticipated profitability of the acquisition.
Stores Subject to the Acquisition Could be Subject to Unexpected Problems
Stores subject to the acquisition could be the subject of facts
significantly affecting their value which were not discovered, or fully
provided for, in the course of the acquisition. Such facts could include:
. structural or equipment deficiencies;
. real estate restrictions;
. environmental contamination or non-compliance;
. pending developments affecting the desirability of particular locations,
such as changes in highway access;
. the opening of competitive stores nearby; and
. changes in local ordinances and regulations.
Depending on the particular circumstances, Stater Bros. may not be entitled to
any recourse against Albertson's in respect of such matters.
Certain Stores Could be Excluded from the Acquisition
The planned store acquisitions from Albertson's will be accomplished
sequentially through September 6, 1999. Pursuant to the acquisition agreement,
Albertson's has the right to exclude one or more of the stores from the
acquisition in the event it is unable to eliminate applicable monetary
encumbrances or to obtain necessary consents to transfer leased properties. In
such circumstances, Stater Bros. would be entitled to a mutually agreed
reduction in the purchase price. While Stater Bros. does not expect that any
of the stores will be eliminated from the acquisition, no absolute assurance
can be provided in this respect.
If one or more stores were excluded from the acquisition, the pro forma
financial information presented herein with respect to the related
transactions would be affected, since such information assumes that all 43 of
the stores involved in the acquisition will be acquired.
Risks Related to the Exchange Notes
Stater Bros.' High Ratio of Debt to Equity Provides Little Protection for Debt
Holders in the Event of Losses
As the result of the related transactions, including the offering of the
outstanding notes, Stater Bros. would have had total indebtedness of
approximately $473.3 million and negative net worth of approximately
$41.9 million as of June 27, 1999. If Stater Bros.' operations fail to
generate sufficient cash for the payment of principal and interest on its
indebtedness, the amount of assets that could potentially be liquidated to
provide funds for the payment of debt is limited and could be insufficient.
Stater Bros. Operations are Subject to Stringent Limitations Imposed by its
Debt Instruments
The indenture governing the exchange notes and Stater Bros. Markets' new
credit facility will each contain financial and other covenants that restrict,
among other things, the ability of Stater Bros. to:
. incur additional indebtedness;
. make restricted payments;
. make investments;
16
<PAGE>
. grant liens on assets;
. sell assets;
. enter into transactions with related persons;
. issue capital stock of subsidiaries; and
. merge, consolidate or transfer substantially all of its assets.
The need for Stater Bros. to remain in compliance with its covenants may
restrict its flexibility in managing and making changes in its business.
High Levels of Debt Restrict the Ability of Stater Bros. to Invest in its
Business and Respond to Competitive Challenges
Because a large part of funds generated in Stater Bros. operations will be
required for the payment of interest on indebtedness, Stater Bros. will be
constrained in its ability to acquire or develop new stores, undertake store
remodeling, invest in improved computer and other systems or make other
investments in its business. Stater Bros.' financing costs will also impose
limitations on its ability to reduce prices in its stores. As a result, Stater
Bros. could be at a competitive disadvantage to more strongly capitalized
competitors.
Stater Bros.' Holding Company Structure Restricts the Funds and Assets
Available for the Payment of Principal and Interest on the Exchange Notes
Stater Bros. Holdings Inc. is a holding company whose principal asset is the
stock of Stater Bros. Markets. Funds for the payment of principal and interest
by Stater Bros. Holdings Inc. must be obtained from its operating
subsidiaries, principally Stater Bros. Markets. The ability of Stater Bros.
Holdings Inc. to obtain such funds is subject to the superior rights of
creditors of such subsidiaries. The new credit facility is with the principal
operating subsidiary, Stater Bros. Markets, and, under certain circumstances,
will restrict the payment of dividends to Stater Bros. Holdings Inc. In
addition, the operating subsidiaries are not obligated or required to pay any
amounts due in connection with the exchange notes or to make funds available
to make such payments in the form of dividends or advances to the holding
company. In the event of a default by Stater Bros. Markets under the new
credit facility, the lender thereunder would be entitled to exercise certain
remedies which could impair Stater Bros. Holdings Inc.'s ability to pay
principal and interest.
Stater Bros. May Be Unable to Raise the Funds Necessary to Finance a Change of
Control Offer Required by the Indenture
Upon the occurrence of certain change of control events, Stater Bros. will
be required to offer to repurchase all outstanding exchange notes at a price
equal to 101% of the principal balance of the exchange notes, plus accrued and
unpaid interest, if any. It is possible that Stater Bros. will not have
sufficient funds at the time of the change of control to make the required
repurchase of the exchange notes. Indebtedness outstanding under the new
credit facility may require prepayment before funds may be used to repurchase
the exchange notes in the event of a change of control.
There is No Existing Public Market for the Exchange Notes and the Offering or
Sale of the Exchange Notes is Subject to Significant Legal Restrictions and
Uncertainties Regarding the Liquidity of the Trading Market for the Exchange
Notes.
There is no public market for the exchange notes, and there is no assurance
that any such market will develop. The exchange notes will not be listed on
any securities exchange, but are expected to be eligible for trading in the
PORTAL market. If the exchange notes are traded after their initial issuance,
they may trade at a discount from their price at the time the exchange offer
is consummated, depending upon prevailing interest rates,
17
<PAGE>
the market for similar securities, Stater Bros.' performance and other
factors. Stater Bros. has been advised by Banc of America Securities LLC, the
initial purchaser of the outstanding notes, that it intends to make a market
in the exchange notes after consummation of the exchange offer, as permitted
by applicable laws and regulations. However, the initial purchaser is not
obligated to do so and these market making activities may be discontinued at
any time without notice. As a result, purchasers of the exchange notes may
find it difficult to dispose of exchange notes without a discount.
General declines in the market for similar securities may also adversely
affect the liquidity of, and trading market for, the exchange notes. These
declines may adversely affect liquidity and trading markets independent of
Stater Bros.' financial performance and prospects.
Risks Related to the Supermarket Industry and Stater Bros.
Stater Bros.' Results are Subject to Risks Relating to Intense Competition and
Narrow Profit Margins in the Supermarket Industry
The supermarket industry is highly competitive and generally characterized
by narrow profit margins. Stater Bros. competes with various types of
retailers, including local, regional and national supermarket retailers,
convenience stores, retail drug chains, general merchandisers and discount
retailers, membership clubs and warehouse stores, some of which have greater
resources than Stater Bros. Competitive factors in the supermarket industry
include location, quality of products and service, price, variety of product
offerings and supermarket conditions. In addition, the supermarket industry
has undergone substantial consolidation, resulting in competitors with
increased financial resources and purchasing power.
Stater Bros. is Heavily Dependent on Key Personnel
Stater Bros.' success is largely dependent upon its senior management team,
led by Jack H. Brown, Stater Bros.' Chairman of the Board, President and Chief
Executive Officer, and other key managers. The loss of such persons could have
a material adverse effect on Stater Bros.' operations.
Stater Bros. Results are Subject to Risks Relating to Santee Dairies
Stater Bros. owns one-half of the equity interests in Santee Dairies, LLC,
which owns and operates a fluid milk production facility through its wholly-
owned subsidiary, Santee Dairies, Inc. ("Santee Dairies"). Stater Bros. is
party to a requirements agreement under which it is obligated to purchase its
fluid milk and certain other products from Santee Dairies at a price based
upon Santee Dairies' direct and indirect costs. Delays and operational issues
encountered by Santee Dairies in connection with the construction and opening
of a new dairy during 1998 have caused Santee Dairies to increase product
prices to enable it to meet its financial obligations. As a result, Stater
Bros.' results of operations have been adversely affected. Final completion of
the new dairy was achieved on April 30, 1999. Stater Bros. is not a guarantor
of Santee Dairies' indebtedness and Santee Dairies' earnings are not a source
of cash flow for Stater Bros. Nevertheless Stater Bros.' future results of
operations could be adversely affected by problems at Santee Dairies as the
result of its requirements agreement.
The Geographic Concentration of Stater Bros. Supermarkets Creates a Heavy
Exposure to the Risks of the Local Economy
An adverse change in the economy of Southern California or the Inland Empire
would adversely impact Stater Bros. Stater Bros. does not have operations in
other geographic areas to provide a cushion against the effect of local
economic changes.
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<PAGE>
Prolonged Labor Disputes with Unionized Employees May Impede Stater Bros.'
Ability to Timely Pay Interest on the Exchange Notes
Substantially all of Stater Bros.' employees are represented by unions.
Prolonged disputes between Stater Bros. and any of the unions representing its
employees could have a material adverse effect on Stater Bros.' cash flow from
operations and, as a result, its ability to pay interest on the exchange notes
in a timely manner.
Stater Bros.' Operations Are Subject to Year 2000 Compliance Risks
The efficient operations of Stater Bros. are dependent, in part, upon its
information systems and upon the timely and consistent delivery of goods and
services from its vendors, financial institutions and other companies. If
Stater Bros.' information systems are not Year 2000 compliant or if companies
conducting business with Stater Bros. are not Year 2000 compliant,
interruptions caused by Year 2000 non-compliance may have a material adverse
effect on Stater Bros.' operations, liquidity and financial condition.
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
On August 6, 1999, Stater Bros. sold $450.0 million in principal amount of
the outstanding notes in a private placement through Banc of America
Securities LLC to a limited number of "Qualified Institutional Buyers," as
defined under the Securities Act of 1933, and to limited persons outside the
United States. In connection with the sale of the outstanding notes, Stater
Bros. and Banc of America Securities LLC entered into a registration rights
agreement dated as of August 6, 1999. Under that agreement, Stater Bros. must,
among other things, file with the Commission a registration statement under
the Securities Act of 1933 covering the exchange offer and use its best
efforts to cause that registration statement to become effective under the
Securities Act of 1933. Upon the effectiveness of that registration statement,
Stater Bros. must also offer each holder of the outstanding notes the
opportunity to exchange its securities for an equal principal amount of
exchange notes.
Stater Bros. is making the exchange offer to comply with its obligations
under the registration rights agreement. A copy of the registration rights
agreement has been filed as an exhibit to the registration statement of which
this prospectus is a part.
In order to participate in the exchange offer, an investor must represent to
Stater Bros., among other things, that the investor:
. is not a broker-dealer;
. is not participating in a distribution of the exchange notes; and
. is not an "affiliate" of Stater Bros. Holdings Inc., as the term is
defined in Rule 144A under the Securities Act of 1933.
Resale of the Exchange Notes
Based on previous interpretations by the staff of the Commission set forth
in no-action letters issued to third parties, Stater Bros. believes that the
exchange notes issued in the exchange offer may be offered for resale, resold
and otherwise transferred by investors, unless they are affiliates of Stater
Bros., without compliance with the registration and prospectus delivery
provisions of the Securities Act of 1933, provided that the representations
set forth in "Purpose and Effect of the Exchange Offer" apply.
19
<PAGE>
If holders tender in the exchange offer with the intention of participating
in a distribution of the exchange notes, they cannot rely on the
interpretation by the staff of the Commission as set forth in the no-action
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933 in connection with a secondary
resale transaction. In the event that Stater Bros.' belief regarding resale is
inaccurate, those who transfer exchange notes in violation of the prospectus
delivery provisions of the Securities Act of 1933 and without an exemption
from registration under the federal securities laws may incur liability under
these laws. Stater Bros. does not assume, nor will it indemnify investors
against, this liability.
The exchange offer is not being made to, nor will Stater Bros. accept
surrenders for exchange from, holders of outstanding notes in any jurisdiction
in which the exchange offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of the particular
jurisdiction. Each broker-dealer that receives exchange notes for its own
account in exchange for outstanding notes, where the outstanding notes were
acquired by that broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of the exchange notes. In order to facilitate
the disposition of exchange notes by broker-dealers participating in the
exchange offer, Stater Bros. has agreed, subject to specific conditions, to
make this prospectus, as it may be amended or supplemented from time to time,
available for delivery by those broker-dealers to satisfy their prospectus
delivery obligations under the Securities Act of 1933.
Terms of the Exchange Offer
Upon the terms and conditions in this prospectus, and in the accompanying
letter of transmittal, Stater Bros. will accept all outstanding notes validly
tendered prior to 5:00 p.m., New York City time, on the expiration date.
Stater Bros. will issue $1,000 in principal amount of exchange notes in
exchange for an equal principal amount of outstanding notes tendered and
accepted in the exchange offer. Holders may tender some or all of their
outstanding notes pursuant to the exchange offer in any denomination of $1,000
or in integral multiples thereof.
In addition, in connection with any resales of exchange notes, any broker-
dealer who acquired outstanding notes for its own account as a result of
market-making activities or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale
of the exchange notes. The Commission has taken the position that
participating broker-dealers may fulfill their prospectus delivery
requirements for the exchange notes, other than a resale of an unsold
allotment from the original sales of outstanding notes, with the prospectus
contained in the exchange offer registration statement. Under the registration
rights agreement, Stater Bros. is required to allow participating broker-
dealers, and other persons, if any, subject to similar prospectus delivery
requirements, to use the prospectus contained in the exchange offer
registration statement in connection with the resale of exchange notes.
However, Stater Bros. is not required to amend or supplement this prospectus
for a period exceeding 90 days after the date of the last expiration date. The
term "expiration date" means 5:00 p.m., New York City time, on , 1999
unless Stater Bros., in its sole discretion, extends the exchange offer. If
Stater Bros. extends the exchange offer, the "expiration date" will be 5:00
p.m., New York City time, on the latest date to which the exchange offer is
extended. The expiration date will be at least 30 days from the date that this
prospectus is mailed to the holders of the outstanding notes.
If Stater Bros. consummates the exchange offer on or before February 2,
2000, it will not be required to file a shelf registration statement to
register any outstanding notes. The interest rate on any outstanding notes
will remain at the initial level of 10 3/4% per annum. The exchange offer
will be deemed to have been consummated when Stater Bros. has exchanged,
pursuant to the exchange offer, exchange notes for outstanding notes that have
been properly tendered and not withdrawn by the expiration date. In this
event, holders of outstanding notes not participating in the exchange offer
who are seeking liquidity in their investment would have to rely on exemptions
to registration requirements under the securities laws, including the
Securities Act.
The form and terms of the exchange notes will be the same as the form and
terms of the outstanding notes except that the exchange notes will not bear
legends restricting the transfer thereof. The exchange notes will
20
<PAGE>
evidence the same debt as the outstanding notes. The exchange notes will be
issued under and entitled to the benefits of the indenture.
As of the date of this prospectus, $450,000,000 aggregate principal amount
of the outstanding notes are outstanding and there is one registered holder
thereof. In connection with the issuance of the outstanding notes,
Stater Bros. arranged for the outstanding notes to be eligible for trading in
the Private Offering, Resale and Trading through Automated Linkages Market.
The PORTAL market is the National Association of Securities Dealers' screen
based, automated market trading of securities eligible for resale under Rule
144A. The exchange notes will also be issuable and transferable in book-entry
form through DTC.
Stater Bros. will be deemed to have accepted validly tendered outstanding
notes when, as and if it gives oral or written notice of acceptance to the
exchange agent. See "--Exchange Agent." The exchange agent will act as agent
for the tendering holders of outstanding notes for the purpose of receiving
exchange notes from Stater Bros. and delivering exchange notes to the holders.
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender or the occurrence of certain other events described in this
prospectus, certificates for the unaccepted outstanding notes will be
returned, without expense, to the tendering holder as promptly as practicable
after the expiration date.
Holders of outstanding notes who tender in the exchange offer will not be
required to pay:
. brokerage commissions or fees; or
. transfer taxes with respect to the exchange of outstanding notes
pursuant to the exchange offer, subject to the instructions in the
accompanying letter of transmittal.
Stater Bros. will pay all charges and expenses, other than specified taxes,
in connection with the exchange offer. See "--Fees and Expenses."
Holders of outstanding notes do not have any appraisal or dissenters' rights
in connection with the exchange offer. Stater Bros. intends to conduct the
exchange offer in accordance with the provisions of the registration rights
agreement and the applicable requirements of the Exchange Act and the rules
and regulations of the Commission interpreting the Exchange Act. Outstanding
notes that are not tendered for exchange in the exchange offer will remain
outstanding and be entitled and continue to accrue interest, but will not be
entitled to any rights or benefits under the registration rights agreement.
Expiration Date; Extensions; Amendments
The term "expiration date" means 5:00 p.m. New York City time, on ,
1999 unless Stater Bros., in its sole discretion, extends the exchange offer.
If Stater Bros. extends the exchange offer, the "expiration date" will be
5:00 p.m. New York City time on the latest date to which the exchange offer is
extended.
If Stater Bros. extends the expiration date, it will:
. notify the exchange agent of any extension by oral or written notice;
and
. mail an announcement of the extension to the record holders of
outstanding notes prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
Any announcement may state that Stater Bros. is extending the exchange offer
for a specified period of time.
If any of the conditions listed under "Conditions to the Offer" occur and
are not waived by Stater Bros., by giving oral or written notice to the
exchange agent, Stater Bros. reserves the right:
. to delay acceptance of any outstanding notes;
. to extend the exchange offer;
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<PAGE>
. to terminate the exchange offer;
. to refuse to accept outstanding notes not previously accepted; and
. to amend the terms of the exchange offer in any manner it deems to be
advantageous to the holders of the outstanding notes.
Any delay in acceptance, extension, termination or amendment will be
followed as promptly as possible by oral or written notice to the exchange
agent. If the exchange offer is amended in a manner Stater Bros. determines
constitutes a material change, it will promptly disclose the amendment in a
way reasonably calculated to inform holders of the amendment.
Without limiting the manner in which Stater Bros. may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the exchange offer, Stater Bros. has no obligation to publish, advertise,
or otherwise communicate any public announcement, other than by making a
timely release to the Dow Jones News Service or PR Newswire.
Interest on the Exchange Notes
The exchange notes will bear interest from the last interest payment date on
which interest was paid on the outstanding notes. If interest has not yet been
paid, the outstanding notes will bear interest from August 6, 1999. Interest
will be paid with the first interest payment on the exchange notes. Interest
on the outstanding notes accepted for exchange will cease to accrue upon
issuance of the exchange notes.
The exchange notes will bear interest at a rate of 10 3/4% per annum.
Interest on the exchange notes will be payable semi-annually, in arrears, on
each February 15 and August 15 following the consummation of the exchange
offer. Untendered outstanding notes that are not exchanged for exchange notes
pursuant to the exchange offer will bear interest at a rate of 10 3/4% per
annum after the expiration date.
Procedures for Tendering Outstanding Notes
To tender in the exchange offer, holders must do the following:
. complete, sign and date the letter of transmittal, or a facsimile of it;
. have the signatures guaranteed, if required by the letter of
transmittal; and
. mail or deliver the letter of transmittal, or the facsimile, together
with the outstanding notes and any other required documents, to the
exchange agent.
The exchange agent must receive these documents by 5:00 p.m., New York City
time, on the expiration date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the outstanding notes by
causing DTC to transfer the outstanding notes into the exchange agent's
account via the ATOP system in accordance with DTC's transfer procedure.
Although delivery of outstanding notes may be effected through book-entry
transfer into the exchange agent's account at DTC, the letter of transmittal,
or its facsimile, with any required signature guarantees and documents, must,
in any case, be transmitted to and received or confirmed by the exchange agent
at its addresses in this prospectus prior to 5:00 p.m., New York City time, on
the expiration date. Delivery of documents to DTC in accordance with its
procedures does not constitute delivery to the exchange agent.
Tender of outstanding notes by a holder will constitute an agreement between
the holder and Stater Bros. in accordance with the terms and subject to the
conditions in this prospectus and in the letter of transmittal.
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<PAGE>
Delivery of all documents must be made to the exchange agent at its address
listed in this prospectus. Holders may also request that their respective
brokers, dealers, commercial banks, trust companies or nominees effect tender
for them.
The method of delivery of outstanding notes and the letter of transmittal
and all other required documents to the exchange agent is up to each holder.
However, holders also bear the risks of non-delivery. Instead of delivery by
mail, Stater Bros. recommends use of an overnight or hand delivery service. In
all cases, holders should allow sufficient time to assure timely delivery. No
letter of transmittal should be sent to Stater Bros.
Only a holder of outstanding notes may tender outstanding notes in the
exchange offer. The term "holder" with respect to the exchange offer means any
person in whose name outstanding notes are registered on Stater Bros.' books
or any other person who has obtained a properly completed bond power from the
registered holder or any person whose outstanding notes are held of record by
DTC who desires to deliver the outstanding notes by book-entry transfer at
DTC.
Any beneficial holder whose outstanding notes are registered in the name of
the holder's broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact the registered holder promptly and
instruct the registered holder to tender on the holder's behalf. If the
beneficial holder wishes to tender on the holder's own behalf, the beneficial
holder must, prior to completing and executing the letter of transmittal and
delivering the outstanding notes, either make appropriate arrangements to
register ownership of the outstanding notes in the holder's name or obtain a
properly completed bond power from the registered holder. The transfer of
record ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an "eligible institution" unless the outstanding
notes tendered are:
. tendered by a registered holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on
the letter of transmittal; or
. tendered for the account of an "eligible institution."
An eligible institution is:
. a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
. a commercial bank or trust company having an office or correspondent in
the United States, or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act; or
. an "eligible institution" that is a participant in a recognized
medallion signature guarantee program.
If the letter of transmittal is signed by a person other than the registered
holder of any outstanding notes listed therein, the outstanding notes tendered
must be endorsed or accompanied by appropriate bond powers which authorize
that person to tender the outstanding notes on behalf of the registered
holder, in either case signed as the name of the registered holder or holders
appears on the outstanding notes.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, the person should indicate this when signing, and unless waived by
Stater Bros., submit evidence satisfactory to Stater Bros. of that person's
authority to so act with the letter of transmittal.
Stater Bros. will determine, in its sole discretion, all questions as to the
validity, form, and eligibility, including time of receipt, acceptance and
withdrawal of the tendered outstanding notes. Stater Bros.' determination will
be final and binding. Stater Bros. reserves the absolute right to reject any
and all outstanding notes not properly tendered or any outstanding notes of
which acceptance would, in the opinion of Stater Bros.' counsel, be unlawful.
Stater Bros. also reserves the absolute right to waive any irregularities or
conditions of
23
<PAGE>
tender as to particular outstanding notes. Stater Bros.' interpretation of the
terms and conditions of the exchange offer, including the instructions in the
letter of transmittal, will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of
outstanding notes must be cured within the time as Stater Bros. determines.
Neither Stater Bros., the exchange agent nor any other person is under any
duty to give notification of defects or irregularities with respect to tenders
of outstanding notes. Additionally, none of them will incur any liability for
failure to give this notification. Tenders of outstanding notes will not be
deemed to have been made until these irregularities have been cured or waived.
Any outstanding notes received by the exchange agent that have defects or
irregularities not cured or waived by Stater Bros. will be returned to holders
without cost by the exchange agent, unless otherwise provided in the letter of
transmittal as soon as practicable after the expiration date.
In addition, Stater Bros. reserves the right in its sole discretion to:
. purchase or make offers for any outstanding notes that remain
outstanding subsequent to the expiration date;
. terminate the exchange offer according to the terms in "--Conditions to
the Offer"; and
. to the extent permitted by applicable law, purchase outstanding notes in
the open market, in privately negotiated transactions or otherwise.
The terms of any of these purchases or offers may differ from the terms of
the exchange offer.
Guaranteed Delivery Procedures
If holders wish to tender their outstanding notes and either their
outstanding notes are not immediately available, or they cannot deliver their
outstanding notes, the letter of transmittal or any other required documents
to the exchange agent prior to the expiration date, or if they cannot complete
the procedure for book-entry transfer on a timely basis, they may effect a
tender if:
. the tender is made through an eligible institution;
. prior to the expiration date, the exchange agent receives from an
eligible institution a properly completed and duly executed notice of
guaranteed delivery, by facsimile transmission, mail or hand delivery,
stating the name and address of the holder of the outstanding notes, the
certificate number or numbers of such outstanding notes and the
principal amount of outstanding notes tendered, stating that the tender
is being made, and guaranteeing that, within three business days after
the expiration date, the letter of transmittal, or facsimile thereof,
together with the certificate(s) representing the outstanding notes,
unless the book-entry transfer procedures are to be used, to be tendered
in proper form for transfer and any other documents required by the
letter of transmittal, will be deposited by the eligible institution
with the exchange agent; and
. the properly completed and executed letter of transmittal, or facsimile
thereof, together with the certificates representing all tendered
outstanding notes in proper form for transfer, or confirmation of a
book-entry transfer into the exchange agent's account at DTC of
outstanding notes delivered electronically, and all other documents
required by the letter of transmittal are received by the exchange agent
within three business days after the expiration date.
If holders wish to tender their outstanding notes according to the
guaranteed delivery procedures, they should make request to the exchange agent
and a notice of guaranteed delivery will be sent to them.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, tenders of outstanding
notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the expiration date.
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<PAGE>
To withdraw a tender of outstanding notes in the exchange offer, a written
or facsimile transmission notice of withdrawal must be received by the
exchange agent at the address given in this prospectus prior to 5:00 p.m., New
York City time, on the expiration date. Any notice of withdrawal must:
. specify the name of the person having deposited the outstanding notes to
be withdrawn;
. identify the outstanding notes to be withdrawn, including the
certificate number or numbers and principal amount of the outstanding
notes;
. be signed by the depositor in the same manner as the original signature
on the letter of transmittal by tendering the outstanding notes,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to permit the trustee of the
outstanding notes to register the transfer of the outstanding notes into
the name of the depositor withdrawing the tender; and
. specify the name in which any outstanding notes are to be registered, if
different from that of the depositor.
All questions as to the validity, form and eligibility, including time of
receipt, of any withdrawal notices will be determined by Stater Bros., and
will be final and binding on all parties. Any outstanding notes so withdrawn
will be deemed not to have been validly tendered for purposes of the exchange
offer, and no exchange notes will be issued unless the outstanding notes
previously withdrawn are validly re-tendered. Any outstanding notes that have
been tendered but which are not accepted for exchange will be returned to the
holder without cost to the holder as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
outstanding notes may be re-tendered by following one of the procedures
described above under "Procedures for Tendering Outstanding Notes" at any time
prior to the expiration date.
Conditions to the Offer
Regardless of any other term of the exchange offer, Stater Bros. is not
required to accept for exchange or to exchange any outstanding notes that are
not accepted for exchange according to the terms of the exchange offer.
Additionally, Stater Bros. may terminate or amend the exchange offer as
provided in this prospectus before accepting the outstanding notes if:
. any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer,
which, in Stater Bros.' judgment, might materially impair its ability to
proceed with the exchange offer; or
. any law, statute, rule or regulation is proposed, adopted or enacted, or
any existing law, statute, rule or regulation is interpreted by the
staff of the Commission in a manner, which, in Stater Bros.' judgment,
might materially impair its ability to proceed with the exchange offer.
These conditions are for Stater Bros.' sole benefit. Stater Bros. may assert
them in whole or in part at any time and from time to time, in its sole
discretion. Stater Bros.' failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any right and the right shall be deemed
an ongoing right which may be asserted at any time and from time to time.
In addition, Stater Bros. will not accept for exchange any outstanding notes
tendered, and no exchange notes will be issued in exchange for any outstanding
notes, if at the time of tender:
. a stop order is threatened by the Commission or is in effect for the
registration statement that this prospectus is a part of; or
. a stop order is threatened or in effect regarding qualification of the
indenture under the Trust Indenture Act of 1939, as amended.
If Stater Bros. determines that it may terminate or amend the exchange
offer, it may:
. refuse to accept any outstanding notes and return any tendered
outstanding notes to the holder;
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<PAGE>
. extend the exchange offer and retain all outstanding notes tendered
prior to the expiration of the exchange offer, subject to the rights of
the holders of tendered outstanding notes to withdraw their tendered
outstanding notes;
. waive the termination event with respect to the exchange offer and
accept all properly tendered outstanding notes that have not been
withdrawn; or
. amend the exchange offer at any time prior to 5:00 p.m. New York City
time on the expiration date.
If the waiver or amendment constitutes a material change in the exchange
offer, Stater Bros. will disclose the change by means of a supplement to this
prospectus that will be distributed to each registered holder of outstanding
notes, and Stater Bros. will extend the exchange offer for a period of five to
ten business days, if the exchange offer would otherwise expire during that
period, depending on the significance of the waiver or amendment and the
manner of disclosure to the registered holders of the outstanding notes.
The exchange offer is not conditioned on any minimum principal amount of
outstanding notes being tendered for exchange.
Exchange Agent
IBJ Whitehall Bank & Trust Company has been appointed as exchange agent for
the exchange offer. Questions and requests for assistance and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent addressed as follows:
By Mail, Overnight Courier or Hand Delivery:
IBJ Whitehall Bank & Trust Company
1 State Street
New York, NY 10004
Attention: Customer Service
Telephone number: (212) 858-2103
Facsimile transmission: (212) 858-2611
Fees and Expenses
Stater Bros. will bear the expenses of soliciting tenders pursuant to the
exchange offer. The principal solicitation for tenders pursuant to the
exchange offer is being made by mail. Additional solicitations may be made by
Stater Bros. officers and regular employees and Stater Bros.' affiliates in
person, by telegraph or by telephone.
Stater Bros. will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. Stater Bros. will, however, pay
the exchange agent reasonable customary fees for its services and will
reimburse the exchange agent for its reasonable out-of-pocket expenses in
connection with this exchange offer. Stater Bros. may also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable out-of-
pocket expenses they incur in forwarding copies of this prospectus, letters of
transmittal and related documents to the beneficial owners of the outstanding
notes and in handling or forwarding tenders for exchange.
Stater Bros. will pay the fees and expenses incurred in connection with the
exchange offer, for the following:
. the exchange agent;
. the trustee;
. accounting; and
. legal services.
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<PAGE>
Stater Bros. will pay all transfer taxes, if any, applicable to the exchange
of outstanding notes pursuant to the exchange offer. The amount of these
transfer taxes, whether imposed on the registered holder or any other persons,
will be payable by the tendering holder if:
. certificates representing exchange notes or outstanding notes not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the
registered holder of the outstanding notes tendered;
. tendered outstanding notes are registered in the name of any person
other than the person signing the letter of transmittal; or
. a transfer tax is imposed for any reason other than the exchange of
outstanding notes pursuant to the exchange offer.
If satisfactory evidence of payment of, or exemption from, these taxes is
not submitted with the letter of transmittal, the amount of these transfer
taxes will be billed directly to the tendering holder.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the
outstanding notes, which is face value, as reflected in Stater Bros.'
accounting records on the date of the exchange. Accordingly, no gain or loss
for accounting purposes will be recognized by Stater Bros. upon the
consummation of the exchange offer. The expenses of the exchange offer will be
amortized by Stater Bros. over the term of the exchange notes under generally
accepted accounting principles.
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CAPITALIZATION
The following table sets forth the unaudited capitalization of Stater Bros.
as of June 27, 1999 on an actual basis and on a pro forma basis after giving
effect to the related transactions and the application of the proceeds from
the offering of the outstanding notes as if they had occurred on June 27,
1999. This table should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Stater
Bros.' consolidated financial statements.
<TABLE>
<CAPTION>
As of June 27, 1999
-------------------
Actual Pro Forma
-------- ---------
(In thousands)
<S> <C> <C>
Cash and cash equivalents(1)............................... $ 55,427 $ 50,948
======== ========
Long-term debt (including current maturities):
Capital lease obligations(2)............................. $ 4,688 $ 18,117
New Credit Facility(3)................................... -- --
11% Senior Notes due 2001................................ 165,000 5,148
10 3/4% Senior Notes due 2006............................ -- 450,000
9% Senior Subordinated Notes due 2004.................... 100,000 --
-------- --------
Total long-term debt................................... 269,688 473,265
Stockholders' deficit(4)................................... (24,821) (41,908)
-------- --------
Total capitalization................................... $244,867 $431,357
======== ========
</TABLE>
- --------
(1) Pro forma cash and cash equivalents reflect year-to-date expenditures of
$10.6 million for capital expenditures related to the acquisition. As a
result, pro forma cash and cash equivalents reflect the use of $15.1
million for the related transactions less Stater Bros.' year-to-date
expenditure of $10.6 million for capital expenditures related to the
acquisition.
(2) Pro forma amount includes the assumption of $13.4 million of capitalized
lease obligations related to the acquisition.
(3) On August 6, 1999, Stater Bros. Markets entered into a new unsecured bank
credit facility with Bank of America. The new credit facility consists of
a $50.0 million credit facility with an additional $25.0 million facility
available for the issuance of commercial and standby letters of credit.
The term of the new credit facility is three years. It is expected that
borrowings under the new credit facility will be used for certain working
capital and corporate purposes. At August 17, 1999, there were no
revolving borrowings outstanding thereunder and the aggregate amount of
all letters of credit issued thereunder was approximately $10.0 million.
See "Description of Certain Indebtedness."
(4) Pro forma amount reflects the following extraordinary charges, net of
taxes, associated with the related transactions: (i) a $6.0 million write-
off of deferred financing fees associated with the 11% senior notes, the
9% senior subordinated notes and the existing bank credit facility and
(ii) $11.1 million of estimated aggregate tender premiums associated with
the tender offer.
28
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following tables provide pro forma financial data for Stater Bros.
reflecting the completion of the Acquisition Transactions. The pro forma
earnings and operating information for the 52 weeks ended September 27, 1998
gives effect to the Acquisition Transactions as if they had occurred September
30, 1997. The pro forma earnings and operating information for the 39 weeks
ended June 27, 1999 gives effect to the Acquisition Transactions as if they
had occurred as of September 28, 1998 and the pro forma balance sheet
information as of June 27, 1999 gives effect to the Acquisition Transactions
as if they had occurred on June 27, 1999. This pro forma information, while
helpful in illustrating the financial characteristics of Stater Bros. after
the completion of the Acquisition Transactions under one set of assumptions,
does not attempt to predict or suggest future results. It also does not
necessarily reflect what the historical results of Stater Bros. would have
been had the Acquisition Transactions actually occurred as of or on the dates
stated above. For a discussion of factors that could impact the accuracy of
the pro forma financial information, see "Risk Factors--Risk Related to the
Acquisition." The information in the following tables is based on historical
financial information of Stater Bros. The information for Albertson's Stores
and Lucky Stores is derived from the historical financial information included
in this prospectus. Investors should read the following tables in connection
with this historical financial information and with the more detailed
financial information Stater Bros. has provided in this document.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(As of June 27, 1999)
<TABLE>
<CAPTION>
Historical
----------------------------------------------- Pro Forma Stater Bros.
Stater Bros. Albertson's(a) Lucky(a) Combined Adjustments Pro Forma
------------ -------------- -------- --------- ----------- ------------
(In thousands)
ASSETS:
-------
<S> <C> <C> <C> <C> <C> <C>
Current assets
Cash and cash
equivalents........... $ 55,427 $ -- $ -- $ 55,427 $ (4,479)(b) $ 50,948
Receivables............ 21,636 -- -- 21,636 11,874 (c) 33,510
Inventories............ 113,048 36,236 7,900 157,184 8,306 (d) 165,490
Prepaid expenses....... 6,588 747 239 7,574 (986)(e) 6,588
Deferred income taxes.. 4,589 -- -- 4,589 -- 4,589
Properties held for
sale.................. 1,251 -- -- 1,251 -- 1,251
Other current assets... -- 1,214 884 2,098 (2,098)(e) --
--------- -------- -------- --------- --------- ---------
Total current assets... 202,539 38,197 9,023 249,759 12,617 262,376
Investment in
unconsolidated
affiliate.............. 9,396 -- -- 9,396 -- 9,396
Property and equipment
Land................... 17,287 23,186 2,598 43,071 2,643 (f) 45,714
Buildings and
improvements.......... 99,378 56,156 7,235 162,769 5,546 (f) 168,315
Store fixtures and
equipment............. 126,723 53,706 27,771 208,200 (53,004)(f) 155,196
Property subject to
capital leases, net... 14,368 5,617 4,933 24,918 1,966 (f) 26,884
--------- -------- -------- --------- --------- ---------
257,756 138,665 42,537 438,958 (42,849) 396,109
Less accumulated
depreciation and
amortization.......... (116,901) (59,229) (18,663) (194,793) 77,892 (g) (116,901)
--------- -------- -------- --------- --------- ---------
Net property and
equipment.............. 140,855 79,436 23,874 244,165 35,043 279,208
Deferred income taxes... 2,449 -- -- 2,449 -- 2,449
Deferred debt issuance
costs, net............. 10,185 -- -- 10,185 6,215 (h) 16,400
Lease guarantee escrow.. 10,957 -- -- 10,957 -- 10,957
Other assets............ 5,871 -- -- 5,871 1,069 (i) 6,940
--------- -------- -------- --------- --------- ---------
Total assets............ $ 382,252 $117,633 $ 32,897 $ 532,782 $ 54,944 $ 587,726
========= ======== ======== ========= ========= =========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' (DEFICIT):
------------------------
<S> <C> <C> <C> <C> <C> <C>
Current liabilities
Accounts payable....... $ 65,728 $ -- $ -- $ 65,728 $ 18,984 (j) $ 84,712
Accrued payroll and
related expenses...... 27,804 -- -- 27,804 -- 27,804
Other accrued
liabilities........... 31,989 5,239 331 37,559 (5,570)(e) 31,989
--------- -------- -------- --------- --------- ---------
Total current
liabilities........... 125,521 5,239 331 131,091 13,414 144,505
Net purchase obligation. -- 104,673 26,858 131,531 (131,531)(k) --
Long-term debt,
including current
portion................ 265,000 -- -- 265,000 190,148 (l) 455,148
Capital lease
obligations, including
current portion........ 4,688 7,721 5,708 18,117 -- 18,117
Long-term portion of
self-insurance and
other reserves......... 8,284 -- -- 8,284 -- 8,284
Other long-term
liabilities............ 3,580 -- -- 3,580 -- 3,580
Stockholders' (deficit)
Class A Common Stock... 1 -- -- 1 -- 1
Additional paid-in
capital............... 12,715 -- -- 12,715 -- 12,715
Retained earnings
(deficit)............. (37,537) -- -- (37,537) (17,087)(m) (54,624)
--------- -------- -------- --------- --------- ---------
Total stockholders'
(deficit)............. (24,821) -- -- (24,821) (17,087) (41,908)
--------- -------- -------- --------- --------- ---------
Total liabilities and
stockholders'
(deficit).............. $ 382,252 $117,633 $ 32,897 $ 532,782 $ 54,944 $ 587,726
========= ======== ======== ========= ========= =========
</TABLE>
footnotes on following page
30
<PAGE>
- --------
(a) Reflects the financial position of Albertson's Stores and Lucky Stores as
of April 29, 1999 and May 1, 1999, respectively.
(b) The net adjustments to cash and cash equivalents are anticipated to be as
follows:
<TABLE>
<S> <C>
Increases:
Offering of outstanding notes.................................. $ 450,000
---------
Total increases.............................................. $ 450,000
Decreases:
Repurchase of 11% Senior Notes and 9% Senior Subordinated
Notes......................................................... $(259,852)
Acquisition consideration(1)................................... (133,613)
Capital expenditures(2)........................................ (24,198)
Tender premiums(3)............................................. (18,777)
Estimated fees and expenses.................................... (16,400)
Other, net(4).................................................. (1,639)
---------
Total decreases.............................................. (454,479)
---------
Net adjustment to cash and cash equivalents.................... $ (4,479)
=========
</TABLE>
--------
(1) Reflects the purchase of property, plant and equipment ($94.9 million)
and the estimated value of inventories at closing ($38.7 million).
(2) Reflects capital expenditures related to the acquisition which are
expected to be incurred after June 27, 1999.
(3) As of July 30, 1999, Stater Bros. had received the consents and tenders
from holders of approximately $159.9 million and holders of $100.0
million of the outstanding principal amount of the 11% senior notes and
the 9% senior subordinated notes, respectively. The 11% senior notes
and the 9% senior subordinated notes mature on March 1, 2001 and July
1, 2004, respectively. Stater Bros. may choose to defease any
outstanding 11% senior notes that are not purchased pursuant to the
tender offer, in accordance with the applicable indenture.
(4) Reflects estimated post-closing adjustments related to the acquisition.
(c) Reflects the income tax receivable associated with the write-off of
deferred financing fees and the tender premiums related to the tender
offer.
(d) Reflects an estimated increase associated with certain warehouse
inventories ($17.8 million) offset in part by the anticipated write-down
of Albertson's and Lucky's private label and other inventories ($9.5
million).
(e) Reflects the elimination of certain net accrued real estate liabilities
which are obligations of the previous owner of the acquired stores.
(f) Reflects purchase accounting adjustments associated with the acquisition.
(g) Reflects the elimination of the accumulated depreciation and amortization
associated with the fixed assets of the acquired stores.
(h) Reflects the write-off of deferred financing fees ($10.2 million) and the
addition of issuance costs associated with the related transactions ($16.4
million).
(i) Reflects the assumed value of liquor licenses acquired in the acquisition.
(j) Reflects an increase in trade payables associated with the acquisition of
inventories.
(k) Reflects the elimination of the net book value of the assets acquired.
(l) Reflects the retirement of a substantial portion of the 11% senior notes
and the retirement of the 9% senior subordinated notes ($259.9 million)
and the addition of the exchange notes ($450.0 million).
(m) Reflects the write-off (net of taxes) of deferred financing fees ($6.0
million) and the tender premiums related to the tender offer ($11.1
million).
31
<PAGE>
STATER BROS. HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OTHER OPERATING DATA
52 WEEKS ENDED SEPTEMBER 27, 1998
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
Historical
------------------------------------------------ Pro Forma Stater Bros.
Stater Bros. Albertson's(a) Lucky(a) Combined Adjustments Pro Forma
------------ -------------- -------- ---------- ----------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales................... $1,726,107 $519,684 $149,562 $2,395,353 $ -- $2,395,353
Cost of sales........... 1,323,522 381,448 110,340 1,815,310 2,729 (b) 1,818,039
---------- -------- -------- ---------- -------- ----------
Gross profit............ 402,585 138,236 39,222 580,043 (2,729) 577,314
Operating expenses:
Selling, general and
administrative
expenses............. 353,075 112,936 29,746 495,757 4,401 (c) 500,158
Depreciation and
amortization......... 15,434 9,150 2,734 27,318 1,073 (d) 28,391
---------- -------- -------- ---------- -------- ----------
Operating profit........ 34,076 16,150 6,742 56,968 (8,203) 48,765
Interest income......... 3,059 3,059 (647)(e) 2,412
Interest expense........ (30,206) (886) (523) (31,615) (21,326)(f) (52,941)
Equity in earnings
(loss) from
unconsolidated
affiliate.............. (2,941) -- -- (2,941) -- (2,941)
Other, net.............. 2 -- -- 2 -- 2
---------- -------- -------- ---------- -------- ----------
Earnings (loss) before
income taxes........... 3,990 $ 15,264 $ 6,219 25,473 (30,176) (4,703)
======== ========
Income taxes (benefit).. 1,459 1,459 (3,387)(g) (1,928)
---------- ---------- -------- ----------
Net earnings............ $ 2,531 $ 24,014 $(26,789)(h) $ (2,775)
========== ========== ======== ==========
Earnings (loss) per
common share........... $ 50.62 $ (55.50)
========== ==========
Average number of shares
outstanding............ 50,000 50,000
========== ==========
Other Operating Data:
EBITDA(i)............... $ 52,569 $ 25,300 $ 9,476 $ 87,345 $ (7,777) $ 79,568
Depreciation and
amortization........... $ 15,434 $ 9,150 $ 2,734 $ 27,318 $ 1,073 $ 28,391
</TABLE>
[footnotes on page 34]
32
<PAGE>
STATER BROS. HOLDINGS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OTHER OPERATING DATA
39 WEEKS ENDED JUNE 27, 1999
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
Historical
------------------------------------------------ Pro Forma Stater Bros.
Stater Bros. Albertson's(a) Lucky(a) Combined Adjustments ProForma
------------ -------------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales..................... $1,324,358 $389,189 $110,445 $1,823,992 $ $1,823,992
Cost of sales............. 1,011,542 281,424 80,593 1,373,559 2,047 (b) 1,375,606
---------- -------- -------- ---------- -------- ----------
Gross profit.............. 312,816 107,765 29,852 450,433 (2,047) 448,386
Operating expenses:
Selling, general and
administrative expenses. 265,907 83,423 22,217 371,547 3,301 (c) 374,848
Depreciation and
amortization ............ 11,813 6,821 2,087 20,721 805 (d) 21,526
---------- -------- -------- ---------- -------- ----------
Operating profit.......... 35,096 17,521 5,548 58,165 (6,153) 52,012
Interest income........... 2,388 2,388 (485)(e) 1,903
Interest expense.......... (22,699) (651) (386) (23,736) (15,995)(f) (39,731)
Equity in earnings (loss)
from unconsolidated
affiliate................ 924 -- -- 924 -- 924
Other, net................ (319) -- -- (319) -- (319)
---------- -------- -------- ---------- -------- ----------
Earnings (loss) before
income taxes............. 15,390 $ 16,870 $ 5,162 37,422 (22,633) 14,789
======== ========
Income taxes (benefit).... 6,156 6,156 (93)(g) 6,063
---------- ---------- -------- ----------
Net earnings.............. $ 9,234 $ 31,266 $(22,540)(h) $ 8,726
========== ========== ======== ==========
Earnings (loss) per common
share.................... $ 184.68 $174.52
========== ==========
Average number of shares
outstanding.............. 50,000 50,000
========== ==========
Other Operating Data:
EBITDA(i)................ $ 49,297 $ 24,342 $ 7,635 $ 81,274 $ (5,833) $ 75,441
Depreciation and
amortization............ $ 11,813 $ 6,821 $ 2,087 $ 20,721 $ 805 $ 21,526
</TABLE>
[footnotes on following page]
33
<PAGE>
- --------
(a) Reflects, for the 52 weeks ended September 27, 1998 for Stater Bros.
Holdings Inc., 52 weeks ended January 28, 1999 for the Albertson's Stores
and 52 weeks ended January 30, 1999 for the Lucky Stores.
Reflects, for the 39 weeks ended June 27, 1999 for Stater Bros. Holdings
Inc., 39 weeks ended April 29, 1999 for the Albertson's Stores and 39 weeks
ended May 1, 1999 for the Lucky Stores.
(b) Reflects the estimated additional warehousing and distribution costs
associated with processing the product requirements of the acquired stores
through Stater Bros.' warehouse and distribution facilities.
(c) Reflects estimated additional selling, general and administrative expenses
required to support the acquired stores.
(d) Reflects an increase in depreciation and amortization.
(e) Reflects a reduction in interest income resulting from the use of cash and
cash equivalents in connection with the related transactions.
(f) Reflects additional interest expense and amortization of debt issue costs
from debt incurred to finance the transaction.
(g) Reflects the adjustment necessary to state the pro forma income taxes at
an assumed rate of 41%.
(h) Excludes extraordinary loss from early extinguishment of debt of $17.1
million, net of income tax benefit of $11.9 million.
(i) EBITDA, as calculated per the definition of "Consolidated Cash Flow"
contained in the indenture governing the exchange notes offered hereby,
represents the sum of net loss, extraordinary (charge), income taxes,
interest expense, depreciation and amortization and non-cash expenses
(income). Stater Bros.' non-cash expenses (income) are reflected in other
income (expense)--net and equity in earnings from unconsolidated
affiliate. Stater Bros. has included information concerning EBITDA as it
is relevant for covenant analysis under the exchange notes and because it
is used by certain investors as a measure of a company's ability to
service its debt. EBITDA should not be used as an alternative to, or be
construed as more meaningful than, operating income or cash flows as an
indicator of Stater Bros.' operating performance.
34
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table shows selected consolidated financial data and other
information. The annual data for 1994 and 1995 are derived from audited
consolidated financial statements not included in this prospectus. The annual
data for 1996, 1997 and 1998 are derived from the audited consolidated
financial statements of Stater Bros. and the related notes which appear
elsewhere in this document. The information for the 39-week periods is derived
from unaudited consolidated financial statements contained elsewhere in this
document. In the opinion of management, such unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of this data. The results for
the 39 weeks ended June 27, 1999 are not necessarily indicative of the results
for a full year or for any future period. Investors should read the complete
historical financial statements included elsewhere in this prospectus and
should read the following information in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
which appears elsewhere in the prospectus.
SELECTED HISTORICAL FINANCIAL AND STATISTICAL DATA
OF STATER BROS.
<TABLE>
<CAPTION>
Unaudited
----------------------
Fiscal Years Ended 39 Weeks Ended
--------------------------------------------------------------------- ----------------------
September 25, September 24, September 29, September 28, September 27, June 28, June 27,
1994 1995 1996(1) 1997 1998 1998 1999
------------- ------------- ------------- ------------- ------------- ---------- ----------
(In thousands, except for other operating and financial data and store data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Sales................... $1,539,717 $1,579,895 $1,705,332 $1,717,924 $1,726,107 $1,285,048 $1,324,358
Cost of goods sold...... 1,199,794 1,227,355 1,315,726 1,326,410 1,323,522 987,172 1,011,542
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit............ 339,923 352,540 389,606 391,514 402,585 297,876 312,816
Operating expenses:
Selling, general and
administrative
expenses.............. 297,474 308,332 328,242 333,199 353,075 261,216 265,907
Depreciation and
amortization.......... 11,656 11,756 12,583 13,265 15,434 11,345 11,813
Consulting fees(2)..... 830 1,500 1,525 1,458 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses............... 309,960 321,588 342,350 347,922 368,509 272,561 277,720
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit........ 29,963 30,952 47,256 43,592 34,076 25,315 35,096
Interest income......... 384 952 1,929 3,034 3,059 2,371 2,388
Interest expense........ (15,501) (20,076) (20,258) (21,563) (30,206) (22,641) (22,699)
Equity in earnings
(loss) from
unconsolidated
affiliate.............. (592) (980) (1,624) (2,313) (2,941) (2,692) 924
Other income (expense)--
net.................... 391 97 (172) 76 2 42 (319)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes, extraordinary
charge and cumulative
effect of a change in
accounting for income
taxes.................. 14,645 10,945 27,131 22,826 3,990 2,395 15,390
Income taxes............ 5,856 4,218 11,120 9,359 1,459 982 6,156
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
extraordinary charge
and cumulative effect
of a change in
accounting for income
taxes.................. 8,789 6,727 16,011 13,467 2,531 1,413 9,234
Extraordinary
(charge)(3)............ (8,036) -- -- -- -- -- --
Cumulative effect of a
change in accounting
for income taxes(4).... 372 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. 1,125 6,727 16,011 13,467 2,531 1,413 9,234
Preferred dividends..... 327 -- 4,111 6,166 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income available to
common stockholders.... $ 798 $ 6,727 $ 11,900 $ 7,301 $ 2,531 $ 1,413 $ 9,234
========== ========== ========== ========== ========== ========== ==========
Earnings per common
share before
extraordinary charge
and cumulative effect
of a change in
accounting for income
taxes.................. $ 84.62 $ 67.27 $ 165.28 $ 146.02 $ 50.62 $ 28.26 $ 184.68
Earnings per common
share.................. $ 7.98 $ 67.27 $ 165.28 $ 146.02 $ 50.62 $ 28.26 $ 184.68
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Unaudited
-------------------
Fiscal Years Ended 39 Weeks Ended
--------------------------------------------------------------------- -------------------
September 25, September 24, September 29, September 28, September 27, June 28, June 27,
1994 1995 1996(1) 1997 1998 1998 1999
------------- ------------- ------------- ------------- ------------- -------- --------
(In thousands, except for other operating and financial data and store data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (end
of period):
Cash and cash
equivalents............ $ 21,289 $ 26,308 $ 45,279 $ 59,086 $ 57,281 $48,000 $55,427
Working capital......... 41,422 45,014 63,473 92,013 90,725 87,039 75,647
Total assets............ 306,489 314,082 338,294 358,477 364,318 361,615 382,252
Total debt.............. 175,342 174,186 173,099 271,917 270,660 270,976 269,688
Total stockholders'
equity (deficit)....... 6,851 13,578 (43,887) (36,586) (34,055) (35,173) (24,821)
Other Operating and
Financial Data:
Sales increases
(decreases):
Total stores........... 0.9% 2.6% 7.9% 0.7% 0.5% (0.6)% 3.1%
Like stores (comparable
52 weeks)............. (0.7)% 1.2% 6.3% 2.6% (1.0)% (1.8)% 2.5%
EBITDA (000s)(5)........ $ 42,003 $ 43,660 $ 61,768 $ 59,891 $ 52,569 $39,031 $49,297
Capital expenditures
(000s)................. 19,409 13,178 22,415 20,268 26,278 20,287 34,382
Gross profit as a
percentage of sales.... 22.08% 22.31% 22.85% 22.79% 23.32% 23.18% 23.62%
Selling, general and
administrative expenses
as a percentage of
sales.................. 19.32% 19.52% 19.25% 19.40% 20.46% 20.33% 20.08%
EBITDA as a percentage
of sales............... 2.73% 2.76% 3.62% 3.49% 3.05% 3.04% 3.72%
Ratio of earnings to
fixed charges(6)....... 1.47x 1.36x 1.53x 1.23x 1.03x -- 1.42x
Store Data:
Number of stores (at end
of period)............. 111 110 110 110 112 112 112
Average sales per store
(000s)................. $ 13,997 $ 14,298 $ 15,503 $ 15,617 $ 15,551 $11,474 $11,825
Average store size:
Total square feet...... 28,617 28,717 28,809 28,809 29,061 29,061 29,177
Selling square feet.... 20,708 20,773 20,845 20,845 20,991 20,991 21,047
Total square feet (at
end of period) (000s).. 3,177 3,159 3,169 3,169 3,255 3,255 3,268
Total selling square
feet (at end of period)
(000s)................. 2,299 2,285 2,293 2,293 2,351 2,351 2,357
Sales per average total
square foot............ $ 492 $ 499 $ 538 $ 542 $ 537 $ 395 $ 405
Sales per average
selling square foot.... $ 680 $ 689 $ 744 $ 749 $ 743 $ 547 $ 562
</TABLE>
- -------
(1) The year ending September 29, 1996 was a 53-week year, whereas fiscal
1994, 1995, 1997 and 1998 were 52-week years.
(2) During 1994, 1995, 1996 and 1997, consulting fees were paid pursuant to
consulting agreements with La Cadena Investments and Craig Corporation.
These consulting agreements were terminated on July 31, 1997.
(3) The extraordinary charge for 1994 represents an after-tax charge for the
early retirement of debt.
(4) Stater Bros. adopted SFAS No. 109 ("Accounting For Income Taxes")
effective at the beginning of the fiscal year ended September 25, 1994 as
a cumulative effect of a change in accounting principles.
(5) EBITDA, as calculated per the definition of "Consolidated Cash Flow"
contained in the indenture governing the exchange notes offered hereby,
represents the sum of net income, cumulative effect of a change in
accounting for income taxes, extraordinary (charge), income taxes,
interest expense, depreciation and amortization and non-cash expenses
(income). For each of the periods presented above, Stater Bros.' non-cash
expenses (income) were reflected in other income (expense)--net and equity
in earnings (loss) from unconsolidated affiliate. Stater Bros. has
included information concerning EBITDA as it is relevant for covenant
analysis under the exchange notes and because it is used by certain
investors as a measure of a company's ability to service its debt. EBITDA
should not be used as an alternative to, or be construed as more
meaningful than, operating income or cash flows as an indicator of Stater
Bros.' operating performance.
(6) For purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes and extraordinary charges,
amortization of previously capitalized interest and undistributed earnings
or loss from less than 50% owned subsidiaries and includes fixed charges.
Fixed charges consist of interest expense whether expensed or capitalized,
amortization of deferred debt expense, preferred stock dividends adjusted
to represent pre-tax earnings requirements and such portion of rental
expenses as deemed by management to be representative of the interest
factor in the particular case. Earnings were insufficient to cover fixed
charges for the 39 weeks ended June 28, 1998 by approximately $1.1
million.
36
<PAGE>
SELECTED HISTORICAL FINANCIAL AND STATISTICAL DATA
OF THE ACQUIRED STORES
The following tables show selected historical financial and statistical data
for the stores to be acquired from Albertson's. This information is derived
from the audited financial statements for stores to be acquired from
Albertson's and the related notes which appear elsewhere in this prospectus.
The data set forth below for the 13-week periods are derived from unaudited
financial statements which are included elsewhere in this prospectus. In the
opinion of management, such unaudited financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of this data. The results for the 13-week periods are not
necessarily indicative of the results for a full year or for any future
period. The other operating data information contained below are unaudited and
are derived from their respective financial data. Investors should read the
complete historical financial statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Unaudited
--------------------
Fiscal Years Ended 13 Weeks Ended
----------------------------------- --------------------
January 30, January 29, January 28, April 30, April 29,
Albertson's Stores 1997 1998 1999 1998 1999
- ------------------ ----------- ----------- ----------- --------- ---------
(In thousands, except store data)
<S> <C> <C> <C> <C> <C>
Statement of Store Level
Earnings:
Sales.................... $474,928 $507,088 $519,684 $129,845 $130,612
Cost of sales(1)......... 354,723 375,988 381,448 96,326 94,093
-------- -------- -------- -------- --------
Gross profit............. 120,205 131,100 138,236 33,519 36,519
Store operating
expenses(2)............. 105,685 115,832 122,972 29,902 30,292
-------- -------- -------- -------- --------
Store level earnings..... $ 14,520 $ 15,268 $ 15,264 $ 3,617 $ 6,227
======== ======== ======== ======== ========
Other Operating Data:
EBITDA(3)................ $ 23,005 $ 24,769 $ 25,300 $ 6,092 $ 8,660
Interest expense......... 966 929 886 226 214
Depreciation and
amortization............ 7,519 8,572 9,150 2,249 2,219
Store Data:
Number of stores (at end
of period).............. 32 33 33 33 33
<CAPTION>
Unaudited
-----------------
Fiscal Years Ended 13 Weeks Ended
----------------------------------- --------------------
February 1, January 31, January 30, May 2, May 1,
Lucky Stores 1997 1998 1999 1998 1999
- ------------ ----------- ----------- ----------- --------- ---------
(In thousands, except store data)
<S> <C> <C> <C> <C> <C>
Statement of Store Level
Earnings:
Sales.................... $150,714 $144,510 $149,562 $ 37,904 $ 36,579
Cost of sales(1)......... 111,313 108,073 110,340 28,668 26,964
-------- -------- -------- -------- --------
Gross profit............. 39,401 36,437 39,222 9,236 9,615
Store operating
expenses(2)............. 30,347 31,413 33,003 7,791 8,037
-------- -------- -------- -------- --------
Store level earnings..... $ 9,054 $ 5,024 $ 6,219 $ 1,445 $ 1,578
======== ======== ======== ======== ========
Other Operating Data:
EBITDA(3)................ $ 12,123 $ 7,953 $ 9,476 $ 2,215 $ 2,388
Interest Expense......... 563 545 523 132 127
Depreciation and
amortization............ 2,506 2,384 2,734 638 683
Store Data:
Number of stores (at end
of period).............. 9 10 10 10 10
</TABLE>
- --------
(1) Includes an allocation for warehouse and transportation expenses.
(2) Includes depreciation and amortization and interest expense related to
capital lease obligations.
(3) EBITDA represents the sum of store level earnings, interest expense and
depreciation and amortization. EBITDA should not be used as an alternative
to, or be construed as more meaningful than, operating income or cash
flows as an indicator of operating performance.
37
<PAGE>
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 53-week fiscal year ended September 29, 1996,
the 52-week fiscal years ended September 27, 1998 and September 28, 1997 and
the thirty-nine weeks ended June 28, 1998 and June 27, 1999.
<TABLE>
<CAPTION>
Fiscal Year Ended 39 Weeks Ended
----------------------------- -----------------
Sept. 29, Sept. 28, Sept. 27, June 28, June 27,
1996 1997 1998 1998 1999
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales.......................... 100.00% 100.00% 100.00% 100.00% 100.00%
Gross profit................... 22.85 22.79 23.32 23.18 23.62
Operating expenses:
Selling, general and
administrative expense...... 19.25 19.40 20.46 20.33 20.08
Depreciation and
amortization................ .74 .77 .89 .88 .89
Consulting fees.............. .09 .08 -- -- --
Operating profit............... 2.77 2.54 1.97 1.97 2.65
Interest income................ .11 .18 .18 .19 .18
Interest (expense)............. (1.19) (1.26) (1.75) (1.76) (1.72)
Equity in (loss) from
unconsolidated affiliate...... (.10) (.13) (.17) (.21) .07
Other income (expense)--net.... -- -- -- -- (.02)
Earning before income taxes.... 1.59% 1.33% .23% .19% 1.16%
</TABLE>
39 Weeks Ended June 28, 1998 and June 27, 1999
Sales. Total sales for the thirty-nine weeks year to date ended June 27,
1999 increased 3.06% and amounted to $1,324.4 million, compared to $1,285.1
million for the same period in 1998. Like store sales increased 2.51% for the
year to date period. The increase in sales in the thirty-nine week year to
date period was due to favorable customer response to Stater Bros.' marketing
plan, which emphasizes Stater Bros.' high quality and expanded product
selections in the produce and other perishable departments and the opening of
a new replacement supermarket, which opened in December 1998. Stater Bros.
operated 112 supermarkets at June 27, 1999 and June 28, 1998.
Gross Profit Margin. Gross profit margin for the thirty-nine week year to
date period increased to $312.8 million or 23.62% of sales in 1999, compared
to $297.9 million or 23.18% of sales in the prior year. Gross profit margin
for the thirty-nine week year to date period was favorably impacted by the
1999 marketing plan which features the perishable departments which typically
have higher gross margins as a percent of sales, and by lower costs in the
warehousing and transportation departments. Additionally, 1999 gross profit
margin was reduced by approximately $8.2 million for the thirty-nine weeks
year to date from a temporary increase in the cost of products purchased by
Stater Bros. from Santee Dairies, compared to $1.2 million for the 1998
thirty-nine weeks year to date.
Operating Expenses. Operating expenses include selling, general and
administrative expenses and depreciation and amortization expenses. For the
thirty-nine week year to date period, selling, general and administrative
expenses amounted to $265.9 million or 20.08% of sales, compared to $261.2
million or 20.33% of sales for the like period of the prior year. The
reduction in selling, general and administrative expenses in 1999 when
compared to 1998 was due to cost savings, primarily in labor and advertising
expenses which were partially offset by costs and expenses incurred to operate
at the higher sales level and contractual wage rate increases in collective
bargaining agreements.
Depreciation and amortization expenses amounted to $11.8 million for the
year to date period ended June 27, 1999. Depreciation and amortization expense
amounted to $11.4 million for the corresponding year to
38
<PAGE>
date period of the prior year. Depreciation and amortization included
amortization of approximately $250,000 per quarter from a prepaid five-year
covenant not to compete between Stater Bros. and Craig Corporation which
became effective in March 1994 and terminated in March 1999.
Operating Profit. Operating profits for the thirty-nine weeks year to date
ended June 27, 1999 amounted to $35.1 million or 2.65% of sales, compared to
$25.3 million or 1.97% of sales for the like period in 1998.
Interest Expense. Interest expense for the year to date periods of 1999 and
1998 amounted to $22.7 million and $22.6 million, respectively. Interest
expense in the year to date periods includes amortization of $2.1 million in
1999 and 1998 from fees and expenses incurred to acquire debt.
Santee Dairies, LLC. Stater Bros.' equity in earnings from Santee Dairies,
its unconsolidated affiliate, amounted to $924,000 for the thirty-nine week
year to date period in 1999, compared to a loss of $2.7 million for the
thirty-nine week year to date period in 1998. The 1999 earnings of Santee
Dairies were favorably impacted by temporary increases in the cost of products
Santee Dairies charged to its two owners, Hughes Family Markets and Stater
Bros. Markets, which amounted to approximately $11.4 million (pre-tax) for the
thirty-nine week year to date period. In March 1998, Santee Dairies vacated
its Los Angeles, California facility and moved into a newly constructed
facility in City of Industry, California. Santee Dairies has incurred expenses
associated with commissioning the new facility and transferring and
integrating the production of dairy products into the new facility. From June
1998 through January 1999, Stater Bros. accepted and paid approximately $1.0
million per month as a result of a temporary increase in the cost of products
it purchased from Santee Dairies. Beginning in February 1999, the temporary
increase in the cost of products purchased from Santee Dairies by Stater Bros.
decreased to approximately $800,000 per month. The temporary increase in the
cost of products purchased from Santee Dairies is included in Stater Bros.
cost of goods sold and amounted to approximately $8.2 million for the 1999
year to date period compared to $1.2 million for the year to date period of
fiscal 1998. Stater Bros. believes that the temporary increase in the cost of
products purchased from Santee Dairies by Stater Bros. will eventually be
eliminated, but no assurances can be given that the temporary price increase
will be eliminated. Stater Bros. continues to explore alternatives available
to it regarding its investment in Santee Dairies. For further information
concerning Stater Bros. arrangements with Santee Dairies, see "Business--
Santee Dairies, LLC"
Income Before Income Taxes. Income before income taxes amounted to $15.4
million and $2.4 million for the year to date periods of 1999 and 1998,
respectively.
Net Income. Net income for the year to date periods for 1999 and 1998,
amounted to $9.2 million and $1.4 million, respectively.
Fiscal Years Ended September 27, 1998, September 28, 1997 and September 29,
1996
Sales. Total sales amounted to $1.726 billion in the 52-week 1998 fiscal
year compared to $1.718 billion in the 52-week 1997 fiscal year and $1.705
billion in the 53-week 1996 fiscal years. Like-store sales for comparable 52-
week periods decreased 1.0% in 1998 compared to increases of 2.6% in fiscal
1997 and 6.3% in fiscal 1996. The increase in like-store sales in fiscal 1997
and 1996 was due to many factors, including slight improvements in the
Southern California economy and favorable customer response to Stater Bros.'
merchandising expansion and upgrading program. This included expanding product
offerings in the deli, bakery, frozen foods and dairy departments and
continuing with the introduction of fresh cut flowers and prepackaged
vegetables into most of Stater Bros.' supermarkets. Additionally, like store
sales were impacted by the departure of a competitor from the market place.
During the second quarter of fiscal 1996, Smith's Food & Drug ("Smith's"),
announced the termination of its Southern California operations and began
closing all of its supermarkets located in Southern California. Approximately
fifteen Smith's supermarkets competed with Stater Bros. As of September 29,
1996, nine Smith's supermarkets remained closed and as of September 28, 1997,
five Smith's supermarkets remained closed. Sales for fiscal 1997 and 1998 were
adversely affected as competitors periodically acquired and reopened the
vacated
39
<PAGE>
Smith's supermarkets. Management believes it has been successful in attracting
and retaining many of the previous Smith's customers to its supermarkets.
Gross Profit Margin. Stater Bros.' gross profit margin increased to 23.32%
of sales in fiscal 1998 compared to 22.79% of sales in 1997 and 22.85% of
sales in 1996. The increase in gross profit, as a percentage of sales in
fiscal year 1998 was due to the introduction of higher gross margin products
achieved through Stater Bros.' merchandising expansion and upgrading programs.
The decrease in gross profit as a percentage of sales in 1997 when compared to
1996, was due to aggressive competitive pricing in selected areas of Southern
California in the third and fourth quarters of fiscal 1997. Stater Bros.
adjusts its pricing strategy as necessary to retain its "every day low price"
marketing position.
Operating Expenses. In fiscal 1998, selling, general and administrative
expenses amounted to 20.46% of sales compared to 19.40% of sales in 1997 and
19.25% of sales in 1996. Selling, general and administrative expenses for
fiscal 1998 included expenses incurred to operate two additional supermarkets
and non-recurring advertising expenses of approximately $2.1 million incurred
in the second and third quarters to re-affirm Stater Bros.' strategy of "every
day low price" leadership in its primary marketing areas. Additionally,
commencing in April 1998, Stater Bros. was required to resume employer
contributions of approximately $750,000 per month to a previously over-funded
collective bargaining pension trust. Such employer contributions had been
suspended since 1994. In fiscal 1997, selling, general and administrative
expenses increased as a percentage of sales due to contractual increases in
collective bargaining employees rates of pay and increases in fixed expenses
such as rent expense, utilities, depreciation and supermarket supplies.
Depreciation and amortization expenses include amortization of $1.0 million
in fiscal 1998, 1997 and 1996, from a $5.0 million prepaid five-year covenant
not to compete included in a consulting agreement between Stater Bros. and a
former stockholder.
Operating Profit. Operating profit amounted to $34.1 million or 1.97% of
sales in 1998 compared to $43.6 million or 2.54% of sales in 1997 and $47.3
million or 2.77% of sales in 1996.
Interest Expense. Interest expense increased in fiscal 1998 due to the
issuance, in July 1997, of $100.0 million of the 9% senior subordinated notes.
Interest expense included amortization of fees and expenses incurred to
acquire debt of $2.8 million in 1998, $1.5 million in 1997 and $1.2 million in
1996.
Santee Dairies, LLC. The increase in Stater Bros.' equity in loss from
unconsolidated affiliate in fiscal years 1998, 1997 and 1996 relates to Stater
Bros.' investment at September 27, 1998 of $8.5 million in Santee Dairies,
LLC. Santee Dairies, a wholly-owned subsidiary of Santee Dairies LLC, moved
from its previous facility in Los Angeles to a newly constructed facility in
the City of Industry in March 1998. Santee Dairies' decision to move reduced
the economic lives of certain assets associated with its former facility,
thereby increasing depreciation in 1996, 1997 and 1998. The decision to move
also resulted in increased rent expense during a two year lease extension that
was required while the new facility was constructed. During fiscal 1998,
Stater Bros.' equity in loss from unconsolidated affiliate included its share
of Santee Dairies' costs and expenses incurred to relocate to the new facility
and costs incurred to start up and commission the new plant. Since June 1998,
Stater Bros. has incurred increased prices for fluid milk and other products
purchased pursuant to a requirements contract with Santee Dairies, as the
result of delays and higher-than-anticipated start-up and operating costs of
the new Santee Dairies facility.
Income Before Income Taxes. Income before income taxes amounted to $4.0
million, $22.8 million and $27.1 million for the 1998, 1997 and 1996 fiscal
years, respectively.
Net Income. Net income amounted to $2.5 million in 1998, $13.5 million in
1997 and $16.0 million in 1996.
40
<PAGE>
Liquidity and Capital Resources
Working Capital Requirements. Stater Bros. historically has funded its daily
cash flow requirements through funds generated from operations and from
borrowings from short-term revolving credit facilities. Stater Bros.' existing
credit agreement as amended, expires in June 2000, and consists of a revolving
credit facility for working capital of $15.0 million, all of which was
available at June 27, 1999, and a standby letter of credit facility with a
maximum availability of $25.0 million, of which $14.2 million was available at
June 27, 1999. The standby letter of credit facility is maintained pursuant to
Stater Bros.' workers' compensation and general liability self-insurance
requirements.
Stater Bros. did not have short-term borrowings outstanding at June 27, 1999
or at fiscal years end 1998, 1997 and 1996, and Stater Bros. did not incur
short-term borrowings during the 1999 interim period or during fiscal 1998,
1997 and 1996.
On August 6, 1999, Stater Bros. Markets entered into a new unsecured bank
credit facility with Bank of America. The new credit facility consists of a
$50.0 million revolving unsecured credit facility with an additional $25.0
million facility available for the issuance of commercial and standby letters
of credit. The term of the new credit facility is three years. It is expected
that borrowings under the new credit facility will be used for certain working
capital and corporate purposes. At August 17, 1999 there were no revolving
borrowings outstanding thereunder and the aggregate amount of all letters of
credit issued thereunder was approximately $10.0 million. See "Description of
Certain Indebtedness."
Working capital amounted to $90.7 million at September 27, 1998, $92.0
million at September 28, 1997, $63.5 million at September 29, 1996 and $75.7
million at June 27, 1999. Stater Bros.' current ratio was 1.78:1, 1.81:1 and
1.50:1 for fiscal year end 1998, 1997 and 1996, respectively, and 1.60:1 as of
June 27, 1999. Fluctuations in working capital and current ratios are not
unusual in the industry.
Cash Flows from Operating Activities. Net cash provided by operating
activities amounted to $26.4 million in fiscal 1998, $9.7 million in fiscal
1997, $27.9 million in fiscal 1996. The net cash provided by operating
activities for the 1999 interim period amounted to $30.6 million and consisted
of increased earnings and an increase in accounts receivables, prepaid
expenses, other assets, accounts payable and accrued liabilities, net of a
decrease in inventories. Net cash provided by operating activities for the
1998 interim period, amounted to $11.0 million and consisted of increases in
accounts payable, inventories, other assets and prepaid expenses. The change
in net cash provided by operating activities between 1998, 1997 and 1996 is
primarily due to fluctuations in inventories and related accounts payable. In
September 1996, Stater Bros. increased its inventory and related accounts
payable in anticipation of the implementation of Stater Bros.' 60th
Anniversary Marketing Program in the first quarter of fiscal 1997 and the
subsequent decrease in accounts payable in the first quarter of 1997. Fiscal
1998 reflects a return to a more traditional year end balance of accounts
payable. Fluctuations in net cash provided by operating activities are not
unusual in the industry.
Financing Activities. Net cash used by financing activities amounted to
$972,000 and $941,000 for the 1999 interim period and the 1998 interim period,
respectively, and consisted of reductions in capital lease obligations. Net
cash used in financing activities during fiscal 1998 amounted to $1.3 million
and consisted of reductions in capitalized lease obligations. Net cash
provided by financing activities in fiscal 1997 amounted to $12.8 million and
resulted from the issuance of $100.0 million of 9% senior subordinated notes,
redemption of the Series B preferred stock for $69.4 million, costs and
expenses to issue debt of $10.5 million, payment of dividends on the Series B
preferred stock of $6.2 million and reduction to amounts due on capitalized
lease obligations of $1.2 million. Net cash used in financing activities in
fiscal year 1996 amounted to $5.2 million and consisted of reductions in
capital lease obligations and payments of deferred dividends.
Investing Activities and Capital Expenditures. Net cash used in investing
activities for the 1998, 1997 and 1996 fiscal years, amounted to $27.0
million, $8.6 million and $3.8 million, respectively. Net cash used by
investing activities for the 1999 interim period amounted to $31.5 million,
compared to net cash used by investing activities of $21.1 million for the
1998 interim period. The difference in net cash used by investing
41
<PAGE>
activities between comparable periods is due to Stater Bros.' capital
expenditures during such periods, net of proceeds from asset dispositions.
Capital expenditures amounted to $26.3 million in 1998, $20.3 million in 1997
and $22.4 million in 1996. Capital expenditures amounted to $34.4 million for
the 1999 interim period compared to $20.3 million for the 1998 interim period.
The increase in capital expenditures in fiscal 1999 was due primarily to the
purchase of store point of sale scan systems and related equipment and
warehouse material handling equipment purchased in anticipation of the
acquisition of 43 stores from Albertson's, which amounted to $10.6 million.
Additionally, capitalized expenditures to achieve Year 2000 compliance
amounted to $3.0 million. During the second quarter of fiscal 1999, Stater
Bros. was reimbursed by the landlord for costs incurred to construct the new
Loma Linda replacement supermarket, which opened in December 1998. Capital
expenditures for the thirty-nine weeks ended June 27, 1999, were incurred to
open a new 37,400 square foot replacement supermarket in Loma Linda,
California. Additionally, Stater Bros. completed five major remodels and six
minor remodels and installed 31 new point of sale scan systems. The difference
in net cash used in investing activities between fiscal 1998, 1997 and 1996
was due to Stater Bros.' capital expenditures during such periods, net of
proceeds from asset dispositions.
Capital expenditures for fiscal 1998 included costs to complete construction
and to open two supermarkets, to begin construction on a third supermarket
(which opened in December 1998) and to complete five minor and six major
remodels. Additionally, during fiscal 1998, Stater Bros. installed 15 new
point of sale scan systems in its supermarkets. Capital expenditures for 1998
were funded through cash flow from operations.
Capital expenditures for 1997 amounted to $20.3 million and included costs
incurred to complete thirteen minor remodels and one major remodel, acquire
one supermarket site and to remodel a perishable products warehouse. Two
supermarkets were under construction during fiscal 1997. Capital expenditures
for fiscal 1997 were funded from the proceeds of an October 1996 sale and
leaseback transaction and from a portion of the net proceeds from the July
1997 issuance of the 9% senior subordinated notes.
In October 1996 (fiscal 1997), Stater Bros. completed a sale and leaseback
transaction with an unrelated third party for four of Stater Bros.'
supermarkets. The net proceeds from the sale of the four supermarkets amounted
to approximately $16.0 million, which approximated fair market value. Stater
Bros. entered into leases for the four supermarkets with initial terms of 20
years and with options available to Stater Bros. which extend the lease terms
up to an additional 20 years. The gains from the sale of the supermarkets were
approximately $2.5 million and will be deferred and amortized into income over
the initial terms of the leases. As a result of the additional rent expenses,
net of reductions in depreciation expense, due on the four supermarkets,
operating expenses increased by approximately $1.2 million in fiscal 1997.
Capital expenditures for 1996 amounted to $22.4 million and included costs
incurred to construct a replacement supermarket, to complete eight major
remodels and eight minor remodels and capital expenditures incurred to acquire
store equipment to support the 1996 merchandising expansion and upgrade
program. Capital expenditures in 1996 were financed primarily by proceeds from
the January 1996 sale and leaseback of five supermarkets.
In January 1996 (fiscal 1996), Stater Bros. completed a sale and leaseback
transaction with an unrelated third party for five of Stater Bros.'
supermarkets. Gross proceeds from the sale of the five supermarkets amounted
to approximately $18.5 million. Stater Bros. entered into leases for the five
supermarkets with initial terms of 20 years and with options available to
Stater Bros. which extend the lease terms up to an additional 20 years. The
gains from the sale of the supermarkets are deferred and will be amortized
into income over the initial term of the leases. As a result of the additional
rent expenses, net of reductions in depreciation expense, paid on the five
supermarkets, operating expenses increased by approximately $900,000 in fiscal
1996 and by $259,000 in fiscal 1997.
Management believes that, in addition to the purchase price related to the
acquisition (including related capital expenditures), cash capital
expenditures for fiscal 1999 will be approximately $28.0 million. Management
believes that operating cash flow will be sufficient to meet Stater Bros.'
currently identified operating needs and scheduled capital expenditures.
42
<PAGE>
Conversion and Redemption of Series B Preferred Stock. In March 1994, Stater
Bros. acquired, for $14.7 million, an option available to Stater Bros. to
convert 50,000 shares of Stater Bros. common stock held by Craig Corporation
into 693,650 shares of 10.5% Series B preferred stock on or before March 8,
1996. Effective March 8, 1996, Stater Bros. exercised its option. The Series B
preferred stock which resulted was redeemed by Stater Bros. in August 1997 for
$69.4 million plus accrued and unpaid dividends.
Recent Accounting Standards
The Financial Accounting Standards Board has issued Statements of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share"; No. 130,
"Reporting on Comprehensive Income"; and No. 131, "Disclosures about Segments
of an Enterprise and Related Information", all of which were adopted by
Stater Bros. in its fiscal year ending on September 27, 1998 (fiscal 1998).
The adoption of SFAS No. 128, No. 130 and No. 131 did not have a material
effect on its financial position or its results of operations in fiscal 1998.
Effect of Inflation and Competition
Stater Bros.' performance is affected by inflation. In recent years the
impact of inflation on the operations of Stater Bros. has been moderate. As
inflation has increased expenses, Stater Bros. has recovered, to the extent
permitted by competition, the increase in expenses by increasing prices over
time. However, the economic environment in Southern California continues to
challenge Stater Bros. to become more cost efficient as its ability to recover
increases in expenses through price increases is diminished. The future
results of operations of Stater Bros. will depend upon the ability of Stater
Bros. to adapt to the current economic environment as well as to the current
competitive conditions.
Stater Bros. conducts business in an industry segment, the operation of
retail food supermarkets, which offers for sale to the public most merchandise
typically found in supermarkets. The supermarket industry is highly
competitive and is characterized by low profit margins. Stater Bros.' primary
competitors include Lucky, Vons, Albertson's, Ralph's and a number of
independent supermarket operators. Competitive factors typically include the
price, quality and selection of products offered for sale, customer service
and the convenience and location of retail facilities. Stater Bros. monitors
competitive activity and senior management regularly reviews Stater Bros.'
marketing and business strategy and periodically adjusts them to adapt to
changes in Stater Bros.' primary trading area.
Year 2000 Compliance
The efficient operations of Stater Bros. are dependent, in part, upon its
computer software programs, systems, and processes, which are used in several
key areas, including, but not limited to, supermarket operations, warehousing
and distribution, merchandising and purchasing, inventory management, and
accounting and financial reporting. In 1997, Stater Bros. established a Year
2000 compliance committee and developed a Year 2000 compliance plan. Stater
Bros.' Year 2000 compliance plan addresses Stater Bros.' information systems,
communications with vendors, financial institutions and others, and provides
for contingency planning. Stater Bros. is in the process of updating its
information systems for Year 2000 compliance requirements and has engaged
independent consultants since mid-1998 to assist in achieving Year 2000
compliance with its information systems by September 1999. Additionally,
Stater Bros. has also been in communication with some of its vendors,
financial institutions and others whose computer software, programs and
information systems may interface with those of Stater Bros. to assess the
status of their compliance with Year 2000 requirements. Failure of companies
that Stater Bros. conducts business with to comply with the Year 2000
requirements could have an adverse effect on Stater Bros.' operations.
Based on the information currently available, Stater Bros. believes it will
meet the Year 2000 compliance requirements through a combination of
information systems modifications and through the acquisition of new equipment
and technology that are Year 2000 compliant. Stater Bros.' Year 2000
compliance committee is
43
<PAGE>
developing a contingency plan for its information systems and is developing
contingency plans in the event vendors, financial institutions and others that
Stater Bros. conducts business with do not comply with the Year 2000
requirements. Stater Bros. believes that costs required to replace or modify
information systems, including scheduled replacements of in-store point of
sale equipment, will approximate $8.4 million, of which $6.9 million will be
capitalized and $1.5 million will be expensed. Through June 27, 1999, Stater
Bros. has incurred capitalized expenditures of $6.2 million and operating
expenses of $982,000. Stater Bros. believes that it will successfully achieve
compliance with the Year 2000 requirements by September 1999, however, no
assurances can be given that Stater Bros.' information systems and its
vendors, financial institutions and others will be successful in achieving
Year 2000 compliance.
Stater Bros.' ability to timely implement its Year 2000 compliance plan may
be adversely affected by a variety of factors, some of which are beyond Stater
Bros.' control, including the potential of unforeseen implementation problems,
delays in the delivery of products, and disruption of store operations
resulting from a loss of power or communication links between stores,
distribution centers and headquarters. Based on currently available
information, Stater Bros. is unable to determine whether such interruptions
are likely to have a material adverse effect on Stater Bros.' results of
operations, liquidity or financial condition.
Costs to Integrate Newly Acquired Stores
During the fiscal quarter ending September 26, 1999, Stater Bros. expects to
incur up to $5.0 million of costs associated with the acquisition and related
integration activities.
44
<PAGE>
BUSINESS
General
Stater Bros., the largest independently-owned supermarket chain in Southern
California, was founded in 1936 when the first Stater Bros. market opened in
Yucaipa, California, located in the Inland Empire. Historically, Stater Bros.'
supermarkets have been concentrated in the Inland Empire counties of San
Bernardino (46 stores) and Riverside (35 stores), one of the fastest growing
areas of the United States. Stater Bros.' 112 existing supermarkets are
currently located as follows:
. Inland Empire: 81;
. Eastern Los Angeles and Kern Counties: 15; and
. Orange County: 16.
Stater Bros. is recognized as a low price leader and its supermarkets offer
a high level of customer service, a broad selection of brand-name merchandise,
and quality meats and produce. All of Stater Bros.' supermarkets have full-
service meat departments and a broad selection of produce. In addition, many
of the supermarkets have full service delicatessens and service bakery
departments. Stater Bros., with sales in excess of $1.76 billion for the
twelve months ended June 27, 1999, is the largest supermarket chain in its
primary market area.
La Cadena Investments is the sole holder of Stater Bros.' common stock. La
Cadena is a California general partnership whose partners include Jack H.
Brown, Chairman of the Board, President and Chief Executive Officer of Stater
Bros. and one other present and one other former member of senior management.
Jack H. Brown has a majority interest in La Cadena and is the managing general
partner with the power to vote the shares of Stater Bros. held by La Cadena.
The Acquisition
On May 7, 1999, Stater Bros. entered into an agreement with Albertson's to
purchase 43 supermarkets and one future store site in Stater Bros.' existing
and contiguous market areas. The stores were formerly operated by Albertson's
or Lucky Stores and are being divested in connection with the merger of
Albertson's and the parent of Lucky Stores. The purchase price is estimated to
be $147 million for land, buildings and equipment plus the value of
inventories on hand at closing, estimated to be $39 million. Acquisition of
the stores will take place sequentially over a thirty-day period which is
expected to commence on or about August 9, 1999. The acquired stores will be
operated under the Stater Bros. name as fully integrated units within the
Stater Bros. system. It is expected that each acquired store will be reopened
under the Stater Bros. name within two days of acquisition.
The acquired supermarkets are located as follows:
<TABLE>
<S> <C>
. Riverside County...................................................... 5
. Orange County......................................................... 14
. Los Angeles County.................................................... 14
. San Diego County...................................................... 10
---
43
===
</TABLE>
Benefits of the Acquisition
Management believes that the acquisition will provide a number of key
benefits, including the following:
. Increase Leading Market Share in the Inland Empire. Stater Bros.
currently is the largest supermarket chain in both San Bernardino and
Riverside counties. The acquisition will increase Stater Bros.' presence
in these counties from 81 to 86 supermarkets and, more importantly, will
provide Stater Bros. with a strong presence (three supermarkets) in the
Palm Springs area, where Stater Bros. does not have any existing
supermarkets.
45
<PAGE>
. Enhance Presence in Existing and Contiguous Market Areas. Stater Bros.
will enhance significantly its market presence in Orange County and the
eastern and Palmdale areas of Los Angeles County, where it presently
operates. Stater Bros. will increase its presence from 16 to 30
supermarkets in Orange County, a region where Stater Bros. has
experienced its strongest sales volume increases for the most recent two
fiscal years. Stater Bros. will also increase its presence in eastern
Los Angeles County from 13 to 27 supermarkets including establishing a
presence in the Palmdale area with three stores. In addition, Stater
Bros. will enter northern San Diego County with 10 supermarkets and one
future store site. Management believes that northern San Diego County is
an attractive market based on its strong demographic trends and
proximity to Stater Bros.' headquarters and warehouse/distribution
facilities.
. Leverage Stater Bros.' Market Presence. As discussed above, Stater Bros.
currently operates in market areas which are overlapping or contiguous
to all of the 43 supermarkets being acquired. Since Stater Bros. has
been advertising within these areas for many years, management believes
Stater Bros.' prospective customers are familiar with the Stater Bros.
name and understand Stater Bros.' market position as the low price
leader. In connection with the acquisition, Stater Bros. plans to direct
the advertising expenses of the acquired stores towards a "direct-mail"
strategy. As such, management believes that Stater Bros. can leverage
its advertising expenses to achieve greater awareness among potential
customers within its operating territories.
. Increase Purchasing Leverage. Management expects that Stater Bros.'
merchandise purchases will increase by approximately 34% following the
acquisition. As a result, management believes that Stater Bros. should
be able to negotiate more favorable terms with its vendors.
. Improve Warehousing and Distribution Efficiencies. Stater Bros.
currently leases approximately 1.3 million square feet of warehouse and
distribution space located in Colton, California, which is central to,
and can efficiently supply, Stater Bros.' existing 112 supermarkets.
Management believes that its existing warehouse and distribution
facilities will be adequate for its currently identified needs,
including supplying the 43 supermarkets to be acquired in the
acquisition. During the first quarter of calendar 1999, Stater Bros.
implemented productivity-related initiatives in its warehouse and
distribution operations. Stater Bros. is currently realizing cost
savings from these initiatives and expects to realize additional
economies by distributing the added product requirements for the
acquired stores.
46
<PAGE>
Market Areas
Southern California. Stater Bros.' primary operating territory includes San
Bernardino and Riverside counties. Following the acquisition, Stater Bros.
will also maintain significant store counts in Orange and Los Angeles
counties. As shown in the table below, a sizable population base resides
within Stater Bros.' operating territory. Additionally, the table shows that
there has been a relatively strong level of recent net migration into Stater
Bros.' primary market area. Specifically, the San Bernardino/Riverside
Metropolitan Statistical Area or MSA ranked sixth in 1998 among 256 domestic
MSAs in terms of net migration. Modest home prices represent one of the
factors promoting growth in the Inland Empire. This strong growth is also
evidenced by the significant percentage increase in the number of households
within the San Bernardino/ Riverside MSA over the last ten years. Only the Las
Vegas, Nevada MSA ranks higher in terms of this metric.
<TABLE>
<CAPTION>
10-yr Growth
Stater Median Rate in Number
Metropolitan Statistical Bros. 1998 1998 Net Home Price of Households
Area(1) Stores(2) Population Migration(3) 1Q99 (1986-1996)
- ------------------------ --------- ---------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C>
San
Bernardino/Riverside... 86 3,114,100 36,100 $108,500 45.9%
National Rank.......... 11 6 114 2
Orange County........... 30 2,721,700 27,000 $249,500 16.5%
National Rank.......... 15 11 6 92
Los Angeles/Long Beach.. 27 9,213,500 (9,600) $186,800 5.2%
National Rank.......... 1 248 20 195
San Diego County........ 10 2,780,600 30,300 $216,700 19.7%
National Rank.......... 14 9 12 60
</TABLE>
- --------
(1) Represents a core area containing a large population nucleus, together
with adjacent communities having a high degree of economic and social
integration with that core. There are 256 MSAs recognized in the
United States, excluding 3 in Puerto Rico.
(2) Pro Forma for the acquisition. Excludes two stores located in Kern County.
(3) The difference between the influx of new people, including both
international and domestic migration, and the outflow of current
residents.
Sources: United States Census Bureau and National Association of Realtors.
Inland Empire. Pro forma for the acquisition, over 55% of Stater Bros.'
stores will be located in the Inland Empire region of Southern California. The
Inland Empire is comprised primarily of San Bernardino and Riverside Counties.
Since 1980, this region has been one of the fastest growing areas in the
United States. Specifically, from 1980 to 1998, the Inland Empire's population
more than doubled to approximately 3.1 million.
Several factors have contributed to the Inland Empire's significant growth,
including affordable housing, availability of land, affordable industrial and
commercial office space, and the region's favorable geographic location and
quality of life. According to the National Association of Realtors, the median
home price in the first quarter of 1999 for the San Bernardino/Riverside MSA
was approximately $108,500, compared to $186,800, $216,700 and $249,500 for
the Los Angeles/Long Beach, San Diego County and Orange County MSAs,
respectively. Additionally, low commercial and industrial lease rates,
compared to those of the adjacent coastal counties, coupled with the region's
standing as a logistics hub and freight gateway, have prompted many firms to
expand or relocate their operations to the Inland Empire.
According to the California Department of Finance, the Inland Empire should
continue to be one of the fastest growing regions in the United States,
increasing its population to 4.6 million by 2010, representing a compound
annual growth rate of approximately 3.4%.
47
<PAGE>
Business Strategy
Stater Bros. offers its customers a high level of customer service and broad
selections of grocery, meat, produce, liquor and general merchandise. All of
Stater Bros.' supermarkets have full-service meat departments and a broad
selection of produce. In addition, many of the supermarkets have service
delicatessens and service bakery departments.
Stater Bros. believes that 62 years of continuous service in the Inland
Empire, its commitment to everyday low prices and the involvement of members
of its management in community activities have contributed significantly to
Stater Bros.' leading market position. Management has developed an operating
strategy which it believes will foster continued growth in revenues and EBITDA
and help maintain market share in its market area. Specifically, the strategy
includes the following:
Everyday Low Prices. Stater Bros. uses the "everyday low price" format,
combined with an aggressive advertising program, as an integral part of its
strategy to provide the best overall supermarket value in its market area.
Stater Bros. supplements its everyday low price format with temporary price
reductions on selected food and non-food merchandise. Stater Bros.'
information systems and distribution network give management the flexibility
to respond to market conditions by rapidly adjusting its prices.
Quality and Breadth of Selection. A key factor in Stater Bros.' business
strategy is to provide its customers with a variety of quality brand-name
merchandise as well as alternative selections of high quality private label
and generic brands of merchandise. Stater Bros. carries an average of 35,000
items in each of its supermarkets and places particular emphasis on the
freshness and quality of its meat and produce, which management believes
contributes significantly to attracting customers to its supermarkets. Stater
Bros. is able to maintain consistently fresh and high quality meat and produce
because this merchandise is received and distributed through its central
distribution facilities where the quality and freshness of the merchandise are
carefully controlled. Each supermarket features a full-service meat
department, where custom-cut meats, as well as prepackaged self-service
selections of meat, are available. Stater Bros.' close proximity to the
Southern California produce growers and its strong relationships with produce
distributors help to ensure a reliable supply of high quality produce.
Additionally, Stater Bros. has a product quality assurance inspector who
regularly tests and samples product delivered to the distribution center.
Customer Service. Stater Bros. considers customer service and customer
confidence to be critical to the success of its business strategy. This
strategy, to provide courteous and efficient customer service through specific
programs and training, is a focus of the executive officers and is implemented
at all levels of employees. Stater Bros. maintains an intensive checker
training school to train prospective checkers and to provide a refresher
program for existing checkers. Store efficiencies are increased by employing
technological advances, such as computerized scanning check-out equipment in
each location and on-line communications between Stater Bros.' supermarkets
and the mainframe computer which is located in the main office. All of Stater
Bros.' supermarkets provide customers with purchase carry-out service and have
express check-out lanes for purchases of ten items or less.
Centralized Warehousing and Distribution Operations. Management believes
that its centralized warehousing and distribution operations give Stater Bros.
a competitive advantage. Upon completion of the acquisition, Stater Bros.'
centralized distribution facilities will be located an average distance of
40.5 miles from its supermarkets, a nine-mile increase from the pre-
acquisition average. Most stores can be reached without using the most
congested portions of the Southern California freeway system. With a
distribution facility located in the Inland Empire, management believes that
Stater Bros. has a shorter average haul, in time and distance, than any of its
major competitors.
48
<PAGE>
Store Profile and Locations
Stater Bros.' existing supermarkets have well-established locations and low
overhead expenses, including fixed rent payments in most cases. Stater Bros.
believes that its supermarkets are well-maintained and generally require
capital expenditures only for customary maintenance. An average Stater Bros.
supermarket is approximately 30,000 square feet, while newly constructed
Stater Bros. supermarkets range from approximately 35,300 to 43,500 square
feet. The average size of the stores being acquired in the Acquisition, 42,579
square feet, is similar in size to the newer Stater Bros. supermarkets. Stater
Bros.' supermarkets typically utilize approximately 72% of total square feet
for retail selling space. Stater Bros. operates its supermarkets with minimal
back-room storage space because of the close proximity of its distribution
facility to its store locations. Generally, Stater Bros. supermarkets are
similarly designed and stocked, allowing customers to find items easily in
most locations.
Substantially all of Stater Bros.' 112 supermarkets, and the 43 stores being
acquired in the acquisition, are located in neighborhood shopping centers in
well-populated residential areas. Stater Bros. endeavors to locate its
supermarkets in growing areas that will be convenient to potential customers
and will accommodate future supermarket expansion.
Management continually reviews the acquisition of sites for new
supermarkets. In an effort to determine sales potential, new supermarket sites
are carefully researched and analyzed by management for population shifts,
zoning changes, traffic patterns, nearby new construction and competitive
locations. Stater Bros. works with developers to attain Stater Bros.' criteria
for potential supermarket sites, and to insure adequate parking and a
complementary co-tenant mix.
Store Expansion and Remodeling
Stater Bros. has historically focused its expansion in the Inland Empire
and, more recently, Orange and Los Angeles counties and adjacent market areas.
Such expansion has been accomplished through improving and remodeling existing
stores and constructing new supermarkets.
Stater Bros. monitors sales and profitability of its operations on a store-
by-store basis and enlarges, remodels or replaces stores in light of their
performance and management's assessment of their future potential. Since the
beginning of fiscal 1996, approximately 50% of Stater Bros.' supermarkets have
been either newly constructed or remodeled. Minor remodels cost between
$100,000 and $250,000 and typically include new fixtures, a change in decor,
and the addition of one or more specialty service departments such as a
delicatessen or bakery. Major remodels cost in excess of $250,000, typically
involve more extensive refurbishment of the store's interior and often
increase the retail selling space per store. Expansions entail enlargement of
the store building and typically include breaking through an exterior wall.
The primary objectives of remodelings and expansions are to improve the
attractiveness of supermarkets, to increase sales of higher margin product
categories and, where feasible, to increase selling area. Stater Bros.
conducts all of its new construction and remodeling through its wholly-owned
subsidiary, Stater Bros. Development, Inc., which serves as the general
contractor for all of Stater Bros.' construction projects.
In fiscal fourth quarter 1999, Stater Bros. intends to complete one major
remodel and two minor remodels in its existing stores. Stater Bros. also plans
to complete either minor or major remodels in all of the stores purchased in
the acquisition. Stater Bros. estimates that the remodeling of acquired stores
will cost approximately $23 million (including new scan systems and MIS
related equipment installed at each store). These expenditures will be funded
with a portion of the proceeds from the offering of the outstanding notes. In
addition, upon successful integration (including the remodeling program) of
the stores purchased in the acquisition, Stater Bros. plans to open
approximately two to five new stores per year, based upon a number of factors,
including customer demand, market conditions, profitability, costs of opening
and availability of financing for such new stores.
49
<PAGE>
The following table sets forth certain statistical information with respect
to Stater Bros.' supermarket expansion and remodeling for the periods
indicated.
<TABLE>
<CAPTION>
Fiscal Year Ended 39 Weeks Ended
----------------------------- -----------------
Sept. 29, Sept. 28, Sept. 27, June 28, June 27,
1996 1997 1998 1998 1999
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Number of supermarkets:
Opened..................... 1 -- 2 2 1
Replaced................... (1) -- -- -- (1)
Closed..................... -- -- -- -- --
Total at end of year....... 110 110 112 112 112
Minor Remodel.............. 8 13 5 3 6
Major Remodel.............. 8 1 6 5 5
</TABLE>
Warehouse and Distribution Facilities
Stater Bros.' main complex warehouse and distribution facilities and
administrative offices are located in Colton, California, and as of June 27,
1999 encompassed approximately 1,268,000 square feet. The facilities include
warehouses for:
. grocery, produce and deli products;
. health and beauty aids;
. meats and frozen products; and
. bakery merchandise.
Approximately 84% of the products offered for sale in Stater Bros.'
supermarkets are processed through Stater Bros.' warehouse and distribution
facilities.
During the first calendar quarter of 1999, Stater Bros. began an expansion
and a reorganization study of its warehouse and distribution facilities. This
expansion, which was completed in the second calendar quarter of 1999,
included the addition of approximately 250,000 square feet of newly leased
warehouse facilities located approximately four miles from the main complex.
Management believes its existing warehouse and distribution facilities will be
adequate for its currently identified needs, including supplying the stores to
be acquired from Albertson's.
Stater Bros.' warehouse and distribution facilities are centrally located
and are an average distance of 31.5 miles from its supermarkets. Upon
completion of the acquisition, the average distance will increase to
40.5 miles. Most supermarkets can be reached without using the most congested
portions of the Southern California freeway system.
Stater Bros.' transportation fleet consists of modern, well-maintained
vehicles. As of June 27, 1999, Stater Bros. operated approximately 113
tractors and 302 trailers, approximately 5% of which were leased by Stater
Bros. Stater Bros. also operates a repair terminal at the Colton distribution
facility. Upon completion of the acquisition, Stater Bros. will increase its
fleet by approximately 25 tractors and 80 trailers, the majority of which will
be leased.
Operations
Stater Bros.' supermarkets are well maintained, provide off-street parking
and generally are open from 7:00 a.m. until 10:00 p.m. or 11:00 p.m., seven
days a week, including all holidays with the exception of Christmas Day.
Because Stater Bros. operates all of its supermarkets under a single format,
management believes it is able to achieve certain operating economies.
50
<PAGE>
Store Management. Each supermarket is managed by a store manager and an
assistant manager, each of whom receives a base salary and may receive a bonus
based on the individual supermarket's overall performance and management of
labor costs within the supermarket. Additionally, beginning with fiscal year
1998, the store manager and assistant manager could receive an additional
bonus based on their store's sales increase when compared to a specific target
sales increase. The store manager and assistant manager are supported by their
store management staff who have the training and skills necessary to provide
proper customer service, operate the store and manage personnel in each
department. The store manager is also supported by individual department
managers for grocery, meat, produce, and where applicable, bakeries and
delicatessens. Store managers report to one of six district managers, each of
whom is responsible for an average of 18 supermarkets. District managers
report to one of three regional vice presidents.
Purchasing and Marketing. Stater Bros. uses an aggressive everyday low price
format supported by an aggressive advertising campaign including radio, TV,
newspaper and direct mail programs. Stater Bros.' strategy is to provide its
customers with the best overall supermarket value in its primary market areas.
Stater Bros. supplements its everyday low price structure with chain-wide
temporary price reductions on selected food and non-food merchandise.
A key factor in Stater Bros.' business strategy is to provide its customers
with a variety of quality brand-name merchandise as well as alternative
selections of high-quality private label and generic brands. Stater Bros.
believes that it is able to satisfy customers' desire for variety in selection
by stocking most of its supermarkets with approximately 35,000 items. Stater
Bros. places particular emphasis on the freshness and quality of its meat and
produce and maintains high standards for these perishables by processing and
distributing the merchandise through its perishable warehouses and
distribution facilities.
Advertising and Promotion. Stater Bros. promotes sales through aggressive
advertising in local and regional newspapers, on television and radio, and
through direct mail programs and printed circulars. The geographic location of
Stater Bros.' supermarkets allows it to reach its target consumers through a
variety of media and Stater Bros. aggressively advertises its everyday low
prices through local and regional newspapers, direct mail and printed
circulars as well as advertisements on radio and television. Stater Bros.
believes it is the largest supermarket chain print advertiser in local
newspapers and circulars in the Inland Empire. Stater Bros. advertising
features high-demand and name brand products at competitive prices and avoids
the use of promotional activities such as games, gimmicks or double coupons.
Stater Bros. actively promotes its everyday low prices strategy in its
advertising and operations, and virtually all buying discounts, promotion and
slotting allowances it receives are passed on to its customers through lower
prices.
Customer Service. Stater Bros. considers customer service and customer
confidence to be critical to the success of its business strategy. This
strategy, to provide courteous and efficient customer service through specific
programs and training, is a focus of the executive officers and is implemented
at all levels of employees. Stater Bros. maintains an intensive checker
training school to train prospective checkers and to provide a refresher
program for existing checkers. Store efficiencies are increased by employing
technological advances, such as computerized scanning check-out equipment in
each location and on-line communications between Stater Bros.' supermarkets
and the mainframe computer which is located in the main office. All of Stater
Bros.' supermarkets provide customers with purchase carry-out service and have
express check-out lanes for purchases of 10 items or less.
Management Information Systems. Stater Bros.' management information systems
and point-of-sale scanning technology reduce the labor costs attributable to
product pricing and customer check-out, and provide management with
information that facilitates purchasing, receiving and management of inventory
and accounts payable. Stater Bros. has point-of-sale scanning checkout
technology in all of its stores. All stores use electronic systems for
employee time and attendance records, inventory orderings, and labor
scheduling, which assist store management in developing a more efficient and
customer-sensitive work schedule.
During fiscal 1998, Stater Bros. installed in fifteen stores a new
generation of electronic scan systems, and has installed an additional 28 such
systems during fiscal 1999. These new systems are more customer oriented,
operate more efficiently and reduce the time required to check out customers.
51
<PAGE>
During fiscal 1995, Stater Bros. completed the installation of the Stater
Express(R) system in all of Stater Bros.' supermarkets. Stater Express(R) is a
combined supermarket technology platform that includes enhanced systems for
check verification and acceptance and provides alternative payment choices,
such as debit and credit cards. Stater Express(R) also provides each
supermarket with the technology required to print in-store advertising signs
and connects each supermarket to Stater Bros.' host computer for data
transfers between the supermarkets and Stater Bros.' main office. Stater Bros.
has obtained a federal service mark for the name "Stater Express."
Santee Dairies, LLC
Stater Bros. and Hughes Family Markets currently each own a 50% interest in
Santee Dairies, LLC, and have jointly owned the Santee Dairies operation since
1986. Recently, through a series of transactions, Kroger Company became the
indirect owner of Hughes, which it operates as Ralph's supermarkets. Santee
Dairies operates one of the largest dairy plants in California and provides
fluid milk products to Stater Bros., Ralph's, and other customers in Southern
California. Santee Dairies processes, packages and distributes whole milk,
low-fat and non-fat milk, as well as orange juice, fruit drinks and certain
other cultured milk products under the Knudsen, Foremost and certain store
brand names. Santee Dairies is the exclusive licensee of the Knudsen trademark
from Kraft Foods, Inc. for fluid milk, juices and certain other cultured milk
products in the Southern California market. In addition, Santee Dairies is the
exclusive licensee for Foremost Farms USA, Cooperative of the Foremost
trademark for fluid milk in Southern California. Santee Dairies also
distributes Hershey chocolate milk under license. In calendar 1998, Santee
Dairies processed approximately 66 million gallons of fluid products,
including 49 million gallons of fluid milk. Total revenues in Santee Dairies'
53-week fiscal year ended January 2, 1999 were $170.7 million, of which
approximately $75.7 million were sales to Stater Bros. and Ralph's. Santee
Dairies also sells to unaffiliated supermarkets, independent food
distributors, military bases and food service providers in Southern
California.
In 1998 Santee Dairies moved to a new dairy plant in City of Industry,
California. The new dairy increased Santee Dairies' capacity to process milk
to approximately 250,000 to 350,000 gallons per day, with the ability to
expand capacity to approximately 500,000 gallons per day. Plans for the new
dairy contemplated that, when operating at full capacity, the new dairy would
lower Santee Dairies' costs of producing fluid milk and other products.
However, the new dairy has not, to date, achieved the planned operating
efficiencies and Santee Dairies' costs of production have been higher than
anticipated.
Stater Bros. and Santee Dairies are parties to a ten-year fluid milk
purchase agreement entered into in August 1997. It requires that Stater Bros.
purchase its requirements of fluid milk and certain other products, subject to
a minimum volume each year equal to approximately 80% of the volume purchased
during Stater Bros.' 1996 fiscal year. Prices under the agreement are
calculated to cover Santee Dairies' direct and indirect costs of production,
including financing costs. However, recoverable costs by Santee Dairies may
not include under any circumstances amounts owing solely by reason of the
acceleration of principal payments under any loan agreement to which Santee
Dairies is a party. During 1998, the prices paid by Stater Bros. pursuant to
the fluid milk agreement were adversely affected by delays in completion of
the new dairy, cost overruns and lower production volumes than anticipated.
Beginning in June 1998, Stater Bros. accepted and paid incremental prices of
approximately $1.0 million per month to Santee Dairies as the result of its
increased cost structure. In February 1999, incremental prices paid to Santee
Dairies by Stater Bros. decreased to approximately $800,000 per month. Stater
Bros. believes that further reductions will be achieved in the incremental
prices paid for products purchased from Santee Dairies, but no assurances can
be given that such incremental prices will be completely eliminated.
Stater Bros. accounts for its investment in Santee Dairies using the equity
method of accounting.
Properties
Stater Bros. leases its warehouses, distribution facilities and main office
which are located in Colton, California, and management believes that its
central warehouses and distribution facilities are well maintained
52
<PAGE>
and are adequate to serve the currently identified expansion plans of Stater
Bros., including stores acquired in the acquisition.
The following schedule presents Stater Bros.' warehouse and distribution
facilities by product classification and the size of each facility as of the
dates indicated.
<TABLE>
<CAPTION>
As of As of
Dec. 27, June 27,
1998 1999
--------- ---------
Facility Square Feet
-------- -------------------
<S> <C> <C>
Grocery................................................ 416,000 416,000
Grocery--Offsite....................................... 237,000 414,000
Produce/deli........................................... 118,000 118,000
Meat................................................... 116,000 116,000
Frozen--Offsite........................................ -- 74,000
Health and beauty aids................................. 35,000 35,000
Bakery................................................. 21,000 21,000
Support and administrative offices..................... 74,000 74,000
--------- ---------
Total................................................ 1,017,000 1,268,000
========= =========
</TABLE>
As of June 27, 1999, Stater Bros. owned 24 of its supermarkets and leased
the remaining 88 supermarkets. Management believes that its supermarkets are
well maintained and adequately meet the expectations of its customers.
The following schedule presents Stater Bros.' stores by size, county, and
the number of stores that are either leased or owned as of June 27, 1999.
<TABLE>
<CAPTION>
No. of Stores Total Square Feet
------------------ --------------------------------------
Under 24,001- 29,001- 34,001- 39,001-
County Total Owned Leased 24,000 29,000 34,000 39,000 45,000
------ ----- ----- ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
San Bernardino.... 46 9 37 -- 18 10 14 4
Riverside......... 35 7 28 -- 15 14 5 1
Orange............ 16 7 9 1 13 -- 1 1
Los Angeles....... 13 1 12 -- 11 1 1 --
Kern.............. 2 -- 2 -- -- 1 1 --
--- --- --- --- --- --- --- ---
Total........... 112 24 88 1 57 26 22 6
=== === === === === === === ===
</TABLE>
The average size of the stores to be acquired from Albertson's is
approximately 42,500 square feet. The following table presents the stores that
will be acquired by size, county and the number of stores that are either
leased or owned as of June 27, 1999.
<TABLE>
<CAPTION>
No. of Stores Total Square Feet
------------------ ---------------------------------------------
Under 29,001- 34,001- 39,001- 45,001- Above
County Total Owned Leased 29,000 34,000 39,000 45,000 50,000 50,001
------ ----- ----- ------ ------ ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Riverside............... 5 3 2 -- -- -- 2 1 2
Orange.................. 14 4 10 3 1 2 8 -- --
Los Angeles............. 14 4 10 -- -- 2 6 4 2
San Diego............... 10 4 6 1 1 1 3 2 2
--- --- --- --- --- --- --- --- ---
Total................. 43 15 28 4 2 5 19 7 6
=== === === === === === === === ===
</TABLE>
53
<PAGE>
The following table presents combined store data by size, county and number
of stores for Stater Bros. and the stores to be acquired that are either
leased or owned as of June 27, 1999.
<TABLE>
<CAPTION>
No. of Stores Total Square Feet
------------------ ---------------------------------------------
Under 29,001- 34,001- 39,001- 45,001- Above
County Total Owned Leased 29,000 34,000 39,000 45,000 50,000 50,001
------ ----- ----- ------ ------ ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
San Bernardino.......... 46 9 37 18 10 14 4 -- --
Riverside............... 40 10 30 15 14 5 3 1 2
Orange.................. 30 11 19 17 1 3 9 -- --
Los Angeles............. 27 5 22 11 1 3 6 4 2
Kern.................... 2 -- 2 -- 1 1 -- -- --
San Diego............... 10 4 6 1 1 1 3 2 2
--- --- --- --- --- --- --- --- ---
Total................. 155 39 116 62 28 27 25 7 6
=== === === === === === === === ===
</TABLE>
Employees
Stater Bros. has approximately 8,700 employees, approximately 600 of whom
are management and administrative employees and approximately 8,100 of whom
are hourly employees. Approximately 69% of Stater Bros.' employees work part-
time. Substantially all of Stater Bros.' hourly employees are members of
either the United Food & Commercial Workers or International Brotherhood of
Teamsters labor unions and are represented by several different collective
bargaining agreements. Stater Bros.' collective bargaining agreements with the
United Food & Commercial Workers, which covers the largest number of
employees, were renewed in June 1999 and expire in October 2003. The
International Brotherhood of Teamsters agreement was renewed in September 1998
and expires in September 2002.
As a result of the acquisition, Stater Bros. expects that it will add
approximately 3,000 employees, approximately 100 of whom will be management
and administration and approximately 2,900 of whom will be hourly employees.
In the acquisition, Stater Bros. will assume collective bargaining agreements
with the same unions mentioned above, covering employees at the acquired
stores.
Stater Bros. values its employees and believes its relationship with them is
good and that employee loyalty and enthusiasm are key elements of its
operating performance.
Competition
Stater Bros. operates in a highly competitive industry characterized by
narrow profit margins. Competitive factors include:
. price;
. customer service;
. quality and variety of products; and
. store location and condition.
Stater Bros. believes that its competitive strengths include its:
. specialty services;
. high product quality;
. everyday low prices;
. one-stop shopping convenience;
. breadth of product selection;
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<PAGE>
. attention to customer service;
. convenient store locations;
. central warehouse and distribution facilities' proximity to its stores;
and
. long history of community involvement.
Given the wide assortment of products it offers, Stater Bros. competes with
various types of retailers, including local, regional and national supermarket
retailers, convenience stores, retail drug stores, national general
merchandisers and discount retailers, membership clubs and warehouse stores.
Stater Bros.' primary competitors include Lucky, Vons, Albertson's, Ralph's
and a number of independent supermarket operators.
Environmental
During fiscal 1998, Stater Bros. removed all of its underground gasoline
fuel storage tanks and remediated the surrounding soils, where necessary. The
costs incurred in 1998 to remove the underground gasoline storage tanks and to
remediate the surrounding soils amounted to approximately $84,000. During
fiscal 1997, Stater Bros. removed all of its underground diesel fuel storage
tanks and related diesel refueling equipment from its Colton, California
distribution facility. The costs incurred during fiscal 1997 to remove the
underground diesel fuel storage tanks and to remediate the surrounding soils,
amounted to approximately $330,000. Stater Bros. refuels its transportation
equipment at several off-site locations which are owned and operated by an
unrelated third party.
Environmental remediation costs incurred over the past five years have been
approximately $684,000, in the aggregate, including remediation costs of
approximately $174,000 in 1998, $330,000 in 1997, and $80,000, in 1996.
Management believes that any such future remediation costs will not have an
adverse material effect on the financial condition or results of operations of
Stater Bros.
Year 2000 Compliance
The efficient operations of Stater Bros. are dependent, in part, upon its
computer software programs, systems and processes. Stater Bros.' information
systems are used in several key areas of Stater Bros., including, but not
limited to, supermarket operations, warehousing and distribution,
merchandising and purchasing, inventory management, and accounting and
financial reporting. In 1997, Stater Bros. established a Year 2000 compliance
committee and developed a Year 2000 compliance plan. Stater Bros.' Year 2000
compliance plan addresses Stater Bros.' information systems, communications
with vendors, financial institutions and others, and provides for contingency
planning. Stater Bros. is in the process of updating its information systems
for Year 2000 compliance requirements and has engaged independent consultants
since mid-1998 to assist in achieving Year 2000 compliance with its
information systems by September 1999. Additionally, Stater Bros. has also
been in communication with some of its vendors, financial institutions and
others whose computer software, programs and information systems may interface
with those of Stater Bros. to assess the status of their compliance with Year
2000 requirements. Failure of companies that Stater Bros. conducts business
with to comply with the Year 2000 requirements could have an adverse effect on
Stater Bros.' operations.
Based on the information currently available, Stater Bros. believes it will
meet the Year 2000 compliance requirements through a combination of
information systems modifications and through the acquisition of new equipment
and technology that are Year 2000 compliant. Stater Bros.' Year 2000
compliance committee is developing a contingency plan for its information
systems and is developing contingency plans in the event vendors, financial
institutions and others that Stater Bros. conducts business with do not comply
with the Year 2000 requirements. Stater Bros. believes that costs required to
replace or modify information systems, including scheduled replacements of in-
store point of sale equipment, will approximate $8.4 million, of which $6.9
million will be capitalized and $1.5 million will be expensed. Through June
27, 1999, Stater Bros. has incurred capitalized expenditures of $6.2 million
and operating expenses of $982,000. Stater Bros. believes that
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<PAGE>
it will successfully achieve compliance with the Year 2000 requirements by
September 1999, however, no assurances can be given that Stater Bros.'
information systems and its vendors, financial institutions and others will be
successful in achieving Year 2000 compliance.
Stater Bros.' ability to timely implement its Year 2000 compliance plan may
be adversely affected by a variety of factors, some of which are beyond Stater
Bros.' control, including the potential of unforeseen implementation problems,
delays in the delivery of products, and disruption of store operations
resulting from a loss of power or communication links between stores,
distribution centers and headquarters. Based on currently available
information, Stater Bros. is unable to determine whether such interruptions
are likely to have a material adverse effect on Stater Bros.' results of
operations, liquidity or financial condition.
Legal Proceedings
In the ordinary course of its business, Stater Bros. is party to various
legal actions which it believes are incidental to the operation of its
business. Stater Bros. records an appropriate provision when the occurrence of
loss is probable and can be reasonably estimated. Stater Bros. believes that
the outcome of such legal proceedings to which Stater Bros. is currently a
party will not have a material adverse effect upon its results of operations
or its consolidated financial condition.
In April 1998, certain environmental groups and the California State
Attorney General filed two separate lawsuits against Stater Bros. Markets and
lawsuits against other supermarket chains in California. Both cases filed
against Stater Bros. Markets involve claims alleging that the aggregate
release of diesel fuel emissions caused by the ingress and egress of diesel
engine vehicles at its distribution facility in Colton, California violate
California law. The lawsuits filed against the other California supermarket
chains involved similar allegations. Both cases involving Stater Bros. Markets
are currently in the discovery stage. Management anticipates that the
resolution of these cases will not involve adverse financial consequences to
Stater Bros.
On June 19, 1997, Stater Bros. Markets was named as a defendant in the case
of Ufondu, et al. vs. Stater Bros. Markets filed in the Superior Court of the
State of California for the County of San Bernardino. The complaint filed by
twelve employees seeks unspecified damages alleging racial discrimination in
Stater Bros.' employment practices. Stater Bros. believes the complaint is
without merit and intends to vigorously defend the case. There can be no
assurances, however, as to the outcome of this case.
Government Regulation
Stater Bros. is subject to regulation by a variety of governmental
authorities, including federal, state and local agencies. Regulations cover
trade practices, building standards, labor, health, safety and environmental
matters. The distribution and sale of alcoholic beverages, tobacco products,
milk and other agricultural products are also subject to regulation.
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MANAGEMENT
The following table sets forth certain information with respect to the
current executive officers and directors of Stater Bros., their ages and
principal occupations for at least the past five years. Directors of Stater
Bros. each serve for a term of one year, or until their successors are
elected. The officers serve at the discretion of the Board of Directors of
Stater Bros.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jack H. Brown........... 60 Chairman of the Board, President and Chief Executive Officer
Donald I. Baker......... 58 Executive Vice President
H. Harrison Lightfoot... 61 Group Senior Vice President--Development
A. Gayle Paden.......... 62 Group Senior Vice President--Human Resources
Dennis N. Beal.......... 48 Senior Vice President--Finance and Chief Financial Officer
Bruce D. Varner......... 62 Director and Secretary
Thomas W. Field, Jr..... 64 Vice Chairman of the Board of Directors
</TABLE>
Background of Directors and Executive Officers
Jack H. Brown. Jack H. Brown has been President and Chief Executive Officer
of Stater Bros. since June 1981 and Chairman of the Board since 1986. From
September 1978 to June 1981, Mr. Brown served as President of Pantry Food
Markets, Inc. and American Community Stores Corporation, Inc., both wholly-
owned subsidiaries of Cullum Companies, Inc., a publicly held corporation.
From 1972 to 1978, Mr. Brown served as Corporate Vice President of Marsh
Supermarkets, Inc., a publicly held corporation. Mr. Brown has been employed
in various capacities in the supermarket industry for 47 years. Mr. Brown has
a majority interest and is the managing general partner of La Cadena
Investments.
Donald I. Baker. Donald I. Baker has been Executive Vice President of Stater
Bros. since October 1998. Mr. Baker joined Stater Bros. in November 1983 as
Vice President--Warehouse and Transportation and was Group Senior Vice
President--Administration from July 1996 to October 1998. From July 1992 to
July 1996, Mr. Baker was Group Senior Vice President--Human Resources and
Distribution. From August 1986 to July 1992, Mr. Baker was Senior Vice
President--Human Resources and Distribution. Mr. Baker has approximately 39
years of experience in the supermarket industry. Prior to joining Stater
Bros., Mr. Baker was employed by American Community Stores Corporation, Inc.,
a subsidiary of Cullum Companies, Inc., a publicly held corporation, from 1972
to 1983 in various capacities including Vice President of Retail Operations,
and was also employed by Kroger Company from 1966 to 1972.
H. Harrison Lightfoot. H. Harrison Lightfoot has been Group Senior Vice
President--Development since May 1998 and was Group Senior Vice President--
Retail Operations of Stater Bros. from June 1986 to May 1998. Mr. Lightfoot
has served Stater Bros. for 45 years in various capacities, including store
manager, buyer, general supervisor and Vice President. Mr. Lightfoot is a
general partner of La Cadena Investments.
A. Gayle Paden. A. Gayle Paden has been Group Senior Vice President--Human
Resources since May 1998 and was Group Senior Vice President--Distribution
from July 1996 to May 1998. Mr. Paden joined Stater Bros. in 1986 as Group
Senior Vice President--Administration and served in that capacity until July
1996. Mr. Paden was previously with Lucky Stores for 35 years where he served
in various capacities, the most recent of which was President of the Southern
California Food Division.
Dennis N. Beal. Dennis N. Beal has been Senior Vice President--Finance and
Chief Financial Officer since May 1998 and was Vice President of Finance and
Chief Financial Officer of Stater Bros. from September 1992 to May 1998. Mr.
Beal was Vice President and Controller of American Stores Company from 1989 to
1992 and Vice President and Controller of subsidiaries of American Stores
Company from 1987 to 1989 and served in various financial positions since
1981. Mr. Beal, a certified public accountant, was also a partner in the
accounting firm of Bushman, Daines, Rasmussen & Wisan and served in various
capacities with the firm from 1974 to 1981.
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<PAGE>
Bruce D. Varner. Bruce D. Varner has been a director of Stater Bros. Markets
since September 1985 and director of Stater Bros. since May 1989. Since
February 1997, Mr. Varner has been a partner in the law firm of Varner,
Saleson & Dobler LLP. From 1967 to February 1997, Mr. Varner was a partner in
the law firm of Gresham, Varner, Savage, Nolan & Tilden. Mr. Varner
specializes in business and corporate matters. Mr. Varner and the law firm of
Varner, Saleson & Dobler LLP have performed legal services in the past for
Stater Bros. and Stater Bros. expects such services to continue in the future.
Thomas W. Field, Jr. Thomas W. Field, Jr. has been Vice Chairman of the
Board of Directors of Stater Bros. since May 1998 and a Director of Stater
Bros. since 1994. He has been President of Field and Associates since 1989.
From 1988 to 1989, Mr. Field was Chairman of the Board, President and Chief
Executive Officer of McKesson Corporation and was its President since 1984,
and President and Chief Executive Officer from 1986 to 1988. Mr. Field was
President of American Stores Company from 1981 to 1984 and was President of
Alpha Beta Company from 1976 to 1984. Mr. Field was a Director of American
Stores Company from 1979 to 1984. Mr. Field is a nationally recognized and
highly regarded supermarket executive. Mr. Field has held various positions in
the supermarket industry for over 40 years and serves as a Director for
several companies including Campbell Soup Company and Maxicare.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 27, 1999, the number and
percentage of outstanding shares of common stock beneficially owned by (a)
each person known by Stater Bros. to beneficially own more than 5% of such
stock; (b) each director of Stater Bros.; (c) each of the named executive
officers; and (d) all directors and executive officers of Stater Bros. as a
group:
<TABLE>
<CAPTION>
Percentage of
Shares of Class A Class A
Common Stock Common Stock
Name and Address of Beneficial Owner Beneficially Owned Outstanding
------------------------------------ ------------------ -------------
<S> <C> <C>
La Cadena Investments(1)...................... 50,000 100%
Jack H. Brown(1)(2)........................... 50,000 100
H. Harrison Lightfoot(1)(2)................... 50,000 100
Richard C. Moseley(1)(2)...................... 50,000 100
A. Gayle Paden(2)............................. -- --
Donald J. Baker(2)............................ -- --
Dennis N. Beal(2)............................. -- --
Bruce D. Varner(2)............................ -- --
Thomas W. Field, Jr.(2)....................... -- --
All directors and executive officers as a
group (7 persons)(1)(3)...................... 50,000 100
</TABLE>
- --------
(1) The 50,000 outstanding shares of Stater Bros.' Class A common stock are
owned by La Cadena Investments and may be deemed to be beneficially owned
by the partners of La Cadena Investments. The general partners of La
Cadena Investments are Jack H. Brown, Richard C. Moseley and H. Harrison
Lightfoot. Mr. Brown has the majority interest and is the managing general
partner of La Cadena Investments and has the power to vote the shares of
Stater Bros. owned by La Cadena Investments on all matters. Certain La
Cadena Investments issues, such as the disposition of such shares of
Stater Bros., may require approval of 60% of the voting power of La Cadena
Investments. Accordingly, Messrs. Brown, Moseley and Lightfoot may be
deemed to have shared voting power or shared investment power with respect
to the shares owned by La Cadena Investments, and such individuals
therefore may be deemed to be the beneficial owners thereof. The address
of La Cadena Investments is 3750 University Avenue, Suite 610, Riverside,
California 92501.
(2) The address of Messrs. Brown, Lightfoot, Moseley, Paden, Baker, Beal,
Varner and Field is c/o Stater Bros. at 21700 Barton Road, Colton,
California 92324.
(3) Does not include Mr. Moseley.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Bruce D. Varner and the law firm of Varner, Saleson & Dobler LLP, of
which Mr. Varner is a partner, have performed legal services in the past for
Stater Bros. The total cost of such legal services incurred by Stater Bros.
during fiscal 1998 was approximately $1.6 million. Stater Bros. believes that
the terms and costs of such legal services provided by Mr. Varner and the law
firm of Varner, Saleson & Dobler LLP were at least as fair to Stater Bros. as
could have been obtained from unaffiliated law firms. Stater Bros. expects
such services to continue in the future.
Stater Bros. has agreed to pay La Cadena Investments a fee for advisory
services rendered in connection with the related transactions equal to 1% of
the aggregate principal amount of the outstanding notes.
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of important terms of Stater Bros.' material
indebtedness:
New Credit Facility
Stater Bros.' principal operating subsidiary, Stater Bros. Markets, signed a
new credit facility with Bank of America on August 6, 1999. The new credit
facility provides for (i) a $50.0 million three-year revolving loan facility
and (ii) a $25.0 million three-year letter of credit facility. Borrowings
under the revolving loan facility are expected to be used for certain working
capital and corporate purposes. Letters of credit under the letter of credit
facility are expected to be used to support the purchase of inventory,
obligations incurred in connection with the construction of stores, and
workmen's compensation insurance obligations. The availability of the loans
and letters of credit are subject to certain sublimits and other borrowing
restrictions.
Indebtedness of Stater Bros. Markets under the new credit facility is
guaranteed by Stater Bros. Development, Inc., a subsidiary of Stater Bros.,
and any subsidiaries that Stater Bros. Markets or Stater Bros. Development,
Inc. acquires or forms after the date of the new credit facility.
Loans under the new credit facility bear interest at a rate based upon
either (i) the "Base Rate" (defined as the higher of (a) the rate of interest
publicly announced by Bank of America as its "reference rate" and (b) the
federal funds effective rate from time to time plus 0.50%), plus 1.00%, or
(ii) the "Offshore Rate" (defined as the rate (adjusted for statutory reserve
requirements for eurocurrency liabilities) at which eurodollar deposits for
one, two, three or six months (as selected by Stater Bros. Markets) are
offered to Bank of America in the interbank eurodollar market), plus 2.25%.
The revolving loan facility will cease to be available and will be payable
in full on August 6, 2002. Letters of credit under the new credit facility can
be issued until August 6, 2002, and all letters of credit must expire not
later than August 6, 2003. The loans under the revolving loan facility must be
repaid for a period of ten consecutive days semi-annually.
Loans under the revolving loan facility may be repaid and reborrowed. The
loans under the revolving loan facility may be prepaid at any time without
penalty, subject to certain minimums and payment of any breakage and
redeployment costs in the case of loans based on the offshore rate. The
commitments under the new credit facility may be reduced by Stater Bros.
Markets. Stater Bros. Markets will be required to pay a commitment fee equal
to 0.25% per annum on the actual daily unused portion of the revolving loan
facility and the letter of credit facility, payable quarterly in arrears. For
purposes of that fee, commercial letters of credit will not constitute usage
of the letter of credit facility. Stater Bros. Markets will also be required
to pay a commission on all outstanding standby letters of credit issued under
the letter of credit facility equal to 1.25% per annum on the face amount of
such letters of credit, and will be required to pay standard fees charged by
Bank of America with respect to the issuance, negotiation, and amendment of
commercial letters of credit issued under the letter of credit facility.
Availability of the loans and letters of credit under the new credit
facility is subject to a monthly borrowing base test based on inventory. The
new credit facility requires Stater Bros. Markets to meet certain financial
tests, including minimum net worth and minimum EBITDA tests. The new credit
facility contains covenants which, among other things, will limit
indebtedness, liens, guarantee obligations, mergers, consolidations,
liquidations and dissolutions, asset sales, leases, investments, loans and
advances, transactions with affiliates, sale-leasebacks, other matters
customarily restricted in such agreements and modifications to the holding
company status of Stater Bros.
The new credit facility also contains covenants that apply to Stater Bros.
Holdings Inc., and Stater Bros. Holdings Inc. is a party to the new credit
facility for purposes of these covenants. These covenants, among other things,
limit dividends and other payments in respect of Stater Bros. Holdings Inc.'s
capital stock, prepayments and redemptions of the exchange notes and other
debt, and limit indebtedness, investments, loans and advances by Stater Bros.
Holdings Inc. The new credit facility requires Stater Bros. Holdings Inc. and
Stater Bros. Markets to comply with certain covenants intended to ensure that
their legal identities remain separate.
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The new credit facility contains customary events of default, including
payment defaults; material inaccuracies in representations and warranties;
covenant defaults; cross-defaults to certain other indebtedness; certain
bankruptcy events; certain ERISA events; judgment; defaults; invalidity of any
guaranty; failure of Jack H. Brown to be Chairman of the Board and Chief
Executive Officer of Stater Bros. Markets; and change of control.
The new credit facility replaced Stater Bros.' previous credit facility with
Bank of America. The previous credit facility provided Stater Bros. Markets
with a revolving facility of $15.0 million and a letter of credit facility of
$25.0 million. As of June 27, 1999, $15.0 million was available to Stater
Bros. Markets under the previous revolving facility and $14.2 million was
available under the previous letter of credit facility. At August 17, 1999
there were no revolving borrowings outstanding under the new credit facility
and the aggregate amount of all letters of credit issued thereunder was
approximately $10.0 million.
11% Senior Notes
In March 1994, Stater Bros. issued $165.0 million principal amount of its
11% senior notes. At August 6, 1999, approximately $5 million of the principal
amount of such senior notes remained outstanding. The 11% senior notes are
governed by the terms of an indenture, as amended, and are unsecured senior
obligations of Stater Bros. The 11% senior notes mature on March 1, 2001 and
interest thereon is payable semi-annually in arrears on March 1 and September
1 of each year. The 11% senior notes rank equally with all of Stater Bros.'
existing and future unsubordinated, unsecured indebtedness.
In connection with Stater Bros.' repurchase of 11% senior notes, Stater
Bros. amended the indenture pursuant to which the 11% senior notes were issued
to eliminate substantially all financial and restrictive covenants. See
"Summary--The Related Transactions."
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DESCRIPTION OF THE EXCHANGE NOTES
In this description, the term "Stater Bros." refers only to Stater Bros.
Holdings Inc. and not to any of its subsidiaries. Definitions of certain other
terms used in this description are found under the subheading "--Certain
Definitions." Certain defined terms used in this description but not defined
below under "--Certain Definitions" have the meanings assigned to them in the
Indenture.
Stater Bros. will issue the exchange notes under an indenture dated August
6, 1999 between itself and IBJ Whitehall Bank & Trust Company, as trustee (the
"Indenture"). The terms of the exchange 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.
The terms of the exchange notes are nearly identical to the outstanding
notes in all material respects, including interest rate and maturity, except
that the exchange notes will not be subject to:
. the restrictions on transfer; and
. the registration agreement covenants regarding registration.
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. The Indenture,
and not this description, defines investors' rights as holders of the exchange
notes.
Brief Description of the Exchange Notes
The Exchange Notes
The exchange notes:
. are general unsecured obligations of Stater Bros.;
. are pari passu in right of payment with existing and future unsecured
senior Indebtedness of Stater Bros.; and
. are senior in right of payment to any future subordinated Indebtedness
of Stater Bros.
The operations of Stater Bros. are conducted through its subsidiaries and,
therefore, Stater Bros. depends on the cash flow of its subsidiaries to meet
its obligations, including its obligations under the exchange notes. The
exchange notes will be effectively subordinated in right of payment to all
Indebtedness and other liabilities and commitments (including trade payables
and lease obligations) of Stater Bros.' subsidiaries. The ability of Stater
Bros., as the owner of equity interests in its subsidiaries, to receive assets
upon the liquidation or reorganization of any of its subsidiaries (and the
consequent right of the holders of the exchange notes to participate in those
assets) will be effectively subordinated to the claims of that subsidiary's
creditors. As of June 27, 1999, Stater Bros.' subsidiaries would have had
approximately $18.1 million of Indebtedness and $144.5 million of trade
payables and other current liabilities outstanding assuming the Transactions
were completed on June 27, 1999. See "Risk Factors--Risks Related to the
Exchange Notes--Stater Bros.' Holding Company Structure Restricts the Funds
and Assets Available for the Payment of Principal and Interest on the Exchange
Notes."
Principal, Maturity and Interest
The Indenture provides for the issuance by Stater Bros. of notes with an
initial aggregate principal amount of $450 million and a maximum aggregate
principal amount of $550 million. Stater Bros. may issue additional notes
under the Indenture from time to time after this offering. Any offering of
additional notes is subject to the covenant described below under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock." The exchange notes and any additional notes subsequently issued under
the Indenture would be treated as a single class for all purposes under the
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase. Stater Bros. will issue exchange notes in denominations of
$1,000 and integral multiples of $1,000. The exchange notes will mature on
August 15, 2006.
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Interest on the exchange notes will accrue at the rate of 10 3/4% per annum
and will be payable semi-annually in arrears on February 15 and August 15,
commencing on February 15, 2000. Stater Bros. will make each interest payment
to the Holders of record on the immediately preceding February 1 and August 1.
Interest on the exchange notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Methods of Receiving Payments on the Exchange Notes
If a Holder has given wire transfer instructions to Stater Bros., Stater
Bros. will pay all principal, interest and premium and Liquidated Damages, if
any, on that Holder's exchange notes in accordance with those instructions.
All other payments on exchange notes will be made at the office or agency of
the Paying Agent and Registrar within the City and State of New York unless
Stater Bros. elects to make interest payments by check mailed to the Holders
at their addresses set forth in the register of Holders.
Paying Agent and Registrar for the Exchange Notes
The Trustee will initially act as Paying Agent and Registrar. Stater Bros.
may change the Paying Agent or Registrar without prior notice to the Holders,
and Stater Bros. or any of its Subsidiaries may act as Paying Agent or
Registrar.
Transfer and Exchange
A Holder may transfer or exchange exchange notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and Stater
Bros. may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. Stater Bros. is not required to transfer or
exchange any exchange note selected for redemption. Also, Stater Bros. is not
required to transfer or exchange any exchange note for a period of 15 days
before a selection of exchange notes to be redeemed. The registered Holder of
a exchange note will be treated as the owner of it for all purposes.
Optional Redemption
At any time prior to August 15, 2002, Stater Bros. may on any one or more
occasions redeem up to 35% of the aggregate principal amount of exchange notes
issued under the Indenture at a redemption price of 110.750% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date, with the net cash proceeds of one or more sales
of Capital Stock of Stater Bros., resulting for each such sale in net cash
proceeds to Stater Bros. in excess of $25.0 million, provided that:
(1) at least 65% of the aggregate principal amount of exchange notes
issued under the Indenture remains outstanding immediately after the
occurrence of such redemption (excluding exchange notes held by Stater
Bros. and its Subsidiaries); and
(2) the redemption must occur within 45 days of the date of the closing
of such offering.
Except pursuant to the preceding paragraph, the exchange notes will not be
redeemable at Stater Bros.' option prior to August 15, 2003.
After August 15, 2003, Stater Bros. may redeem all or a part of the exchange
notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
applicable redemption date, if redeemed during the twelve-month period
beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003........................................................... 105.3750%
2004........................................................... 102.6875%
2005 and thereafter............................................ 100.0000%
</TABLE>
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<PAGE>
Mandatory Redemption
Stater Bros. is not required to make mandatory redemption or sinking fund
payments with respect to the exchange notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of exchange notes will have the
right to require Stater Bros. to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of that Holder's exchange notes pursuant to a
Change of Control Offer on the terms set forth in the Indenture. In the Change
of Control Offer, Stater Bros. will offer a payment in cash equal to 101% of
the aggregate principal amount of exchange notes repurchased plus accrued and
unpaid interest and Liquidated Damages, if any, thereon, to the date of
purchase (the "Change of Control Payment"). Within thirty (30) days following
any Change of Control, Stater Bros. will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase exchange notes on the date specified in
such notice (the "Change of Control Payment Date"), which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed, pursuant to the procedures required by the Indenture and described in
such notice. Stater Bros. will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the exchange notes as a result of a Change
of Control. To the extent that the provisions of any securities laws or
regulations conflict with the Change of Control provisions of the Indenture,
Stater Bros. will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under the Change of
Control provisions of the Indenture by virtue of such conflict.
On the Change of Control Payment Date, Stater Bros. will, to the extent
lawful:
(1) accept for payment all exchange notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all exchange notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee the exchange notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of exchange notes or portions thereof being purchased by
Stater Bros.
The Paying Agent will promptly mail to each Holder of exchange notes so
tendered the Change of Control Payment for such exchange notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new exchange note equal in principal amount to
any unpurchased portion of the exchange notes surrendered, if any; provided
that each such new exchange note will be in a principal amount of $1,000 or an
integral multiple thereof.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control,
Stater Bros. will either (i) cause each of its Restricted Subsidiaries to
obtain the requisite consents, if any, under any agreements governing
outstanding Indebtedness of such Restricted Subsidiary to permit the
repurchase of exchange notes required by such "Change in Control" covenant or
(ii) if any of such requisite consents cannot be obtained, cause the
applicable Restricted Subsidiary or Restricted Subsidiaries to repay the
Indebtedness pursuant to which such consent is required.
Stater Bros. will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
The provisions described above that require Stater Bros. to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that
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permit the Holders of the exchange notes to require that Stater Bros.
repurchase or redeem the exchange notes in the event of a takeover,
recapitalization or similar transaction.
Stater Bros. will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by Stater
Bros. and purchases all exchange notes validly tendered and not withdrawn
under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the direct
or indirect sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the properties or assets of Stater Bros. and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of exchange notes to require Stater Bros. to repurchase such exchange
notes as a result of a sale, lease, transfer, conveyance or other disposition
of less than all of the assets of Stater Bros. and its Restricted Subsidiaries
taken as a whole to another Person or group may be uncertain.
Asset Sales
Stater Bros. will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale (other than a Qualified Santee LLC
Interest Sale) unless:
(1) Stater Bros. (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is evidenced by (i) for any Asset Sale
resulting in Net Proceeds less than or equal to $1.0 million, an Officers'
Certificate delivered to the Trustee or (ii) for any Asset Sale resulting
in Net Proceeds in excess of $1.0 million, a resolution of Stater Bros.'
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee; and
(3) at least 75% of the consideration therefor received by Stater Bros.
or such Restricted Subsidiary is in the form of cash. For purposes of this
provision, each of the following shall be deemed to be cash:
(a) any liabilities (as shown on Stater Bros.' or such Restricted
Subsidiary's most recent balance sheet) of Stater Bros. or any
Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the exchange notes)
that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases Stater Bros. or such
Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by Stater
Bros. or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by
Stater Bros. or such Restricted Subsidiary into cash (to the extent of
the cash received in that conversion);
provided, that any non-cash consideration that becomes Net Proceeds will
thereafter be subject to the provisions of the next paragraph.
Upon the date of consummation of any Asset Sale by Stater Bros. or any
Restricted Subsidiary which, taken individually or together with all such
Asset Sales since the date of the Indenture, results in the receipt of Net
Proceeds in excess of $10.0 million, such Net Proceeds and all Net Proceeds
from all such Asset Sales consummated concurrently therewith or consummated
thereafter (such first consummation date and each such date thereafter a
"Consummation Date") will be applied by Stater Bros. or such Restricted
Subsidiary within 12 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:
(1) investments in assets or businesses in the same line of business as
Stater Bros. or such Restricted Subsidiary;
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(2) the permanent repayment of (and permanent reduction of commitments,
if any, under) any Indebtedness (a) that is secured by or incurred to
construct such assets or (b) of a Restricted Subsidiary;
(3) a combination of payment and investment permitted by the foregoing
clauses (1) and (2); or
(4) pending the final application of any such Net Proceeds, the temporary
reduction of revolving credit borrowings or other investment of such Net
Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in clauses (1), (2) or (3) of the preceding paragraph will constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0
million, Stater Bros. will be required under the Indenture to make an Asset
Sale Offer to all Holders of exchange notes and all holders of other
Indebtedness that is pari passu with the exchange notes containing provisions
similar to those set forth in the Indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets to purchase the maximum
principal amount of exchange notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds. The offer price in any Asset Sale
Offer will be equal to 100% of principal amount plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase, and will be
payable in cash. If any Excess Proceeds remain after consummation of an Asset
Sale Offer, Stater Bros. or such Restricted Subsidiary may use such Excess
Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount of exchange notes and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the exchange notes and such other pari
passu Indebtedness to be purchased on a pro rata basis based on the principal
amount of exchange notes and such other pari passu Indebtedness tendered. Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds will be
reset at zero.
Stater Bros. will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of exchange notes pursuant to an Asset Sale Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
Asset Sales provisions of the Indenture, Stater Bros. will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Asset Sale provisions of the Indenture by
virtue of such conflict.
The agreements governing certain Indebtedness of Stater Bros. Markets limit
the ability of Stater Bros. to purchase the exchange notes in the event of a
Change of Control or an Asset Sale, and also provide that certain change of
control or asset sale events with respect to Stater Bros. Markets would
constitute a default under these agreements. Any future credit agreements or
other agreements relating to Indebtedness to which Stater Bros. Markets
becomes a party may contain similar restrictions and provisions. In the event
a Change of Control or Asset Sale occurs at a time when the ability of Stater
Bros. to purchase the exchange notes is restricted, Stater Bros. Markets could
seek the consent of its lenders to the purchase of exchange notes or could
attempt to repay the borrowings that contain such restriction. If Stater Bros.
Markets did not obtain such a consent or repay such borrowings, Stater Bros.
might not be able to purchase the exchange notes. In such case, Stater Bros.'
failure to purchase tendered exchange notes would constitute an Event of
Default under the Indenture. In addition, the exercise by the Holders of
exchange notes of their right to require Stater Bros. to repurchase the
exchange notes upon a Change of Control or an Asset Sale could cause a default
under these other agreements, even if the Change of Control or Asset Sale
itself does not, due to the financial effect of such repurchases on Stater
Bros. Finally, Stater Bros.' ability to pay cash to the Holders of exchange
notes upon a repurchase may be limited by Stater Bros.' then existing
financial resources. See "Risk Factors--States Bros. May Be Unable to Raise
the Funds Necessary to Finance a Change of Control Offer Required by the
Indenture."
Selection and Notice
If less than all of the exchange notes are to be redeemed at any time, the
Trustee will select exchange notes for redemption as follows:
(1) if the exchange notes are listed, in compliance with the requirements
of the principal national securities exchange on which the exchange notes
are listed; or
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(2) if the exchange notes are not so listed, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate.
No exchange notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of exchange notes to be
redeemed at its registered address. Notices of redemption may not be
conditional.
If any exchange note is to be redeemed in part only, the notice of
redemption that relates to that exchange note shall state the portion of the
principal amount thereof to be redeemed. A new exchange note in principal
amount equal to the unredeemed portion of the original exchange note will be
issued in the name of the Holder thereof upon cancellation of the original
exchange note. Exchange notes called for redemption become due on the date
fixed for redemption. On and after the redemption date, interest and
Liquidated Damages, if any, ceases to accrue on exchange notes or portions of
them called for redemption.
Certain Covenants
Restricted Payments
Stater Bros. will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
on account of Stater Bros.' or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any such payment in connection
with any merger or consolidation involving Stater Bros. or any of its
Restricted Subsidiaries) or to the direct or indirect holders of Stater
Bros.' or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of Stater Bros. or payable to
Stater Bros. or a Restricted Subsidiary of Stater Bros.);
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving Stater Bros.) any Equity Interests of Stater Bros. or any direct
or indirect parent or Affiliate of Stater Bros.;
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the exchange notes, except a payment of interest or
principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"),
unless such Restricted Payment occurs on or after September 27, 1999 and, at
the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof; and
(2) Stater Bros. would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Stater Bros. and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (2), (3), (4), (5), (6), (7), (9), (10) and (11) of
the next succeeding paragraph), is less than the sum, without duplication,
of:
(a) 50% of the Consolidated Net Income of Stater Bros. for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of the Indenture to the
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end of Stater Bros.' most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit); plus
(b) 100% of the aggregate net cash proceeds received by Stater Bros.
since the date of the Indenture as a contribution to its common equity
capital or from the issue or sale of Equity Interests of Stater Bros.
(other than Disqualified Stock) or from the issue or sale of
convertible or exchangeable Disqualified Stock or convertible or
exchangeable debt securities of Stater Bros. that have been converted
into or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to a
Restricted Subsidiary of Stater Bros. or to Santee or Santee LLC); plus
(c) to the extent that any Restricted Investment that was made after
the date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (i) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (ii) the initial amount of such Restricted Investment; plus
(d) an amount equal to the fair market value of the Equity Interests
of each Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary pursuant to the terms of the Indenture; provided,
that such amount shall not in any case exceed the amount of Restricted
Investments previously made by Stater Bros. or any Restricted
Subsidiary in such Person; plus
(e) $5.0 million.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(2) if no Default or Event of Default shall have occurred and be
continuing or would be caused thereby, the redemption, repurchase,
retirement, defeasance or other acquisition of any subordinated
Indebtedness of Stater Bros. or of any Equity Interests of Stater Bros. in
exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary of Stater Bros.) of,
Equity Interests of Stater Bros. (other than Disqualified Stock); provided
that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (3) (b) of the preceding paragraph;
(3) if no Default or Event of Default shall have occurred and be
continuing or would be caused thereby, the defeasance, redemption,
repurchase or other acquisition of subordinated Indebtedness of Stater
Bros. with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of Stater
Bros. to the holders of its Equity Interests on a pro rata basis;
(5) the payment to La Cadena Investments of an amount equal to 1% of the
aggregate principal amount of the exchange notes sold pursuant to this
offering for advisory services rendered in connection therewith;
(6) the payment of any costs and expenses (including any related premium)
in connection with (a) the offering of the exchange notes and the tender
offer and consent solicitation for Stater Bros.' 11% senior notes due 2001
and 9% senior subordinated notes due 2004 and (b) the acquisition of
certain supermarkets and one store site pursuant to the Asset Purchase
Agreement, including all costs and expenses incidental to the foregoing;
(7) the payment to La Cadena Investments or any La Cadena Successor 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
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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;
(8) if no Default or Event of Default shall have occurred and be
continuing or would be caused thereby, other Investments in any Person
having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to
this clause (8) since the date of the Indenture not to exceed $5 million;
(9) if no Default or Event of Default shall have occurred and be
continuing or would be caused thereby, the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of Stater Bros.
held by any key employee of Stater Bros. or its Restricted Subsidiaries
(other than any key employee that is a partner of or otherwise holds any
Equity Interest in La Cadena Investments or any La Cadena Successor) upon
any such person's death, disability or termination of employment and
pursuant to any management equity subscription agreement, stock option
agreement or other incentive compensation plan or agreement entered into in
the ordinary course of business; provided that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall
not exceed $500,000, which aggregate amount shall increase by $500,000 on
each anniversary of the date of the Indenture;
(10) payment of dividends on the Markets Preferred Stock as outstanding
and in effect on the date of the Indenture not to exceed five thousand
dollars ($5,000) per year; and
(11) any redemption or repurchase of the Markets Preferred Stock
outstanding on the date of the Indenture, provided that the aggregate cash
payments made with respect to such redemption or repurchase shall not
exceed fifty thousand dollars ($50,000).
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by Stater Bros. or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be
valued by this covenant shall be determined by a majority of Stater Bros.'
directors whose resolution with respect thereto shall be delivered to the
Trustee. Not later than the date of making any Restricted Payment (other than
Restricted Payments permitted pursuant to clauses (1), (4), (5), (6), (10) and
(11) of the preceding paragraph), Stater Bros. shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this
"Restricted Payments" covenant were computed.
Incurrence of Indebtedness and Issuance of Preferred Stock
Stater Bros. will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt), and Stater Bros. will not issue any Disqualified Stock and
will not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; provided, however, 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, Stater Bros. may incur Indebtedness
(including Acquired Debt) or issue Disqualified Stock if the Fixed Charge
Coverage Ratio for Stater Bros.' most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding
the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, determined on
a pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred or the
Disqualified Stock had been issued, as the case may be, at the beginning of
such four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of any
of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by Stater Bros. or its Restricted Subsidiaries of
Indebtedness in an aggregate principal amount not to exceed $50 million at
any time outstanding under any Credit Facilities or any replacement
facility thereof;
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(2) the incurrence by Stater Bros. and its Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by Stater Bros. of Indebtedness represented by the
outstanding notes issued on the date of the Indenture and the exchange
notes to be issued hereby;
(4) the incurrence by Stater Bros. or any of its Restricted Subsidiaries
of Acquired Debt represented by Capital Lease Obligations with respect to
assets acquired pursuant to the acquisition in an amount not to exceed $15
million in the aggregate, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred pursuant
to this clause (4);
(5) the incurrence by Stater Bros. or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations or of Permitted
Construction Indebtedness in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (5), not to exceed $25.0
million at any time outstanding;
(6) the incurrence by Stater Bros. or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph of this covenant or clauses (1), (2) or
(3) of this paragraph;
(7) the incurrence by Stater Bros. or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among Stater Bros. and any of its
Wholly-Owned Subsidiaries (other than an Unrestricted Subsidiary);
provided, however, that:
(a) if Stater Bros. is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the exchange notes; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
Stater Bros. or a Restricted Subsidiary thereof and (ii) any sale or
other transfer of any such Indebtedness to a Person that is not either
Stater Bros. or a Wholly-Owned Subsidiary (other than an Unrestricted
Subsidiary) thereof, shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by Stater Bros. or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause
(7);
(8) the incurrence by Stater Bros. or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of the Indenture to be outstanding;
(9) the guarantee by Stater Bros. of Indebtedness of Stater Bros. or a
Restricted Subsidiary of Stater Bros. that was permitted to be incurred by
another provision of this covenant;
(10) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness
or an issuance of Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount thereof is included in Fixed
Charges of Stater Bros. as accrued;
(11) the incurrence by Stater Bros. or any of its Restricted Subsidiaries
of Indebtedness to secure workers' compensation and other insurance
coverages, not to exceed the minimum amount required by Stater Bros.' or
any of its Restricted Subsidiaries' insurance carriers or applicable
regulatory agencies (which may be Indebtedness under Credit Facilities in
addition to that permitted under clause (1));
(12) the incurrence by Stater Bros. of Indebtedness to La Cadena
Investments or any La Cadena Successor incurred by Stater Bros. 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 will be subject to the covenant set forth in "Limitation on
Restricted Payments and Investments";
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(13) the incurrence by Stater Bros. or any of its Restricted Subsidiaries
of Indebtedness represented by letters of credit entered into as security
for the obligations of Stater Bros. or any of its Restricted Subsidiaries
pursuant to any or all of the Petrolane Leases;
(14) the incurrence of Indebtedness arising from agreements of Stater
Bros. or any Restricted Subsidiary providing for indemnification,
adjustment of purchase price or similar obligations, or from guarantees or
letters of credit, surety bonds or performance bonds securing any
obligations of Stater Bros. or any Restricted Subsidiary pursuant to such
agreements, incurred or assumed in connection with the disposition of any
business, assets or Subsidiary of Stater Bros. or any Restricted
Subsidiary, other than guarantees or similar credit support by Stater Bros.
or such Restricted Subsidiary 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
(15) the incurrence by Stater Bros. or any of its Restricted Subsidiaries
of other Indebtedness not to exceed $25 million (which may be Indebtedness
under Credit Facilities in addition to that permitted by clause (1)).
Stater Bros. will not incur any Indebtedness (including Permitted Debt) that
is contractually subordinated in right of payment to any other Indebtedness of
Stater Bros. unless such Indebtedness is also contractually subordinated in
right of payment to the exchange notes on substantially identical terms;
provided, however, that no Indebtedness of Stater Bros. shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of
Stater Bros. solely by virtue of being unsecured.
For purposes of determining compliance with this "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant, in the event that an item of
proposed Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (1) through (15) above, or is entitled to
be incurred pursuant to the first paragraph of this covenant, Stater Bros.
will be permitted to classify such item of Indebtedness on the date of its
incurrence, or later reclassify all or a portion of such item of Indebtedness,
in any manner that complies with this covenant.
Indebtedness under the Revolving Credit Facility outstanding on the date on
which exchange notes are first issued and authenticated under the Indenture
shall be deemed to have been incurred on such date in reliance on the
exception provided by clause (1) of the definition of Permitted Debt.
Liens
Stater Bros. will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind on any asset now owned or hereafter acquired,
except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
Stater Bros. will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction of any kind:
(1) on the ability of any Restricted Subsidiary to:
(a) pay dividends or make any other distributions on its Capital
Stock to Stater Bros. or any of its Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to Stater Bros. or any of its
Restricted Subsidiaries;
(b) make loans or advances to Stater Bros. or any of its Restricted
Subsidiaries; or
(c) transfer any of their respective properties or assets to Stater
Bros. or any of its Restricted Subsidiaries;
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(2) On the ability of Stater Bros. or any of its Restricted Subsidiaries
to receive or retain any such:
(a) dividends, payments or distributions,
(b) loans or advances, or
(c) transfer of property (any such restriction being referred to
herein as a "Payment Restriction").
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) agreements in effect as of the date of the Indenture and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof (provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than
those contained in such Existing Indebtedness, as in effect on the date of
the Indenture) or any provisions of any articles of incorporation or
certificate of incorporation with respect to Stater Bros. or any Restricted
Subsidiary (including without limitation the rights, preferences and
privileges of any class or series of preferred stock included therein) in
effect as of the date of the Indenture;
(2) the Indenture and the exchange notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Stater Bros. or any of its Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture
to be incurred;
(5) customary non-assignment provisions in leases and other contracts
entered into in the ordinary course of business;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (2)(c) of the preceding paragraph;
(7) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(8) the Revolving Credit Facility;
(9) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to such Lien; and
(10) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, Consolidation or Sale of Assets
Stater Bros. may not, directly or indirectly: (1) consolidate or merge with
or into another Person (whether or not Stater Bros. is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of Stater Bros. and its
Restricted Subsidiaries taken as a whole, in one or more related transactions,
to another Person; unless:
(1) either: (a) Stater Bros. would be the surviving corporation; or (b)
the Person formed by or surviving any such consolidation or merger (if
other than Stater Bros.) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made would be a corporation
organized or existing under the laws of the United States, any state
thereof or the District of Columbia;
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(2) the Person formed by or surviving any such consolidation or merger
(if other than Stater Bros.) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all
the obligations of Stater Bros. under the exchange notes, the Indenture and
the Registration Rights Agreement pursuant to agreements reasonably
satisfactory to the Trustee;
(3) immediately after giving effect to such transaction (including giving
effect to any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of the transaction) no Default or Event of
Default would exist or be continuing; and
(4) Stater Bros. or the Person formed by or surviving any such
consolidation or merger (if other than Stater Bros.), or to which such
sale, assignment, transfer, conveyance or other disposition shall have been
made:
(a) would have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of
Stater Bros. immediately preceding the transaction; and
(b) would, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(5) Stater Bros. or such Person will have delivered to the Trustee (a) an
officers' certificate of Stater Bros. and an opinion of counsel (which
counsel may not be in-house counsel of Stater Bros.), each stating that
such consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with this provision of the Indenture
and that all conditions precedent in the Indenture relating to such
transaction have been satisfied and (b) a certificate from Stater Bros.'
independent certified public accountants stating that Stater Bros. has made
the calculations required by clause (4) above in accordance with the terms
of the Indenture.
In addition, Stater Bros. may not, and may not permit any of its Restricted
Subsidiaries to, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other
Person. This "Merger, Consolidation or Sale of Assets" covenant will not apply
to a sale, assignment, transfer, conveyance or other disposition of assets
between or among Stater Bros. and any of its Restricted Subsidiaries.
Designation of Restricted and Unrestricted Subsidiaries
The board of directors of Stater Bros. may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of any
Wholly-Owned Subsidiary of Stater Bros. other than a Wholly-Owned Subsidiary
of such Subsidiary; provided, that Stater Bros. provides the Trustee with an
Officers' Certificate accompanied by a resolution of Stater Bros.' board of
directors stating that (x) such designation complies with the covenant
described above under "--Restricted Payments" and (y) such designation will
not otherwise result in any Default or Event of Default. The board of
directors of Stater Bros. may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if (x) immediately after giving effect to such
designation, Stater Bros. is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
covenant described above under "--Incurrence of Indebtedness and Issuance of
Preferred Stock" and (y) immediately before and immediately after giving
effect to such designation, no Default or Event of Default shall have occurred
and be continuing. Any such designation by the board of directors shall be
evidenced to the Trustee by promptly providing the Trustee a copy of the board
resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
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Transactions with Affiliates
Stater Bros. will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are consistent with
industry practice and no less favorable to Stater Bros. or the relevant
Restricted Subsidiary than those that would have been obtained in a
comparable transaction by Stater Bros. or such Restricted Subsidiary with
an unrelated Person; and
(2) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, Stater Bros. delivers to the Trustee a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with this covenant and that such Affiliate
Transaction has been approved by a majority of the members of the Board of
Directors.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) transactions, to the extent not otherwise prohibited under the
Indenture, between or among Stater Bros. and/or its Wholly-Owned
Subsidiaries;
(2) transactions contemplated by the Santee Documents, as amended,
modified, renewed, refunded or replaced from time to time; provided, that
such transactions are not otherwise prohibited by the Indenture;
(3) payment of reasonable directors fees to directors of Stater Bros.;
(4) sales of Equity Interests (other than Disqualified Stock) to
Affiliates of Stater Bros.;
(5) payment to La Cadena Investments of an amount equal to 1% of the
aggregate principal amount of the exchange notes sold pursuant to this
offering for advisory services rendered in connection therewith; and
(6) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments."
Limitation on Issuances and Sales of Equity Interests in Wholly-Owned
Subsidiaries (other than an Unrestricted Subsidiary)
Stater Bros. will not, and will not permit any of its Wholly-Owned
Subsidiaries (other than an Unrestricted Subsidiary) to, transfer, convey,
sell, lease or otherwise dispose of any Equity Interests in any Wholly-Owned
Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros. to any
Person (other than Stater Bros. or a Wholly-Owned Subsidiary of Stater Bros.),
unless:
(1) such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests in such Restricted Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described
above under the caption "--Repurchase at the Option of Holders--Asset
Sales."
In addition, Stater Bros. will not permit any Wholly-Owned Subsidiary (other
than an Unrestricted Subsidiary) of Stater Bros. to issue any of its Equity
Interests (other than, if necessary, shares of its Capital Stock constituting
directors' qualifying shares) to any Person other than to Stater Bros. or a
Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of Stater
Bros.
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Limitations on Issuances of Guarantees of Indebtedness
Stater Bros. will not permit any of its Restricted Subsidiaries, directly or
indirectly, to Guarantee or pledge any assets to secure the payment of any
other Indebtedness of Stater Bros. with a principal amount in excess of an
aggregate of $10.0 million unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture providing for the Guarantee of
the payment of the exchange notes by such Restricted Subsidiary, which
Guarantee shall be senior to or pari passu with such Subsidiary's Guarantee of
or pledge to secure such other Indebtedness.
Payments for Consent
Stater Bros. will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of exchange notes for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the exchange notes unless such consideration is
offered to be paid and is paid to all Holders of the exchange notes that
consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Reports
Whether or not required by the Commission, so long as any exchange notes are
outstanding, Stater Bros. will furnish to the Holders of exchange notes,
within the time periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if
Stater Bros. were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by Stater Bros.' certified independent accountants;
and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if Stater Bros. were required to file such reports.
In addition, following the consummation of this exchange offer, whether or
not required by the Commission, Stater Bros. will file a copy of all of the
information and reports referred to in clauses (1) and (2) above with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such
a filing) and make such information available to securities analysts and
prospective investors upon request.
Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the exchange notes;
(2) default in payment when due of the principal of, or premium, if any,
on the exchange notes;
(3) failure by Stater Bros. or any of its Restricted Subsidiaries to
comply with the provisions described under the captions "--Repurchase at
the Option of Holders--Change of Control," "--Repurchase at the Option of
Holders--Asset Sales," or "--Certain Covenants--Merger, Consolidation or
Sale of Assets";
(4) failure by Stater Bros. or any of its Restricted Subsidiaries for 60
days after notice to comply with any of the other agreements in the
Indenture or the exchange notes (other than a default set forth in clauses
(1), (2) or (3) above);
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Stater Bros. or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by Stater Bros. or any
of its Restricted
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Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, if that default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has
been so accelerated, aggregates $5.0 million or more;
(6) failure by Stater Bros. or any of its Restricted Subsidiaries to pay
final judgments to the extent not covered by insurance underwritten by
third parties aggregating in excess of $2.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; and
(7) certain events of bankruptcy or insolvency with respect to Stater
Bros. or any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of bankruptcy
or insolvency with respect to Stater Bros. or any Restricted Subsidiary, all
outstanding exchange notes will become due and payable immediately and
automatically without further action or notice. If any other Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding exchange notes may declare all the
exchange notes to be due and payable immediately.
Holders of the exchange notes may not enforce the Indenture or the exchange
notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding exchange
notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the exchange notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest or Liquidated Damages, if
any) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the exchange
notes then outstanding by notice to the Trustee may, on behalf of the Holders
of all of the exchange notes, waive any existing Default or Event of Default
and its consequences under the Indenture except a continuing Default or Event
of Default in the payment of interest or Liquidated Damages, if any, on, or
the principal of, the exchange notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of Stater Bros. with the
intention of avoiding payment of the premium that Stater Bros. would have had
to pay if Stater Bros. then had elected to redeem the exchange notes pursuant
to the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted
by law upon the acceleration of the exchange notes. If an Event of Default
occurs prior to August 15, 2003, by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of Stater Bros. with the intention of
avoiding the prohibition on redemption of the exchange notes prior to August
15, 2003, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the exchange notes.
Stater Bros. is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, Stater Bros. is required to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Stater Bros.
or any Subsidiary, as such, shall have any liability for any obligations of
Stater Bros. under the exchange notes or the Indenture, or for any claim
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based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of exchange notes by accepting a exchange note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the exchange notes. The waiver may not be effective to waive
liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
Stater Bros. may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding exchange notes ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding exchange notes to receive
payments in respect of the principal of, or interest or premium and
Liquidated Damages, if any, on such exchange notes when such payments are
due from the trust referred to below;
(2) Stater Bros.' obligations with respect to the exchange notes
concerning issuing temporary exchange notes, registration of exchange
notes, mutilated, destroyed, lost or stolen exchange notes and the
maintenance of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
Stater Bros.' obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, Stater Bros. may, at its option and at any time, elect to have
the obligations of Stater Bros. released with respect to certain covenants
that are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with those covenants shall not constitute a Default or
Event of Default with respect to the exchange notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
exchange notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Stater Bros. must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the exchange notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, or
interest and premium and Liquidated Damages, if any, on the outstanding
exchange notes on the stated maturity or on the applicable redemption date,
as the case may be, and Stater Bros. must specify whether the exchange
notes are being defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, Stater Bros. shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that (a) Stater Bros. has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the date
of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the exchange 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 amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Stater Bros. shall have delivered
to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that the Holders of the exchange notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is continuing either:
(a) on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit); or
(b) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the
date of deposit;
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(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which Stater Bros. or
any of its Subsidiaries is a party or by which Stater Bros. or any of its
Subsidiaries is bound;
(6) Stater Bros. must have delivered to the Trustee an Opinion of Counsel
to the effect that, assuming no intervening bankruptcy of Stater Bros.
between the date of deposit and the 91st day following the deposit and
assuming that no Holder is an "insider" of Stater Bros. under applicable
bankruptcy law, after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(7) Stater Bros. must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by Stater Bros. with the intent of
preferring the Holders of exchange notes over the other creditors of
Stater Bros. with the intent of defeating, hindering, delaying or
defrauding creditors of Stater Bros. or others; and
(8) Stater Bros. must deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been complied with.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture or
the exchange notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the exchange notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, exchange notes),
and any existing default or compliance with any provision of the Indenture or
the exchange notes may be waived with the consent of the Holders of a majority
in principal amount of the then outstanding exchange notes (including, without
limitation, consents obtained in connection with a purchase of, or tender
offer or exchange offer for, exchange notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any exchange notes held by a non-consenting Holder):
(1) reduce the principal amount of exchange notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any exchange
note or alter the provisions with respect to the redemption of the exchange
notes (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
exchange note;
(4) waive a Default or Event of Default in the payment of principal of,
or interest or premium, or Liquidated Damages, if any, on the exchange
notes (except a rescission of acceleration of the exchange notes by the
Holders of at least a majority in aggregate principal amount of the
exchange notes and a waiver of the payment default that resulted from such
acceleration);
(5) make any exchange note payable in money other than that stated in the
exchange notes;
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or Events of Default or the rights of Holders of
exchange notes to receive payments of principal of, or interest or premium
or Liquidated Damages, if any, on the exchange notes;
(7) waive a redemption payment with respect to any exchange note (other
than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"); or
(8) make any change in the preceding amendment and waiver provisions.
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Notwithstanding the foregoing, without the consent of any Holder of exchange
notes, Stater Bros. and the Trustee may amend or supplement the Indenture or
the exchange notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated exchange notes in addition to or in
place of certificated exchange notes;
(3) to provide for the assumption of Stater Bros.' obligations to Holders
of exchange notes in the case of a merger or consolidation or sale of all
or substantially all of Stater Bros.' assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of exchange notes or that does not adversely affect
the legal rights under the Indenture of any such Holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act;
provided, however, that in the case of a change pursuant to clause (1) or (4)
above, Stater Bros. has delivered to the Trustee an Opinion of Counsel stating
that such change does not adversely affect the rights of any Holder.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect as
to all exchange notes issued thereunder, when:
(1) either:
(a) all exchange notes that have been authenticated (except lost,
stolen or destroyed exchange notes that have been replaced or paid and
exchange notes for whose payment money has theretofore been deposited
in trust and thereafter repaid to Stater Bros.) have been delivered to
the Trustee for cancellation; or
(b) all exchange notes that have not been delivered to the Trustee
for cancellation have become due and payable by reason of the making of
a notice of redemption or otherwise or will become due and payable
within one year and Stater Bros. has irrevocably deposited or caused to
be deposited with the Trustee as trust funds in trust solely for the
benefit of the Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be
sufficient without consideration of any reinvestment of interest, to
pay and discharge the entire indebtedness on the exchange notes not
delivered to the Trustee for cancellation for principal, premium and
Liquidated Damages, if any, and accrued interest to the date of
maturity or redemption;
(2) no Default or Event of Default has occurred and is continuing on the
date of such deposit or shall occur as a result of such deposit and such
deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which Stater Bros. is a party or by
which Stater Bros. is bound;
(3) Stater Bros. has paid or caused to be paid all sums payable by it
under the Indenture; and
(4) Stater Bros. has delivered irrevocable instructions to the Trustee
under the Indenture to apply the deposited money toward the payment of the
exchange notes at maturity or the redemption date, as the case may be.
In addition, Stater Bros. must deliver an Officers' Certificate and an Opinion
of Counsel to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
Concerning the Trustee
If the Trustee becomes a creditor of Stater Bros., the Indenture limits its
right to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest as described in the Trust Indenture Act of
1939, as amended, it must eliminate such conflict within 90 days, apply to the
Commission for permission to continue or resign.
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The Holders of a majority in principal amount of the then outstanding
exchange notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default occurs and is continuing, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of its own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any Holder of exchange notes, unless
such Holder has offered to the Trustee security and indemnity satisfactory to
it against any loss, costs, liability or expense that might be incurred by it
in connection with such request or direction.
Governing Law
The Indenture will provide that it and the exchange notes will be governed
by, and construed in accordance with, the laws of the State of New York but
without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be
required thereby.
Additional Information
Anyone who receives this prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Stater Bros.
Holdings Inc., 21700 Barton Road, P.O. Box 150, Colton, California 92324,
Attention: Chief Financial Officer.
Book-Entry, Delivery and Form
The outstanding notes were offered and sold to qualified institutional
buyers in reliance on Rule 144A ("Rule 144A Notes") and in offshore
transactions in reliance on Regulation S ("Regulation S Notes") and were
issued in registered, global form in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof.
Rule 144A Notes are represented by one or more notes in registered, global
form without interest coupons (collectively, the "Rule 144A Global Notes").
Regulation S Notes are represented by one or more notes in registered, global
form without interest coupons (collectively, the "Regulation S Global Notes"
and, together with the Rule 144A Global Notes, the "Outstanding Global
Notes"). The Outstanding Global Notes are on deposit with the Trustee as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below. Through
and including the 40th day after the later of the commencement of the offering
of the outstanding notes and the issuance of the outstanding notes (such
period through and including such 40th day, the "Restricted Period"),
beneficial interests in the Regulation S Global Notes may be held only through
the Euroclear System ("Euroclear") and Cedel, S.A. ("Cedel") (as indirect
participants in DTC), unless transferred to a person that takes delivery
through a Rule 144A Global Note in accordance with the certification
requirements described below. Beneficial interests in the Rule 144A Global
Notes may not be exchanged for beneficial interests in the Regulation S Global
Notes at any time except in the limited circumstances described below. See "--
Exchanges between Regulation S Notes and Rule 144A Notes."
Except as set forth below, the Outstanding Global Notes may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee. Beneficial interests in the Outstanding Global Notes may
not be exchanged for notes in certificated form except in the limited
circumstances described below. See "--Exchange of Global Notes for
Certificated Notes." Except in the limited circumstances described below,
owners of beneficial interests in the Outstanding Global Notes will not be
entitled to receive physical delivery of notes in certificated form.
Rule 144A Notes (including beneficial interests in the Rule 144A Global
Notes) are subject to certain restrictions on transfer and bear a restrictive
legend. Regulation S Notes also bear a similar restrictive legend. In
addition, transfers of beneficial interests in the Outstanding Global Notes
will be subject to the applicable rules and procedures of DTC and its direct
or indirect participants (including, if applicable, those of Euroclear and
Cedel), which may change from time to time.
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Exchange Notes
Exchange notes issued in exchange for outstanding notes originally offered
and sold (1) to QIBs in reliance on Rule 144A under the Securities Act or (2)
in reliance on Regulation S under the Securities Act will be represented by a
single, permanent Global Note in definitive, fully registered book-entry form
(the "Exchange Global Note" and together with the Rule 144A Global Note and
the Regulation S Global Note, the "'Global Notes"), which will be registered
in the name of DTC, or its nominee, on behalf of persons who receive exchange
notes represented thereby for credit to the respective accounts of such
persons, or to such other accounts as they may direct at DTC.
Exchange notes issued in exchange for outstanding notes will be issued, upon
request, in fully registered form, but otherwise such holders will only be
entitled to registration of their respective exchange notes in book-entry form
under the Exchange Global Note.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them. Stater Bros. takes no responsibility for
these operations and procedures and urges investors to contact the system or
their participants directly to discuss these matters.
DTC has advised Stater Bros. that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised Stater Bros. that, pursuant to procedures established
by it:
(1) upon deposit of the Global Notes, DTC would credit the accounts of
Participants designated by the initial purchaser with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes would be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).
Investors in the Rule 144A Global Notes who are Participants in DTC's system
may hold their interests therein directly through DTC. Investors in the Rule
144A Global Notes who are not Participants may hold their interests therein
indirectly through organizations (including Euroclear and Cedel) which are
Participants in such system. Investors in the Regulation S Global Notes must
initially hold their interests therein through Euroclear or Cedel, if they are
participants in such systems, or indirectly through organizations that are
participants in such systems. After the expiration of the Restricted Period
(but not earlier), investors may also hold interests in the Regulation S
Global Notes through Participants in the DTC system other than Euroclear and
Cedel. Euroclear and Cedel will hold interests in the Regulation S Global
Notes on behalf of their participants through customers' securities accounts
in their respective names on the books of their respective depositories, which
are Morgan Guaranty Trust Company of New York, Brussels office, as operator of
Euroclear, and Citibank, N.A., as operator of Cedel. All interests in a Global
Note, including those held through Euroclear or Cedel, may be subject to the
procedures and requirements of DTC. Those interests held through Euroclear or
Cedel may also be subject to the procedures and requirements of such systems.
The laws of some states require that certain Persons take physical
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delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such Persons will
be limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants, the ability of a Person
having beneficial interests in a Global Note to pledge such interests to
Persons that do not participate in the DTC system, or otherwise take actions
in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Except as described below, owners of interests in the Global Notes will not
have exchange notes registered in their names, will not receive physical
delivery of exchange notes in certificated form and will not be considered the
registered owners or "Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest and premium and
Liquidated Damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, Stater Bros. and the
Trustee will treat the Persons in whose names the exchange notes, including
the Global Notes, are registered as the owners thereof for the purpose of
receiving payments and for all other purposes. Consequently, neither Stater
Bros., the Trustee nor any agent of Stater Bros. or the Trustee has or will
have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised Stater Bros. that its current practice, upon receipt of any
payment in respect of securities such as the exchange notes (including
principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date unless DTC has reason to
believe it will not receive payment on such payment date. Each relevant
Participant is credited with an amount proportionate to its beneficial
ownership of an interest in the principal amount of the relevant security as
shown on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of exchange notes will be governed by
standing instructions and customary practices and will be the responsibility
of the Participants or the Indirect Participants and will not be the
responsibility of DTC, the Trustee or Stater Bros. Neither Stater Bros. nor
the Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the exchange notes, and Stater Bros. and
the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and Cedel will be effected in accordance with their
respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
exchange notes described herein, cross-market transfers between the
Participants in DTC, on the one hand, and Euroclear or Cedel participants, on
the other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or Cedel, as the case may be, by its respective
depositary; however, such cross-market transactions will require delivery of
instructions to Euroclear or Cedel, as the case may be, by the counterparty in
such system in accordance with the rules and procedures and within the
established deadlines (Brussels time) of such system. Euroclear or Cedel, as
the case may be, will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action to effect
final settlement on its behalf by delivering or receiving interests in the
relevant Global Note in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and Cedel participants may not deliver instructions
directly to the depositories for Euroclear or Cedel.
DTC has advised Stater Bros. that it will take any action permitted to be
taken by a Holder of exchange notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the
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Global Notes and only in respect of such portion of the aggregate principal
amount of the exchange notes as to which such Participant or Participants has
or have given such direction. However, if there is an Event of Default under
the exchange notes, DTC reserves the right to exchange the Global Notes for
legended exchange notes in certificated form, and to distribute such exchange
notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to
continue to perform such procedures, and may discontinue such procedures at
any time. Neither Stater Bros. nor the Trustee nor any of their respective
agents will have any responsibility for the performance by DTC, Euroclear or
Cedel or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies Stater Bros. that it is unwilling or unable to
continue as depositary for the Global Notes and Stater Bros. fails to
appoint a successor depositary or (b) has ceased to be a clearing agency
registered under the Exchange Act;
(2) Stater Bros., at its option, notifies the Trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing a Default or Event of Default
with respect to the exchange notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated
Notes delivered in exchange for any Global Note or beneficial interests in
Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures) and will bear the applicable restrictive legend
referred to in "Notice to Investors," unless that legend is not required by
applicable law.
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the Trustee a written
certificate (in the form provided in the Indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such notes.
Exchanges Between Regulation S Notes and Rule 144A Notes
Prior to the expiration of the Restricted Period, beneficial interests in
the Regulation S Global Note may be exchanged for beneficial interests in the
Rule 144A Global Note only if:
(1) such exchange occurs in connection with a transfer of the notes
pursuant to Rule 144A; and
(2) the transferor first delivers to the Trustee a written certificate
(in the form provided in the Indenture) to the effect that the notes are
being transferred to a Person:
(a) who the transferor reasonably believes to be a qualified
institutional buyer within the meaning of Rule 144A;
(b) purchasing for its own account or the account of a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A; and
(c) in accordance with all applicable securities laws of the states
of the United States and other jurisdictions.
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Beneficial interests in a Rule 144A Global Note may be transferred to a
Person who takes delivery in the form of an interest in the Regulation S
Global Note, whether before or after the expiration of the Restricted Period,
only if the transferor first delivers to the Trustee a written certificate (in
the form provided in the Indenture) to the effect that such transfer is being
made in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if
available) and that, if such transfer occurs prior to the expiration of the
Restricted Period, the interest transferred will be held immediately
thereafter through Euroclear or Cedel.
Transfers involving exchanges of beneficial interests between the Regulation
S Global Notes and the Rule 144A Global Notes will be effected in DTC by means
of an instruction originated by the Trustee through the DTC Deposit/Withdraw
at Custodian system. Accordingly, in connection with any such transfer,
appropriate adjustments will be made to reflect a decrease in the principal
amount of the Regulation S Global Note and a corresponding increase in the
principal amount of the Rule 144A Global Note or vice versa, as applicable.
Any beneficial interest in one of the Global Notes that is transferred to a
Person who takes delivery in the form of an interest in the other Global Note
will, upon transfer, cease to be an interest in such Global Note and will
become an interest in the other Global Note and, accordingly, will thereafter
be subject to all transfer restrictions and other procedures applicable to
beneficial interest in such other Global Note for so long as it remains such
an interest. The policies and practices of DTC may prohibit transfers of
beneficial interests in the Regulation S Global Note prior to the expiration
of the Restricted Period.
Same Day Settlement and Payment
Stater Bros. will make payments in respect of the exchange notes represented
by the Global Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) by wire transfer of immediately available funds to
the accounts specified by the Global Note Holder. Stater Bros. will make all
payments of principal, interest and premium and Liquidated Damages, if any,
with respect to Certificated Notes by wire transfer of immediately available
funds to the accounts specified by the Holders thereof or, if no such account
is specified, by mailing a check to each such Holder's registered address. The
exchange notes represented by the Global Notes are expected to be eligible to
trade in the PORTAL market and to trade in DTC's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such exchange
notes will, therefore, be required by DTC to be settled in immediately
available funds. Stater Bros. expects that secondary trading in any
Certificated Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. DTC has advised Stater Bros.
that cash received in Euroclear or Cedel as a result of sales of interests in
a Global Note by or through a Euroclear or Cedel participant to a Participant
in DTC will be received with value on the settlement date of DTC but will be
available in the relevant Euroclear or Cedel cash account only as of the
business day for Euroclear or Cedel following DTC's settlement date.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into, became a Subsidiary of, or substantially all
of its business and assets were acquired by, such specified Person, whether
or not such Indebtedness is incurred in connection with, or in
contemplation of, such other
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Person merging with or into, becoming a Subsidiary of, or substantially all
of its business and assets being acquired by, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control," as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided that beneficial ownership of
5% or more of the Voting Stock of a Person shall be deemed to be control. For
purposes of this definition, the terms "controlling," "controlled by" and
"under common control with" shall have correlative meanings. For purposes of
this definition but solely with respect to clause (2) of the first paragraph
of the covenant described under the caption "--Certain Covenants--Restricted
Payments," Santee LLC shall not be deemed to be an Affiliate of Stater Bros.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights (including but not limited to sale and leaseback transactions),
other than any such sale or other disposition in the ordinary course of
business; provided that the sale, conveyance or other disposition of all or
substantially all of the assets of Stater Bros. and its Subsidiaries taken
as a whole will be governed by the provisions of the Indenture described
above under the caption "--Repurchase at the Option of Holders--Change of
Control" and/or the provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of Stater Bros.' Restricted
Subsidiaries or the sale of Equity Interests in any of its Subsidiaries.
Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
(2) a transfer of assets between or among Stater Bros. and its Wholly-
Owned Subsidiaries (other than an Unrestricted Subsidiary);
(3) an issuance of Equity Interests by a Restricted Subsidiary to Stater
Bros. or to another Wholly-Owned Subsidiary (other than an Unrestricted
Subsidiary) of Stater Bros.;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) 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;
(6) the sale or other disposition of cash or Cash Equivalents; and
(7) a Restricted Payment or Permitted Investment that is permitted by the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only after the passage of time or upon the
occurrence of a subsequent condition. The terms "Beneficially Owns" and
"Beneficially Owned" shall have a corresponding meaning.
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"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the Board of Directors of the general
partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated)
of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than one year from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding one year and overnight bank deposits, in each
case, with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations for underlying securities of the types
described in clauses (2) and (3) above entered into with any financial
institution meeting the qualifications specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of Stater Bros. and its Restricted Subsidiaries taken
as a whole to any "person" or "group" of persons (as such terms are used in
Section 13(d)(3) of the Exchange Act) other than either La Cadena
Investments or any La Cadena Successor;
(2) the adoption of a plan relating to the liquidation or dissolution of
Stater Bros.;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" or
"group" (as defined above), other than either La Cadena
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Investments or any La Cadena Successor, becomes the Beneficial Owner,
directly or indirectly, of more than 50% of the Voting Stock of Stater
Bros., measured by voting power rather than number of shares;
(4) the first day on which a majority of the members of the Board of
Directors of Stater Bros. are not Continuing Directors;
(5) Stater Bros. consolidates with, or merges with or into, any Person,
or any Person consolidates with, or merges with or into, Stater Bros., in
any such event pursuant to a transaction in which any of the outstanding
Voting Stock of Stater Bros. or such other Person is converted into or
exchanged for cash, securities or other property, other than any such
transaction where all or a portion of the Voting Stock of Stater Bros.
outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving
or transferee Person constituting a majority of the outstanding shares of
such Voting Stock of such surviving or transferee Person (immediately after
giving effect to such issuance); or
(6) at any time prior to the date that a La Cadena Successor is the
Beneficial Owner of more than 50% of the Voting Stock of Stater Bros., Jack
H. Brown shall cease to (A) be a general partner or managing member of La
Cadena Investments, (B) have the power to vote the majority of the Capital
Stock of La Cadena Investments, (C) be the Beneficial Owner of at least 35%
of the Equity Interests in La Cadena Investments, or (D) be the Beneficial
Owner of a higher percentage of the Equity Interests in La Cadena
Investments than any other "person" or "group" of persons (as such terms
are used in Section 13(d)(3) of the Exchange Act).
"Consolidated Cash Flow" means, with respect to any specified Person for any
period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus the amount of any net
loss realized by such Person or any of its Consolidated Subsidiaries in
connection with (a) an Asset Sale, or (b) the disposition of any securities
by such Person or any of its Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Subsidiaries, in each case to the
extent such losses were deducted in computing such Consolidated Net Income;
plus
(2) provision for taxes based on income or profits of such Person and its
Consolidated Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(3) consolidated interest expense of such Person and its Consolidated
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing such Consolidated Net
Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its
Consolidated Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus
(5) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash
expenses of, a Consolidated Subsidiary of Stater Bros. shall be
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added to Consolidated Net Income to compute Consolidated Cash Flow of Stater
Bros. only to the extent that a corresponding amount would be permitted at the
date of determination to be dividended to Stater Bros. by such Consolidated
Subsidiary without prior governmental approval (that has not been obtained),
and without direct or indirect restriction pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Consolidated Subsidiary
or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its
Consolidated Subsidiaries for such period, on a consolidated basis, determined
in accordance with GAAP; provided that:
(1) the Net Income (but not loss) of Santee LLC and any Person that is
not a Consolidated Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash to the specified Person or a
Restricted Subsidiary thereof;
(2) the Net Income of any Consolidated Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by such Consolidated Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such
Consolidated Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and
(4) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any specified Person as of
any date, the sum of:
(1) the consolidated equity of the common stockholders of such Person and
its Consolidated Subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock, less
(a) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such
business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a Consolidated Subsidiary of such
Person;
(b) the book value of all intangible assets (as determined in
accordance with GAAP) of such Person and its Consolidated Subsidiaries;
(c) 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 any of its Subsidiaries;
(d) all investments in Persons that are not Consolidated
Subsidiaries; and
(e) all unamortized debt discount and expense and unamortized
deferred charges, all of the foregoing 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 Stater Bros. will not be included as
Consolidated Subsidiaries of Stater Bros. for purposes of the 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
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that is not a Subsidiary (as such term is defined herein) of a Person will not
be included as a Consolidated Subsidiary of such Person, regardless of whether
such Person is, or in accordance with GAAP, should be accounted for as a
consolidated subsidiary.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of Stater Bros. who:
(1) was a member of such Board of Directors on the date of the Indenture;
or
(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election.
"Credit Facilities" means one or more debt facilities (including, without
limitation, the Revolving Credit Facility) or commercial paper facilities, in
each case with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special-purpose entities formed to borrow
from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part (whether by revolving or other long-term
Indebtedness) from time to time.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the exchange notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders thereof have the right to require Stater Bros. to
repurchase such Capital Stock upon the occurrence of a change of control or an
asset sale shall not constitute Disqualified Stock if the terms of such
Capital Stock provide that Stater Bros. may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption
complies with the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means up to $6.0 million in aggregate principal
amount of Indebtedness of Stater Bros. and its Restricted Subsidiaries (other
than Indebtedness under the Revolving Credit Facility) in existence on the
date of the Indenture, until such amounts are repaid.
"Fixed Charge Coverage Ratio" means with respect to any specified Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees, repays, repurchases or redeems any Indebtedness (other than
ordinary working capital borrowings) or issues, repurchases or redeems
preferred stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated and on or prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall
be calculated giving pro forma effect to such incurrence, assumption,
Guarantee, repayment, repurchase or redemption of Indebtedness, or such
issuance, repurchase or redemption of preferred stock, and the use of the
proceeds therefrom as if the same had occurred at the beginning of the
applicable four-quarter reference period.
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In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Subsidiaries, including through mergers or consolidations and including
any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date shall be given pro forma effect as if they had occurred on
the first day of the four-quarter reference period and Consolidated Cash
Flow for such reference period shall be calculated on a pro forma basis in
accordance with Regulation S-X under the Securities Act, but without giving
effect to clause (3) of the proviso set forth in the definition of
Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, will be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, will be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Subsidiaries following
the Calculation Date.
"Fixed Charges" means, with respect to any specified Person for any period,
the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its Consolidated
Subsidiaries for such period, whether paid or accrued, including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and
excluding (A) the amortization of any debt issuance costs and (B) the
effect of all payments made or received pursuant to Hedging Obligations;
plus
(2) the consolidated interest of such Person and its Consolidated
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Consolidated Subsidiaries or
secured by a Lien on assets of such Person or one of its Consolidated
Subsidiaries, whether or not such Guarantee or Lien is called upon; plus
(4) all dividends, whether paid or accrued and whether or not in cash, on
any series of preferred stock of such Person or any of its Consolidated
Subsidiaries, other than dividends on Equity Interests payable solely in
Equity Interests of Stater Bros. (other than Disqualified Stock) or to
Stater Bros. or a Consolidated Subsidiary of Stater Bros.
"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 have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
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"Holders" means the holders of the exchange notes.
"Indebtedness" means, with respect to any specified Person and without
duplication, any liability of such Person, whether or not contingent:
(1) for borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and unpaid of the purchase price of
any property, except any such balance that constitutes an accrued expense
or trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of
the specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
For the avoidance of doubt, the Santee Financing and the Santee Documents, as
amended, modified, renewed, refunded or replaced from time to time (provided,
that the terms of such documents as so amended, modified, renewed, refunded or
replaced are at least as favorable to the Holders of exchange notes as those
contained in the Santee Documents as in effect on the date of the Indenture)
will be deemed not to constitute, nor to have given rise to, the incurrence of
any Indebtedness of Stater Bros. or any of its Subsidiaries; provided,
however, that if Santee LLC or Santee becomes a Restricted Subsidiary, and at
such time, the Santee Financing would otherwise qualify as "Indebtedness" of
Santee under this definition, the Santee Financing shall not fail to so
qualify solely because of the provisions of this sentence.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the
forms of loans (including Guarantees or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or
other securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Stater
Bros. or any Restricted Subsidiary of Stater Bros. sells or otherwise disposes
of any Equity Interests of any direct or indirect Restricted Subsidiary of
Stater Bros. such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of Stater Bros., then Stater Bros. shall
be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of pursuant to such sale or disposition in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Certain Covenants--Restricted Payments." If Stater
Bros. or any Restricted Subsidiary of Stater Bros. designates a Restricted
Subsidiary to be an Unrestricted Subsidiary pursuant to the provisions of the
Indenture, then Stater Bros. shall be deemed to have made an Investment on the
date of such designation equal to the fair market value of the Equity
Interests of such Subsidiary in an amount determined as provided in the final
paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted
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Payments." The acquisition by Stater Bros. or any Restricted Subsidiary of
Stater Bros. of a Person that holds an Investment in any third Person shall be
deemed to be an Investment by Stater Bros. or such Subsidiary in such third
Person in an amount equal to the fair market value of the Investment held by
the acquired Person in such third Person in an amount determined as provided
in the final paragraph of the covenant described above under the caption "--
Certain Covenants--Restricted Payments."
"La Cadena Investments" means La Cadena Investments, a California general
partnership.
"La Cadena Successor" means a partnership or limited liability company
(other than La Cadena Investments) with respect to which (a) Jack H. Brown is
a general partner or managing member, (b) Jack H. Brown has the power to vote
the majority of the Capital Stock, (c) Jack H. Brown is the Beneficial Owner
of at least 35% of the Equity Interests therein and (d) Jack H. Brown is the
Beneficial Owner of a higher percentage of the Equity Interests therein than
any other "person" or "group" of persons (as such terms are used in
Section 13(d)(3) of the Exchange Act).
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
"Markets Preferred Stock" means the $11.00 Cumulative Preferred Stock issued
by Stater Bros. Markets.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such Person or any
of its Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by Stater Bros. or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-
cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof, in each case, after taking into account any available tax credits or
deductions and any tax sharing arrangements, and amounts required to be
applied to the repayment of Indebtedness, other than Indebtedness under the
Revolving Credit Facility, secured by a Lien on the asset or assets that were
the subject of such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Construction Indebtedness" means Indebtedness of Stater Bros. or
any Restricted Subsidiary representing the deferred purchase price, 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 Stater Bros. or Stater Bros. Markets. For purposes hereof, "major
remodeling" or "major refurbishment" of a supermarket will 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
$250,000 per project site.
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"Permitted Investments" means:
(1) any Investment in Stater Bros. or in a Restricted Subsidiary
(including any Person who becomes a Subsidiary as a result of any
Investment, other than an Unrestricted Subsidiary), provided that any
Indebtedness evidencing such Investment in a Restricted Subsidiary is not
subordinated to any Indebtedness or other obligation of such Restricted
Subsidiary;
(2) the making of Investments in Stater Bros. by any Subsidiary (provided
that any Indebtedness evidencing such Investment is subordinated and junior
to the exchange notes);
(3) any Investment in Cash Equivalents;
(4) any Investment by Stater Bros. or any Restricted Subsidiary in a
Person, if as a result of such Investment:
(a) such Person becomes a Wholly-Owned Subsidiary (other than an
Unrestricted Subsidiary) of Stater Bros.; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, Stater Bros. or a Restricted Subsidiary;
(5) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales";
(6) any acquisition of assets or any Investment in any Person solely in
exchange for the issuance of Equity Interests (other than Disqualified
Stock) of Stater Bros.;
(7) the making of Investments in Santee LLC of up to $25.0 million;
(8) 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;
(9) the 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; and
(10) Hedging Obligations.
"Permitted Liens" means:
(1) Liens of Stater Bros. and any Restricted Subsidiary securing
Indebtedness and other Obligations (a) under the Revolving Credit Facility
and (b) under other Credit Facilities that, in each case, were permitted by
the terms of the Indenture to be incurred;
(2) Liens in favor of Stater Bros. or any Restricted Subsidiary;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with Stater Bros. or any Restricted
Subsidiary of Stater Bros.; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or
consolidated with Stater Bros. or the Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by
Stater Bros. or any Restricted Subsidiary of Stater Bros., provided that
such Liens were in existence prior to the contemplation of such acquisition
and do not extend to any assets other than such acquired property;
(5) Liens or deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease Obligations and
Permitted Construction Indebtedness) permitted by clauses (2), (4), (5),
(8), (11), (13), (14) and (15) of the second paragraph of the
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covenant entitled "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock" covering only the assets acquired with or
improved with the proceeds of such Indebtedness;
(7) Liens securing the exchange notes;
(8) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(9) Liens incurred in the ordinary course of business of Stater Bros. or
any Restricted Subsidiary with respect to obligations that do not exceed
$5.0 million at any one time outstanding;
(10) Liens existing on the date of the Indenture and renewals, extensions
and replacements thereof, provided that such renewals, extensions or
replacements will not apply to any property or assets not previously
subject to such Liens or increase the principal amount of obligations
secured thereby;
(11) Liens on deposits made in the ordinary course of business;
(12) Liens in favor of collecting banks having a right of setoff,
revocation, refund or chargeback with respect to money or instruments of
Stater Bros. or any Restricted Subsidiary on deposit with or in possession
of such banks;
(13) Liens in respect of Permitted Refinancing Indebtedness; provided
that the terms of such liens in respect of such Permitted Refinancing
Indebtedness are not less favorable to the Holders of the exchange notes
than the terms of the Liens securing the indebtedness being refinanced and
do not extend to any assets not securing such indebtedness;
(14) 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;
(15) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(16) easements, rights-of-way, restrictions and 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 Stater Bros.
or its Subsidiaries, as the case may be, and any exceptions to title set
forth in any title policies;
(17) 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; and
(18) any Liens relating solely to property leased by Stater Bros. or any
Subsidiary and arising solely out of the lease for such property.
"Permitted Refinancing Indebtedness" means any Indebtedness of Stater Bros.
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Stater Bros. or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest thereon
and the amount of all expenses and premiums incurred in connection
therewith);
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(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the exchange
notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of
payment to, the exchange notes on terms at least as favorable to the
holders of the exchange notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and
(4) such Indebtedness is incurred either by Stater Bros. or by the
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Petrolane Leases" means that certain Amended and Restated Sublease
Agreement between ARM Leasing Corp., as Lessor and Stater Bros. Markets, as
Lessee dated as of June 1, 1963, that certain Amended and Restated Sublease
Agreement between Clipse Leasing Corp., as Lessor and Stater Bros. Markets, as
Lessee dated as of May 2, 1983, that certain Sublease Agreement between ARM
Leasing Corp., as Lessor and Stater Bros. Markets, as Lessee dated as of
December 1, 1983, and that certain Amended and Restated Sublease Agreement
between Wren Leasing Corp., as Lessor and Stater Bros. Markets, as Lessee
dated as of June 1, 1983, in each case as amended, modified, renewed, refunded
or replaced from time to time; provided, that the terms of such documents as
so amended, modified, renewed, refunded or replaced are at least as favorable
to the Holders of exchange notes as those contained in the Petrolane Leases as
in effect on the date of the Indenture.
"Qualified La Cadena Investment" means an Investment made in Stater Bros. by
La Cadena Investments or any La Cadena Successor for the purpose of providing
funds to either Stater Bros. 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 will be (a) unsecured Indebtedness, and
(b) subordinated Indebtedness.
"Qualified Santee LLC Interest Sale" means a sale by Stater Bros. Markets of
all or any portion of its interest in Santee LLC.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of Stater Bros. that is not an
Unrestricted Subsidiary.
"Revolving Credit Facility" means the credit facility governed by that
certain Credit Agreement, dated August 6, 1999, by and among Stater Bros.
Markets, Stater Bros., the lenders from time to time parties thereto, and Bank
of America, N.A. as agent, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time, including any such amendment, restatement, modification,
renewal, refunding, replacement, or refinancing facility that alters the
maturity thereof.
"Santee" means Santee Dairies, Inc., a California corporation, a wholly-
owned Subsidiary of Santee LLC.
"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, that
certain Letter Agreement between Stater Bros. and each of the Santee
Noteholders and all documents effecting and ancillary to the Santee Financing.
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"Santee Financing" means the issuance of Santee of up to $80,000,000 in
principal amount of notes pursuant to that certain Note Purchase Agreement
dated as of July 30, 1997, as amended through and including the date of the
Indenture, and all transactions incident and ancillary thereto.
"Santee LLC" means Santee Dairies, LLC, a Delaware limited liability
company.
"Santee Noteholders" means the holders of notes with respect to the Santee
Financing.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the
only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"Unrestricted Subsidiary" means (a) if and at such time as such Persons
become Subsidiaries, Santee LLC and Santee (provided, however, that the board
of directors of Stater Bros. may at such time, if any, as such Persons become
Subsidiaries designate either or both of them as Restricted Subsidiaries by
board resolution in accordance with the terms of the Indenture), (b) any
Subsidiary of Stater Bros. that is designated by the board of directors of
Stater Bros. as an Unrestricted Subsidiary pursuant to a board resolution in
accordance with the terms of the Indenture, and (c) any Subsidiary of an
Unrestricted Subsidiary.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment;
by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly-Owned Subsidiary" of any specified Person means 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
or another Wholly Owned Subsidiary of such Person, and with respect to Stater
Bros., shall include Stater Bros. Markets so long as Stater Bros. or any
Wholly Owned Subsidiary of Stater Bros. owns all of the outstanding shares of
Capital Stock of Stater Bros. Markets other than the Markets Preferred Stock.
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MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
FOR UNITED STATES HOLDERS AND NON-UNITED STATES HOLDERS
The following is a general discussion of United States federal tax
consequences associated with the exchange of the outstanding notes for the
exchange notes and of the ownership and disposition of the exchange notes by
an initial beneficial owner of the exchange notes. These consequences depend
on whether the beneficial owner is or is not a "United States person." For
purposes of this discussion, a "United States person" means (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created or organized in the United States or under the laws of the United
States or of any political subdivision thereof, (c) an estate whose income is
includible in gross income for United States federal income tax purposes
regardless of its source, or (d) a trust, if a United States court is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust, or certain electing trusts that were in existence on
August 19, 1996, and treated as a domestic trust on such date.
This discussion is based upon current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), applicable Treasury Regulations,
judicial authority and administrative rulings and practice, any of which may
be altered with retroactive effect thereby changing the federal tax
consequences discussed herein. The tax treatment of the holders of the
exchange notes may vary depending upon their particular situations. In
addition, certain other holders, including insurance companies, tax exempt
organizations, financial institutions and broker-dealers, may be subject to
special rules not included in this discussion. Stater Bros. will not seek a
ruling from the Internal Revenue Service ("IRS") with respect to any of the
matters discussed herein and there can be no assurance that the IRS will not
challenge one or more of the tax consequences described herein. Investors
should consult their own tax advisor concerning the consequences of the
acquisition, ownership, and disposition of the exchange notes, including the
tax consequences under the laws of any foreign, state, local or other taxing
jurisdictions and the possible effects on investors of changes in United
States federal or other tax laws.
The Exchange Offer
The exchange of outstanding notes for exchange notes pursuant to this
exchange offer will not be treated as a disposition for United States federal
income tax purposes because the exchange notes will not be considered to
differ materially in kind or extent from the outstanding notes. Rather, any
exchange notes received by investors should be treated as a continuation of
their investment in the outstanding notes. As a result, there should be no
United States federal income tax consequences to investors resulting from the
exchange offer. In addition, investors will have the same adjusted basis and
holding period in the exchange notes as they had in the outstanding notes
immediately prior to the exchange.
United States Holders
Stated Interest
Interest on an exchange note will be includable by a United States person
holding an exchange note (a "United States Holder") as ordinary interest
income at the time it accrues or is received in accordance with such holder's
method of accounting for tax purposes.
Sale, Exchange or Redemption of the Exchange Notes
Upon the disposition of an exchange note by sale, exchange or redemption, a
United States Holder will generally recognize gain or loss equal to the
difference between (i) the amount realized on the disposition (other than
amounts attributable to accrued interest) and (ii) the United States Holder's
tax basis in the exchange note. A United States Holder's tax basis in an
exchange note generally will equal the cost of the exchange note (other than
any cost attributable to accrued interest as of the date the United States
Holder acquired the exchange note).
97
<PAGE>
Assuming that the exchange note is held as a capital asset, such gain or
loss will generally constitute capital gain or loss and will be long-term
capital gain or loss if the United States Holder has held such exchange note
for longer than one year. Non-corporate taxpayers are generally subject to a
maximum regular federal income tax rate of 20% on net long-term capital gains.
The deductibility of capital losses is subject to certain limitations.
Backup Withholding and Information Reporting
Under the Code, a United States Holder of an exchange note may be subject,
under certain circumstances, to information reporting and/or to backup
withholding at a 31% rate with respect to interest payments with respect to
such a note or the gross proceeds from dispositions of such a note. This
withholding applies only if the holder (i) fails to furnish its social
security or other taxpayer identification number ("TIN") within a reasonable
time after a request therefor, (ii) furnishes an incorrect TIN, (iii) fails to
report interest or dividends properly, or (iv) fails, under certain
circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is its correct number and that it is not
subject to backup withholding. Any amount withheld from a payment to a United
States Holder under the backup withholding rules is allowable as a credit
against such holder's United States federal income tax liability (and may
entitle such holder to a refund), provided that the required information is
furnished to the IRS. Certain persons are exempt from backup withholding,
including corporations and certain financial institutions. Holders of exchange
notes should consult their tax advisors as to their qualification for
exemption from withholding and the procedure for obtaining such exemption.
Non-United States Holders
Interest
Generally, interest income of a non-United States person holding an exchange
note (a "Non-United States Holder") that is not effectively connected with a
United States trade or business will be subject to a United States federal
income tax and withholding tax at a 30% rate. However, such interest may be
exempt from, or subject to a lower rate of, income tax withholding tax
pursuant to an income tax treaty between the United States and the country of
residence of the Non-United States Holder. A Non-United States Holder claiming
the benefit of such a treaty must provide Stater Bros. or its paying agent
with a properly executed IRS Form 1001 (or a suitable substitute or successor
form or such other form as the IRS may prescribe). Moreover, interest paid on
the exchange notes by Stater Bros. or its paying agent to a Non-United States
Holder will qualify for the so-called "portfolio-interest exemption" and,
therefore, will not be subject to United States federal income tax or
withholding tax provided that such interest income is not effectively
connected with a United States trade or business of the Non-United States
Holder and provided that:
. the Non-United States Holder does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of
Stater Bros. that is entitled to vote;
. the Non-United States Holder is not
. a controlled foreign corporation related to Stater Bros. actually or
constructively through the stock ownership rules under Section
864(d)(4) of the Code, or
. a bank which acquired the exchange notes in consideration for an
extension of credit made pursuant to a loan agreement entered into
in the ordinary course of business;
. the interest paid to the Non-United States Holder is not considered
contingent interest under Section 871(h)(4) of the Code and the
regulations thereunder; and
. the beneficial owner satisfies the requirements set forth in Section
871(h) and 881(c) of the Code and the Treasury regulations issued
thereunder relating to registered securities.
. Currently, this requirement will be satisfied in either of the
following circumstances:
. First, this requirement will be satisfied if the Non-United
States Holder provides to Stater Bros. or its paying agent a Form
W-8 (or a suitable substitute or successor form, such as a
98
<PAGE>
Form W-8BEN), that is signed under penalties of perjury, includes
the holder's name and address, and contains a certification that
the holder is not a United States person.
. Second, the requirement will be satisfied if (a) the Non-United
States Holder provides a Form W-8 (or a suitable substitute or
successor form, such as a Form W-8BEN), signed under the
penalties of perjury, to a qualified intermediary, such as a
securities clearing organization, bank, or other financial
institution who holds customers' securities in the ordinary
course of its trade or business and holds the exchange notes on
behalf of a beneficial owner, and (b) the qualified intermediary
certifies to Stater Bros. or its paying agent, under the
penalties of perjury, that such statement has been received by it
from the beneficial owner, directly or through another
intermediary financial institution, and furnishes Stater Bros. or
its paying agent with a copy thereof.
. Recently finalized Treasury regulations that are applicable to
interest paid after December 31, 2000, provide alternative
documentation procedures for satisfying the certification requirement
described above. Such regulations add intermediary certification
options for certain qualifying agents. For instance, under one such
option, a withholding agent would be allowed to rely on an IRS Form
W-8IMY (or suitable substitute or successor form) furnished by a
financial institution or other intermediary on behalf of one or more
beneficial owners or other intermediaries without having to obtain
the beneficial owner certificate described in the preceding
paragraph, provided that the financial institution or intermediary
has entered into a withholding agreement with the IRS and thus is a
qualified intermediary.
Except to the extent that an applicable treaty otherwise provides, interest
received by a Non-United States Holder that is effectively connected with a
United States trade or business conducted by such holder will be taxed at the
graduated rates applicable to United States persons. Effectively connected
interest received by a corporate Non-United States Holder may also, under
certain circumstances, be subject to an additional "branch profits tax" at a
30% rate, or, if applicable, a lower treaty rate. Even though such effectively
connected interest will be subject to federal income tax, and possibly subject
to the branch profits tax, it will not be subject to withholding if the Non-
United States Holder delivers a properly executed IRS Form 4224 (or suitable
substitute or successor form, such as a W-8ECI or such other form as the IRS
may prescribe) to Stater Bros. or its agent.
Gain on Disposition
A Non-United States Holder will generally not be subject to United States
federal income tax on gain realized on a sale, redemption or other disposition
of the exchange notes unless:
. the gain is effectively connected with the conduct of a trade or
business within the United States by the Non-United States Holder, or
. in the case of a Non-United States Holder who is a nonresident alien
individual and holds the exchange note as a capital asset, such holder
is present in the United States for 183 or more days in the taxable year
and certain other requirements are met.
If a Non-United States Holder falls under the first clause in the preceding
paragraph, the holder will be taxed on the net gain derived from the sale under
the graduated United States federal income tax rates that are applicable to
United States persons and, if the Non-United States Holder is a foreign
corporation, it may also be subject to the branch profits tax described above.
Even though the effectively connected income will be subject to federal income
tax, and possibly subject to the branch profits tax, it will not be subject to
withholding if the Non-United States Holder delivers a properly executed IRS
Form 4224 (or a suitable substitute or successor form, such as a Form W-8ECI)
to Stater Bros. or its agent. If an individual Non-United States Holder falls
under the second clause in the preceding paragraph, the holder generally will
be subject to United States federal income tax at a rate of 30% on the amount
by which the gain derived from the sale from sources within the United States
were to exceed such holder's capital losses allocable to sources within the
United States for the taxable year of the sale.
99
<PAGE>
Backup Withholding and Information Reporting
Stater Bros. must report annually to the IRS and to each Non-United States
Holder the amount of any interest paid on the exchange notes that is subject
to withholding or that is exempt from withholding pursuant to a tax treaty. We
must also report interest that is exempt from tax under the "portfolio
interest exception." Copies of these information returns may also be made
available under the provisions of a specific tax treaty or agreement to the
tax authorities of the country in which the Non-United States Holder resides.
Treasury Regulations provide that backup withholding and additional
information reporting will not apply to payments on the exchange notes by
Stater Bros. to a Non-United States Holder if the holder certifies as to its
status as a Non-United States Holder under penalties of perjury or otherwise
establishes an exemption, provided that neither Stater Bros. nor its paying
agent has actual knowledge that the holder is a United States person or that
the conditions of any other exemption are not, in fact, satisfied.
Information reporting and backup withholding requirements with respect to
the payment of the proceeds from the disposition of the exchange notes by a
Non-United States Holder are as follows:
. If the proceeds are paid to or through the United States office of a
broker, they generally will be subject to information reporting and
backup withholding at a rate of 31%. However, no such reporting and
withholding is required if: (a) the holder either certifies as to its
status as a Non-United States Holder under penalties of perjury on an
IRS Form W-8 or suitable substitute or successor form (as described
above) or otherwise establishes an exemption, and (b) the broker does
not have actual knowledge that the holder is a United States person or
that the conditions of any other exemption are not, in fact, satisfied.
. If the proceeds are paid to or through a non-United States office of a
broker that is not a United States person or a "United States related
person," as defined below, they will not be subject to backup
withholding or information reporting.
. If the proceeds are paid to or through a Non-United States office of a
broker that is either a United States person or a "United States related
person", they generally will be subject to information reporting.
However, no such reporting is required if (a) the holder certifies as to
its status as a Non-United States Holder under penalties of perjury or
the broker has certain documentary evidence in its files as to the Non-
United States Holder's foreign status, and (b) the broker has no actual
knowledge to the contrary. Backup withholding will generally not apply
to payments made through foreign offices of a United States person or
United States related person.
For purposes of this paragraph, a "United States related person" is:
. a "controlled foreign corporation" for United States federal income tax
purposes;
. a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the broker
has been in existence) is derived from activities that are effectively
connected with the conduct of a United States trade or business; or
. for payments made after December 31, 2000, a foreign partnership if at
any time during its tax year one or more of its partners are United
States persons who, in the aggregate, hold more than 50% of the income
or capital interest of the partnership or if, at any time during its
taxable year, the partnership is engaged in the conduct of a United
States trade or business.
Any amounts withheld under the backup withholding rules from a payment to a
Non-United States Holder will be allowed as a refund or a credit against such
Non-United States Holder's United States federal income tax liability provided
that the requisite procedures are followed.
100
<PAGE>
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, these
regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. In addition, these
regulations impose more stringent conditions on the ability of financial
intermediaries acting for a Non-United States Holder to provide certifications
on behalf of the holder, which may include entering into an agreement with IRS
to audit certain documentation with respect to such certifications. These
regulations are generally effective for payments made after December 31, 2000,
subject to certain transition rules. Investors should consult their own tax
advisors to determine the effects of the application of these regulations to
their particular circumstances.
The federal tax discussion set forth above as to both United States Holders
and Non-United States Holders is included for general information only and may
not be applicable depending upon a Holder's particular situation. Holders
should consult their own tax advisors with respect to the tax consequences to
them of the acquisition, ownership and disposition of the exchange notes,
including the tax consequences under state, local, foreign and other tax laws
and the possible effects of changes in federal or other tax laws.
101
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of exchange notes received in exchange for
outstanding notes where such outstanding notes were acquired as a result of
market-making activities or other trading activities.
Stater Bros. will not receive any proceeds from any sale of exchange notes
by broker-dealers. Exchange notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of exchange notes and any commissions or concessions received by
such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
Stater Bros. will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. Stater Bros. has agreed to pay
all expenses incident to the exchange offer other than commissions or
concessions of any brokers or dealers and will indemnify original holders of
the outstanding notes, including any broker-dealers, against certain
liabilities, including certain liabilities under the Securities Act.
LEGAL MATTERS
The validity of the exchange notes offered hereby will be passed upon for
Stater Bros. by Gibson, Dunn & Crutcher LLP, Los Angeles, California. Certain
legal matters for Stater Bros. will be passed upon by Varner, Saleson & Dobler
LLP, Riverside, California. Bruce D. Varner, a partner at Varner, Saleson &
Dobler LLP, is a director of Stater Bros.
102
<PAGE>
EXPERTS
Ernst & Young LLP, independent auditors, have audited Stater Bros.'
consolidated financial statements at September 29, 1996, September 28, 1997
and September 27, 1998, and for the 53 weeks ended September 29, 1996 and for
each of the 52 weeks ended September 28, 1997 and September 27, 1998, as set
forth in their report. Stater Bros. has included its financial statements in
the prospectus and elsewhere in the registration statement in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
The Albertson's Stores statements of net assets as of January 28, 1999 and
January 29, 1998 and store level earnings for the three 52 weeks ended January
28, 1999 included in this prospectus and included elsewhere in the
registration statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and elsewhere in the
registration statement (which report expresses an unqualified opinion and
includes an explanatory paragraph referring to the preparation of the
statements in order to present the net assets relating to certain stores to be
acquired of Albertson's Stores by Stater Bros. pursuant to the Asset Purchase
Agreement and the related statements of store level earnings related to such
net assets, and were not intended to be a complete presentation of
Albertson's, Inc.'s financial position and results of operations) and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the statements of net
assets of Lucky Stores at January 31, 1998 and January 30, 1999, and the
statements of store level earnings for each of the three 52 week periods ended
January 30, 1999, as set forth in their report. Stater Bros. has included the
financial statements of the Lucky Stores in the prospectus and elsewhere in
the registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
103
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Stater Bros. Holdings Inc.
Report of Independent Auditors.......................................... F-2
Audited Financial Statements:
Consolidated Balance Sheets at September 29, 1996, September 28, 1997
and September 27, 1998............................................... F-3
Fiscal years ended September 29, 1996, September 28, 1997 and
September 27, 1998:
Consolidated Statements of Income..................................... F-4
Consolidated Statements of Cash Flows................................. F-5
Consolidated Statements of Stockholders' Equity (Deficit)............. F-6
Notes to Consolidated Financial Statements............................ F-7
Unaudited Financial Statements:
Consolidated Balance Sheets at September 27, 1998 and June 27, 1999... F-19
Consolidated Statements of Income for the 39 Weeks Ended June 28, 1998
and June 27, 1999.................................................... F-20
Consolidated Statements of Cash Flows for the 39 Weeks Ended June 28,
1998 and June 27, 1999 .............................................. F-21
Notes to Consolidated Financial Statements ........................... F-22
Albertson's Stores
Independent Auditors' Report............................................ F-25
Financial Statements:
Audited Statements of Net Assets at January 28, 1999 and January 29,
1998 and Unaudited Statements of Net Assets at April 29, 1999 and
April 30, 1998....................................................... F-26
Audited Statements of Store Level Earnings for the 52 weeks ended
January 28, 1999, January 29, 1998 and January 30, 1997 and Unaudited
Statements of Store Level Earnings for the 13 weeks ended April 29,
1999 and April 30, 1998.............................................. F-27
Notes to Statements of Net Assets and Statements of Store Level
Earnings............................................................. F-28
Lucky Stores
Report of Independent Auditors.......................................... F-31
Financial Statements:
Audited Statements of Store Level Earnings for the 52 weeks ended
January 30, 1999, January 31, 1998 and February 1, 1997 and Unaudited
Statements of Store Level Earnings for the 13 weeks ended May 1, 1999
and May 2, 1998...................................................... F-32
Audited Statements of Net Assets at January 30, 1999 and January 31,
1998 and Unaudited Statements of Net Assets at May 1, 1999 and May 2,
1998................................................................. F-33
Notes to Financial Statements......................................... F-34
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Stater Bros. Holdings Inc.
We have audited the accompanying consolidated balance sheets of Stater Bros.
Holdings Inc. and subsidiaries as of September 29, 1996, September 28, 1997
and September 27, 1998, and the related consolidated statements of income,
stockholders' equity (deficit), and cash flows for the 53-week period then
ended for 1996 and for each of the 52-week periods then ended for 1997 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Stater Bros. Holdings Inc. and subsidiaries as of September 29, 1996,
September 28, 1997 and September 27, 1998, and the consolidated results of
their operations and their cash flows for the 53-week period then ended for
1996 and for each of the 52-week periods then ended for 1997 and 1998 in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Riverside, California
December 1, 1998
F-2
<PAGE>
STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Sept. 29 Sept. 28 Sept. 27
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
ASSETS
------
Current Assets
Cash and cash equivalents...................... $ 45,279 $ 59,086 $ 57,281
Receivables.................................... 19,009 21,481 20,451
Inventories.................................... 117,372 115,513 116,274
Prepaid expenses............................... 3,357 4,667 5,176
Deferred income taxes.......................... 4,710 2,978 4,588
Properties held for sale....................... 1,787 1,342 3,969
-------- -------- --------
Total current assets............................. 191,514 205,067 207,739
Investment in unconsolidated affiliate........... 7,626 10,313 8,472
Property and equipment
Land........................................... 18,688 16,443 15,924
Buildings and improvements..................... 89,856 87,605 94,794
Store fixtures and equipment................... 78,570 86,644 100,781
Property subject to capital leases............. 14,368 14,368 14,368
-------- -------- --------
201,482 205,060 225,867
Less accumulated depreciation and amortization. 87,267 96,203 107,513
-------- -------- --------
114,215 108,857 118,354
Deferred income taxes............................ 5,295 4,699 2,449
Deferred debt issuance costs, net................ 5,221 14,273 12,294
Lease guarantee escrow........................... 6,701 8,069 9,629
Other assets..................................... 7,722 7,199 5,381
-------- -------- --------
Total assets..................................... $338,294 $358,477 $364,318
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities
Accounts payable............................... $ 79,271 $ 66,834 $ 65,553
Accrued payroll and related expenses........... 23,981 23,851 25,363
Other accrued liabilities...................... 23,607 21,113 24,788
Current portion of capital lease obligations... 1,182 1,256 1,310
-------- -------- --------
Total current liabilities........................ 128,041 113,054 117,014
Long-term debt, less current portion............. 165,000 265,000 265,000
Capital lease obligations, less current portion.. 6,917 5,661 4,350
Long-term portion of self-insurance and other
reserves........................................ 10,332 7,409 8,284
Other long-term liabilities...................... 2,526 3,939 3,725
10.5% Cumulative Series B Preferred Stock:
(stated value $100 per share)
Authorized shares--693,650
Issued and outstanding shares--693,650 in 1996,
and 0 in 1997 and 1998........................ 69,365 -- --
Stockholders' equity (deficit)
Common Stock, $.01 par value:
Authorized shares--100,000
Issued and outstanding shares--0 in 1996, 1997
and 1998..................................... -- -- --
Class A Common Stock, $.01 par value:
Authorized shares--100,000
Issued and outstanding shares--50,000 in 1996,
1997 and 1998................................ 1 1 1
Additional paid-in capital..................... 12,715 12,715 12,715
Retained earnings (deficit).................... (41,953) (49,302) (46,771)
Less option to acquire stock................... (14,650) -- --
-------- -------- --------
Total stockholders' equity (deficit)........... (43,887) (36,586) (34,055)
-------- -------- --------
Total liabilities and stockholders' equity
(deficit)....................................... $338,294 $358,477 $364,318
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------
53 Weeks 52 Weeks 52 Weeks
---------- ---------- ----------
Sept. 29, Sept. 28, Sept. 27,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Sales...................................... $1,705,332 $1,717,924 $1,726,107
Cost of goods sold......................... 1,315,726 1,326,410 1,323,522
---------- ---------- ----------
Gross profit............................... 389,606 391,514 402,585
Operating expenses:
Selling, general and administrative
expenses................................ 328,242 333,199 353,075
Depreciation and amortization............ 12,583 13,265 15,434
Consulting fees.......................... 1,525 1,458 --
---------- ---------- ----------
Total operating expenses................... 342,350 347,922 368,509
---------- ---------- ----------
Operating profit........................... 47,256 43,592 34,076
Interest income............................ 1,929 3,034 3,059
Interest expense........................... (20,258) (21,563) (30,206)
Equity in (loss) from unconsolidated
affiliate................................. (1,624) (2,313) (2,941)
Other income (expense) -- net.............. (172) 76 2
---------- ---------- ----------
Income before income taxes................. 27,131 22,826 3,990
Income taxes............................... 11,120 9,359 1,459
---------- ---------- ----------
Net income................................. 16,011 13,467 2,531
Less preferred dividends................. 4,111 6,166 --
---------- ---------- ----------
Net income available to common
shareholders.............................. $ 11,900 $ 7,301 $ 2,531
========== ========== ==========
Earnings per common share.................. $ 165.28 $ 146.02 $ 50.62
========== ========== ==========
Average common shares outstanding.......... 72,000 50,000 50,000
========== ========== ==========
Common shares outstanding at end of year... 50,000 50,000 50,000
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
53 Weeks 52 Weeks 52 Weeks
-------------- -------------- --------------
Sept. 29, 1996 Sept. 28, 1997 Sept. 27, 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Operating activities:
Net income........................ $ 16,011 $ 13,467 $ 2,531
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization... 12,583 13,265 15,434
Deferred income taxes........... (2,238) 2,328 640
Loss (gain) on disposals of
assets......................... 172 (75) (2)
Net undistributed loss in
unconsolidated affiliate....... 1,624 2,313 2,941
Changes in operating assets and
liabilities:
(Increase) decrease in
receivables.................... (3,132) (2,472) 1,030
(Increase) decrease in
inventories.................... (10,226) 1,859 (761)
(Increase) decrease in prepaid
expenses....................... 234 (1,310) (509)
(Increase) decrease in other
assets......................... 1,738 (629) 557
Increase (decrease) in accounts
payable........................ 11,667 (12,437) (1,281)
Increase (decrease) in accrued
liabilities and long-term
portion of self-insurance
reserves....................... (514) (6,649) 5,848
-------- -------- --------
Net cash provided by operating
activities....................... 27,919 9,660 26,428
-------- -------- --------
Financing activities:
Proceeds from long-term debt...... -- 100,000 --
Debt issuance cost................ -- (10,513) --
Redemption of preferred stock..... -- (69,365) --
Common stock exchanged for
preferred stock.................. (69,365) -- --
Preferred stock issued and
exchanged for common stock....... 69,365 -- --
Principal payments on long-term
debt and capital lease
obligations...................... (1,087) (1,182) (1,257)
Dividends paid on preferred stock. (4,111) (6,166) --
-------- -------- --------
Net cash provided by (used in)
financing activities............. (5,198) 12,774 (1,257)
-------- -------- --------
Investing activities:
Investments in unconsolidated
affiliate........................ -- (5,000) (1,100)
Purchase of property and
equipment........................ (22,415) (20,268) (26,278)
Proceeds from sale of property and
equipment and properties held
for sale......................... 18,665 16,641 402
-------- -------- --------
Net cash (used in) investing
activities....................... (3,750) (8,627) (26,976)
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents............. 18,971 13,807 (1,805)
Cash and cash equivalents at
beginning of year................ 26,308 45,279 59,086
-------- -------- --------
Cash and cash equivalents at end
of year.......................... $ 45,279 $ 59,086 $ 57,281
======== ======== ========
Interest paid..................... $ 21,360 $ 18,859 $ 27,133
Income taxes paid................. $ 9,725 $ 6,500 $ 1,000
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands)
<TABLE>
<CAPTION>
Class
A Additional Retained Option to
Common Common Paid-in Earnings Acquire
Stock Stock Capital (Deficit) Stock
------ ------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Balances at September 24, 1995.... $ 1 $ 1 $12,715 $ 15,511 $(14,650)
Conversion of Common Stock for
Series B Preferred Stock....... (1) -- -- (69,364) --
Net income for 53 weeks ended
September 29, 1996............. -- -- -- 16,011 --
Preferred stock dividends paid.. -- -- -- (4,111) --
---- --- ------- -------- --------
Balances at September 29, 1996.... -- 1 12,715 (41,953) (14,650)
Net income for 52 weeks ended
September 28, 1997............. -- -- -- 13,467 --
Preferred stock dividends paid.. -- -- -- (6,166) --
Exercise Option to Acquire
Stock.......................... -- -- -- (14,650) 14,650
---- --- ------- -------- --------
Balances at September 28, 1997.... -- 1 12,715 (49,302) --
Net income for 52 weeks ended
September 27, 1998............. -- -- -- 2,531 --
---- --- ------- -------- --------
Balances at September 27, 1998.... $ -- $ 1 $12,715 $(46,771) $ --
==== === ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1998
Note 1 -- The Company and Its Significant Accounting Policies
Description of Business
Stater Bros. Holdings Inc. (the "Company") is engaged primarily in the
operation of retail supermarkets. As of September 27, 1998, the Company
operated 112 retail food supermarkets under the name "Stater Bros." The
Company's supermarkets are located principally in the "Inland Empire" area of
Southern California--San Bernardino, Riverside and the eastern portions of Los
Angeles, Orange and Kern counties. The Company and its predecessor companies
have operated retail grocery stores under the "Stater Bros." name in the
Inland Empire since 1936.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Stater Bros. Markets ("Markets") and Stater
Bros. Development, Inc. All significant inter-company transactions have been
eliminated in consolidation.
Fiscal Year
The Company's fiscal year ends on the last Sunday in September. The fiscal
years ended September 28, 1997 and September 27, 1998 were 52-week years and
the fiscal year ended September 29, 1996 was a 53-week year.
Cash and Cash Equivalents
Cash and cash equivalents are reflected at cost, which approximates their
fair value, and consist primarily of overnight repurchase agreements,
certificates of deposit and money market funds with maturities of less than
three months when purchased.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Receivables
Receivables represents amounts expected to be received during the next
operating cycle of the Company. The carrying amount reported in the balance
sheet for receivables approximates their fair value.
Properties Held for Sale
Properties expected to be sold within one year are classified as current
assets and are stated at the lower of cost or estimated net realizable value
and consist of land, buildings and equipment.
Deferred Debt Issuance Costs
Direct costs incurred as a result of financing transactions are capitalized
and amortized to interest expense over the terms of the applicable debt
agreements.
F-7
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 1 -- The Company and Its Significant Accounting Policies (continued)
Self-insurance Reserves
The Company provides reserves, subject to certain retention levels, for
workers' compensation, general and automobile liability claims. Consulting
actuaries assist the Company in developing reserve estimates for its self-
insured liabilities. Such reserves are discounted using an 8% rate. The
Company is self-insured, subject to certain retention levels, for healthcare
costs of eligible non-bargaining unit employees. Such healthcare reserves are
not discounted.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share"; No. 130,
"Reporting on Comprehensive Income"; and No. 131, "Disclosures about Segments
of an Enterprise and Related Information", all of which were adopted by the
Company at the beginning of its fiscal year ending on September 27, 1998
(fiscal 1998). Adoption of SFAS No. 128, No. 130 and No. 131 did not have a
material adverse effect on the Company's financial position or its results of
operations in fiscal 1998.
Property and Equipment
Property and equipment are stated at cost and are depreciated or amortized,
principally on the straight-line method over the estimated useful lives of the
assets, and for capitalized leases over the initial lease term or the
estimated economic life of the asset.
The average economic lives are as follows:
<TABLE>
<CAPTION>
Most
Range Prevalent
------------- ---------
<S> <C> <C>
Buildings and improvements......................... 8-30 Years 25 Years
Store furniture and equipment...................... 3-10 Years 5 Years
Property subject to capital leases................. Life of Lease 25 Years
</TABLE>
Income Taxes
The Company provides for deferred income taxes as timing differences arise
between income and expenses recorded for financial and income tax reporting
purposes.
Cost of Goods Sold
Costs of goods sold include certain warehousing, transportation and
distribution costs.
Reclassifications
Certain amounts in the prior periods have been reclassified to conform to
the current period financial statement presentation.
Use of Estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-8
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2 -- Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
Sept. 29 Sept. 28 Sept. 27
1996 1997 1998
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
11% Senior Notes due March 2001.................. $165,000 $165,000 $165,000
9% Senior Subordinated Notes due July 2004....... -- 100,000 100,000
-------- -------- --------
Total long-term debt............................. $165,000 $265,000 $265,000
======== ======== ========
</TABLE>
As of September 27, 1998, principal payments amounting to $165 million were
due in the next three years. Interest on the 11% Senior Notes due 2001 is
payable semi-annually on September 1 and March 1. Interest on the 9% Senior
Subordinated Notes due 2004 is payable semi-annually on July 1 and January 1.
Interest capitalized during fiscal years 1996, 1997 and 1998 amounted to
$116,000, $251,000 and $224,000, respectively. Interest expense incurred,
before the effect of capitalized interest, during 1996, 1997 and 1998 amounted
to $20,374,000, $21,814,000 and $30,430,000, respectively.
The Company did not have short-term borrowings outstanding at September 29,
1996, September 28, 1997 and September 27, 1998. The Company did not incur any
short-term borrowings during fiscal years 1996, 1997 and 1998.
The Company is subject to certain covenants associated with its 11% Senior
Notes due 2001 and 9% Senior Subordinated Notes due 2004 and its bank credit
agreement. As of September 27, 1998, the Company was in compliance with all
such covenants.
Note 3 -- Unconsolidated Affiliate
The Company owns 50% of Santee Dairies LLC. Through its wholly owned
subsidiary, Santee Dairies, Inc. ("Santee"), it operated a fluid milk
processing plant located in Los Angeles, California, and as of May 1, 1998,
Santee moved its operations to a newly constructed fluid milk processing plant
in City of Industry, California. The Company is not the controlling
stockholder. Accordingly, the Company accounts for its investment in Santee
Dairies LLC using the equity method of accounting and recognized losses of
$1,624,000, $2,313,000, and $2,941,000 for fiscal years 1996, 1997 and 1998,
respectively. The Company is a significant customer of Santee which supplies
the Company with a substantial portion of its fluid milk and dairy products.
F-9
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 -- Unconsolidated Affiliate (continued)
Summary of unaudited financial information for Santee Dairies LLC is as
follows:
<TABLE>
<CAPTION>
52 Weeks
----------------------------
Sept. 28 Sept. 27 Sept. 26
1996 1997 1998
-------- -------- ---------
(In thousands)
<S> <C> <C> <C>
Current assets............................... $ 16,937 $ 41,657 $ 19,690
Non-current assets........................... 26,351 86,371 111,236
Current liabilities.......................... 23,410 24,548 31,178
Non-current liabilities...................... 2,860 83,028 82,807
Shareholder's equity......................... 17,018 20,452 16,941
Sales........................................ 191,481 175,937 166,314
Gross profit................................. 16,174 12,592 3,509
Net income (loss)............................ $ (1,640) $ (6,156) $ (5,711)
</TABLE>
The Company accepted and paid a temporary increase in costs of product
purchased from Santee of approximately $4.3 million for product delivered by
Santee to the Company during the last eighteen weeks of fiscal 1998. The
temporary increase in cost of product is included in cost of goods sold for
the year to date period ended September 27, 1998. The Company believes the
temporary increase in cost of product purchased from Santee by the Company
will continue through March 1999, however, no assurance can be provided that
the temporary increase in the cost of product will terminate on or before
March 1999.
Note 4 -- Bank Facilities
Stater Bros. Markets and Bank of America National Trust and Savings
Association (the "Bank") have entered into a credit agreement (as amended)
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, which was available on September 27, 1998, and a revolving letter of
credit facility (the "LC Facility") with a maximum availability of $25.0
million, of which $14.2 million was available on September 27, 1998
(collectively, the "Bank Facilities"). The Bank Facilities will expire on June
1, 2000. Interest on the outstanding principal balance of the Operating
Facility is payable monthly at either the Bank's reference rate plus one
percent per annum or at a fixed rate of interest. Borrowings under the Bank
Facilities are unsecured general obligations of Stater Bros. Markets and are
guaranteed by Stater Bros. Development, Inc. The Bank Facilities contain
customary cross-default provisions with respect to the Company's 11% Senior
Notes due 2001 and 9% Senior Subordinated Notes due 2004.
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 $190.0 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 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
F-10
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 4 -- Bank Facilities (continued)
for at least 5 calendar days each month. As of September 27, 1998, for
purposes of the Bank Facilities, Stater Bros. Markets was in compliance with
all restrictive covenants and had (i) a current ratio of 1.86:1, (ii) tangible
net worth and debt subordinated to the Bank of $234.4 million; (iii) a ratio
of total liabilities to tangible net worth and debt subordinated to the Bank
of .55:1 and (iv) a fixed charge coverage ratio (as defined in the Bank
Facilities) of 1.51:1. 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 the Bank Facilities or, in certain
situations, the prohibition of the payment 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.
Note 5 -- Leases
The Company leases the majority of its retail stores, offices, warehouses
and distribution facilities. Certain leases provide for additional rents based
on sales. Primary lease terms range from 10 to 99 years and substantially all
leases provide for renewal options.
A portion of the Company's lease obligations are guaranteed by Petrolane
Incorporated ("Petrolane") or its successor (see Note 6). The leases
guaranteed by Petrolane had initial terms of 20 years and expire in the year
2003. Lease payments for the properties subject to the Petrolane guarantees
are approximately $10.0 million per year. Under the terms of the agreement
related to the Company's acquisition of Stater Bros. Markets from Petrolane in
1983, as amended in 1985, Stater Bros. Markets is required to make annual
deposits into a lease guarantee escrow account. The amount of each annual
deposit is to be based on (a) a percentage of sales of 20 supermarkets, as
specified in the agreement, to the extent they exceed a defined base; and (b)
a percentage of rents adjusted for increases in the Consumer Price Index for
certain rental property, including the Company's office and warehouse complex.
The Company deposited $738,000, $1,064,000 and $1,113,000 into the lease
guarantee escrow account during fiscal years 1996, 1997 and 1998,
respectively.
Upon termination of the leases, or the termination of the Petrolane lease
guarantees, all amounts deposited into the lease guarantee escrow account,
plus interest thereon, less any amounts disbursed, will be returned to the
Company. At September 27, 1998, the lease guarantee escrow account had a
cumulative balance of $9,629,000, compared to $8,069,000 and $6,701,000 as of
September 28, 1997 and September 29, 1996, respectively.
Petrolane, or its successor, has the right to cause the escrow holder to
disburse funds from the amounts held in the lease guarantee escrow account for
any amounts which Petrolane or its successor may be required to pay as
guarantor of the lease obligations of Stater Bros. Markets.
F-11
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 5 -- Leases (continued)
Following is a summary of future minimum lease payments as of September 27,
1998:
<TABLE>
<CAPTION>
Capital Operating Leases
Fiscal Year Leases Minimum Payment
----------- ------- ----------------
(In thousands)
<S> <C> <C>
1999.............................................. $1,760 $ 20,375
2000.............................................. 1,693 19,648
2001.............................................. 1,397 17,946
2002.............................................. 980 17,673
2003.............................................. 629 14,788
Thereafter........................................ 413 61,732
------ --------
Total minimum lease payments...................... 6,872 $152,162
========
Less amounts representing interest................ 1,212
------
Present value of minimum lease payments........... 5,660
Less current portion.............................. 1,310
------
Long-term portion................................. $4,350
======
</TABLE>
Rental expense and sublease income were as follows:
<TABLE>
<CAPTION>
53 Weeks 52 Weeks
-------- -------------------
Sept. 26 Sept. 28 Sept. 27
1996 1997 1998
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Minimum rentals................................. $19,267 $20,710 $20,194
Rentals based on sales.......................... $ 5,072 $ 5,101 $ 4,727
Sublease income................................. $ 1,186 $ 1,121 $ 1,267
</TABLE>
Aggregate sublease income to be received subsequent to September 27, 1998 is
approximately $5,481,000.
Note 6 -- Preferred Stock
Stater Bros. Markets has issued and outstanding 10 shares of its $11.00
Cumulative Redeemable Preferred Stock due in 2003 for $1,000 plus accrued and
unpaid dividends. Dividends are accrued at the rate of $11.00 per share per
annum. The preferred stock was issued in conjunction with a guarantee of
Stater Bros. Markets lease obligations by Petrolane Incorporated or its
successors (see Note 5). For as long as shares of the $11.00 Cumulative
Redeemable Preferred Stock remain outstanding, Stater Bros. Markets is subject
to certain covenants. The most restrictive covenant limits the amount of
dividends that may be paid to amounts that may be legally paid under
applicable state laws. At September 27, 1998, accumulated earnings available
for dividend distributions were approximately $221.9 million. In the event of
non-compliance by Stater Bros. Markets, the holders of the Stater Bros.
Markets preferred stock may elect the Board of Directors of Stater Bros.
Markets. At September 27, 1998, Stater Bros. Markets was in compliance with
these covenants.
Effective March 8, 1996, pursuant to options available to the Company, the
Company exercised its right to convert all of its outstanding shares of Common
Stock previously held by Craig Corporation ("Craig") into 693,650 shares of
its Series B Preferred Stock. The Series B Preferred Stock had a redemption
value of approximately $69.4 million and currently paid dividends at the rate
of 10.5% per annum. In August 1997, the Company redeemed all of the
outstanding shares of its Series B Preferred Stock for $69.4 million plus
accrued and unpaid dividends.
F-12
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 7 -- Income Taxes
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
53 Weeks 52 Weeks
-------- --------------------
Sept. 29 Sept. 28, Sept. 27,
1996 1997 1998
-------- --------- ----------
(In thousands)
<S> <C> <C> <C>
Current
Federal..................................... $ 8,116 $4,771 $ 1,921
State....................................... 2,478 1,756 795
------- ------ -------
10,594 6,527 2,716
------- ------ -------
Deferred
Federal..................................... 488 2,480 (813)
State....................................... 38 352 (444)
------- ------ -------
526 2,832 (1,257)
------- ------ -------
Income tax expense............................ $11,120 $9,359 $ 1,459
======= ====== =======
</TABLE>
A reconciliation of the provision for income taxes to amounts computed at the
federal statutory rate is as follows:
<TABLE>
<CAPTION>
53 Weeks 52 Weeks
-------- --------------------
Sept. 29 Sept. 28, Sept. 27,
1996 1997 1998
-------- --------- ----------
<S> <C> <C> <C>
Statutory federal income tax rate............ 35.0% 35.0% 34.0%
State franchise tax rate, net of federal
income tax benefit.......................... 6.1 6.0 6.1
Tax credits.................................. -- -- (2.7)
Other........................................ (.1) -- (.9)
---- ---- ----
41.0% 41.0% 36.5%
==== ==== ====
</TABLE>
Deferred income taxes resulted from timing differences in recognizing revenue
and expense for tax and financial statement purposes. The sources of these
timing differences and the income tax (benefit) of each were as follows:
<TABLE>
<CAPTION>
53 Weeks 52 Weeks
--------- -------------------
Sept. 29, Sept. 28, Sept. 27,
1996 1997 1998
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Accrued liabilities.......................... $ 364 $1,340 $ (744)
California franchise tax..................... (590) 678 306
Depreciation................................. (22) (39) (240)
Other, net................................... 774 853 (579)
----- ------ -------
$ 526 $2,832 $(1,257)
===== ====== =======
</TABLE>
F-13
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 7 -- Income Taxes (continued)
Components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
Sept. 29, Sept. 28, Sept. 27,
1996 1997 1998
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Deferred income tax assets:
--------------------------
Property and equipment..................... $ 671 $ 228 $ --
Self-insurance reserves.................... 4,533 3,768 3,712
Pension and vacation liabilities........... 2,453 2,740 1,812
Inventories................................ 1,213 1,469 1,341
Investment in unconsolidated affiliate..... -- 943 1,917
Income deferred for book purposes.......... 1,254 1,187 1,695
Other...................................... -- --
------- ------- -------
Total deferred income tax assets......... 10,124 10,335 10,477
------- ------- -------
Deferred income tax liabilities:
-------------------------------
Property and equipment..................... -- -- (347)
Investment in unconsolidated affiliate..... (5) -- --
Other assets............................... -- -- (950)
Other, net................................. (114) (2,658) (2,143)
------- ------- -------
Total deferred income tax liabilities.... (119) (2,658) (3,440)
------- ------- -------
Net deferred income tax assets............. $10,005 $ 7,677 $ 7,037
======= ======= =======
</TABLE>
Although there can be no assurances as to future taxable income of the
Company, the Company believes that its expectations of future taxable income,
when combined with the income taxes paid in prior years, will be adequate to
realize the deferred income tax assets.
Note 8 -- Related Party Transactions
Consulting Agreements and Covenant Not to Compete
Since January 1, 1989, the Company has entered into various consulting
agreements with its stockholders, La Cadena Investments ("La Cadena") and
Craig, that required them to provide consultation and advice to the Company in
connection with general business, financial, management consulting, real
estate acquisition and development, and product diversification matters. These
consulting agreements with its stockholders terminated on September 26, 1993.
In March 1994, the Company entered into a new five-year Consulting Agreement
with Craig, whereby the Company paid Craig $1.5 million per year and Craig
provided the Company with consultation and advise in connection with general
business issues, financial management consulting, real estate acquisition and
development and product diversification matters. Consulting fees expense
amounted to $1.5 million in 1997 and 1996. The agreement to make annual
consulting payments to Craig was terminated, at the election of the Company,
in August 1997. Additionally, on March 8, 1994, the Company paid Craig
$5.0 million which is amortized to earnings over the five-year term of the
covenant not to compete included in the Consulting Agreement.
Note 9 -- Retirement Plans
Pension Plan
The Company has a noncontributory defined benefit pension plan covering
substantially all non-union employees. The plan provides for benefits based on
an employee's compensation during the three years before
F-14
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 9 -- Retirement Plans (continued)
retirement. The Company's funding policy for this plan is to contribute
annually at a rate that is intended to provide sufficient assets to meet
future benefit payment requirements.
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
53 Weeks 52 Weeks
-------------- -----------------------------
Sept. 29, 1996 Sept. 28, 1997 Sept. 27, 1998
-------------- -------------- --------------
(In thousands)
<S> <C> <C> <C>
Service cost--benefits earned
during the period............ $ 752 $ 826 $ 902
Interest cost on projected
benefit obligation........... 1,000 1,109 1,241
Actual return on assets....... (429) (761) (1,033)
Net amortization and deferral. (181) 78 187
------ ------ -------
Net periodic pension cost..... $1,142 $1,252 $ 1,297
====== ====== =======
Assumptions used for
accounting were:
Discount rate................. 7.50% 7.50% 7.50%
Rate of increase in
compensation levels.......... 5.00% 5.00% 5.00%
Expected long-term rate of
return on assets............. 9.00% 9.00% 9.00%
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheet at:
<TABLE>
<CAPTION>
53 Weeks 52 Weeks
-------------- -----------------------------
Sept. 29, 1996 Sept. 28, 1997 Sept. 27, 1998
-------------- -------------- --------------
(In thousands)
<S> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation..... $ 10,591 $ 11,794 $ 15,376
======== ======== ========
Accumulated benefit
obligation................... $ 10,930 $ 12,160 $ 15,850
======== ======== ========
Projected benefit obligation... $(14,991) $(16,639) $(21,636)
Plan assets at fair value,
primarily notes and bonds..... 9,028 10,442 11,951
-------- -------- --------
Projected benefit obligation in
excess of plan assets......... (5,963) (6,197) (9,685)
Unrecognized net loss.......... 3,745 3,597 6,774
Unrecognized prior service
cost.......................... (71) (66) (61)
Unrecognized net obligations
established October 1, 1987... 216 189 162
-------- -------- --------
Pension (liability) recognized
in the balance sheet.......... $ (2,073) $ (2,477) $ (2,810)
======== ======== ========
</TABLE>
Expenses recognized for this retirement plan were $1,290,000, $1,392,000 and
$1,499,000 in 1996, 1997 and 1998, respectively.
Profit Sharing Plan
The Company has a noncontributory defined contribution profit sharing plan
covering substantially all non-union employees. Union employees may
participate if their collective bargaining agreement specifically provides for
their inclusion. The Company may contribute up to 7.5% of total compensation
paid or accrued during the year to each plan participant subject to
limitations imposed by the Internal Revenue Code. The Company recognized
expenses for this plan in the amount of $347,000, $396,000 and $420,000 in
1996, 1997 and 1998, respectively.
F-15
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 9 -- Retirement Plans (continued)
Multi-Employer Plans
The Company also contributes to multi-employer defined benefit retirement
plans in accordance with the provisions of the various labor agreements that
govern the plans. Contributions to these plans are generally based on the
number of hours worked. Information for these plans as to vested and non-
vested accumulated benefits and net assets available for benefits is not
available.
The Company's expense for these retirement plans and health and welfare
plans consisted of the following:
<TABLE>
<CAPTION>
53 Weeks 52 Weeks
-------- -------------------
Sept. 29 Sept. 28, Sept. 27,
1996 1997 1998
-------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Multi-Employer Pension Plans....................... $ 7,376 $ 8,677 $12,420
Multi-Employer Health and Welfare.................. 36,632 36,771 36,930
------- ------- -------
Total Multi-Employer Benefits...................... $44,008 $45,448 $49,350
======= ======= =======
</TABLE>
The Company's employer contributions increased in fiscal 1998 as a result of
the resumption of employer contributions to a collective bargaining pension
trust, such employer contributions had previously been suspended since 1994.
Note 10 -- Labor Relations
The Company entered into a four-year collective bargaining agreement with
the United Food & Commercial Workers collective bargaining units in October
1995 and entered into a four-year collective bargaining agreement in September
1998 with the International Brotherhood of Teamsters collective bargaining
units.
Note 11 -- Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short-term
maturity of these instruments.
Receivables
The carrying amount approximates fair value because of the short-term
maturity of these instruments.
Long-Term Debt
The fair value of the 11% Senior Notes due 2001 and 9% Senior Subordinated
Notes due 2004, is based on quoted market prices. Although market quotes for
the fair value of the Company's capitalized lease obligations are not readily
available, the Company believes the stated value approximates fair value.
F-16
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 11 -- Fair Value of Financial Instruments (continued)
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
As of
September 27,
1998
-----------------
Carrying Fair
Amount Value
-------- --------
(In thousands)
<S> <C> <C>
Cash and cash equivalents............................... $ 57,281 $ 57,281
Receivables............................................. $ 20,451 $ 20,451
Long-term debt.......................................... $270,660 $276,060
</TABLE>
Note 12 -- Litigation Matters
In the ordinary course of its business, the Company is party to various
legal actions which the Company believes are incidental to the operation of
the business of the Company and its subsidiaries. The Company records an
appropriate provision when the occurrence of loss is probable and can be
reasonably estimated. The Company believes that the outcome of such legal
proceedings to which the Company is currently a party will not have a material
adverse effect upon its results of operations or its consolidated financial
condition.
On May 2, 1993, the Company was named as a defendant along with all of the
other major supermarket chains located in the Los Angeles County area in a
class action complaint filed in the California Superior Court in Los Angeles,
California, alleging among other things that the milk pricing policies of each
of the defendants violate certain antitrust laws and regulations under
California law. In this class action lawsuit, Barela et al. v. Ralphs Grocery
Co. et al., plaintiffs sought unspecified damages. The Company has recently
entered into a settlement agreement with this case and such settlement does
not involve payment of monetary damages and is currently being processed
through the courts for approval and will not have an adverse material effect
on the Company.
On June 19, 1997, Stater Bros. Markets was named as a defendant in the case
of Ufondu, et al. vs. Stater Bros. Markets filed in the Superior Court of the
State of California for the County of San Bernardino. The complaint filed by
twelve employees seeks unspecified damages alleging racial discrimination in
the Company's employment practices. The Company believes the complaint is
without merit and intends to vigorously defend the case. There can be no
assurances, however, as to the outcome of this case.
F-17
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 13 -- Quarterly Results (Unaudited)
Quarterly results for fiscal 1996, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
Net
Income (Loss)
Gross Operating Net Preferred Available to
Sales Profit Profit Income (Loss) Dividends Shareholders
---------- -------- --------- ------------- --------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1996 Quarters
13 weeks ended 12/24/95. $ 408,740 $ 92,261 $11,015 $ 3,597 $ -- $ 3,597
13 weeks ended 03/24/96. 406,223 93,548 12,266 4,341 339 4,002
13 weeks ended 06/23/96. 429,349 99,257 12,188 4,385 1,816 2,569
14 weeks ended 09/29/96. 461,020 104,540 11,787 3,688 1,956 1,732
---------- -------- ------- ------- ------ -------
Total (53 weeks)...... $1,705,332 $389,606 $47,256 $16,011 $4,111 $11,900
========== ======== ======= ======= ====== =======
Fiscal 1997 Quarters
13 weeks ended 12/29/96. $ 433,400 $100,826 $12,080 $ 4,195 $1,816 $ 2,379
13 weeks ended 03/30/97. 431,422 97,695 11,978 4,354 1,816 2,538
13 weeks ended 06/29/97. 427,445 96,714 11,511 4,078 1,816 2,262
13 weeks ended 09/28/97. 425,657 96,279 8,023 840 718 122
---------- -------- ------- ------- ------ -------
Total (52 weeks)...... $1,717,924 $391,514 $43,592 $13,467 $6,166 $ 7,301
========== ======== ======= ======= ====== =======
Fiscal 1998 Quarters
13 weeks ended 12/28/97. $ 430,918 $ 98,296 $10,110 $ 1,373 $ -- $ 1,373
13 weeks ended 03/29/98. 422,829 100,467 10,090 1,225 -- 1,225
13 weeks ended 06/28/98. 431,301 99,113 5,115 (1,185) -- (1,185)
13 weeks ended 09/27/98. 441,059 104,709 8,761 1,118 -- 1,118
---------- -------- ------- ------- ------ -------
Total (52 weeks)...... $1,726,107 $402,585 $34,076 $ 2,531 $ -- $ 2,531
========== ======== ======= ======= ====== =======
</TABLE>
F-18
<PAGE>
STATER BROS. HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Sept. 27, 1998 June 27, 1999
-------------- -------------
<S> <C> <C>
ASSETS
------
Current Assets
Cash and cash equivalents....................... $ 57,281 $ 55,427
Receivables..................................... 20,451 21,636
Inventories..................................... 116,274 113,048
Prepaid expenses................................ 5,176 6,588
Deferred income taxes........................... 4,588 4,589
Properties held for sale........................ 3,969 1,251
-------- --------
Total current assets.............................. 207,739 202,539
Investment in unconsolidated affiliate............ 8,472 9,396
Property and equipment
Land............................................ 15,924 17,287
Buildings and improvements...................... 94,794 99,378
Store fixtures and equipment.................... 100,781 126,723
Property subject to capital leases.............. 14,368 14,368
-------- --------
225,867 257,756
Less accumulated depreciation and amortization.. 107,513 116,901
-------- --------
118,354 140,855
Deferred income taxes............................. 2,449 2,449
Deferred debt issuance costs, net................. 12,294 10,185
Lease guarantee escrow............................ 9,629 10,957
Other assets...................................... 5,381 5,871
-------- --------
Total assets...................................... $364,318 $382,252
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities
Accounts payable................................ $ 65,553 $ 65,728
Accrued payroll and related expenses............ 25,363 27,804
Other accrued liabilities....................... 24,788 31,989
Current portion of capital lease obligations.... 1,310 1,371
-------- --------
Total current liabilities......................... 117,014 126,892
Long-term debt, less current portion.............. 265,000 265,000
Capital lease obligations, less current portion... 4,350 3,317
Long-term portion of self-insurance and other
reserves......................................... 8,284 8,284
Other long-term liabilities....................... 3,725 3,580
Stockholders' equity (deficit)
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 earnings (deficit)..................... (46,771) (37,537)
-------- --------
Total stockholders' equity (deficit).............. (34,055) (24,821)
-------- --------
Total liabilities and stockholders' equity
(deficit)........................................ $364,318 $382,252
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-19
<PAGE>
STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
39 Weeks Ended
----------------------
June 28, June 27,
1998 1999
---------- ----------
<S> <C> <C>
Sales.................................................. $1,285,048 $1,324,358
Cost of goods sold..................................... 987,172 1,011,542
---------- ----------
Gross profit........................................... 297,876 312,816
Operating expenses
Selling, general and administrative expenses......... 261,216 265,907
Depreciation and amortization........................ 11,345 11,813
---------- ----------
Total operating expenses............................... 272,561 277,720
---------- ----------
Operating profit....................................... 25,315 35,096
Interest income........................................ 2,371 2,388
Interest expense....................................... (22,641) (22,699)
Equity in earnings (loss) from unconsolidated
affiliate............................................. (2,692) 924
Other income (expense)--net............................ 42 (319)
---------- ----------
Income before income taxes............................. 2,395 15,390
Income taxes........................................... 982 6,156
---------- ----------
Net income............................................. $ 1,413 $ 9,234
========== ==========
Earnings available to common shareholders.............. $ 1,413 $ 9,234
========== ==========
Earnings per common share.............................. $ 28.26 $ 184.68
========== ==========
Average common shares outstanding...................... 50,000 50,000
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-20
<PAGE>
STATER BROS. HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
39 Weeks Ended
------------------
June 28, June 27,
1998 1999
-------- --------
<S> <C> <C>
Operating Activities:
Net income................................................. $ 1,413 $ 9,234
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 11,345 11,813
Provision for deferred income taxes...................... 1,680 1
(Gain) loss on disposals of assets....................... (42) 319
Net undistributed (gain) loss in investment in
unconsolidated affiliate................................ 2,692 (924)
Changes in operating assets and liabilities:
(Increase) decrease in receivables..................... (2,578) (1,185)
(Increase) decrease in inventories..................... (3,414) 3,226
(Increase) decrease in prepaid expenses................ (2,241) (1,412)
(Increase) decrease in other assets.................... (547) (162)
Increase (decrease) in accounts payable................ 1,169 175
Increase (decrease) in accrued liabilities and long-
term portion of self-insurance reserves............... 1,496 9,497
-------- --------
Net cash provided by operating activities.................. 10,973 30,582
-------- --------
Investing Activities:
Investment in unconsolidated affiliate..................... (1,100) --
Purchase of property and equipment......................... (20,287) (34,382)
Proceeds from sale of property and equipment and properties
held for sale............................................. 269 2,918
-------- --------
Net cash (used by) investing activities.................... (21,118) (31,464)
-------- --------
Financing Activities:
Principal payments on capital lease obligations............ (941) (972)
-------- --------
Net cash (used by) financing activities.................... (941) (972)
-------- --------
Net increase (decrease) in cash and cash equivalents....... (11,086) (1,854)
Cash and cash equivalents at beginning of period........... 59,086 57,281
-------- --------
Cash and cash equivalents at end of period................. $ 48,000 $ 55,427
======== ========
Interest paid.............................................. $ 13,428 $ 13,922
Income taxes paid.......................................... $ 950 $ 2,600
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-21
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 27, 1999
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 27, 1998 and June 27,
1999 and the results of its operations and cash flows for the thirty-nine
weeks ended June 28, 1998 and June 27, 1999. 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 27, 1999 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 28, 1998
and June 27, 1999 consists of the following:
<TABLE>
<CAPTION>
39 Weeks Ended
-----------------
June 28, June 27,
1998 1999
-------- --------
(In thousands)
<S> <C> <C>
Federal income taxes..................................... $760 $5,233
State income taxes....................................... 222 923
---- ------
$982 $6,156
==== ======
</TABLE>
Note 3 -- Unconsolidated Affiliate
The Company owns 50% of Santee Dairies LLC. Through its wholly owned
subsidiary, Santee Dairies, Inc. ("Santee"), it operates a fluid milk
processing plant located in City of Industry, California, and the Company is
not the controlling stockholder. Accordingly, the Company accounts for its
investment in Santee Dairies LLC using the equity method of accounting and
recognized a loss of $2,692,000 for the thirty-nine weeks ended June 28, 1998,
and recognized income of $924,000 for the thirty-nine weeks ended June 27,
1999. The Company is a significant customer of Santee which supplies the
Company with a substantial portion of its fluid milk and dairy products.
Summary of unaudited financial information for Santee Dairies LLC is as
follows:
<TABLE>
<CAPTION>
39 Weeks Ended
------------------
June 28, June 27,
1998 1999
-------- --------
(In thousands)
<S> <C> <C>
Current assets......................................... $ 20,324 $ 15,633
Non-current assets..................................... 109,800 106,971
Current liabilities.................................... 29,876 24,631
Non-current liabilities................................ 82,804 79,019
Shareholder's equity................................... 17,444 18,954
Sales.................................................. 127,428 130,045
Gross profit........................................... 5,588 13,868
Net income (loss)...................................... $ (5,208) $ 2,115
</TABLE>
F-22
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 4 -- Covenant Not to Compete
On March 8, 1994, the Company entered into a $5.0 million prepaid five year
covenant not to compete which was included in a Consulting Agreement with
Craig Corporation and was amortized to earnings over the five year term of the
covenant not to compete. The Covenant Not To Compete terminated in March 1999.
Note 5 -- Reclassifications
Certain amounts in the prior periods have been reclassified to conform to
the current period financial statement presentation.
Note 6 -- 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 7 -- Subsequent Events
Acquisition of 43 Supermarkets from Albertson's
Upon the consummation of the merger of Albertson's, Inc. and American Stores
Company, the Company entered into a definitive Asset Purchase Agreement with
Albertson's, Inc. by which it will acquire 43 supermarkets, one future store
site and the related inventories and assume capitalized lease obligations for
a total purchase price of approximately $147.0 million. The acquisition of the
supermarkets, the future store site and the related inventories is expected to
be completed in August 1999 and are being funded through an offering of $450.0
million of new Senior Notes due 2006 (the "New Senior Notes").
Senior Notes
With the proceeds from the New Senior Notes, the Company repurchased
substantially all of the outstanding 11% Senior Notes due 2001 and all of the
9% Senior Subordinated Notes due 2004 and amended the indenture under which
the 11% Senior Notes were issued to eliminate substantially all of its
financial and restrictive covenants. Approximately $5 million in principal
amount of the 11% Senior Notes remain outstanding and are governed by the
terms of the amended indenture. In connection with the repurchase of the 11%
Senior Notes and the 9% Senior Subordinated Notes, the Company incurred
repurchase premiums of $11.7 million and $7.0 million, respectively. The
repurchase premiums and the write-offs of unamortized debt issuance costs
resulted in an extraordinary loss of $17.1 million, net of applicable income
tax benefit of $11.9 million.
The acquisition of the 43 supermarkets are being funded through the offering
of New Senior Notes, which was completed on August 6, 1999. Proceeds from the
New Senior Notes are being used to consummate the acquisition of the 43
supermarkets and related inventories, fund anticipated capital expenditures in
the acquired supermarkets and pay fees and expenses related to the acquisition
of the supermarkets and the issuance of the New Senior Notes.
In addition to the net proceeds raised from the New Senior Notes, the
Company will be required to use approximately $15.1 million of its cash on
hand to complete the acquisition of the supermarkets and to redeem the Notes.
F-23
<PAGE>
STATER BROS. HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 7 -- Subsequent Events (continued)
Bank Credit Facility
On August 6, 1999, Stater Bros. Markets, the Company's principal operating
subsidiary, entered into a new unsecured bank credit facility (the "New Credit
Facility") with Bank of America, N.A. The New Credit Facility consists of a
$50.0 million revolving credit facility with an additional $25.0 million
facility available for the issuance of commercial and standby letters of
credit. The term of the New Credit Facility is three years. It is expected
that borrowings under the New Credit Facility will be used for certain working
capital and corporate purposes. The availability of the loans and letters of
credit will be subject to certain sublimits and other borrowing restrictions.
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Albertson's, Inc.
We have audited the accompanying statements of net assets of Albertson's
Stores as of January 28, 1999 and January 29, 1998 and the related statements
of store level earnings attributable to such net assets of Albertson's Stores
for the fiscal years ended January 28, 1999, January 29, 1998 and January 30,
1997, pursuant to the Asset Purchase Agreement between Albertson's, Inc.,
Stater Bros. Markets and Stater Bros. Holdings Inc. ("Stater Bros.") dated May
7, 1999 as described in Note 1 to the statements. These statements are the
responsibility of Albertson's, Inc. management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of net assets and
store level earnings are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the statements of net assets and store level earnings.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying statements were prepared to present the net assets relating
to certain stores to be acquired of Albertson's Stores by Stater Bros.
pursuant to the Asset Purchase Agreement described in Note 1, and the related
statements of store level earnings related to such net assets, and are not
intended to be a complete presentation of Albertson's, Inc.'s financial
position and results of operations.
In our opinion, the statements referred to above present fairly, in all
material respects, the net assets of Albertson's Stores as of January 28, 1999
and January 29, 1998 and the store level earnings of Albertson's Stores for
the fiscal years ended January 28, 1999, January 29, 1998 and January 30,
1997, pursuant to the Asset Purchase Agreement referred to in Note 1 to the
statements, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boise, Idaho
May 7, 1999
F-25
<PAGE>
ALBERTSON'S STORES
STATEMENTS OF NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
Unaudited
--------------------
January 28, January 29, April 29, April 30,
1999 1998 1999 1998
----------- ----------- --------- ---------
ASSETS
------
<S> <C> <C> <C> <C>
Prepaid expenses................... $ 595 $ 621 $ 747 $ 723
Inventories........................ 36,793 34,670 36,236 34,666
Other assets....................... 1,214 1,214 1,214 1,214
Land, buildings and equipment:
Land............................. 23,186 21,053 23,186 21,053
Buildings........................ 56,137 54,687 56,156 54,767
Equipment, fixtures and leasehold
improvements.................... 53,869 51,650 53,706 52,425
-------- -------- -------- --------
133,192 127,390 133,048 128,245
Less accumulated depreciation and
amortization.................... (57,515) (50,046) (59,229) (52,012)
-------- -------- -------- --------
75,677 77,344 73,819 76,233
Property under capital leases,
net of accumulated amortization
of $4,362 and $3,886 in 1998 and
1997, respectively, and $4,481
and $4,005 at April 29, 1999 and
April 30, 1998, respectively.... 5,735 6,212 5,617 6,093
-------- -------- -------- --------
81,412 83,556 79,436 82,326
LIABILITIES
-----------
Obligations under capital leases. 7,824 8,208 7,721 8,162
Accrued real estate liabilities.. 5,345 5,412 5,239 5,182
-------- -------- -------- --------
13,169 13,620 12,960 13,344
-------- -------- -------- --------
Net Assets......................... $106,845 $106,441 $104,673 $105,585
======== ======== ======== ========
</TABLE>
See accompanying notes.
F-26
<PAGE>
ALBERTSON'S STORES
STATEMENTS OF STORE LEVEL EARNINGS
(in thousands)
<TABLE>
<CAPTION>
Unaudited
52 Weeks Ended 13 Weeks Ended
----------------------------------- ---------------------
January 28, January 29, January 30, April 29, April 30,
1999 1998 1997 1999 1998
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sales.................... $519,684 $507,088 $474,928 $130,612 $129,845
Cost of sales............ 381,448 375,988 354,723 94,093 96,326
-------- -------- -------- -------- --------
Gross profit............. 138,236 131,100 120,205 36,519 33,519
Store operating expenses. 122,972 115,832 105,685 30,292 29,902
-------- -------- -------- -------- --------
Store level earnings..... $ 15,264 $ 15,268 $ 14,520 $ 6,227 $ 3,617
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-27
<PAGE>
ALBERTSON'S STORES
NOTES TO STATEMENTS OF NET ASSETS AND STATEMENTS
OF STORE LEVEL EARNINGS
YEARS ENDED JANUARY 28, 1999, JANUARY 29, 1998 AND JANUARY 30, 1997
1. BASIS OF PRESENTATION
On May 7, 1999, Albertson's, Inc. entered into an agreement ("Asset Purchase
Agreement") with Stater Bros. Markets and Stater Bros. Holdings Inc. ("Stater
Bros.") to sell 33 Albertson's combination food and drug stores ("Albertson's
Stores" or the "Company") and one land site located in California.
These financial statements relate solely to the 33 Albertson's Stores to be
acquired by Stater Bros. and are not intended to represent the complete
financial position and results of operations of Albertson's, Inc. There are no
complete financial statements issued or prepared for issuance by store.
The statements of store level earnings attributable to the net assets
presented herein differ from a complete statement of earnings in that certain
allocations of indirect charges, including, but not limited to, income tax
expense, interest expense, legal expense and overhead costs incurred at the
corporate and division levels have been excluded. Accordingly, the statements
of store level earnings do not include any expenses, including depreciation,
related to the corporate and division offices. The statements of store level
earnings contain the results of those stores that are to be acquired pursuant
to the Asset Purchase Agreement. Certain amounts, including, cost of sales and
store operating expenses include allocated charges. The allocations of these
costs are based on usage, wages and/or sales. The allocated costs included in
the accompanying statements are not representative of the actual results that
would have resulted had the stores to be acquired been operated as a stand
alone entity. The statement of net assets differs from a complete balance
sheet in that it contains only those assets and liabilities related to the
Albertson's Stores to be acquired pursuant to the Asset Purchase Agreement.
Certain net accrued real estate liabilities included in the statements of net
assets will be prorated at the date of closing and will not be assumed by
Stater Bros. The information contained in the statements has been prepared in
accordance with generally accepted accounting principles.
In the opinion of management, the accompanying unaudited financial
statements include all adjustments necessary to present fairly, in all
material respects, the net assets to be acquired of the Company and the
related store level earnings attributable to such net assets for the periods
presented. Such adjustments consisted only of normal recurring items.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories -- The Company values inventories at the lower of cost or
market. Cost of substantially all inventories is determined on a first-in,
first-out (FIFO) basis.
Capitalization, Depreciation and Amortization -- Land, buildings and
equipment are recorded at cost. Depreciation is provided on the straight-line
method over the estimated useful life of the asset. Estimated useful lives are
generally as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................... 10 to 25 years
Fixtures and equipment........................................ 3 to 8 years
Leasehold improvements........................................ 10 to 15 years
Capitalized leases............................................ 25 to 30 years
</TABLE>
Depreciation and amortization for the fiscal years ended January 28, 1999,
January 29, 1998, January 30, 1997 was approximately $9,150,000, $8,572,000,
and $7,519,000, respectively.
The costs of major remodeling and improvements on leased stores are
capitalized as leasehold improvements. Leasehold improvements are amortized on
the straight-line method over the shorter of the life of
F-28
<PAGE>
ALBERTSON'S STORES
NOTES TO STATEMENTS OF NET ASSETS AND STATEMENTS
OF STORE LEVEL EARNINGS--(continued)
the applicable lease or the useful life of the asset. Capital leases are
recorded at the lower of the fair market value of the asset or the present
value of future minimum lease payments. These leases are amortized on the
straight-line method over their primary term.
Use of Estimates -- The preparation of the Company's financial statements,
in conformity with generally accepted accounting principles, requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
3. LEASES
The Company leases a portion of its real estate. The typical lease period is
25 to 30 years and most leases contain renewal options. Exercise of such
options is dependent on the level of business conducted at the location. In
addition, the Company leases certain equipment. Some leases contain contingent
rental provisions based on sales volume at retail stores.
Capitalized leases are calculated using interest rates appropriate at the
inception of each lease. Contingent rents (net of rental offsets) associated
with capitalized leases were $22,000 in 1998, $3,000 in 1997 and $6,000 in
1996.
Future minimum lease payments for noncancelable operating leases, related
subleases and capital leases at January 28, 1999, were as follows (in
thousands):
<TABLE>
<CAPTION>
Operating Capital
Leases Subleases Leases
--------- --------- -------
<S> <C> <C> <C>
1999.......................................... $ 3,374 $(143) $1,274
2000.......................................... 3,503 (143) 1,274
2001.......................................... 3,425 (125) 1,239
2002.......................................... 3,324 (25) 1,061
2003.......................................... 3,309 1,004
Remainder..................................... 32,770 8,902
------- ----- ------
Total minimum obligations (receivables)....... $49,705 $(436) 14,754
======= =====
Interest...................................... (6,930)
------
Present value of net minimum obligations...... $7,824
======
</TABLE>
Rent expense under operating leases was as follows:
<TABLE>
<CAPTION>
January 28, January 29, January 30,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Minimum rent........................... $3,082 $2,966 $2,556
Contingent rent........................ 31 48 58
Sublease rent.......................... (143) (118) (18)
------ ------ ------
$2,970 $2,896 $2,596
====== ====== ======
</TABLE>
Interest expense under capital leases for the fiscal years ended January 28,
1999, January 29, 1998, and January 30, 1997 was approximately $886,000,
$929,000, and $966,000, respectively.
F-29
<PAGE>
ALBERTSON'S STORES
NOTES TO STATEMENTS OF NET ASSETS AND STATEMENTS
OF STORE LEVEL EARNINGS--(continued)
4. ADVERTISING EXPENSE
The Company expenses advertising costs when the advertisement occurs. Net
advertising expense was approximately $5,288,000, $4,639,000, and $3,089,000
in 1998, 1997 and 1996, respectively, and has been reported in cost of sales
in the accompanying statements of store level earnings.
5. DEPRECIATION, INTEREST AND ADVERTISING EXPENSE (Unaudited)
Depreciation and amortization for the 13 weeks ending April 29, 1999 and
April 30, 1998 was approximately $2,219,000 and $2,249,000, respectively.
Interest expense related to capital leases for the 13 weeks ending April 29,
1999, and April 30, 1998, was approximately $214,000 and $226,000,
respectively.
Net advertising expense for the 13 weeks ending April 29, 1999 and April 30,
1998 was approximately $1,029,000 and $1,449,000, respectively.
******
F-30
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
American Stores Company
We have audited the accompanying statements of net assets of the Lucky
Stores as of January 30, 1999 and January 31, 1998 and the statements of store
level earnings for the fiscal years ended January 30, 1999, January 31, 1998
and February 1, 1997. These statements are the responsibility of the
management of Lucky Stores. Our responsibility is to express an opinion on
these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of net assets and
store level earnings are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of net assets and store level earnings. An audit also includes
assessing the basis of accounting used and significant estimates made by
management, as well as evaluating the overall presentation of the statements
of net assets and store level earnings. We believe that our audits provide a
reasonable basis for our opinion.
As described in the notes to financial statements, the accompanying
statements of net assets and store level earnings were prepared pursuant to
the Asset Purchase Agreement between Albertson's, Inc., Stater Bros. Markets
and Stater Bros. Holdings Inc. dated as of May 7, 1999, and are not intended
to be complete presentations of the earnings or the assets and liabilities of
the Lucky Stores to be acquired.
In our opinion, the statements referred to above present fairly, in all
material respects, the net assets of the Lucky Stores at January 30, 1999 and
January 31, 1998 and the store level earnings for the fiscal years ended
January 30, 1999, January 31, 1998 and February 1, 1997, pursuant to the Asset
Purchase Agreement as described in the Notes to Financial Statements, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Salt Lake City, Utah
May 17, 1999
F-31
<PAGE>
LUCKY STORES
STATEMENTS OF STORE LEVEL EARNINGS
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
52 Weeks Ended 13 Weeks Ended
----------------------------------- -------------------
January 30, January 31, February 1, May 1, May 2,
1999 1998 1997 1999 1998
----------- ----------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales................... $149,562 $144,510 $150,714 $36,579 $37,904
Cost of merchandise
sold................... 110,340 108,073 111,313 26,964 28,668
-------- -------- -------- ------- -------
Gross profit............ 39,222 36,437 39,401 9,615 9,236
Store operating expense. 33,003 31,413 30,347 8,037 7,791
-------- -------- -------- ------- -------
Store level earnings.... $ 6,219 $ 5,024 $ 9,054 $ 1,578 $ 1,445
======== ======== ======== ======= =======
</TABLE>
See accompanying notes.
F-32
<PAGE>
LUCKY STORES
STATEMENTS OF NET ASSETS
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
January 30, January 31, May 1, May 2,
1999 1998 1999 1998
----------- ----------- ------- -------
<S> <C> <C> <C> <C>
ASSETS
------
Prepaid expenses....................... $ 226 $ 220 $ 239 $ 230
Inventories............................ 7,737 6,910 7,900 7,184
Other assets........................... 892 920 884 294
Property, Plant and Equipment:
Land................................. 2,598 2,598 2,598 2,598
Buildings............................ 7,088 7,285 7,235 7,029
Equipment, fixtures and leasehold
improvements........................ 27,651 22,787 27,771 23,218
------- ------- ------- -------
37,337 32,670 37,604 32,845
Less accumulated depreciation and
amortization........................ 18,046 15,755 18,663 16,317
------- ------- ------- -------
Property under capital leases, net of
accumulated amortization of $4,324
and $4,884 in 1998 and 1997,
respectively and $4,415 and $4,987
in 1st Qtr 1999 and 1st Qtr 1998,
respectively........................ 5,024 5,419 4,933 5,315
------- ------- ------- -------
33,170 30,384 32,897 29,551
LIABILITIES
-----------
Obligations under capital leases..... 5,775 6,030 5,708 5,968
Accrued real estate liabilities...... 304 266 331 278
------- ------- ------- -------
Net Assets ............................ $27,091 $24,088 $26,858 $23,305
======= ======= ======= =======
</TABLE>
See accompanying notes.
F-33
<PAGE>
LUCKY STORES
NOTES TO FINANCIAL STATEMENTS
Basis of Presentation
On May 7, 1999, Lucky Stores, Inc., American Stores Properties, Inc. and
American Food and Drug entered into an agreement ("Asset Purchase Agreement")
with Stater Bros. Holdings Inc. to sell ten stores located in California
(these stores are hereinafter referred to as the Lucky Stores). Lucky Stores,
Inc., American Stores Properties, Inc. and American Food and Drug are indirect
wholly-owned subsidiaries of American Stores Company. The ten stores do not
represent a separate legal entity, but represent the assets and operations to
be acquired as defined by the Asset Purchase Agreement. Some of the Lucky
Stores leased certain buildings and land from certain related entities under
operating lease agreements. For purposes of these statements, cost,
accumulated depreciation and depreciation expense related to these properties,
as recorded by the related entities, have been recorded as if the property was
owned by the store.
The accompanying financial statements relate solely to the 10 Lucky Stores
to be acquired by Stater Bros. Holdings Inc. and are not intended to represent
the complete financial position and results of operations of the Lucky Stores.
There are no complete financial statements issued or prepared for issuance by
store.
Amounts in cost of merchandise sold and store operating expense include some
allocated charges. However, certain allocations of indirect charges,
including, but not limited to, income tax expense, interest expense and
overhead costs incurred at the corporate, region and district levels have been
excluded. Also, the statements of store level earnings do not include any
expenses, including depreciation, related to the region and district offices.
The statements of store level earnings contains the results of those stores
that are to be acquired. The allocations of these costs are based on usage,
wages and/or sales. The allocated costs included in the accompanying
statements are not necessarily representative of the actual results that would
have resulted had the stores to be acquired been operated as a stand alone
entity. The statements of net assets differs from a complete balance sheet in
that it contains only those assets and liabilities related to the Lucky Stores
to be acquired pursuant to the Asset Purchase Agreement. Certain net accrued
real estate liabilities included in the statements of net assets will be
prorated at the date of closing and will not be assumed by Stater Bros. The
information contained in the statements has been prepared in accordance with
generally accepted accounting principles.
Summary of Significant Accounting Policies
Inventories
Inventories are stated at the lower of cost or market. The FIFO (first-in-
first-out) or average cost methods are used to determine the cost of the
inventories.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization charged to earnings for financial statement purposes, including
amortization of property under capital leases, are computed using the
straight-line method applied to individual property items. The depreciable
lives are primarily 20 to 25 years for buildings, 3 to 10 years for equipment
and fixtures and generally 20 to 25 years for leasehold improvements and
property under capital lease, depending on the lease terms. Depreciation and
amortization for the fiscal years ended January 30, 1999, January 31, 1998 and
February 1, 1997 was $2,733,560, $2,384,051 and $2,505,867, respectively.
Depreciation and amortization for the thirteen-week unaudited periods ended
May 1, 1999 and May 2, 1998 was $683,558 and $638,043, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-34
<PAGE>
LUCKY STORES
NOTES TO FINANCIAL STATEMENTS--(continued)
Advertising Expense
The Company expenses advertising costs when the advertisement occurs. Total
advertising expense amounted to $2,327,911, $2,450,346 and $2,215,329 in 1998,
1997 and 1996, respectively. Advertising expense for the thirteen-week
unaudited periods ended May 1, 1999 and May 2, 1998 was $685,383 and $733,135,
respectively.
Leases
Certain of the retail stores are leased from unrelated third parties.
Remaining initial lease terms range from 2 to 23 years plus renewal options
that may provide for additional rentals based on sales volume in excess of
specified levels.
The summary below shows the aggregate future minimum lease commitments as of
January 30, 1999.
<TABLE>
<CAPTION>
Operating Capital
Fiscal Year Leases Leases
----------- ----------- -----------
<S> <C> <C>
1999.............................................. $ 1,475,260 $ 790,212
2000.............................................. 1,496,984 768,488
2001.............................................. 1,508,765 725,040
2002.............................................. 1,445,432 725,040
2003.............................................. 1,390,688 725,040
Thereafter........................................ 16,298,940 6,343,420
----------- -----------
Total minimum rental commitments.................. $23,616,069 10,077,240
===========
Less:
Amount representing interest.................... (4,113,994)
Amount representing executory costs............. (188,185)
-----------
Capital lease obligation.......................... $ 5,775,061
===========
</TABLE>
Rental expense was $1,467,165 for fiscal 1998, $1,000,376 for fiscal 1997
and $681,133 for fiscal 1996, which includes contingent rents of $103,057 for
fiscal 1998, $135,780 for fiscal 1997 and $153,951 for fiscal 1996. Rental
expense for the thirteen-week unaudited periods ended May 1, 1999 and May 2,
1998 was $387,547 and $324,845, respectively, which includes contingent rents
of $26,139 for the period ended May 1, 1999 and $30,568 for the period ended
May 2, 1998.
Interest expense under capital leases amounted to $522,994, $544,899 and
$563,317 in 1998, 1997 and 1996, respectively. Interest expense under capital
leases for the thirteen-week unaudited periods ended May 1, 1999 and May 2,
1998 amounted to $127,087 and $132,880, respectively.
Corporate, Region and District Overhead Allocations (Unaudited)
Various administrative and operational services are provided to the Lucky
Stores which includes, but is not limited to, operational supervision, data
processing, legal assistance, employee benefit administration, human
resources, treasury, accounting, audit, tax and real estate functions. The
costs are allocated based on usage, wages and/or sales. The costs are not
necessarily indicative of costs that would be incurred on a stand alone basis.
The allocations to the Lucky Stores for fiscal 1998, 1997 and 1996 were
$2,440,102, $1,594,376 and $1,904,070, respectively. The allocations for the
unaudited thirteen-week periods ended May 1, 1999 and May 2, 1998 were
$542,826 and $584,227, respectively. As discussed in the Basis of Presentation
footnote above, none of these costs are included in the accompanying
statements of store level earnings.
F-35
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
All tendered outstanding notes, executed letters of transmittal and other
related documents should be directed to the exchange agent. Questions and
requests for additional copies of this prospectus, the letter of transmittal
and other related documents should be addressed to the exchange agent as
follows:
By Mail, Overnight Courier or Hand:
IBJ Whitehall Bank & Trust Company
1 State Street
New York, New York 10004
Attention: Customer Service
By Facsimile:
(212) 858-2611
Confirm by Telephone:
(212) 858-2103
(Originals of all documents submitted by facsimile should be sent promptly
by hand, overnight courier, or registered or certified mail.)
No broker dealer or other person is authorized in connection with any offer
made hereby to give any information or to make any representations not
contained in this prospectus and, if given or made, the unauthorized
information or representations must not be relied upon as having been
authorized by us. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the securities offered
hereby nor does it constitute an offer to sell or a solicitation of an offer
to buy any of the securities offered hereby to any person in any jurisdiction
in which it is unlawful to make such an offer or solicitation to such person.
Neither the delivery of this prospectus nor any sale made hereunder shall
under any circumstances create any implication that the information contained
herein is correct as of any time subsequent to the date hereof.
Until , 1999 (90 days from the date of this prospectus) all dealers
effecting transactions in the exchange notes, whether or not participating in
this exchange offer, may be required to deliver a prospectus.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF STATER BROS.]
Stater Bros. Holdings Inc.
Offer to Exchange
its 10 3/4% Senior Notes due 2006
which have been Registered under the
Securities Act of 1933
for
Any and All of its Outstanding
10 3/4% Senior Notes due 2006
---------------
PROSPECTUS
---------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law ("DGCL") permits a
corporation to indemnify any of its directors or officers who was or is a
party or is threatened to be made a party to any third party proceeding by
reason of the fact that such person is or was a director or officer of the
corporation against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that such person's
conduct was unlawful. In a derivative action, i.e., one by or in the right of
a corporation, the corporation is permitted to indemnify any of its directors
or officers against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged liable to the corporation, unless and
only to the extent that the court in which such action or suit was brought
shall determine upon application that such person is fairly and reasonably
entitled to indemnity for such expenses despite such adjudication of
liability.
Pursuant to Section 102(b)(7) of the DGCL, Stater Bros.' Certificate of
Incorporation eliminates the liability of our directors to Stater Bros. or its
stockholders, except for liabilities related to breach of the duty of loyalty,
actions not in good faith, and certain other liabilities. As permitted by
Section 145 of the DGCL, Article V of Stater Bros.' Bylaws provides for the
indemnification of all directors, officers, employees and agents against
expenses actually and reasonably incurred in connection with certain stated
proceedings and under certain stated conditions.
ITEM 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
1 Purchase Agreement dated August 6, 1999 by and between Stater Bros.
and Banc of America Securities LLC.
2.1 Asset Purchase Agreement dated as of May 7, 1999, by and between
Albertson's, Inc., Stater Bros. Markets and Stater Bros.
3.1(1) Certificate of Incorporation of Stater Bros. Holdings Inc.
3.2(1) Bylaws of Stater Bros. Holdings Inc.
4.2(4) First Supplemental Indenture between Stater Bros. and IBJ Schroder
Bank & Trust Company, as Trustee, for $165,000,000 11% Senior
Notes due 2001, dated as of July 22, 1997.
4.6 Indenture dated as of August 6, 1999 between Stater Bros. and IBJ
Whitehall Bank & Trust Company.
4.7 Registration Rights Agreement dated as of August 6, 1999, by and
between Stater Bros. and Banc of America Securities LLC.
4.8 Second Supplemental Indenture dated as of July 16, 1999 between
Stater Bros. and IBJ Whitehall Bank & Trust Company, for the
securities issued under the indenture dated as of March 8, 1994,
as amended by the First Supplemental Indenture dated as of July
22, 1997.
5(5) Opinion of Gibson, Dunn & Crutcher LLP.
10.1(1) Reclassification Agreement dated September 3, 1993, by and among
Stater Bros., Craig and La Cadena.
10.2(1) Amendment to Reclassification Agreement, dated January 12, 1994, by
and among Stater Bros., Craig and La Cadena.
10.3(1) Agreement of Stockholders dated May 10, 1989, by and among Stater
Bros., Craig and La Cadena.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.4(1) Amendment to Agreement of Stockholders dated September 3, 1993, by
and among Stater Bros., Craig, Craig Management, Inc. ("CMI") and
La Cadena.
10.5(1) Option Agreement dated September 3, 1993, by and between Stater
Bros. and Craig.
10.6(1) Amendment to Option Agreement dated January 12, 1994, by and
between Stater Bros. and Craig.
10.7(1) Consulting Agreement dated September 3, 1993, by and between
Stater Bros., Craig and CMI.
10.8(1) Letter Agreement regarding Consulting Agreement, dated March 8,
1994, by and between Stater Bros., Craig and CMI.
10.9(1) Second Amended and Restated Stock Agreement dated January 12,
1994, by and among Stater Bros., Craig, CMI, La Cadena and James
J. Cotter.
10.10(1) Security Agreement dated March 8, 1994, by and between Stater
Bros. and Craig.
10.12(1) Credit Agreement dated March 8, 1994, by and between Stater Bros.
Markets and Bank of America Trust and Savings Association.
10.12(a)(2) Amendment dated June 23, 1995 to the Credit Agreement dated March
8, 1994, by and between Stater Bros. Markets and Bank of America
Trust and Savings Association.
10.12(b)(3) Amendment dated July 22, 1996 to the Credit Agreement dated March
8, 1994, by and between Stater Bros. Markets and Bank of America
Trust and Savings Association.
10.12(c) Credit Agreement dated as of August 6, 1999 by and among Stater
Bros. Markets, Stater Bros., and Bank of America, N.A.
10.13(1) Continuing Guaranty dated March 8, 1994, of Stater Bros.
Development, Inc. in favor of Bank of America Trust and Savings
Association.
10.15(1) Subordination Agreement dated March 8, 1994, by and among Stater
Bros., Stater Bros. Markets and Bank of America Trust and Savings
Association.
10.16(1) Amended and Restated Sublease Agreement dated June 1, 1983,
between Wren Leasing Corp., as Lessor, and Stater Bros. Markets,
as Lessee.
10.17(1) Preferred Stock Agreement dated March 22, 1983, between Stater
Bros. Markets and Petrolane Incorporated.
10.18(1) Escrow Agreement dated September 19, 1985, by and among Stater
Bros. Markets, Petrolane Incorporated and First Interstate Bank
of California.
10.19 Dealer Manager Agreement dated as of July 1, 1999 by and between
Stater Bros. and Banc of America Securities LLC.
12 Computation of Ratio of Earnings to Fixed Charges.
21(1) Subsidiaries of Stater Bros.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Ernst & Young LLP.
23.4(5) Consent of Gibson, Dunn & Crutcher (included in Exhibit 5).
24 Powers of Attorney (included on signature pages of this
Registration Statement on Form S-4).
25 Form T-1 Statement of Eligibility and Qualification of IBJ
Whitehall Bank & Trust Company, as Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
(1) Previously filed with the Securities and Exchange Commission as an exhibit
to the Registration Statement S-4 No. 33-77296 dated July 21, 1994.
II-2
<PAGE>
(2) Previously filed with the Securities and Exchange Commission as an exhibit
to the Registrant's Quarterly Report on Form 10-Q dated June 25, 1995 and
filed on August 8, 1995.
(3) Previously filed with the Securities and Exchange Commission as exhibit
10.12(b) with the Annual Report on Form 10-K for the fiscal year ended
September 29, 1996.
(4) Previously filed with the Securities and Exchange Commission as exhibits
to the Registration Statement S-4, No. 333-34113 dated October 17, 1997.
(5) To be filed by amendment.
(b) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts
Schedules other than that listed above have been omitted because of the
absence of conditions under which they are required or because the information
required is set forth in the financial statements or the notes thereto.
ITEM 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form within one business day of
receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Stater Bros. Holdings
Inc. has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the city of Colton, California,
on August 19, 1999.
Stater Bros. Holdings Inc.
/s/ Jack H. Brown
By: ______________________________
Jack H. Brown
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bruce D. Varner as his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the foregoing, as fully to all intents and purposes as he might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jack H. Brown Chairman of the Board, August 19, 1999
____________________________________ President, Chief Executive
Jack H. Brown Officer and Director
(Principal executive
officer)
/s/ Thomas W. Field, Jr. Vice Chairman of the Board August 19, 1999
____________________________________ and Director
Thomas W. Field, Jr.
/s/ Bruce D. Varner Secretary and Director August 19, 1999
____________________________________
Bruce D. Varner
/s/ Dennis N. Beal Senior Vice President-- August 19, 1999
____________________________________ Finance and Chief Financial
Dennis N. Beal Officer (Principal
financial and accounting
officer)
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
1 Purchase Agreement dated August 6, 1999 by and between Stater Bros.
and Banc of America Securities LLC.
2.1 Asset Purchase Agreement dated as of May 7, 1999, by and between
Albertson's, Inc., Stater Bros. Markets and Stater Bros.
4.6 Indenture dated as of August 6, 1999 between Stater Bros. and IBJ
Whitehall Bank & Trust Company.
4.7 Registration Rights Agreement dated as of August 6, 1999, by and
between Stater Bros. and Banc of America Securities LLC.
4.8 Second Supplemental Indenture dated as of July 16, 1999 between
Stater Bros. and IBJ Whitehall Bank & Trust Company, for the
securities issued under the indenture dated as of March 8, 1994 as
amended under the First Supplemental Indenture dated as of July 22,
1999.
5 (1) Opinion of Gibson, Dunn & Crutcher LLP.
10.12(c) Credit Agreement dated as of August 6, 1999 by and among Stater Bros.
Markets, Stater Bros., and Bank of America, N.A.
10.19 Dealer Manager Agreement dated as of July 1, 1999 by and between
Stater Bros. and Banc of America Securities LLC.
12 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Ernst & Young LLP.
23.4(1) Consent of Gibson, Dunn & Crutcher (included in Exhibit 5).
24 Powers of Attorney (included on signature pages of this Registration
Statement on Form S-4).
25 Form T-1 Statement of Eligibility and Qualification of IBJ Whitehall
Bank & Trust Company, as Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
(1) To be filed by amedment.
<PAGE>
EXHIBIT 1
STATER BROS. HOLDINGS INC.
$450,000,000
10 3/4% Senior Notes due 2006
PURCHASE AGREEMENT
------------------
Banc of America Securities LLC
231 S. LaSalle Street
Chicago, Illinois 60697
Dear Sirs:
Stater Bros. Holdings Inc., a Delaware corporation (the "Company"), proposes
-------
to issue and sell to Banc of America Securities LLC (the "Initial Purchaser") an
-----------------
aggregate of $450,000,000 principal amount of its 10 3/4% Senior Notes due 2006
(the "Notes"). Pursuant to terms of an indenture (the "Indenture") to be
----- ----------
entered into between the Company and IBJ Whitehall Bank & Trust Company as
trustee (the "Trustee"), relating to the Notes, the Company shall issue on the
-------
Closing Date (as defined below) the Global Note and Definitive Notes (each as
defined below) representing the Notes to be purchased hereunder.
The Notes are being issued and sold in connection with the consummation of the
following series of transactions (collectively, the "Related Transactions" and,
--------------------
together with transactions contemplated by the Operative Documents (as defined
below), the "Transactions"): (i) (A) the acquisition by Stater Bros. Markets
------------
(the "Acquisition") of 43 supermarkets and one future store site (together with
-----------
related inventories, the "Acquired Properties") pursuant to an Asset Purchase
-------------------
Agreement, dated as of May 7, 1999 (together with all other documents executed
and delivered pursuant thereto, the "Asset Purchase Agreement"), among
------------------------
Albertson's, Inc., Stater Bros. Markets and the Company; (ii) the offer to
purchase and consent solicitation by the Company with respect to its $165.0
million principal amount of 11% Senior Notes due 2001 and $100 million principal
amount of 9% Senior Subordinated Notes due 2004 (collectively, the "Existing
--------
Notes") pursuant to the Offer to Purchase and Consent Solicitation Statement
- -----
(the "Offer to Purchase") of the Company dated July 1, 1999 (the "Tender Offer")
----------------- ------------
and, in connection therewith, the entering into of the supplemental indentures
with respect to the indentures governing the Existing Notes (collectively, the
"Supplemental Indentures"); (iii) the entering into by Stater Bros. Markets of
- ------------------------
the new bank credit facility (the "New Credit Facility" and, together with the
-------------------
Asset Purchase Agreement, the Supplemental Indentures and the Promissory Note
(as defined in Section 3(nn) below), the "Related Transaction Documents") with a
-----------------------------
term of three years and consisting of a $50.0 million revolving credit facility
and an additional $25.0 million facility for the issuance of commercial and
standby letters of credit; (iv) the payment to La
<PAGE>
Cadena Investments of an amount equal to 1% of the aggregate principal amount of
the Notes sold pursuant to the offering for advisory services rendered in
connection therewith; and (v) the declaration and payment of the Dividend (as
defined in Section 3(nn) below).
The Notes will be dated the Closing Date, will bear interest from the Closing
Date and will be otherwise in the form of Exhibit A to the Indenture.
Capitalized terms used but not defined herein shall have the respective meanings
given to such terms in the Indenture.
The Notes will be offered and sold to the Initial Purchaser pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended (the "Act"), and the rules and regulations (collectively referred to
---
as the "Rules and Regulations") of the Securities and Exchange Commission (the
---------------------
"Commission") thereunder.
- -----------
The Company has prepared a preliminary offering memorandum, dated July 16,
1999 (the "Preliminary Offering Memorandum"), and a final offering memorandum,
-------------------------------
dated August 2, 1999 (the "Offering Memorandum"), setting forth information
-------------------
relating to the Company and the sale and issuance of the Notes. Any references
herein to the Preliminary Offering Memorandum and the Offering Memorandum shall
be deemed to include all amendments and supplements thereto and all documents
incorporated therein by reference.
Upon original issuance thereof, and until such time as the same is no longer
required under the applicable requirements of the Act, the Notes (and all
securities issued in exchange therefor or in 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 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 (AN "INSTITUTIONAL
ACCREDITED INVESTOR")) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE
-2-
<PAGE>
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."
The Initial Purchaser has advised the Company that it may make offers (the
"Exempt Resales") of the Notes purchased by the Initial Purchaser hereunder
- ---------------
initially at the prices set forth on the cover page to the Offering Memorandum
and otherwise on the terms set forth in the Offering Memorandum to (i) persons
(each, a "Qualified Institutional Buyer") whom the Initial Purchaser reasonably
-----------------------------
believes to be "qualified institutional buyers" as defined in Rule 144A under
the Act and (ii) outside the United States in reliance on Regulation S
("Regulation S") under the Act (such persons specified in clauses (i) and (ii)
- -------------- --------------------
being referred to herein as the "Eligible Purchasers"). The offering price for
-------------------
Exempt Resales may be changed at any time without notice.
Holders (including subsequent transferees) of the Notes will have the
registration rights set forth in the exchange and registration rights agreement
(the "Registration Rights Agreement"), to be dated the Closing Date, containing
-----------------------------
substantially the same terms as described in the Preliminary Offering Memorandum
and the Offering Memorandum under the heading "Description of the Notes
Registration Rights; Liquidated Damages," for so long as such Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
- -------------------------------
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Commission under the circumstances set forth therein, (i)
a registration statement under the Act (the "Exchange Offer Registration
---------------------------
Statement") relating to new securities (the "Exchange Notes"), which will have
- --------- --------------
terms substantially identical in all material respects to the Notes (except that
the Exchange Notes will not contain terms with transfer restrictions) to be
offered in exchange for the Transfer Restricted Securities (the "Exchange
--------
Offer") and/or (ii) under certain circumstances, a shelf registration statement
pursuant to Rule 415 under the Act (the "Shelf Registration Statement") relating
----------------------------
to the resale by certain holders of Transfer Restricted Securities. The Company
will also agree to use its best efforts to cause such Registration Statements to
be declared effective by certain dates and/or to remain effective for certain
periods of time, as applicable.
The Purchase Agreement (this "Agreement"), the Indenture and the
---------
Registration Rights Agreement are hereinafter referred to collectively as the
"Operative Documents" and the
-------------------
-3-
<PAGE>
Operative Documents and Related Transaction Documents are hereinafter referred
to collectively as the "Transaction Documents".
----------------------
The Company hereby confirms its agreement with the Initial Purchaser as
follows:
1. Agreement to Sell and Purchase. Upon the basis of the respective
------------------------------
representations, warranties and agreements of the parties herein contained and
subject to all the terms and conditions of this Agreement, the Company agrees to
sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from
the Company at the purchase price of 97.500% of the principal amount thereof,
plus accrued interest, if any, an aggregate of $450 million principal amount of
the Notes.
2. Delivery and Payment. Delivery of the Notes shall be made to the Initial
--------------------
Purchaser at the office of Banc of America Securities LLC, 231 South LaSalle
Street, 18th Floor, Chicago, Illinois 60697, at 10:00 a.m., New York City time
against payment of the purchase price by wire transfer of Federal or other funds
immediately available in New York City. Delivery of and payment for the Notes
shall occur at 10:00 a.m., New York City time, on the fourth business day
following the date of this Agreement, or at such other place and at such time on
such other date, as may be agreed upon by the Company and the Initial Purchaser
(such date is hereinafter referred to as the "Closing Date").
------------
One or more Notes in definitive form, registered in the name of Cede & Co.,
as nominee of The Depository Trust Company ("DTC"), or such other names as the
---
Initial Purchaser may request upon notice to the Company, in an amount
corresponding to the aggregate principal amount of Notes sold pursuant to Exempt
Resales to Qualified Institutional Buyers (the "Global Note") shall be delivered
-----------
to DTC by the Company. The Global Note in definitive form shall be made
available to the Initial Purchaser for inspection not later than 9:30 a.m. on
the Business Day immediately preceding the Closing Date.
Notes in definitive form, registered in such names and in such
denominations as the Initial Purchaser may request upon notice to the Company,
(respectively, the "Definitive Notes") shall be delivered to the Initial
----------------
Purchaser pursuant to the first paragraph of this Section 2. The Company will
---------
make such Notes available to the Initial Purchaser for inspection not later than
9:30 a.m. on the Business Day immediately preceding the Closing Date.
3. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Initial Purchaser that:
(a) A Preliminary Offering Memorandum and an Offering Memorandum with
respect to the Notes have been prepared by the Company in connection with
the Exempt Resales. Copies of such Preliminary Offering Memorandum and
Offering Memorandum and the amendments thereto have been delivered by the
Company to the Initial Purchaser for distribution to potential investors.
No stop order or other similar order or decree preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum or any amendment
or supplement thereto, or any order asserting that the
-4-
<PAGE>
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued and no proceeding for that purpose
has commenced or is pending or, to the knowledge of the Company, is
contemplated.
(b) The Preliminary Offering Memorandum, as of the date thereof, and
the Offering Memorandum, as of the date thereof, do not, and any amendment
or supplement thereto will not, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided that no representation
--------
or warranty is made as to information relating to the Initial Purchaser
contained in the Preliminary Offering Memorandum or the Offering Memorandum
in reliance upon and in conformity with written information relating to the
Initial Purchaser furnished to the Company by the Initial Purchaser
specifically for inclusion therein. The Company acknowledges that the
statements set forth in the first sentence of the third paragraph and in
the second sentence of the fourth paragraph under the heading "Plan of
Distribution" in the Offering Memorandum and Preliminary Offering
Memorandum constitute the only information relating to the Initial
Purchaser furnished to the Company by the Initial Purchaser specifically
for inclusion in the Offering Memorandum or the Preliminary Offering
Memorandum. The Company is not required to deliver the information
specified in Rule 144A(d)(4) of the Act in connection with Exempt Resales.
(c) The Offering Memorandum as delivered from time to time shall
incorporate by reference the most recent Annual Report of the Company on
Form 10-K filed with the Commission and each Quarterly Report of the
Company on Form 10-Q and each Current Report of the Company on Form 8-K
filed with the Commission since the filing of the end of the fiscal year to
which such Annual Report relates. The documents incorporated or deemed to
be incorporated by reference in the Offering Memorandum at the time they
were or hereafter are filed with the Commission (collectively, the
"Incorporated Documents") complied and will comply in all material respects
----------------------
with the requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
------------
(d) The only subsidiaries (as defined in the Rules and Regulations)
of the Company are Stater Bros. Markets and Stater Bros. Development, Inc.
(collectively, the "Subsidiaries"). The Company and each of its
------------
Subsidiaries is, and at the Closing Date will be, a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company and each of its Subsidiaries
has, and at the Closing Date will have, full power and authority to conduct
all the activities conducted by it, to own or lease all the assets owned or
leased by it and to conduct its business as described in the Preliminary
Offering Memorandum and the Offering Memorandum. The Company and each of
its subsidiaries has, and at the Closing Date will have, full power and
authority to enter into and perform their respective obligations under the
Transaction Documents. The Company and each of its Subsidiaries is, and at
the Closing Date will be, duly licensed or qualified to do business and in
good standing as a foreign corporation in all jurisdictions in which the
nature of the activities conducted by it or the character of the assets
owned or leased by it (including the Acquired Properties) makes such
licensing or qualification necessary, except where the failure to
-5-
<PAGE>
be so licensed or qualified would not have a material adverse effect on the
business, properties, business prospects, condition (financial or
otherwise), net worth or results of operations of the Company and its
Subsidiaries, taken as a whole, or their ability to consummate any of the
Related Transactions (a "Material Adverse Effect"). Other than the stock of
-----------------------
the Subsidiaries and the limited liability company interests of Santee
Dairies, LLC ("Santee"), the Company does not own, and at the Closing Date-
------
will not own, directly or indirectly, any shares of stock or any other
equity or long-term debt securities of any corporation or have any equity
interest in any firm, partnership, joint venture, association or other
entity. The outstanding shares of capital stock and other securities of the
Subsidiaries have been duly authorized, validly issued, fully paid and
nonassessable and are not subject to any preemptive or similar right. All
of the outstanding shares of capital stock of the Subsidiaries are
beneficially owned by the Company, except for the ten outstanding shares of
$11.00 Cumulative Preferred Stock of Stater Bros. Markets. Complete and
correct copies of the certificate of incorporation and of the by-laws (or
other comparable documents) of the Company, each of its Subsidiaries and
Santee and all amendments thereto have been delivered to the Initial
Purchaser, and no changes therein will be made subsequent to the date
hereof and prior to the Closing Date.
(e) The outstanding shares of capital stock and other securities of the
Company have been duly authorized, validly issued, fully paid and
nonassessable and, as of the Closing Date, will not be subject to any
preemptive or similar right. The outstanding shares of capital stock of the
Company are beneficially owned by the parties listed in the Preliminary
Offering Memorandum and the Offering Memorandum under the caption "Security
Ownership of Certain Beneficial Owners and Management." Except as set forth
in the Preliminary Offering Memorandum and the Offering Memorandum, there
are not outstanding, and at the Closing Date there will not be outstanding,
any options to purchase, or any rights or warrants to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments
to issue or sell, any shares of capital stock of the Company, any shares of
capital stock of any Subsidiary or any such warrants, convertible
securities or obligations.
(f) The consolidated financial statements of the Company and its
Subsidiaries and the Acquired Properties (including all notes and schedules
thereto) included in the Preliminary Offering Memorandum and the Offering
Memorandum present fairly on a consolidated basis the financial position,
the results of operations and cash flows and the changes in stockholders'
equity and the other information purported to be shown therein of each of
the Company and its Subsidiaries, on a consolidated basis, and the Acquired
Properties at the respective dates and for the respective periods to which
they apply; such financial statements and related schedules and notes have
been prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein, and all adjustments necessary for a fair presentation of the
results for such periods have been made, except as disclosed therein and
subject in the case of interim statements to normal year-end audit
adjustments; and the other financial and statistical information and data
set forth in the Preliminary Offering Memorandum and the Offering
Memorandum (and any amendment or supplement thereto) are accurately
presented in all material respects and prepared on a basis
-6-
<PAGE>
consistent with such financial statements and the books and records of each
of the Company and its Subsidiaries and the Acquired Properties.
(g) The pro forma financial statements and the related notes thereto
included in the Preliminary Offering Memorandum and the Offering Memorandum
(and in each case any amendment or supplement thereto) have been prepared
on a basis consistent with the historical financial statements and related
notes thereto of Albertson's, Inc. and American Stores Company and the
Company and its Subsidiaries except as specifically referred to therein or
in the notes thereto and give effect to assumptions used in the preparation
thereof on a reasonable basis and in good faith and present fairly the
historical and proposed transactions contemplated by the Preliminary
Offering Memorandum and the Offering Memorandum; and such pro forma
financial statements comply as to form in all material respects with the
requirements applicable to pro forma financial statements included in
registration statements on Form S-1 under the Act. The other pro forma
financial and statistical information and data included in the Offering
Memorandum are, in all material respects, accurately presented and prepared
on a basis consistent with the pro forma financial statements.
(h) (i) Ernst & Young LLP ("E&Y"), who has certified the
---
consolidated financial statements of the Company and its Subsidiaries
(including all notes and schedules thereto) included in the Preliminary
Offering Memorandum and the Offering Memorandum, are independent
accountants with respect to the Company and (ii) Deloitte & Touche LLP
("Deloitte" and, together with E&Y, the "Accountants") and E&Y, who have
certified the consolidated financial statements with respect to the
Acquired Properties (including all notes and schedules thereto) used to
calculate the pro forma financial and statistical information and data
included in the Preliminary Offering Memorandum and the Offering
Memorandum, are independent accountants with respect to Albertson's, Inc
and American Stores, respectively.
(i) Subsequent to the respective dates as of which information is
given in the Preliminary Offering Memorandum and the Offering Memorandum
and prior to the Closing Date, except as set forth in or contemplated by
the Preliminary Offering Memorandum and the Offering Memorandum, (1) there
has not been and will not have been any material change in the
capitalization of the Company, or any material adverse change in the
business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries,
taken as a whole, or their ability to consummate any of the Related
Transactions (a "Material Adverse Change"), arising for any reason
-----------------------
whatsoever, (2) neither the Company nor any of its Subsidiaries has
incurred nor will it incur any material liabilities or obligations, direct
or contingent, nor has it entered into nor will it enter into any
transactions material to the business of the Company and its Subsidiaries,
taken as a whole, other than pursuant to the Transaction Documents and (3)
the Company has not and will not have paid or declared any dividends or
other distributions of any kind on any class of its capital stock.
(j) Neither the Company nor any of its Subsidiaries is an
"investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an
-7-
<PAGE>
"investment company," as such terms are defined in the Investment Company
Act of 1940, as amended.
(k) Except as set forth in the Preliminary Offering Memorandum and
the Offering Memorandum, (1) there are no actions, suits or proceedings
pending or threatened against or affecting the Company or any of its
Subsidiaries or any of their respective officers in their capacity as such,
before or by any Federal or state court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign,
wherein an unfavorable ruling, decision or finding might have a Material
Adverse Effect and (2) to the knowledge of the Company, no statute, rule,
regulation or order that has been enacted, adopted or issued by any
governmental agency or that has been proposed by any governmental body that
could materially adversely affect the issuance of the Notes or the
consummation of any of the transactions contemplated by the Transaction
Documents. The Company has not been served with notice of any injunction,
restraining order or order of any nature by a federal or state court or
other tribunal of competent jurisdiction that would prevent the issuance of
the Notes or the Exchange Notes or the consummation of any of the Related
Transactions.
(l) The Company and each of its Subsidiaries has, and at the Closing
Date will have, (1) all governmental licenses, permits, consents, orders,
approvals and other authorizations, including but not limited to any
necessary approvals or exemptions under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("Licenses") necessary to consummate
--------
each of the Related Transactions and carry on its business as contemplated
in the Preliminary Offering Memorandum and the Offering Memorandum, except
for such Licenses the absence of which would not have a Material Adverse
Effect, (2) complied in all material respects with all laws, regulations
and orders applicable to it or its business and (3) performed all its
obligations required to be performed by it, and is not, and at the Closing
Date will not be, in default, under any contract or other instrument to
which it is a party or by which its property is bound or affected, except
where such default would not have a Material Adverse Effect. To the best
knowledge of the Company and each of its Subsidiaries, no other party under
any contract or other instrument to which it is a party is in default in
any respect thereunder, except where such default would not have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is, nor at
the Closing Date will any of them be, in violation of any provision of its
certificate of incorporation or by-laws.
(m) No consent, approval, authorization or order of, or any filing
or declaration with, any court or governmental agency or body is required
for the consummation by the Company or its Subsidiaries, as the case may
be, of (i) the transactions on its part herein contemplated or (ii) the
Related Transactions, except such as may be required under state securities
or Blue Sky laws. Except as provided in the previous sentence, as of the
Closing Date, the Company and its Subsidiaries will have obtained all
consents or waivers from any person as are required to consummate (i) the
transactions contemplated by the Operative Documents and (ii) the Related
Transactions.
-8-
<PAGE>
(n) The Company and each of its Subsidiaries party thereto has full
corporate power and authority to enter into each of the Transaction
Documents. Each of the Transaction Documents have been duly authorized,
executed and delivered by the Company and each of its Subsidiaries party
thereto and constitute a valid and binding agreement of the Company and
such Subsidiaries and are enforceable against the Company and such
Subsidiaries in accordance with the terms thereof, except (A) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or
affecting creditors' rights generally; (B) that the remedies of specific
performance and injunctive and other forms of relief are subject to general
equitable principles, whether enforcement is sought at law or in equity,
and that such enforcement may be subject to the discretion of the court
before which any proceedings therefore may be brought; and (C) as rights to
indemnity and contribution may be limited by state and federal laws
relating to securities or by the policies underlying such laws. The
performance of each of the Transaction Documents and the consummation of
the transactions contemplated thereby will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of the
Company or any of its Subsidiaries pursuant to the terms or provisions of,
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or give any other party a right to terminate
any of its obligations under, or result in the acceleration of any
obligation under, the certificate of incorporation or by-laws of the
Company or any of its Subsidiaries, any indenture, mortgage, deed of trust,
voting trust agreement, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, lease, contract or other material agreement
or instrument to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of its properties is
bound or affected, or violate or conflict with any judgment, ruling,
decree, order, statute, rule or regulation of any court or other
governmental agency or body applicable to the business or properties of the
Company or any of its Subsidiaries.
(o) The Company and each of its Subsidiaries have and, with respect
to the Acquired Properties, upon consummation of the Acquisition the
Company and its Subsidiaries will have, good and marketable title to all
properties and assets described in the Preliminary Offering Memorandum and
the Offering Memorandum as owned by it or to be acquired by it or its
Subsidiaries, in each case free and clear of all liens, charges,
encumbrances or restrictions, except such as are described in the
Preliminary Offering Memorandum and the Offering Memorandum, are Permitted
Liens, or are not material to the business of the Company or its
Subsidiaries. The Company and each of its Subsidiaries has, or, with
respect to the Acquired Properties, upon consummation of the Acquisition
will have, valid, subsisting and enforceable leases for the properties
described in the Preliminary Offering Memorandum and the Offering
Memorandum as leased by it or to be leased by it following the consummation
of the Acquisition, with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such
properties by the Company and such Subsidiaries.
(p) There is no material document or contract concerning the Company
which is not described in the Preliminary Offering Memorandum and the
Offering Memorandum. All such contracts to which the Company or any
Subsidiary is a party
-9-
<PAGE>
have been duly authorized, executed and delivered by the Company or such
Subsidiary, constitute valid and binding agreements of the Company or such
Subsidiary and are enforceable against the Company or such Subsidiary in
accordance with the terms thereof.
(q) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required
by this Agreement to be delivered to the Initial Purchaser was or will be,
when made, inaccurate, untrue or incorrect.
(r) Neither the Company nor, to the best of the Company's knowledge,
any of its directors, officers or controlling persons has taken, directly
or indirectly, any action designed, or which might reasonably be expected,
to cause or result, under the Act or otherwise, in, or which has
constituted, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Notes. Except as
permitted by the Act, the Company has not distributed the Preliminary
Offering Memorandum or Offering Memorandum or any other offering material
in connection with the Exempt Resales.
(s) Except as disclosed in the Preliminary Offering Memorandum and
Offering Memorandum, there are no holders of securities of the Company (and
the issuance of the Notes hereunder will not create any such holders), who,
by reason of the execution by the Company of any of the Transaction
Documents or the filing of any Registration Statement pursuant thereto,
have the right to request or demand that the Company register under the
Act, securities held by them.
(t) The Company and each of its Subsidiaries are in compliance with
all local, state and federal laws, ordinances and regulations applicable to
their properties (whether owned or leased) and their businesses, with the
exception of violations of such laws, ordinances and regulations which
would not have a Material Adverse Effect.
(u) The issuance and sale of the Notes and the Exchange Notes have
been duly authorized by the Company, and all legally required corporate
proceedings by the Company in connection with the issuance and sale thereof
have been taken; each of the Notes and the Exchange Notes when delivered to
and paid for by the Initial Purchaser or upon consummation of the Exchange
Offer, in accordance with the Operative Documents, as applicable (assuming
the due authorization and authentication of the Notes and the Exchange
Notes by the Trustee), will be a legal, valid and binding obligation of the
Company entitled to the benefits provided by the Indenture, enforceable in
accordance with their terms, except (A) as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws now
or hereafter in effect relating to or affecting creditors' rights
generally; (B) that the remedies of specific performance and injunctive and
other forms of relief are subject to general equitable principles, whether
enforcement is sought at law or in equity, and that such enforcement may be
subject to the discretion of the court before which any proceedings
therefore may
-10-
<PAGE>
be brought; and (C) as rights to indemnity and contribution may be limited
by state and federal laws relating to securities or by the policies
underlying such laws.
(v) The Indenture complies as to form in all material respects with
the requirements of the Trust Indenture Act of 1939, as amended (the "Trust
-----
Indenture Act"), and the rules and regulations of the Commission
-------------
thereunder. Upon effectiveness of the applicable registration statement to
be filed pursuant to the Registration Rights Agreement, the Indenture will
be duly qualified under the Trust Indenture Act.
(w) On the Closing Date, (1) the Indenture will have been duly and
validly authorized, executed and delivered by the Company and will
constitute a valid and legally binding obligation of the Company
enforceable against the Company in accordance with its terms, (2) the
Registration Rights Agreement will have been duly authorized by the Company
and, when executed by the Company in accordance with the terms hereof, will
be validly executed and delivered and will be the legally valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, (3) the Indenture, the Registration Rights Agreement, the
Asset Purchase Agreement, the New Credit Facility and the Notes will
conform in all material respects to the descriptions thereof contained in
the Preliminary Offering Memorandum and the Offering Memorandum, except
with respect to clauses (1), (2) and (3), (A) as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally; (B) that the remedies of specific performance and injunctive and
other forms of relief are subject to general equitable principles, whether
enforcement is sought at law or in equity, and that such enforcement may be
subject to the discretion of the court before which any proceedings
therefore may be brought; and (C) as rights to indemnity and contribution
may be limited by state and federal laws relating to securities or by the
policies underlying such laws.
(x) All tax returns required to be filed by the Company and its
Subsidiaries, in all jurisdictions, have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due or claimed to be due from such entities or that are due
and payable have been paid, other than those being contested in good faith
by appropriate proceedings and for which adequate reserves have been
provided or those currently payable without penalty or interest. The
Company does not know of any material proposed additional tax assessments
against it or any of its Subsidiaries.
(y) Except as disclosed in the Preliminary Offering Memorandum and
Offering Memorandum, neither the Company nor any of its Subsidiaries has
incurred, individually or in the aggregate, any material liabilities or
obligations as a result of any casualty loss, whether insured or uninsured.
(z) Except as disclosed in the Preliminary Offering Memorandum and
the Offering Memorandum, there are no contracts, agreements or
understandings between the Company and any person that would give rise to a
valid claim against the Company or
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<PAGE>
the Initial Purchaser for a brokerage commission, finder's fee or like
payment in connection with the transactions contemplated by this Agreement.
(aa) When the Notes are issued and delivered pursuant to this
Agreement, such Notes will not be of the same class (within the meaning of
Rule 144A under the Act) as securities of the Company that are listed on a
national securities exchange registered under Section 6 of the Exchange
Act, or that are quoted in a United States automated interdealer quotation
system. No securities of the same class as the Notes have been issued or
sold by the Company within the six-month period immediately prior to the
date hereof.
(bb) Assuming (1) that the Initial Purchaser's representations and
warranties in Section 4 are true and (2) that each of the Eligible
---------
Purchasers is a Qualified Institutional Buyer, the purchase and resale of
the Notes pursuant hereto (including pursuant to the Exempt Resales) is
exempt from the registration requirements of the Act. No form of general
solicitation or general advertising was used by the Company or any of its
representatives (other than the Initial Purchaser, as to whom the Company
makes no representation) in connection with the offer and sale of the
Notes, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any such general solicitation or general
advertising.
(cc) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Notes to be purchased by the
Eligible Purchasers will not result in the occurrence of any non-exempt
prohibited transaction within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code") with respect to employee
----
benefit plans maintained or contributed to by the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has ever
maintained or contributed to any employee pension benefit plan, including
any multiemployer plan, or to any employee welfare benefit plan that
provides health or welfare benefits to any retired or former employee of
the Company or any Subsidiary, except as set forth in the Preliminary
Offering Memorandum or the Offering Memorandum or to the extent required
under the provisions of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended. Each of the Company and its Subsidiaries is in
compliance in all material respects with any applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
-----
the Code and regulations and published interpretations thereunder with
respect to all employee welfare benefit plans maintained or contributed to
by the Company or any of its Subsidiaries. As used in this paragraph, the
terms "employee benefit plan," "employee pension benefit plan", "employee
welfare benefit plan" and "multiemployer plan" shall have the meanings
assigned to such terms in ERISA.
(dd) Neither the Company nor any agent thereof acting on its behalf
has taken, and none of them will take, any action that might cause this
Agreement or the issuance or sale of the Notes or the Exchange Notes or the
application of proceeds thereof to violate
-12-
<PAGE>
Section 7 of the Exchange Act or any regulation issued pursuant thereto,
including, without limitation, Regulation T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect now or
as the same may hereafter be in effect on the Closing Date.
(ee) The Company causes to be maintained insurance covering the
properties, operations, personnel and businesses of the Company and its
Subsidiaries in such amounts and against such losses and risks as are
adequate in accordance with customary industry practice to protect the
Company and its Subsidiaries and their businesses. Neither the Company nor
any Subsidiary has received notice from any insurer or agent of such
insurer that substantial capital improvements or other expenditures will
have to be made in order to continue such insurance. All such insurance is
outstanding and duly in force on the date hereof and will be outstanding
and duly in force
on the Closing Date.
(ff) Except as disclosed in the Preliminary Offering Memorandum and
Offering Memorandum, (A) (1) neither the Company nor any of its
Subsidiaries is involved in any unfair labor practice, (2) there is no
unfair labor practice complaint pending or, to the Company's best
knowledge, threatened against the Company or any of its Subsidiaries before
the National Labor Relations Board and no grievance or arbitration
proceeding arising out of or under collective bargaining agreements is
pending or, to the Company's best knowledge, threatened against the Company
or any of its Subsidiaries, (3) there is no strike, labor dispute, slowdown
or stoppage pending or, to the Company's best knowledge, threatened against
the Company or any of its Subsidiaries and (4) no outstanding dispute with
any union representing the employees of the Company or any of its
Subsidiaries exists with respect to representation of the employees of the
Company or any of its Subsidiaries and, to the best knowledge of the
respective managements of the Company or any of its Subsidiaries, no union
organizing activities are taking place other than activities by unions
disclosed in the Preliminary Offering Memorandum and the Offering
Memorandum as currently representing the Company or any of its
Subsidiaries, and (B) there has been no violation of any federal, state or
local law relating to discrimination in the hiring, promotion or pay of
employees, of any applicable wage or hour laws, nor any provisions of ERISA
or the rules and regulations promulgated thereunder except any violation
that may exist in connection with any case disclosed in the Preliminary
Offering Memorandum or the Offering Memorandum and which violation, if any,
will not result in a Material Adverse Effect.
(gg) Except as disclosed in the Preliminary Offering Memorandum and
Offering Memorandum, there are no business relationships or related party
transactions which, if subject to Item 404 of Regulation S-K under the Act,
would be required to be disclosed therein.
(hh) To the best knowledge of each of the Company and its
Subsidiaries, each of the Company and its Subsidiaries has obtained all
permits, licenses and other authorizations that are required under, and is
otherwise in compliance with, all environmental laws, including but not
limited to the Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et
seq.), Resource Conservation & Recovery Act (42 U.S.C. (S) 6901 et
-13-
<PAGE>
seq.), Safe Drinking Water Act (21 U.S.C. (S) 349, 42 U.S.C. (S)(S) 201,
300f), Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), Clean Air
Act (42 U.S.C. (S) 7401 et seq.), Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. (S) 9601 et seq.), other
appropriate California laws and any other laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water,
ground water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal transport or
handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes or under any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder (collectively, the "Environmental
Laws"), except as otherwise set forth in the Preliminary
------------------
Offering Memorandum or the Offering Memorandum or to the extent failure to
have any such permit, license or authorization, individually or in the
aggregate, does not have a Material Adverse Effect. Except as described in
the Offering Memorandum, each of the Company and its Subsidiaries is in
compliance with all terms and conditions of any required permits, licenses
and authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws,
except to the extent failure to comply would not have a Material Adverse
Effect.
(ii) To the best knowledge of each of the Company and its
Subsidiaries, (1) there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans relating
to the business as presently being conducted by the Company or its
Subsidiaries that interfere with or prevent compliance or continued
compliance with the Environmental Laws, or which would be reasonably likely
to give rise to any legal liability (whether statutory or common law) or
otherwise would be reasonably likely to form the basis of any claim,
action, demand, suit, proceeding, hearing, notice of violation, study,
investigation, remediation or cleanup based on or related to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release into
the workplace, the community or the environment of any pollutant,
contaminant, chemical or industrial, toxic, or hazardous substance or
waste, except for any liabilities or any claims, demands or other actions
specified above that will not individually or in the aggregate have a
Material Adverse Effect, and (2) except as previously disclosed in the
Preliminary Offering Memorandum or the Offering Memorandum, no asbestos-
containing material and no underground or above-ground tanks are located on
property owned or leased by the Company or its Subsidiaries and none have
been previously removed or filled by the Company or its Subsidiaries or, to
the best of their knowledge, any predecessor of the Company or its
Subsidiaries.
(jj) None of the Company, its Subsidiaries or any of their
respective "affiliates" (as defined in Rule 501(b) under the Act) or any
person authorized to act on their respective behalf (excluding the Initial
Purchaser, as to which no representation is made) has sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect
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<PAGE>
of any security (as such term is defined in the Act) of the Company in a
manner which would require registration under the Act.
(kk) The Company and its Subsidiaries own, possess or currently have
the right to use the trademarks, service marks, trade names, patent rights,
copyrights, licenses, inventions, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) (collectively, "Intellectual Property")
---------------------
presently employed by them in connection with, or necessary for the conduct
of, the businesses now operated by them or to be operated by them as
contemplated in the Offering Memorandum, and none of the Company or its
Subsidiaries has received any notice of, or is otherwise aware of, any
infringement of, or conflict with, asserted rights of others with respect
to the foregoing.
(ll) The Company and its affiliates and all persons acting on their
behalf (other than the Initial Purchaser, as to whom the Company makes no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering
of the Notes outside the United States and, in connection therewith, the
Offering Memorandum will contain the disclosure required by Rule 902(g)(2)
under the Securities Act.
(mm) The Company is a "reporting issuer", as defined in Rule 902
under the Securities Act.
(nn) Stater Bros. Markets has declared and paid to the Company, as a
dividend (the "Dividend"), a demand promissory note in the amount of $50
--------
million (the "Promissory Note"). Under the terms of the New Credit
---------------
Facility, Stater Bros. Markets will be permitted to borrow up to $50
million to pay all or a portion of the Promissory Note ("Borrowing"). The
---------
execution and delivery of the Promissory Note, the Dividend, any such
Borrowing, the repayment of the Promissory Note, and any subsequent
contribution by the Company to Stater Bros. Markets of the proceeds of such
repayment will not result in the creation or imposition of any lien, charge
or encumbrance upon any of the assets of the Company or any of its
Subsidiaries pursuant to the terms or provisions of, or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, or give any other party a right to terminate any of its obligations
under, or result in the acceleration of any obligation under, the
certificate of incorporation or by-laws of the Company or any of its
Subsidiaries, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other material agreement or
instrument to which the Company or any of its Subsidiaries is a party as of
the date hereof or by which the Company or any of its Subsidiaries or any
of its properties is bound or affected as of the date hereof, or violate or
conflict with any judgment, ruling, decree, order, statute, rule or
regulation of any court or other governmental agency or body applicable to
the business or properties of the Company or any of its Subsidiaries.
4. Representations and Warranties of the Initial Purchaser. The Initial
-------------------------------------------------------
Purchaser represents and warrants to the Company that:
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<PAGE>
(a) It is a Qualified Institutional Buyer with such knowledge and
experience in financial and business matters as are necessary to evaluate
the merits and risks of an investment in the Notes. It is acquiring its
interest in the Notes for its own account as principal for the purpose of
investment and not with a view to the distribution or resale thereof,
except resales in compliance with the registration requirements or
exemption provisions of the Act and that neither it, nor anyone acting on
its behalf, will offer the Notes so as to bring the issuance and sale of
the Notes within the provisions of Section 5 of the Act.
(b) The Initial Purchaser (1) is not acquiring the Notes with any
present intention of offering or selling any of the Notes in a transaction
that would violate the Act or the securities laws of any state of the
United States or any other applicable jurisdiction, (2) will be re-offering
and reselling the Notes only to Qualified Institutional Buyers in reliance
on the exemption from the registration requirements of the Act provided by
Rule 144A under the Act and outside the United States in reliance on
Regulation S of the Act, and (3) has used no form of general solicitation
or general advertising in connection with the offer and sale of the Notes.
(c) In connection with the Exempt Resales, the Initial Purchaser
will solicit offers to buy the Notes only from, and will offer to sell the
Notes only to, the Eligible Purchasers. The Initial Purchaser will offer to
sell the Notes only to, and will solicit offers to buy the Notes only from,
persons who in purchasing such Notes will be deemed to have represented and
agreed that (1) if such Eligible Purchaser is a Qualified Institutional
Buyer, it is purchasing the Notes for its own account or an account with
respect to which it exercises sole investment discretion and it or such
accounts are Qualified Institutional Buyers, (2) such Notes have not been
registered under the Act or any securities laws of any jurisdiction and
that the Notes may be offered, resold, pledged or otherwise transferred
only (i) to a person who the seller reasonably believes is a Qualified
Institutional Buyer in a transaction meeting the requirements of Rule 144A,
in a transaction meeting the requirements of Rule 144, outside the United
States to a non-U.S. person in a transaction meeting the requirements of
Rule 904 under the Act, to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of the Act), that, prior to such
transfer, furnishes the Trustee a signed letter containing certain
representations and agreements and, if such transfer is in an aggregate
principal amount of less than $100,000, an opinion of counsel acceptable to
the Company that such transfer is in compliance with the Act, or in
accordance with another exemption from the registration requirements of the
Act (and based upon an opinion of counsel if the Company so requests), (ii)
to the Company, (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, (3) such
Eligible Purchaser will, and each subsequent holder will be required to,
notify any purchaser of any security from it of the resale restrictions set
forth in (2) above, and (4) the Notes acquired by such Eligible Purchasers
in certificated form will bear the legends set forth in the preamble of
this Agreement.
-16-
<PAGE>
The Initial Purchaser also understands that the Company and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Sections
--------
6(d) and 6(e) hereof, counsel to the Company and counsel to the Initial
- -------------
Purchaser, will rely upon the accuracy and truth of the foregoing
representations and agreements and the Initial Purchaser hereby consents to such
reliance.
5. Agreements of the Company. The Company agrees with the Initial
-------------------------
Purchaser as follows:
(a) The Company will not amend or supplement the Offering Memorandum,
unless a copy thereof first shall have been submitted to the Initial
Purchaser within a reasonable period of time prior thereto and the Initial
Purchaser shall not have objected thereto in good faith. The Company will
prepare promptly upon the Initial Purchaser's request, any amendment to the
Preliminary Offering Memorandum or the Offering Memorandum that may be
necessary or advisable in connection with the Exempt Resales.
(b) The Company will advise the Initial Purchaser promptly, and will
confirm such advice in writing (unless the Initial Purchaser advises the
Company in each instance that such written confirmation is unnecessary) of
the happening of any event that makes any statement of a material fact made
in the Preliminary Offering Memorandum or the Offering Memorandum untrue or
that requires the making of any additions to or changes in the Preliminary
Offering Memorandum or Offering Memorandum. If, prior to the completion of
the placement of the Notes by the Initial Purchaser with the Eligible
Purchasers, any event shall occur or condition exist as a result of which
it is necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in the light of the circumstances when the
Offering Memorandum is delivered to a purchaser, not misleading, or if in
the reasonable opinion of the Initial Purchaser or counsel for the Initial
Purchaser it is otherwise necessary to amend or supplement the Offering
Memorandum or any Incorporated Document to comply with law, the Company
agrees to promptly prepare (subject to Section 5(a) hereof), file with the
Commission, in the case of any Incorporated Document, and furnish at its
own expense to the Initial Purchaser, amendments or supplements to the
Offering Memorandum and such Incorporated Document so that the statements
in the Offering Memorandum and the Incorporated Documents as so amended or
supplemented will not, in the light of the circumstances when the Offering
Memorandum is delivered to a purchaser, be misleading or so that the
Offering Memorandum, as amended or supplemented, will comply with law.
(c) From time to time, the Company will deliver to the Initial
Purchaser, without charge, as many copies of the Preliminary Offering
Memorandum and Offering Memorandum or any amendment or supplement thereto
as the Initial Purchaser may reasonably request. The Company consents to
the use of the Preliminary Offering Memorandum and the Offering Memorandum
and any amendment or supplement thereto by the Initial Purchaser, both at
the time of the offering or sale of the Notes and for such period of time
thereafter as the Offering Memorandum may be delivered in connection
therewith. If during such period of time any event shall occur which in the
judgment of
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<PAGE>
the Company or counsel to the Initial Purchaser should be set forth in the
Offering Memorandum in order to make any statement therein, in the light of
the circumstances under which it was made, not misleading, or if it is
necessary to supplement or amend the Offering Memorandum to comply with
law, the Company will forthwith prepare an appropriate supplement or
amendment thereto, and will deliver to the Initial Purchaser, without
charge, such number of copies thereof as the Initial Purchaser may
reasonably request.
(d) Prior to the Exempt Resales, and from time to time, the Company
will take such action as the Initial Purchaser may reasonably request to
cooperate with the Initial Purchaser and its counsel in connection with the
registration or qualification of the Notes for offer and sale by the
Initial Purchaser under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser may reasonably designate, and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary for the
distribution and resale of the Notes and the Exchange Notes as contemplated
by the Preliminary Offering Memorandum, the Offering Memorandum and the
Operative Documents; provided, that in no event shall the Company be
--------
obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action which would subject it to service of
process in suits, other than those arising out of the offering or sale of
the Notes or the Exchange Notes, in any jurisdiction where it is not now so
subjected.
(e) During the five years after the date of this Agreement, the
Company will furnish without charge to the Initial Purchaser, as soon as
available, a copy of each report of the Company or other publicly available
information that the Company shall mail or otherwise make available to the
holders of common stock of the Company or shall file with the Commission
and such other publicly available information concerning the Company or its
Subsidiaries as the Initial Purchaser may reasonably request.
(f) For so long as any of the Notes remain outstanding and are
Transfer Restricted Securities, and during any period in which the Company
is not subject to Section 13 or 15(d) of the Exchange Act, the Company
agrees to make available to any Eligible Purchaser or beneficial owner of
the Notes in connection with any sale thereof, and any prospective
purchaser of such Notes from such Eligible Purchaser or beneficial owner,
the information required by Rule 144A(d)(4) under the Act or any successor
provision under the Act.
(g) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, the
Company will pay all costs, expenses and fees (including fees and
disbursements of the Accountants and counsel to the Company) incident to
and in connection with (1) the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum and the Offering
Memorandum (including, without limitation, financial statements and
exhibits) and all amendments and supplements thereto, (2) the preparation,
printing (including, without limitation, word processing and duplication
costs) and delivery of the Operative Documents, all Blue Sky Memoranda and
all other agreements, memoranda,
-18-
<PAGE>
correspondence and other documents printed and delivered in connection
herewith and with the Exempt Resales (including reasonable fees and
disbursements of the Initial Purchaser's counsel incurred in connection
with the preparation, printing and delivery of such Blue Sky Memoranda),
(3) the preparation, issuance and delivery by the Company of the Notes and
the Exchange Notes (including, without limitation, printing and engraving
thereof), (4) the qualification of the Notes and the Exchange Notes for
offer and sale under the securities or Blue Sky laws of the several states
(including, without limitation, the reasonable fees and disbursements of
the Initial Purchaser's counsel relating to such registration or
qualification), (5) furnishing such copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and all amendments and supplements
thereto, as may be reasonably requested for use in connection with the
Exempt Resales, (6) the application for quotation of the Notes in the
Private Offerings, Resales and Trading Through Automated Linkages market of
the National Association of Securities Dealers, Inc. ("PORTAL"), (7) fees
------
and expenses of the Trustee, including fees and expenses of counsel
thereto, (8) any fees charged by investment rating agencies for the rating
of the Notes and (9) the performance by the Company of its other
obligations under the Operative Documents.
(h) The Company will not take, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Notes or the Exchange Notes. Except
as permitted by the Act, the Company will not distribute any offering
material in connection with the Exempt Resales.
(i) The Company will apply the net proceeds from the sale of the
Notes in accordance with the description set forth in the Preliminary
Offering Memorandum and the Offering Memorandum under the caption "Use of
Proceeds."
(j) The Company will use its best efforts to do and perform all
things required or necessary to be done and performed under this Agreement
by it prior to the Closing Date and to satisfy all conditions precedent to
the delivery of the Notes.
(k) The Company agrees not to sell, offer for sale or solicit
offers to buy or otherwise negotiate with respect to any security (as
defined in the Act) that would be integrated with the sale of the Notes in
a manner that would require the registration under the Act of the sale to
the Initial Purchaser or the Eligible Purchasers of the Notes.
(l) The Company agrees to comply with its agreements in the
Registration Rights Agreement and all agreements set forth in any
representation letter of the Company to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer. The Company agrees to use its best
efforts to cause the Notes to be eligible for clearance and settlement
through DTC.
(m) The Company agrees to use its best efforts, as requested by the
Initial Purchaser, to enable the Initial Purchaser to effect the inclusion
of the Notes in PORTAL.
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<PAGE>
(n) If the Initial Purchaser surrenders any Note or Exchange Note to
the Company or to the Trustee for any reason, the Company will pay the cost
of delivering to the home office of the Initial Purchaser or to the office
of the Initial Purchaser's designee from the Company or such Trustee,
insured to the Initial Purchaser's satisfaction, each security issued in
substitution or replacement for the surrendered security.
(o) The Company will pay all stamp, transfer or similar taxes (other
than any taxes that are based upon the Initial Purchaser's net or gross
income, assets or capital) in connection with (1) the issuance, sale to the
Initial Purchaser and delivery of the Notes and Exchange Notes and the
execution and delivery of the Operative Documents and any other agreements
and instruments contemplated thereby and (2) any modification of any of
such Notes, Exchange Notes, Operative Documents or such other agreements
and instruments and will hold the Initial Purchaser harmless without
limitation as to time against any and all liabilities with respect to all
such taxes.
(p) The Company will pay or cause to be paid all amounts payable
with respect to any Notes or Exchange Notes held by the Initial Purchaser
or the Initial Purchaser's nominee (without any presentment of such Notes
or Exchange Notes and without any notation of such payment being made
thereon) by crediting the Initial Purchaser's or such other holder's (as
the case may be) account in any bank in the United States as may be
designated and specified in writing by the Initial Purchaser or such holder
before 11:00 a.m. local time by federal funds bank wire transfer.
(q) The Company will not voluntarily claim, and will resist actively
any attempts to claim, the benefits of any usury laws against the holders
of any Notes or any Exchange Notes.
(r) The Company will take all reasonable actions necessary to keep
the Initial Purchaser's identity confidential, and will not disclose the
Initial Purchaser's identity as an investor in the Company in any public
announcement, governmental filing or otherwise (other than in connection
with the consummation of the transactions contemplated hereby) without the
Initial Purchaser's prior written consent unless such disclosure is
required by law or compelled by order of a court of competent jurisdiction,
in which case prior to making such disclosure the Company will give written
notice to the Initial Purchaser describing in all reasonable detail the
proposed content of such disclosure and will afford the Initial Purchaser
in good faith an opportunity to suggest modifications in the form and
substance of such proposed disclosure.
(s) The Company will cooperate and assist in any filings required to
be made with the National Association of Securities Dealers, Inc. and in
the performance of any due diligence investigation by any broker-dealer
participating in the sale of the Notes.
(t) During the period from the Closing Date to one year after the
Closing Date, the Company will not, and will not permit any of its
"affiliates" (as defined in Rule 144 under the Act) to, resell any of the
Notes that have been reacquired by them, except
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<PAGE>
for Notes purchased by the Company or any of such affiliates and resold in
a transaction registered under the Act or exempt from such registration
requirements under the Act.
(u) The Company will take all necessary action to consummate each of
the Related Transactions.
6. Conditions of the Obligations of the Initial Purchaser. The
------------------------------------------------------
obligations of the Initial Purchaser hereunder are subject to the following
conditions:
(a) Since the respective dates as of which information is given in
the Preliminary Offering Memorandum and the Offering Memorandum, (1) there
shall not have been a Material Adverse Change, whether or not arising from
transactions in the ordinary course of business, in each case other than as
set forth in or contemplated by the Preliminary Offering Memorandum and the
Offering Memorandum, (2) neither the Company nor any of its Subsidiaries
shall have sustained any material loss or interference with its business or
properties from fire, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not set forth in
the Preliminary Offering Memorandum and the Offering Memorandum, and (3)
there shall not have been any material adverse change in the capital stock
or debt of the Company and Subsidiaries taken as a whole, if in the
judgment of the Initial Purchaser any such development makes it
impracticable or inadvisable to consummate the sale and delivery of the
Notes by the Initial Purchaser at the purchase price.
(b) Since the respective dates as of which information is given in
the Preliminary Offering Memorandum and the Offering Memorandum, there
shall have been no litigation or other proceeding instituted against the
Company or any of its Subsidiaries or any of their respective officers or
directors in their capacities as such, before or by any Federal, state or
local court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding would have a Material Adverse
Effect.
(c) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date, as if made at the Closing Date, and all covenants and
agreements herein contained to be performed on the part of the Company and
all conditions herein contained to be fulfilled or complied with by the
Company at or prior to the Closing Date shall have been duly performed,
fulfilled or complied with.
(d) The Initial Purchaser shall have received an opinion, dated the
Closing Date, satisfactory in form and substance to counsel for the Initial
Purchaser, from Varner, Saleson & Dobler LLP, counsel to the Company, as to
the matters set forth in Exhibit A-1, and from Gibson, Dunn & Crutcher LLP,
counsel to the Company, as to the matters set forth in Exhibit A-2. In
addition, the Initial Purchaser shall have received a reliance letter,
dated on or prior to the Closing Date, from Gibson, Dunn & Crutcher
-21-
<PAGE>
LLP, counsel to the Company, with respect to the Articles of Incorporation
of Stater Bros. Markets, which opinion shall be satisfactory in all
respects to the Initial Purchaser.
(e) The Initial Purchaser shall have received an opinion, dated the
Closing Date, from Milbank, Tweed, Hadley & McCloy LLP, counsel for the
Initial Purchaser, with respect to the validity of the Notes and such other
matters as are customarily covered in such opinions, which opinion shall be
satisfactory in all respects to the Initial Purchaser.
(f) Concurrently with the execution and delivery of this Agreement,
(i) E&Y shall have furnished to the Initial Purchaser a letter, dated the
date of its delivery, addressed to the Initial Purchaser and in form and
substance satisfactory to the Initial Purchaser, confirming that they are
independent accountants with respect to the Company and with respect to the
financial and other statistical and numerical information contained in the
Preliminary Offering Memorandum and the Offering Memorandum and (ii)
Deloitte and E&Y shall have each furnished to the Initial Purchaser a
letter, dated the date of its delivery, addressed to the Initial Purchaser
and in form and substance satisfactory to the Initial Purchaser, confirming
that they are independent accountants with respect to Albertson's, Inc. and
American Stores, respectively, and with respect to the financial and other
statistical and numerical information delivered to the Company by each of
Deloitte and E&Y with respect to the Acquired Properties. At the Closing
Date, each of the Accountants shall have furnished to the Initial Purchaser
a letter, dated the date of its delivery, which shall confirm, on the basis
of a review in accordance with the procedures set forth in the letter from
the Accountants, that nothing has come to their attention during the period
from the date of the letter referred to in the prior sentence to a date
(specified in the letter) not more than five days prior to the Closing Date
which would require any change in their letter dated the date hereof if it
were required to be dated and delivered at the Closing Date.
(g) Concurrently with the execution and delivery of this Agreement
and at the Closing Date, there shall be furnished to the Initial Purchaser
an accurate certificate, dated the date of its delivery, signed by each of
the Chief Executive Officer and the Chief Financial Officer of the Company,
in form and substance satisfactory to the Initial Purchaser, to the effect
that:
(1) Each signer of such certificate has carefully examined the
Preliminary Offering Memorandum and the Offering Memorandum and (A) as
of the date of such certificate, such documents are true and correct
in all material respects and do not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not untrue or misleading and (B) in the case of the
certificate delivered at the Closing Date, since the date hereof, no
event has occurred as a result of which it is necessary to amend or
supplement the Offering Memorandum in order to make the statements
therein not untrue or misleading in any material respect.
-22-
<PAGE>
(2) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at
the time such certificate is delivered, true and correct in all
material respects.
(3) Each of the covenants required herein to be performed by
the Company on or prior to the date of such certificate has been duly,
timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the delivery of such
certificate has been duly, timely and fully complied with.
(h) Concurrently with the execution and delivery of this Agreement
and at the Closing Date, there shall be furnished to the Initial Purchaser
an accurate certificate, dated the date of its delivery, signed by the
Secretary of the Company, in form and substance satisfactory to the Initial
Purchaser, and attaching the Company's articles of incorporation, by-laws,
resolutions, a specimen of the Notes and such other documents or records as
the Initial Purchaser may reasonably request.
(i) The Notes shall be qualified for sale in such states as the
Initial Purchaser may reasonably request, each such qualification shall be
in effect and not subject to any stop order or other proceeding on the
Closing Date.
(j) The Notes shall have been duly authorized for quotation in
PORTAL.
(k) The Company shall have furnished to the Initial Purchaser such
certificates, in addition to those specifically mentioned herein, as the
Initial Purchaser may have reasonably requested as to the accuracy and
completeness at the Closing Date of any statement in the Preliminary
Offering Memorandum or the Offering Memorandum, as to the accuracy at the
Closing Date of the representations and warranties of the Company herein,
as to the performance by the Company of its obligations hereunder, or as to
the fulfillment of the conditions concurrent and precedent to the
obligations hereunder of the Initial Purchaser.
(l) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by the Board of
Governors of the Federal Reserve System or any other governmental agency as
of the Closing Date that would prevent the issuance of the Notes. No
injunction, restraining order or order of any nature by a federal or state
court of competent jurisdiction shall have been issued as of the Closing
Date that would prevent the issuance of the Notes or the consummation of
the Exempt Resales. The purchase of and payment for the Notes to be
purchased by the Initial Purchaser shall not subject the Initial Purchaser
to any penalty or, in the Initial Purchaser's reasonable judgment, other
onerous conditions under or pursuant to any applicable law or governmental
regulation. On the Closing Date, no action, suit or proceeding shall be
pending against or, to the knowledge of the Company, affecting or
threatened against, the Company or any of its Subsidiaries before any
court, arbitrator or governmental body, agency or official that would
interfere with or adversely affect the
-23-
<PAGE>
issuance of the Notes or in any manner draw into question the validity of
this Agreement or the Notes.
(m) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchaser not later than 9:00 a.m., New York
City time, on the date one Business Day after the date of this Agreement or
at such later date and time as the Initial Purchaser may approve in
writing.
(n) The Company shall have entered into the Registration Rights
Agreement in form and substance acceptable to the Initial Purchaser, and
the Initial Purchaser shall have received an original, duly executed by the
Company, of the Registration Rights Agreement.
(o) The Company and the Trustee shall have entered into the
Indenture and the Initial Purchaser shall have received counterparts,
confirmed as executed, thereof. The Notes shall have been issued.
(p) Subsequent to the date hereof, there shall not have been any
decrease in the rating of any of the Company's or any of its Subsidiaries'
debt securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act) or any
notice given of any intended or potential decrease in any such rating or of
a possible change in any such rating that does not indicate the direction
of the possible change.
(q) The Company shall have furnished to the Initial Purchaser such
further information, certificates and documents as the Initial Purchaser
may reasonably request.
(r) The following events shall have taken place at the time of the
purchase of the Notes by the Initial Purchaser: (i) each of the conditions
precedent to the Company's and Stater Bros. Markets' obligations under the
Asset Purchase Agreement shall have been satisfied and not waived by the
Company or Stater Bros. Markets, (ii) the Company and IBJ Whitehall Bank &
Trust Company (the "11% Note Trustee"), as successor in interest to IBJ
----------------
Schroder Bank & Trust Company, shall have entered into the Second
Supplemental Indenture in substantially the form attached as Appendix B-1
to the Offer to Purchase amending the Indenture dated as of March 8, 1994
between the Company and the 11% Note Trustee (as amended by the First
Supplemental Indenture dated as of July 22, 1997 between the Company and
the 11% Note Trustee) and the Initial Purchaser shall have received
counterparts, confirmed as executed, thereof, (iii) the Company and US Bank
National Association (the "9% Note Trustee"), as successor in interest to
---------------
First Trust of New York National Association, shall have entered into the
First Supplemental Indenture in substantially the form attached as Appendix
B-2 to the Offer to Purchase amending the Indenture dated as of July 24,
1997 between the Company and the 9% Note Trustee and the Initial Purchaser
shall have received counterparts, confirmed as executed, thereof, (iv) the
Company shall have consummated the Tender Offer and (v) the Company and
Bank of America shall have entered into the New Credit Facility.
-24-
<PAGE>
All opinions, certificates, letters and other documents required by this
Section 6 to be delivered by the Company will be in compliance with the
- ---------
provisions hereof only if they are reasonably satisfactory in form and substance
to the Initial Purchaser. The Company will furnish to the Initial Purchaser,
without charge, such conformed copies of such opinions, certificates, letters
and other documents as the Initial Purchaser shall reasonably request.
If any of the conditions specified in this Section 6 shall not have been
---------
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchaser and their counsel, this Agreement and all
obligations of the Initial Purchaser hereunder may be canceled on the Closing
Date by the Initial Purchaser. Notice of such cancellation shall be given to
the Company in writing or by telephone or telegraph confirmed in writing.
7. Indemnification.
---------------
(a) The Company will indemnify and hold harmless the Initial
Purchaser, the directors, officers, employees and agents of the Initial
Purchaser and each person, if any, who controls the Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act from and against any and all losses, claims, liabilities, expenses and
damages (including any and all investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), to which they,
or any of them, may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, liabilities, expenses or damages arise out
of or are based on any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum or the Preliminary
Offering Memorandum or any amendment or supplement thereto or the omission
or alleged omission to state in such document a material fact required to
be stated in it or necessary to make the statements in it not misleading;
provided, however, that the Company will not be liable to the extent that
-------- -------
such loss, claim, liability, expense or damage arises from the sale of the
Notes to any person by the Initial Purchaser and is based on an untrue
statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to the Initial
Purchaser furnished in writing to the Company by the Initial Purchaser
expressly for inclusion in the Offering Memorandum or the Preliminary
Offering Memorandum; and provided, further, that the Company will not be
-------- ------
liable to the extent that such loss, claim, liability, expense or damage
arises from the sale of the Notes to any person by the Initial Purchaser
and is based on an untrue statement or omission or alleged untrue statement
or omission made in the Preliminary Offering Memorandum that is corrected
in the Offering Memorandum if the person asserting any such loss, claim,
liability, expense or damage purchased the Notes from the Initial Purchaser
in reliance upon the Preliminary Offering Memorandum but was not sent or
given a copy of the Offering Memorandum at or prior to the written
confirmation of the sale of such Notes to such person, unless the failure
to deliver the Offering Memorandum was a result of noncompliance by the
Company with Section 6(m) of this Agreement. The Company acknowledges that
-----------
the statements set forth in the first sentence of the third
-25-
<PAGE>
paragraph and in the second sentence of the fourth paragraph under the
heading of "Plan of Distribution" in the Preliminary Offering Memorandum
and the Offering Memorandum constitute the only information furnished in
writing to the Company by the Initial Purchaser expressly for inclusion
therein. This indemnity agreement will be in addition to any liability that
the Company might otherwise have.
(b) The Initial Purchaser will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, each director
of the Company and each officer of the Company to the same extent as the
foregoing indemnity from the Company to the Initial Purchaser, but only
insofar as losses, claims, liabilities, expenses or damages arise out of or
are based on any untrue statement or omission or alleged untrue statement
or omission made in reliance on and in conformity with information relating
to the Initial Purchaser furnished in writing to the Company by the Initial
Purchaser expressly for use in the Offering Memorandum or the Preliminary
Offering Memorandum. The Company acknowledges that the statements set forth
in the first sentence of the third paragraph and in the second sentence of
the fourth paragraph under the heading of "Plan of Distribution" in the
Preliminary Offering Memorandum and the Offering Memorandum constitute the
only information furnished in writing to the Company by the Initial
Purchaser expressly for inclusion therein. This indemnity will be in
addition to any liability that the Initial Purchaser might otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 7 will, promptly after receipt of notice of commencement
---------
of any action against such party in respect of which a claim is to be made
against an indemnifying party or parties under this Section 7, notify each
---------
such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying
party (i) will not relieve it from any liability that it may have to any
indemnified party under the foregoing provisions of this Section 7 unless,
---------
and only to the extent that such omission results in the forfeiture of
substantive rights or defenses by the indemnifying party and (ii) will not,
in any event, relieve the indemnifying party from any obligation to an
indemnified party other than the indemnification obligation provided in
paragraphs (a) and (b) above. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in
and, to the extent that it elects by delivering written notice to the
indemnified party promptly after receiving notice of the commencement of
the action from the indemnified party, jointly with any other indemnifying
party similarly notified, to assume the defense of the action, with counsel
satisfactory to the indemnified party, and after notice from the
indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party
for any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified
party in connection with the defense. The indemnified party will have the
right to employ its own counsel in any such action, but the fees, expenses
and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified
party has been authorized in writing by the indemnifying party, (2) the
-26-
<PAGE>
indemnified party has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the
indemnifying party, (3) a conflict or potential conflict exists (based on
advice of counsel to the indemnified party) between the indemnified party
and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the
indemnified party) or (4) the indemnifying party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified parties. All such fees, disbursements and other charges will be
reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not be liable for any settlement of any action or
claim effected without its written consent (which consent will not be
unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 7 is applicable in accordance with its terms but
---------
for any reason is held to be unavailable from the Company or the Initial
Purchaser, the Company and the Initial Purchaser will contribute to the
total losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted, but after deducting any contribution received by the
Company from persons other than the Initial Purchaser, such as persons who
control the Company within the meaning of the Act, officers of the Company
and directors of the Company, who also may be liable for contribution) to
which the Company and the Initial Purchaser may be subject in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Initial Purchaser on the
other. The relative benefits received by the Company on the one hand and
the Initial Purchaser on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and
commissions received by the Initial Purchaser, in each case as set forth in
the table on the cover page of the Offering Memorandum. If, but only if,
the allocation provided by the foregoing sentence is not permitted by
applicable law, the allocation of contribution shall be made in such
proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the
Company on the one hand and the Initial Purchaser on the other, with
respect to the statements or omissions which resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any
other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by the Company or
the Initial Purchaser, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent
-27-
<PAGE>
such statement or omission. The Company and the Initial Purchaser agree
that it would not be just and equitable if contributions pursuant to this
Section 7(d) were to be determined by pro rata allocation or by any other
------------
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section
-------
7(d) shall be deemed to include, for purpose of this Section 7(d), any
--- ------------
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7(d), the Initial Purchaser
------------
shall not be required to contribute any amount in excess of the discounts
received by it, and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7(d), any person who
------------
controls a party to this Agreement within the meaning of the Act will have
the same rights to contribution as that party, and each officer of the
Company will have the same rights to contribution as the Company, subject
in each case to the provisions hereof. Any party entitled to contribution,
promptly after receipt of notice of commencement of any action against such
party in respect of which a claim for contribution may be made under this
Section 7(d), will notify any such party or parties from whom contribution
------------
may be sought, but the omission so to notify will not relieve the party or
parties from whom contribution may be sought from any other obligation it
or they may have under this Section 7(d). No party will be liable for
-----------
contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 7 and the representations and warranties of the Company contained
---------
in this Agreement shall remain operative and in full force and effect
regardless of (i) any investigation made by or on behalf of the Initial
Purchaser, (ii) acceptance of any of the Notes and payment therefor or
(iii) any termination of this Agreement.
8. Termination. The obligations of the Initial Purchaser under this
-----------
Agreement may be terminated at any time prior to the Closing Date by notice to
the Company from the Initial Purchaser without liability on the part of the
Initial Purchaser to the Company, if, prior to delivery and payment for the
Notes, in the sole judgment of the Initial Purchaser, (i) any Material Adverse
Effect, whether or not arising in the ordinary course of business, would, in the
sole judgment of the Initial Purchaser, make the offering or the delivery of the
Notes impracticable or the consummation of the Exempt Resales otherwise
impracticable, (ii) trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum or maximum prices shall
have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall
have been imposed upon trading in securities generally by such exchange or by
order of the Commission or any court or other governmental authority, (iii) a
general banking moratorium shall have been declared by either Federal or New
York State authorities or (iv) any material adverse change in the financial or
securities markets in the United States or in political, financial or economic
conditions in the United States, any outbreak or material escalation of
hostilities or declaration
-28-
<PAGE>
by the United States of national emergency or war or other calamity or crisis
shall have occurred, the effect of any of which is such as to make it, in the
sole judgment of the Initial Purchaser, impracticable or inadvisable to market
the Notes on the terms and in the manner contemplated by the Preliminary
Offering Memorandum and the Offering Memorandum.
9. Miscellaneous. Notice given pursuant to any of the provisions of this
-------------
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered:
(a) to the Company:
Stater Bros. Holdings Inc.
21700 Barton Road
Colton, California 92324
Attention: Chief Financial Officer
with copies to:
Varner, Saleson & Dobler LLP
3750 University Avenue, Suite 610
Riverside, California 92501
Attention: Bruce D. Varner, Esq.
and
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue, Suite 4800
Los Angeles, CA 90071-3197
Attention: Andrew E. Bogen, Esq.
(b) to the Initial Purchaser:
Banc of America Securities LLC
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Bruce R. Thompson
with copies to:
Milbank, Tweed, Hadley & McCloy LLP
601 South Figueroa Street, 30th Floor
Los Angeles, California 90017
Attention: Eric H. Schunk, Esq.
or in any case to such other address as the person to be notified may have
requested in writing. Any such notice shall be effective only upon receipt.
Any notice may be made by telex or telephone, but if so made shall be
subsequently confirmed in writing.
-29-
<PAGE>
This Agreement has been and is made solely for the benefit of the Initial
Purchaser, the Company and of the controlling persons, directors and officers
referred to in Section 7, and their respective successors and assigns, and no
---------
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" as used in this Agreement shall
not include a purchaser, as such purchaser, of Notes from the Initial Purchaser.
This Agreement shall be governed by and construed in accordance with the laws
of the State of New York applicable to contracts made and to be performed
entirely within such State.
This Agreement may be signed in two or more counterparts with the same effect
as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement 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.
THE COMPANY AND THE INITIAL PURCHASER EACH HEREBY IRREVOCABLY WAIVE ANY RIGHT
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON OR ARISING
OUT OF THIS AGREEMENT OR THE RELATED TRANSACTIONS CONTEMPLATED HEREBY.
[The remainder of this page is intentionally left blank]
-30-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the Initial Purchaser.
Very truly yours,
STATER BROS. HOLDINGS INC.
By: /s/ Jack H. Brown
--------------------------------
Jack H. Brown
Chairman of the Board, President
and Chief Executive Officer
By: /s/ Bruce D. Varner
--------------------------------
Bruce D. Varner
Secretary
Confirmed as of the date first
above mentioned:
BANC OF AMERICA SECURITIES LLC
By: /s/ Bruce R. Thompson
----------------------------
Bruce R. Thompson
Managing Director
-31-
<PAGE>
EXHIBIT A-1
-----------
Form of Opinion of
Varner, Saleson & Dobler LLP
----------------------------
[TO COME]
<PAGE>
EXHIBIT A-2
-----------
Form of Opinion of
Gibson, Dunn & Crutcher LLP
---------------------------
[TO COME]
<PAGE>
EXHIBIT 2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
Between
ALBERTSON'S, INC.
STATER BROS. MARKETS
and
STATER BROS. HOLDINGS INC.
TABLE OF CONTENTS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- -----
<S> <C> <C>
1. Agreement to Sell and Agreement to Purchase............................................. 2
1.1 Assets to be Conveyed............................................................. 2
1.2 Assets Excluded................................................................... 3
1.3 Closing........................................................................... 6
1.3.1 Initial Closing Date...................................................... 6
1.3.2 Escrow.................................................................... 6
1.3.3 Closing of Escrow......................................................... 6
1.4 Assets are Indivisible............................................................ 7
2. Consideration to be Paid by Buyer....................................................... 7
2.1 Purchase Price For Non-Inventory.................................................. 7
2.2 Purchase Price For Inventory...................................................... 8
2.3 Other Amounts..................................................................... 8
3. Assumption of Liabilities............................................................... 8
3.1 Liabilities Assumed by Buyer...................................................... 8
3.2 Liabilities Not Assumed by Buyer.................................................. 8
4. Possession; Store Leases................................................................ 9
4.1 Possession and Risk of Loss....................................................... 9
4.2 Store Leases...................................................................... 9
5. Inventory Condition and Computation of the Inventory Purchase Price..................... 9
5.1 Condition of Inventory............................................................ 9
5.2 Inventory Purchase Price.......................................................... 9
5.3 Inventory......................................................................... 10
5.4 Purchase Price Payment/Adjustment................................................. 10
6. Payments/Delivery of Documents.......................................................... 11
6.1 Payments.......................................................................... 11
6.2 Delivery of Documents............................................................. 11
6.3 Payment of Prorations............................................................. 12
7. Licenses and Permits.................................................................... 13
8. Inventory In Transit.................................................................... 14
9. Prorations.............................................................................. 14
9.1 Personal Property Taxes........................................................... 14
9.2 Real Property Taxes............................................................... 15
9.3 Payment of Prorated Taxes and Tax Responsibility.................................. 15
9.4 Sales and Use Taxes............................................................... 16
9.5 Purchase Price Allocation......................................................... 16
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C> <C>
9.6 Deposits; Prepaid Expenses........................................................ 16
9.7 Utilities......................................................................... 16
9.8 Prorations Generally; Percentage Rents............................................ 17
10. Conduct of Business...................................................................... 17
10.1 Seller Conduct of Business........................................................ 17
10.2 Maintenance....................................................................... 18
10.3 Third Parties..................................................................... 18
11. Access................................................................................... 18
11.1 Access to Records and Files....................................................... 18
11.2 Telecommunications................................................................ 19
11.2.1 Access to Telecommunications Equipment................................... 19
11.2.2 Telephone Numbers........................................................ 19
12. Bulk Transfer Laws........................................................................ 19
13. Accounts Receivable....................................................................... 19
14. Representations and Warranties of the Parties..................................... 19
14.1 Good Standing..................................................................... 19
14.2 Corporate Authority............................................................... 20
14.3 Binding Obligation................................................................ 20
15. Representations and Warranties of Seller.................................................. 20
15.1 "As Is" Condition................................................................. 20
15.2 Pending Litigation................................................................ 21
15.3 Store Leases...................................................................... 21
15.4 Zoning............................................................................ 21
15.5 Title to Personalty; Liens........................................................ 21
15.6 Environmental Laws................................................................ 21
15.7 Definitions....................................................................... 22
15.8 Buyers Representations and Warranties............................................. 22
16. Representations and Warranties of Buyer................................................... 22
16.1 Pending Litigation................................................................ 22
16.2 "As Is" Condition................................................................. 23
16.3 Financing......................................................................... 24
16.4 Competitive Capability............................................................ 24
16.5 Seller's Representations and Warranties........................................... 24
17. Indemnification........................................................................... 24
17.1 Seller's Indemnification.......................................................... 24
17.2 Buyer's Indemnification........................................................... 25
17.3 Procedure for Indemnification..................................................... 25
17.4 Survival.......................................................................... 26
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C> <C>
17.5 Indemnification as Exclusive Remedy................................................. 26
18. Consents................................................................................... 27
18.1 Consents and Approvals.............................................................. 27
18.2 Further Cooperation................................................................. 27
18.3 Financial Information............................................................... 28
18.4 Reasonable Efforts.................................................................. 28
19. Casualty................................................................................... 28
19.1 Damage.............................................................................. 28
19.2 Condemnation........................................................................ 30
19.3 Store Encumbrances; Leases.......................................................... 30
20. Employee Relations......................................................................... 31
21. Confidentiality and Access................................................................. 32
21.1 Access.............................................................................. 32
21.2 Confidentiality..................................................................... 33
21.3 Cooperation on Tax Matters.......................................................... 33
21.4 Notice.............................................................................. 33
22. Conditions to Closing...................................................................... 33
22.1 Conditions to Obligations of Each Party............................................. 33
22.1.1 No Order or Injunction..................................................... 33
22.1.2 Compliance with Law........................................................ 33
22.2 Conditions to Obligations of Buyer.................................................. 34
22.2.1 Representations and Warranties True........................................ 34
22.2.2 Seller's Performance....................................................... 34
22.2.3 Opinion of Seller's Counsel................................................ 34
22.2.4 Consents................................................................... 35
22.2.5 Closing Documentation...................................................... 35
22.2.6 Title Insurance............................................................ 35
22.2.7 FIRPTA Affidavit........................................................... 38
22.2.8 Condition of Stores........................................................ 38
22.2.9 Warranties and Guarantees.................................................. 40
22.2.10 Landlord Estoppels......................................................... 40
22.3 Conditions to Obligations of Seller................................................. 40
22.3.1 Merger Agreement........................................................... 40
22.3.2 Representations and Warranties............................................. 40
22.3.3 Buyer's Performance........................................................ 41
22.3.4 Opinion of Buyer's Counsel................................................. 41
22.3.5 Sales Tax Resale Exemption Certificate..................................... 41
22.3.6 Consents................................................................... 41
</TABLE>
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<TABLE>
<S> <C> <C>
23. Termination................................................................................. 42
24. Miscellaneous............................................................................... 42
24.1 Notices.............................................................................. 42
24.2 Assignability and Parties in Interest................................................ 43
24.3 Governing Law........................................................................ 44
24.4 Counterparts......................................................................... 44
24.5 Indemnification for Brokerage........................................................ 44
24.6 Publicity............................................................................ 44
24.7 Complete Agreement................................................................... 44
24.8 Modifications. Amendments and Waivers................................................ 44
24.9 Interpretation....................................................................... 45
24.10 Subsidiaries......................................................................... 45
24.11 Expenses............................................................................. 45
24.11.1 Transaction Expenses....................................................... 45
24.11.2 Litigation Expenses........................................................ 45
24.12 No Use of Names...................................................................... 45
24.13 Time is of the Essence............................................................... 45
24.14 Third Party Beneficiary Rights....................................................... 46
24.15 Further Assurance.................................................................... 46
24.16 1031 Exchange........................................................................ 46
24.17 Guarantee............................................................................ 47
</TABLE>
Exhibits
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A Owned Stores
B Store Leases
C Collective Bargaining Agreements and Union Contracts
D Excluded Equipment
E Excluded Contracts
F Inventory Prices
G Form of Special Warranty (or Grant) Deeds
H Form of Bill of Sale
I Form of Estoppel Certificate
J Form of Assignment and Assumption Agreement (Store Leases)
K Form of Assignment and Assumption Agreement (Contracts)
L Form of Assignment and Assumption Agreement (Labor Agreements)
M Form of Assignment and Assumption Agreement (Guarantees)
N Form of Assignment and Assumption Agreement (Prepaid Expenses)
O Purchase Price Allocation
P Seller Disclosure Schedule
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Q Buyer Disclosure Schedule
R Permitted Exceptions/Title Policies
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
the 7th day of May, 1999, by and between ALBERTSON'S, INC., a Delaware
corporation, ("Seller"), STATER BROS. MARKETS, a California corporation and
STATER BROS. HOLDINGS INC., a Delaware corporation (collectively "Buyer").
Seller and Buyer are sometimes hereinafter referred to individually as "Party"
and collectively as "Parties".
RECITALS
WHEREAS, Seller or its subsidiaries (the "Affiliated Sellers" and,
collectively with Seller, the "Sellers" and individually a "Seller") is (i) the
owner of certain real property identified on Exhibit A hereto (an "Owned Store";
collectively, the "Owned Stores") and (ii) the tenant of real property under
certain leases or subleases identified on Exhibit B hereto (a "Store Lease";
collectively, the "Store Leases"), each such property being referred to as a
"Store Property", and collectively as the "Store Properties";
WHEREAS, Seller has entered into an Agreement and Plan of Merger dated as
of August 2, 1998 by and between Seller, Abacus Holdings, Inc., a Delaware
corporation and a wholly owned subsidiary of Seller, and American Stores
Company, a Delaware corporation (the "Merger Agreement"), providing for, on the
terms and conditions thereof, the merger (the "Merger") of Abacus Holdings, Inc.
with and into American Stores Company, with American Stores Company surviving
the Merger as a wholly owned subsidiary of Seller;
WHEREAS, in connection with the consummation of the Merger, Seller
contemplates entering into a consent decree (the "Provisional Consent Decree")
with the Federal Trade Commission ("FTC") and/or certain state Attorneys General
that will require Seller to divest certain assets relating to the Store
Properties to resolve any issues relating to the preservation of competition
post-Merger;
WHEREAS, the Sellers desire to sell, cause to be sold or otherwise transfer
or assign to Buyer, and Buyer wishes to purchase, the Sellers' interest in the
Store Properties and certain related assets to the extent provided herein on the
terms and conditions hereof (including consummation of the Merger); and
WHEREAS, Buyer has agreed to assume certain liabilities of the Sellers as
more specifically provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the Parties covenant and agree as follows:
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1. Agreement to Sell and Agreement to Purchase.
1.1 Assets to be Conveyed.
On the terms and subject to the conditions set forth in this
Agreement, on the Initial Closing Date, and the respective Subsequent Closing
Dates, (both as hereinafter defined) Seller shall (and shall cause each
Affiliated Seller to) convey, transfer, assign, sell and deliver to Buyer, and
Buyer shall acquire, accept and purchase, to the extent transferable or
assignable by the Sellers all of the right, title and interest of the Sellers in
and to the following assets comprising or relating to the Store Properties
(hereinafter collectively referred to as the "Assets") as the same may exist on
the respective Closing Date, but excluding the Excluded Assets (as defined in
Section 1.2):
(a) Those parcels of land on which the Owned Stores are located,
together with the buildings, fixtures and improvements located on or attached to
such real property (the "Improvements"), and all rights arising out of the
ownership thereof including, without limitation, all leases and subleases of
such real property, in whole or part, all options and rights of first refusal,
together with and subject to all licenses, permits, easements and rights-of-way
which are appurtenant to such real property (all of which are hereinafter
collectively referred to as the "Real Property"), subject only to the Permitted
Exceptions (as defined in Section 22.2.6, below) and those liabilities, liens,
obligations and encumbrances which are expressly assumed by Buyer pursuant to
Section 3.1 hereof.
(b) The Store Leases and any sublease of all or any portion
thereof.
(c) All assignable guarantees and warranties for the benefit of
Seller, to the extent they relate specifically to the ownership or operation of
the Store Properties (and not to the extent they relate to other properties or
operations of the Sellers) (provided, however, that to the extent any guarantees
-------- -------
and warranties relate to the ownership or operation of the Store Properties and
also to properties of the Sellers other than the Store Properties, such
guarantees and warranties shall be included in the Assets solely to the extent
the portion of such guarantees or warranties related to the ownership or
operation of the Store Properties is separately assignable) (the "Guarantees").
(d) Any and all union contracts and collective bargaining agreements,
relating to persons employed at, or in connection with, the Store Properties, to
the extent they relate to the Store Properties or the operation of the
supermarket business at the Store Properties, a list of which is attached hereto
as Exhibit C (the "Labor Agreements").
(e) Other than the Labor Agreements referred to above, any and all
contracts and agreements, including written Equipment (as defined below) leases,
relating exclusively to the Store Properties or the operation of the supermarket
business at the Store Properties (and not other properties or operations of the
Sellers) (the "Contracts").
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(f) All merchandise inventory (including private label inventory),
supplies (including private label supplies), containers, labels, packaging
material, maintenance supplies, food and other similar items (other than
consigned inventory) which are located in the Store Properties on the respective
Closing Date, (collectively, the "Inventory").
(g) All of the machinery, equipment, shopping carts, tools,
furniture, forklifts, fixtures, leasehold improvements, computer equipment and
order entry devices and construction in progress owned by Seller on the date of
this Agreement and located at the Store Properties (the "Equipment") but
excluding (x) motor vehicles (trucks, vans, and autos), and rail, truck and sea
containers, and (y) any such items which are disposed of in the ordinary course
of business prior to the respective Closing Date.
(h) All of the following books, records, files and papers, whether in
hard copy or computer format (or, at Seller's election, the underlying data
contained in such books, records, files and papers) to the extent they are in
Seller's possession, custody or control and to the extent used exclusively in
connection with the Store Properties: surveys (boundary and topographical),
construction drawings, soil reports, asbestos inspections, environmental reports
and assessments, fixture plans, warranties, information relating to Taxes (as
defined in Section 9.3), employee payroll records as reasonably required by
Buyer to promptly process payroll checks for employees currently employed by the
Sellers and thereafter hired by Buyer at each of the Store Properties (and by
Store Property) and all records and information relating to the Store Leases or
Real Property, including an unaudited depreciation schedule relating to the
Assets in such form as agreed to by the Parties (collectively the "Files and
Records").
(i) All transferable deposits, prepaid rent and prepaid expenses made
by Seller under the Store Leases or otherwise in respect of the Store Properties
(collectively the "Prepaid Expenses").
(j) The liquor licenses, in accordance with Section 7.
1.2 Assets Excluded.
Assets not described above, and notwithstanding anything to the
contrary contained in this Agreement, the property and assets described below
are expressly excluded from the transaction contemplated by this Agreement and
do not comprise the Assets being transferred hereunder (the "Excluded Assets"):
(a) Any Equipment owned by third parties who are not affiliated with
the Sellers, any pharmacy related computer equipment, and those items or
categories of Equipment set forth upon Exhibit D attached hereto (the "Excluded
Equipment"). Seller shall use reasonable efforts to remove the Excluded
Equipment from the Store Properties within five (5) days following the Closing
in relation to each Store Property; any Excluded Equipment not removed by the
Sellers shall be removed by Buyer at its expense.
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(b) Except as specifically provided in Section 24.12 hereof, any
signs or personal property which contain the name (or trade derivative thereof)
or logo of Seller or its affiliates including all uniforms supplied to the
Sellers' employees, which signs and personal property Seller shall use its best
efforts to remove from the Store Properties within five (5) days following the
respective Closing; any signs and personal property not removed by Sellers shall
be deemed abandoned by Seller and may be removed by Buyer at its own cost and
destroyed and Buyer shall neither use nor allow any third party to use such
signs or personal property.
(c) Currency and cash equivalents located in or at the Store
Properties at or prior to the Closing Date for such Store Properties.
(d) Undeposited or uncollected checks and food stamps.
(e) Subject to Section 9.6, accounts receivable relating to the Store
Properties or the operation of the business at the Store Properties which are
owed to the Sellers (or their affiliates) at the respective Closing including,
but not limited to, delinquent rent payments, tenant reimbursements, refunds of
insurance premiums or security deposits with utilities accruing to, or held for,
the benefit of the Sellers, and, except as may be provided to the contrary in
Section 19, insurance proceeds, condemnation awards or other compensation
payable upon any sale, destruction, damage, taking or other disposition of any
of the Assets (the "Accounts Receivable").
(f) Except as specifically provided in Section 1.2(b) and Section
24.12 hereof, trademarks, trade names, and similar intangibles including any
right to use or interest in any of the names of Seller, any Affiliated Seller,
or any other subsidiary, affiliate or division of Seller, or any similar name or
intangible registered or licensed to any of the foregoing, or any tradenames
used by Seller; provided, however, that the Buyer shall be entitled for a period
-------- -------
of 120 days following the respective Closing of each of the Store Properties to
sell all items included in the Inventory notwithstanding that such items may be
labeled with the Sellers' trademark or similar intangible (acknowledging that
Buyer shall acquire no rights or interest in Sellers' trademark other than such
limited right to sell such Inventory).
(g) Claims, rebates, refunds and other general intangibles arising
from the operation of the Store Properties prior to the Closing with respect to
such Store Properties.
(h) Any and all rights to any software used in any computer equipment
included in the Assets, provided that, to the extent that the right to use any
software that is non-proprietary to the Sellers is separately assignable as to
such computer equipment without any third party consent, or if any consent is
required and can be obtained without any cost to Seller, such right will be
included in the Assets.
(i) The books and business records of the Sellers including, without
limitation, policy, compliance and procedures manuals, internal audit reports
and any information,
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books, records and files (whether in writing or electronic format) concerning
the financial performance, strategic plans, budgets, forecasts, projections and
competitive or capital spending analysis of the Store Properties or the Sellers'
operations, employee manuals, employee handbooks and employee personnel records.
(j) All property becoming upon installation or expiration of the
relevant Store Lease or other leases, the property of the landlord or lessor
thereof.
(k) All refunds and credits of Taxes (as defined in Section 9.3)
and other Tax attributes of the Sellers.
(l) All records relating to the employees of the Sellers or to
claims, obligations or liabilities against the Sellers or any of their
affiliates which do not constitute Assumed Liabilities (as defined in Section
3.1, below).
(m) Any lease, sublease, license, sublicense or other contract
relating to the installation, use or operation of ATM or similar banking
machines, in-store banking facilities, photo-finishing equipment, or slot
machines or other gaming devices ("In-Store Operations"), at the Store
Properties or as part of the operations of the Store Properties (and any
interest of the Sellers in such equipment), except to the extent assignment to
Buyer is required by the applicable agreement; provided, however, that Buyer
-------- -------
shall allow each bank operating ATM's or other in-store banking facilities to
continue to operate in the relevant Store Property for up to 100 days after
receipt of notice by Seller informing each such bank of the transfer of the
relevant Store Property to Buyer. Seller agrees that it shall not object to
Buyer entering into any agreement relating to In-Store Operations and if
necessary, shall waive any exclusivity provisions in Sellers' agreements
relating thereto. Upon request, Seller shall provide Buyer with any names of
the appropriate contacts necessary to allow Buyer to pursue such agreements with
Sellers' operators relating to In-Store Operations.
(n) Any Store Properties excluded from sale under this Agreement
pursuant to Section 19.
(o) Subject to Section 7 hereof (dealing with liquor licenses), any
permits or licenses (or similar governmental approvals) issued to Seller or its
affiliates in connection with the ownership, use or operation of any Store
Properties.
(p) All audio and video tapes or devices that are available for sale
or rental at the Store Properties to the extent they are not owned by the
Sellers.
(q) All customer data and information derived from customer loyalty
cards, promotions, co-branded credit card programs and the like.
(r) All Contracts listed on Exhibit E hereto or which Seller has
notified the Buyer in writing prior to the Initial Closing Date will be excluded
from the Assets.
(s) All pharmacy merchandise (legend, non-legend and generic).
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(t) The customer lists, filled and unfilled prescriptions for each
such customer, and customer phone numbers relating to the Store Property
pharmacies.
(u) All Inventory in transit, in accordance with Section 8.
1.3 Closing.
1.3.1 Initial Closing Date.
The closing of the transactions herein contemplated shall, unless
another date, time, method or place is agreed to in writing by the Parties, take
place through an escrow as described below (the "Escrow"). The Escrow shall be
fully funded and established, as promptly as reasonably practicable, and no
later than forty-five (45) days, following the consummation of the Merger
subject to the satisfaction or waiver of the other conditions set forth in
Section 22. The date on which the first closing is held hereunder shall be
termed the "Initial Closing Date" or the "Initial Closing". The Initial Closing
shall occur within five (5) days following the funding of the Escrow.
1.3.2 Escrow
As soon as reasonably practicable after the date hereof, the
Parties shall open the Escrow with a mutually agreeable escrow holder (the
"Escrow Holder"). Within 5 days prior to the Initial Closing Date, Buyer shall
deposit the Purchase Price and the Estimated Inventory Purchase Price (both as
defined below) with the Escrow Holder (the "Escrow Amount") which Escrow Amount
shall be deposited by Buyer into the interest-bearing account selected by Buyer
as specified below and Buyer and Seller respectively shall deposit the closing
documents and other instruments necessary to close the transaction as
contemplated by this Agreement in respect of all of the Store Properties. The
Escrow Amount shall be invested by the Escrow Holder in an interest bearing
account selected by Buyer, and Buyer shall be entitled to any interest earned on
the Escrow Amount which shall be paid pro rata (proportional to the relevant
amount of the Purchase Price and the Estimated Inventory Purchase Price) (the
"Escrow Interest") to Buyer at the same time as the Purchase Price and the
Estimated Inventory Purchase Price are paid to Seller upon the closing of the
Escrow with respect to each Store Property. Buyer and Seller shall each pay one-
half (1/2) the cost of the Escrow Holder. Seller and Buyer both agree to execute
such additional agreements or other documents reasonably requested by Escrow
Holder to fully effectuate this Agreement. In the event of any conflict between
such agreements and this Agreement, the terms of this Agreement shall prevail.
1.3.3 Closing of Escrow
(a) There may be multiple closing dates for the closing of the
Escrow for each Store Property over a period of not longer than thirty (30) days
following the Initial Closing Date. The Parties shall use their best efforts to
close on all of the Store Properties as soon as possible after the Initial
Closing Date. The Parties acknowledge that they expect to close
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on at least one (1) Store Property on the Initial Closing Date and on no less
than three (3) Store Properties each business day commencing four (4) days
following the Initial Closing Date. The Parties agree to co-operate to
facilitate the prompt closing on all of the Store Properties, including giving
as much advance notice as possible of the intended date of closing for each
Store Property.
(b) On the closing date for each Store Property (each such
closing date on which either the Initial Closing or a Subsequent Closing occurs
shall be deemed to be a "Closing Date" with respect to the store properties
which are transferred at such "Closing" and each Closing Date after the Initial
Closing Date shall be deemed a "Subsequent Closing Date" or a "Subsequent
Closing"), the Escrow Holder shall transfer by wire transfer to Seller:
(i) that portion of the Escrow constituting the Purchase
Price for such Store Property, as set forth in Exhibit O; and
(ii) that portion of the Escrow constituting the Estimated
Inventory Purchase Price for such Store Property, as set forth in Exhibit O, and
the Escrow Holder shall transfer the Escrow Interest to Buyer by wire transfer.
(c) on each respective Closing Date, the Escrow Holder shall
release to Buyer (or Seller, as the case may be) the documents and instruments
referred to in Section 6.2 relating to such Store Property.
(d) The Parties agree that following the Initial Closing no
further conditions exist on each Party's obligation to consummate this
transaction, other than delivery by the Escrow Agent of the Funds and documents
held by the Escrow Holder and the payment by the Parties of any adjusted
payments required to then be paid, as set forth herein.
1.4 Assets are Indivisible.
Except as otherwise provided herein (including Section 19 hereof), the
rights to purchase the Assets are indivisible. Such Assets may not be
individually purchased without all of the others, unless expressly permitted or
required pursuant to the provisions of this Agreement.
2. Consideration to be Paid by Buyer.
2.1 Purchase Price For Non-Inventory.
Subject to adjustment as herein provided, in addition to the amounts
specified below, the purchase price payable hereunder for the Assets (other than
the Inventory) shall be ninety four million, nine hundred and thirteen thousand,
two hundred and thirty eight dollars ($94,913,238) which shall be paid by Buyer
to Seller in accordance with Section 1.3 (the "Purchase Price"). The Purchase
Price shall be allocated among the Assets in accordance with the provisions of
Section 9.5.
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2.2 Purchase Price For Inventory.
The purchase price for the Inventory (the "Inventory Purchase Price")
shall be determined in accordance with Article 5 herein.
2.3 Other Amounts.
Buyer shall also pay to Seller and Seller shall pay to Buyer by wire
transfer at or after the Initial Closing all other amounts specified to be paid
by Buyer or Seller at or after the Initial Closing under this Agreement. At
least three (3) days prior to the Initial Closing and each Subsequent Closing,
Seller will provide Buyer and the Escrow Holder with a preliminary closing
statement which identifies each amount due from Buyer to Seller, from Seller to
Buyer and each amount to be released from Escrow.
3. Assumption of Liabilities.
3.1 Liabilities Assumed by Buyer.
On the terms and subject to the conditions set forth in this
Agreement, on the respective Closing Date for each Store Property, Buyer shall
and hereby agrees to, subject to Section 3.2 herein, assume, and thereafter pay
when due, and discharge and indemnify, defend and hold Seller harmless with
respect to all liabilities or obligations of any kind, fixed and contingent,
known or unknown, relating to or arising in connection with the use, non-use,
ownership (whether by leasehold or fee) of the Assets or the operation of such
Store Property or compliance with any legal or contractual obligations with
respect to employees of the Store Properties (including, but not limited to,
obligations under the Store Leases, and any leases or subleases of all or any
portion of the Store Properties in which Seller or its affiliates is a lessor or
sublessor, the Contracts and the Guarantees, and the Labor Agreements, to the
extent such liabilities and obligations arise during, accrue during, or are
attributable to, the period from and after the Closing Date for each respective
Store Property (the "Assumed Liabilities").
3.2 Liabilities Not Assumed by Buyer.
It is expressly agreed that Buyer is not assuming and shall in no
event be liable for any liabilities or obligations of any kind, fixed and
contingent, known or unknown, relating to or arising in connection with the use,
non-use, ownership (whether by leasehold or by fee) of the Assets or the
operation of the Store Properties or compliance with any legal or contractual
obligations with respect to employees at the Store Properties (including, but
not limited to, obligations under the Store Leases, and any leases or subleases
of all or any portion of the Store Properties in which Seller or its affiliates
is a lessor or sublessor, the Contracts, the Guarantees, and the Labor
Agreements and consent decrees relating to employees at the Store Properties) to
the extent such liabilities and obligations arise during, accrue during, or are
attributable to the period prior to the Closing Date for such respective Store
Property (the "Excluded Liabilities"). It is agreed that the Assumed
Liabilities include, and the Excluded Liabilities do not include,
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matters for which Seller makes no representation or warranty and which Buyer
accepts pursuant to Section 16.2 hereof.
4. Possession; Store Leases.
4.1 Possession and Risk of Loss.
Buyer shall take possession of the Store Properties together with the
other Assets being transferred hereunder at the Closing of such respective Store
Property, and shall assume all risk of loss by fire or other casualty and all
risks relating to the operation of the business with respect thereto upon the
taking of such possession, excluding any risk of loss of Excluded Equipment or
other property of Seller's which remains on the Store Properties after each
respective Closing. The keys to the Store Properties and the combinations to all
safes at the Store Properties shall be delivered to the designated Buyer
representative at such time and Buyer shall immediately make its own
arrangements to have the locks changed.
4.2 Store Leases.
Buyer will (and will cause its assignees and successors to) fully and
promptly perform all of the obligations of the Sellers assumed by Buyer pursuant
to this Agreement accruing and attributable to the period from and after the
Closing Date for each respective Store Property including, but not limited to,
the obligations of the tenant under the Store Leases and as lessor or sublessor
of any leases or subleases.
5. Inventory Condition and Computation of the Inventory Purchase Price.
5.1 Condition of Inventory.
The Assets constituting the Inventory shall be sold to Buyer under
this Agreement in "AS IS" condition "WITH ALL FAULTS" (and without any warranty
of any kind as set forth in Sections 15.1 and 16.2) as of the Closing for the
respective Store Property and shall be conveyed to Buyer by the Bill of Sale (as
hereinafter defined). Notwithstanding anything herein to the contrary, Seller
shall not be released and shall remain fully liable (and indemnify Buyer from)
any product liability claims arising out of the sale of Seller's private label
products, except to the extent that such claim relates to the acts or omissions
of Buyer or its affiliates, assignees, agents, contractors or employees. In the
event of such a product liability claim, Buyer shall use reasonable commercial
efforts to assist Seller in any claim Seller may have against a manufacturer or
other third party.
5.2 Inventory Purchase Price.
The "Inventory Purchase Price" shall be the aggregate of the Sales
Floor Price for each item on display or on the sales floor of the Store
Properties at the Closing for the respective Store Property and the Backroom
Price for each item in storage at the Store Properties, as determined in
accordance with the schedule set forth on Exhibit F hereto. Prior to the
Initial Closing, Seller shall make a reasonable estimate of the Inventory
Purchase Price for all of the
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Store Properties (the "Estimated Inventory Purchase Price") which amount shall
be paid by Buyer at the Initial Closing into the Escrow in accordance with
Section 1.3.
5.3 Inventory.
A physical count of the Inventory designated for inventory pursuant to
Section 5.2 above shall be made by Buyer, Seller and an independent inventory
service mutually agreed to by the Parties (the "Inventory Service"). The
Inventory Service shall make a physical accounting of the Inventory on the day
prior to the Closing Date for the respective Store Property, or such other time
period before such Closing mutually agreeable to Buyer and Seller, in accordance
with mutually agreed upon instructions. Both Parties shall be entitled to have
representatives present during the inventory. These representatives will
attempt, in good faith, to resolve any disputes respecting out of date, spoiled
or distressed inventory and quantity or pricing which may arise during the
inventory. Out of date, spoiled or distressed Inventory shall be identified at
the taking of the inventory. Any such Inventory will be transferred to Buyer at
no cost. All Inventory other than perishable Inventory (such as Inventory
offered for sale in the produce, bakery, dairy, delicatessen and meat
departments ("Perishable Inventory")), shall be considered out of date if such
Inventory has a remaining shelf life of less than three (3) days at the Closing
Date for the respective Store Property. Perishable Inventory shall be
considered out of date if it has expired at the Closing for the respective Store
Property. Buyer and Seller shall each pay one half (1/2) the cost of the
Inventory Service. Departments, such as Perishable Inventory departments, not
inventoried by the Inventory Service shall be inventoried by appropriate Store
personnel at mutually agreed upon times and in the presence of representatives
of Buyer and Seller. It is hereby agreed by Buyer and Seller that the Store
Properties will close at 6:00 p.m. local time on the day of such inventory,
unless otherwise agreed.
5.4 Purchase Price Payment/Adjustment.
Based on the physical accounting by the Inventory Service pursuant to
Section 5.3, above, Seller shall issue a revised estimate of the Inventory
Purchase Price (the "Revised Estimated Inventory Purchase Price"). The
difference between the Estimated Inventory Purchase Price (as computed as of the
Initial Closing) and the Revised Estimated Inventory Purchase Price shall be
paid by Buyer to Seller or by Seller to Buyer, as the case may be, in cash via
wire transfer in immediately available U.S. funds on the Closing Date in
relation to the respective Store Property. The Revised Inventory Purchase Price
shall be adjusted between the Parties within thirty (30) days after receipt of
final inventory documentation based on the inventory performed pursuant to
Section 5.3 above, and based on the Inventory Purchase Price calculations made
pursuant to Section 5.2 above (the "Final Inventory Purchase Price"). The Party
owing funds, if any, to the other Party as a result of such adjustment shall
promptly transmit via wire transfer, in immediately available funds, such amount
owing to the other Party or, if there is a dispute, the
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amount which is not disputed. In the event Buyer and Seller are unable to agree
on such adjustment within five (5) business days after receipt of final
inventory documentation, Buyer and Seller shall submit the items remaining for
resolution in writing, together with such written evidence as Buyer or Seller
may elect, to a big five accounting firm agreed upon by the Parties not then
employed by Buyer or Seller or any of their material affiliates (the
"Independent Accounting Firm"), which shall, within twenty (20) business days of
such submission, resolve any differences between the Parties and report to
Seller and Buyer upon such remaining disputed items, and such report shall be
final, binding and conclusive upon Seller and Buyer. Buyer and Seller shall each
be responsible for one-half (1/2) of the fees and disbursements of the
Independent Accounting Firm. Any amount that is subject to dispute under this
Section 5.4 shall be paid by Seller or Buyer, as the case may be, in immediately
available funds within three (3) business days following a resolution of such
dispute and in an amount in accordance with such resolution.
6. Payments/Delivery of Documents.
6.1 Payments.
On the Initial Closing Date, as a condition to closing, Buyer shall
pay to the Escrow Holder the Escrow Amount (including the Purchase Price, the
Estimated Inventory Purchase Price, and the amounts provided for in this Section
6).
6.2 Delivery of Documents.
On the Initial Closing Date, as a condition to closing, Buyer and each
Seller shall deliver, to the Escrow Holder for the benefit of the other, all
documents necessary to transfer to Buyer all of each Sellers' right, title and
interest in and to the Assets being purchased hereunder or required by this
Agreement to be delivered on the relevant Closing Date including, but not
limited to, the following:
(a) Special Warranty (or Grant) Deeds substantially in the form
attached hereto as Exhibit G (the "Deeds") conveying fee simple title to the
Real Property to Buyer, subject only to the Permitted Exceptions, to be dated as
of the Closing Date for the relevant Store Property.
(b) Bill of Sale substantially in the form attached hereto as Exhibit
H conveying title to the Equipment and Inventory to Buyer free and clear of all
liens and encumbrances except personal property taxes not yet due and payable,
to be dated as of the Closing Date for the relevant Store Property.
(c) Estoppel certificates, substantially in the form attached hereto
as Exhibit I, from the landlords under the Store Leases, if available, dated
within a reasonable period prior to the Initial Closing Date. If the landlord
fails to provide such a document, it will be provided by the Seller, dated
within a reasonable period prior to the Initial Closing Date.
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(d) Assignment and Assumption Agreement substantially in the form
attached hereto as Exhibit J assigning to Buyer all of the Sellers' right, title
and interest in and to the Store Leases and any sublease of all or any portion
thereof (the "Assignment"), to be dated as of the relevant Closing Date.
(e) Assignment and Assumption Agreement substantially in the form
attached hereto as Exhibit K assigning to Buyer all of the Sellers' right, title
and interest in the Contracts, to be dated as of the relevant Closing Date.
(f) Assignment and Assumption Agreement substantially in the form
attached hereto as Exhibit L assigning to Buyer all of the Sellers' right, title
and interest in the Labor Agreements and other Assumed Liabilities and pursuant
to which Buyer shall assume all of the Sellers' obligations thereunder, to be
dated as of the relevant Closing Date.
(g) Assignment and Assumption Agreement substantially in the form
attached hereto as Exhibit M assigning to Buyer all of the Sellers' right, title
and interest in the Guarantees, to be dated as of the relevant Closing Date.
(h) Assignment and Assumption Agreement substantially in the form
attached hereto as Exhibit N assigning to Buyer all of the Sellers' right, title
and interest in the Prepaid Expenses, to be dated as of the relevant Closing
Date.
(i) FIRPTA Affidavit in accordance with Section 22.2.7, below.
(j) Original Store Leases or copies if the originals are not
available.
(k) The Files and Records.
(l) Title Policies (as hereinafter defined), to be dated as of
the Initial Closing Date.
(m) All other instruments, opinions and certificates required by
this Agreement.
All documents to be delivered at or with respect to the Initial Closing or
any Subsequent Closing shall be effective as of the date specified therein. The
relevant documents shall be released by the Escrow Holder to Buyer or Seller (as
the case may be) at the Closing for each respective Store Property. Buyer and
Seller both severally irrevocably constitute and appoint the Escrow Holder and
any officer or agent thereof, with full power of substitution, as their
respective lawful attorney-in-fact with full power and authority in the place
and stead of each of Buyer and Seller respectively, for the purpose of carrying
out the terms of this Agreement, to date each of the relevant documents
described above the date of the relevant Closing for each respective Store
Property.
6.3 Payment of Prorations.
Subject to Section 9 hereof, at the same time and manner as the
payments are made as provided in Section 6.1 hereof, the Parties shall, to the
extent the figures are available as
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of the Closing for each respective Store Property, calculate all prorations of
all matters to be prorated hereunder and the net difference shall be paid to the
applicable Party at such Closing. Subject to Section 9, with respect to
prorations which are not able to be made as of such date, the calculations
thereof shall be estimated and payment therefor shall be made at the Closing for
each respective Store Property based upon such estimate, and any necessary
adjustments of such prorations shall be made as soon as reasonably practicable
thereafter.
7. Licenses and Permits.
As soon as reasonably possible following the date of this Agreement, Seller
hereby agrees to use its best efforts, but at Buyer's cost and expense, to
assist Buyer to obtain all permits and licenses (the "Permits") required for
Buyer's operation of the Store Properties following the date of this Agreement.
The liquor and all other licenses held for use primarily or exclusively in
relation to the Store Properties and owned by Seller shall, if requested by
Buyer and provided Buyer has made application in Buyer's name and in substantial
compliance with all applicable rules and regulations therefor, be transferred to
Buyer to the extent (but only to the extent) (i) such licenses are transferable
in accordance with law by Seller and at no material cost or expense to Seller,
and (ii) such licenses relate exclusively to the Store Properties. With respect
to any liquor license or liquor inventory conveyed hereunder, the Parties shall
comply with the applicable laws and regulations (including those of the State of
California or any other State if applicable), including the creation of any
necessary escrow and the disbursement or release of any funds held in such
escrow, with the related escrow fees being paid by the Buyer. The Parties shall
cooperate in executing and delivering any documentation necessary to effect the
foregoing and to determine the amount of the Purchase Price allocable to such
liquor license or liquor inventory. The closing of this transaction is not
conditioned on obtaining the necessary liquor license; provided, however, if
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the state liquor control authority refuses to consent to the transfer or
issuance of a liquor license to Buyer, the liquor inventory shall be deemed an
Excluded Asset and Seller shall have the right to access the Store Properties to
remove the liquor inventory for its own use. The Parties will cooperate to meet,
to the extent possible, governmental regulations so that Buyer may operate in
the ordinary course of business until all of the Permits requested by Buyer can
be transferred; provided, in no event shall Buyer operate under any Permit of
Seller for a period beyond the earlier of (i) the period permitted by law, and
(ii) ninety (90) days following the Closing for the respective Store Property.
Buyer agrees to and does hereby indemnify and hold Seller harmless from any and
all liabilities it may incur during the period that Buyer operates the Store
Properties using one or more of the Seller's Permits. Subject to Section 18, the
Parties shall use their best efforts to transfer or arrange for the issuance of
the Permits as expeditiously as possible and each Party shall assist the other
in connection therewith.
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8. Inventory In Transit.
Inventory ordered in the ordinary course of business of the Store
Properties, delivery of which is not received on or prior to the respective
Closing Date for each Store Property, shall remain the property of Seller and
shall not be deemed part of the Inventory transferred hereunder.
9. Prorations.
9.1 Personal Property Taxes.
Subject to Section 9.4, personal property taxes associated with the
Assets including, without limitation, sales, use, and other similar taxes (the
"Personal Property Taxes") that are imposed on a periodic basis and are payable
for a tax period that includes (but does not end on) the respective Closing Date
for each Store Property shall be prorated as of such Closing Date, and Seller
shall bear the proportion of, and shall have the sole responsibility for, such
taxes equal to a fraction, the numerator of which is equal to the number of days
which shall have elapsed from the beginning of the applicable tax period to such
Closing Date and the denominator of which is the number of days in the entire
applicable tax period, and Buyer shall be responsible for the remainder. If the
tax statement or appropriate information for the applicable tax year is
initially sent to Seller, then Seller shall promptly forward such statement to
Buyer. If the tax statement or appropriate information for the applicable tax
year is not in the possession of the Parties on such Closing Date, the Personal
Property Tax proration payment shall be estimated and paid on such Closing Date
based upon such estimate, and any necessary adjustment shall be made as soon
thereafter as the tax statement or appropriate information is received. Seller
shall be responsible for any penalties and interest payable for rent or other
items under each Store Lease where the same are due as a result of an
underpayment or late payment by Seller prior to such Closing Date; Buyer shall
be responsible for such amounts in respect of periods on or following such
Closing Date.
Personal Property Taxes which are based on or related to receipts,
income or disbursements shall be prorated at the end of the current tax period,
and such Personal Property Taxes payable, if any, shall be paid by Buyer when
due and Seller shall promptly reimburse to Buyer a portion of the net Personal
Property Taxes in proportion to a fraction the numerator of which shall be the
receipts, income and disbursements accrued prior to the respective Closing Date
for each Store Property and the denominator of which shall be the receipts,
income and disbursements accrued during the current tax period (both before and
after such Closing Date), and Buyer shall be responsible for the remainder.
Refunds or credits of any Personal Property Tax contemplated by this
Agreement shall be apportioned between the Parties in accordance with
apportionment of the Personal Property Tax pursuant to this Agreement. From and
after the respective Closing Date, Buyer agrees to take all actions reasonably
necessary to notify all applicable federal, state and local
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governmental authorities of the change of ownership and address to which all
such tax statements and related information should be mailed to insure Buyer's
receipt thereof.
9.2 Real Property Taxes.
The real property taxes and assessments including, without limitation,
commercial rent taxes, ad valorem, sewer rents, business improvement district,
license, intangibles and other similar Taxes (the "Real Property Taxes")
required to be paid by Seller pursuant to the Store Leases or in connection with
the Real Property shall be prorated as of respective Closing Date for each Store
Property between Buyer and Seller in the same manner as described in Section 9.1
for Personal Property Taxes. Taxes relating to utilities shall be apportioned in
accordance with the apportionment of the relevant utility charge or fee
contained in Section 9.7, below.
9.3 Payment of Prorated Taxes and Tax Responsibility.
Where Taxes to be prorated pursuant to Sections 9.1 and 9.2 are
required to be included in tax returns filed by Buyer, and the applicable tax
statement or appropriate information is not available at the respective Closing
Date for the Store Property, Seller shall make payments of its prorated tax
liability to Buyer within thirty (30) days after written request by Buyer for
such amounts, which request shall be accompanied by a written statement
describing the basis of the calculation of Seller's liability; provided,
--------
however, that Seller shall not be liable for any interests or penalties
- -------
attributable to Buyer's failure to timely file any required tax returns or pay
any Taxes relating thereto. Unless otherwise provided to the contrary herein,
Buyer shall be solely responsible for Taxes relating to the Assets applicable to
or arising from the period from and after the respective Closing Date for each
Store Property, and Seller shall be solely responsible for Taxes relating to the
Assets applicable to or arising prior to such Closing Date. Subject to Sections
9.1, 9.2 and 9.4, Seller shall indemnify and hold Buyer harmless from any
liability for Taxes relating to the Assets accruing prior to such Closing Date,
and Buyer shall indemnify and hold Seller harmless from any liability for Taxes
relating to the Assets accruing from and after such Closing Date. As used in
this Agreement, the term "Taxes" shall mean and refer to any and all taxes,
including, without limitation, any debts, liabilities, obligations or
commitments for any income, excise, sales, use, gross receipts, franchise,
employment, payroll related or property tax of any sort, and any deficiencies,
assessments, charges, interest and penalties associated therewith, imposed by
the United States, any taxing or other governmental authority outside the United
States, or any state or local instrumentality or authority within the United
States. It is acknowledged that, except as otherwise provided to the contrary in
this Agreement, each Party shall pay its own capital (including capital gains),
net worth, user, franchise and income taxes and the same shall not be the
subject of apportionment hereunder.
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9.4 Sales and Use Taxes.
All transfer, transfer gains, documentary, sales, use, stamp,
registration and other such federal, state and local taxes and fees (including
any penalties, interest, additions to tax and costs and expenses relating to
such taxes), whether for real or personal property, incurred in connection with
the consummation and performance of the transactions contemplated hereby
(collectively the "Sales Taxes") shall be borne by Buyer. If, and to the extent,
Seller is required by law to collect the Sales Taxes, Buyer shall pay to Seller
at the relevant Closing an amount equal to the Sales Taxes and Seller shall
remit such amount to the appropriate governmental authority.
9.5 Purchase Price Allocation.
Buyer and Seller have agreed upon the allocation of the Purchase Price
among the categories of Assets as set forth in Exhibit O hereto (the "Purchase
Price Allocation"), and shall, as promptly as practicable, agree upon the
allocation of Purchase Price amongst the Store Properties, to be set forth in
Exhibit O hereto. The Parties shall cooperate on the timely filing of Internal
Revenue Service Form 8594, if required in the reasonable judgment of the
Parties, which shall be prepared in conformity with the Purchase Price
Allocation. Seller and Buyer agree to act in accordance with the Purchase Price
Allocation for all purposes including income, franchise and Sales Taxes and
shall not take any position for any such purpose which is inconsistent with such
allocation.
9.6 Deposits; Prepaid Expenses.
Buyer shall reimburse Seller at the Closing of each respective Store
Property for the full amount of all Prepaid Expenses and recoverable deposits
made by Seller that are assigned to Buyer including respecting the Store Leases,
the Contracts, the Permits, the Labor Agreements, the Guarantees or the Store
Properties (except any such amounts recouped or retained by Seller pursuant to
Section 1.2(e) including, without limitation, all deposits held by any utility
company, landlord, any governmental authority or any other person in connection
with the Store Leases, the Contracts, the Permits, the Labor Agreements, the
Guarantees or the Store Properties), and Seller shall assign such recoverable
deposits to Buyer.
9.7 Utilities.
Seller shall attempt to obtain final meter readings for utilities at
the Store Properties as of the respective Closing Date for each Store Property
and shall pay for all utilities to such date. In the event it shall not be
practicable to obtain the meter reading for any utility as of that date or there
are utilities which are not metered, then as soon as all such utility bills are
finally received, the Parties shall, on a pro rata basis, pay their respective
shares of such bills.
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9.8 Prorations Generally; Percentage Rents.
(a) Any and all other Store Lease payments or receipts, rentals,
costs, charges, fees or expenses connected with or used in the operation of any
Store Property, including all common area costs and costs under the Contracts,
the Permits, the Labor Agreements, the Guarantees or revenues from Assets such
as copy machines, vending machines, pay phones and the like, shall be prorated
between the Parties on the respective Closing Date for each Store Property or as
soon thereafter as reasonably practicable and Seller shall bear its proportion
thereof through the day prior to such Closing Date; provided, however,
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percentage rents payable under any of the Store Leases shall be prorated at the
end of the current lease year or applicable calculation period for each such
Store Lease, and the percentage rents payable, if any, shall be paid by Buyer
when due and Seller shall promptly reimburse to Buyer a portion of such
percentage rents in proportion to the gross receipts of the respective Store
Property for the fraction of the rent year for which percentage rent is payable
that precedes such Closing Date, and Buyer shall be responsible for the
remainder. Seller shall be responsible for any penalties and interest payable
for rent or other items under each Store Lease where the same are due as a
result of an underpayment or late payment by Seller prior to such Closing Date;
Buyer shall be responsible for such amounts in respect of periods on or
following such Closing Date.
(b) If any of the items described above cannot be finally apportioned
at the respective Closing for each Store Property, because of the unavailability
of the amounts which are to be apportioned or otherwise, or are incorrectly
apportioned at the Closing or subsequent thereto, such items shall be
apportioned or reapportioned, as the case may be, as soon as practicable after
such Closing or the date such error is discovered or the event giving rise to an
apportionment or reapportionment occurs, as applicable.
(c) The provisions of this Section 9 shall survive the Initial
Closing and the Subsequent Closings and shall not be deemed subject to any
limitations or restrictions placed upon the liability of the Parties with
respect to indemnification obligations pursuant to Section 17 hereof.
10. Conduct of Business.
10.1 Seller Conduct of Business
(a) Buyer acknowledges that the transaction contemplated hereby is a
sale of the specified Assets and does not include the sale of any goodwill.
Notwithstanding the foregoing, the Sellers agree from the date of this Agreement
until the respective Closing Date for each Store Property (i) to maintain
reasonably comparable hours of operation in such Store Properties except as a
result of security concerns or as required by law; (ii) to exercise good faith
in pricing merchandise between the date of this Agreement and such Closing Date,
including not to increase such prices other than in the Sellers' ordinary course
of business and consistent with
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the Sellers' normal pricing strategy; (iii) to maintain reasonably comparable
types of inventory and overall levels of Inventory located at such Store
Properties; (iv) to perform customary maintenance on such Store Properties and
Equipment in accordance with the Sellers' past practices; and (v) without the
consent of Buyer (which shall not be unreasonably withheld), not to enter into
any material amendment to any of the Store Leases.
(b) In the event the Sellers are not in compliance with the terms set
forth in this Section 10.1, Buyer shall provide Seller with written notice of
such non-compliance, whereupon Seller shall have ten (10) days from the date of
receipt of such notice to comply, and if the respective Closing Date is
scheduled to occur before the expiration of such ten (10) day period, the
respective Closing Date shall automatically be extended until the earlier of the
date the Sellers cure such non-compliance or the date such ten (10) day period
expires. If the respective Closing shall occur, Buyer shall be deemed to have
waived any and all claims it may have against Seller pursuant to this Section
10.1, irrespective of whether or not Buyer has actual knowledge of such claims
or facts giving rise to such claims, except to the extent that Buyer shall have
given Seller notice pursuant to the preceding sentence.
10.2 Maintenance.
Subject to the provisions of this Agreement, the Sellers agree to keep
and maintain the Store Properties (including all heating, ventilating, air
conditioning, refrigeration and heat reclaim equipment and accessories) in
working condition, ordinary wear and tear and damage by casualty excepted, and
to deliver same in such condition to Buyer on the respective Closing Date for
each Store Property.
10.3 Third Parties.
Buyer acknowledges that the Sellers shall not be obligated to deal
with anyone other than Buyer as the buyer of the Store Properties in connection
with the sale hereof pursuant to this Agreement including, but not limited to,
any operators, subtenants, or assignees of Buyer who might acquire an interest
in the Store Properties from Buyer. In no event shall the Sellers be liable to
such third parties in connection with any aspect of the transactions
contemplated by this Agreement, nor shall any third party be or become a
beneficiary of such rights, nor shall Buyer act or hold itself out as the
Sellers' agent (and Buyer is not the Sellers' agent for any purpose) in any
activity including, but not limited to, dealings with any such third parties.
11. Access
11.1 Access to Records and Files.
Seller shall have the right for a period of three years following the
Initial Closing Date, subject to any third party rights of confidentiality, to
have reasonable access to, and may make copies of the Files and Records and will
hold all such information confidential in accordance
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with the Confidentiality Agreement (as defined in Section 21.2, below) except as
may be required by law.
11.2 Telecommunications.
11.2.1 Access to Telecommunications Equipment.
Seller, or its agents, shall have and the Buyer shall allow
representatives of the telephone company and other appropriate persons, for a
period of sixty (60) days following the respective Closing Date, reasonable
access to the telephone equipment situated in Store #1623, Palm Springs-Indio,
(which telephone equipment services that and other stores of Seller) to remove,
relocate or alter such telephone equipment. Seller shall repair any damage
caused by such removal.
11.2.2 Telephone Numbers.
Seller shall consent to the assignment to Buyer following each
respective Closing of all telephone numbers, telephone lines, communication
lines and similar rights used exclusively in connection with the Store
Properties.
12. Bulk Transfer Laws.
Buyer waives the requirements of any laws with respect to bulk transfers,
and Seller agrees to pay and discharge when due all claims of creditors which
could be asserted against Buyer by reason of such waiver to the extent such
liability is not specifically assumed by Buyer herein. In consideration thereof,
Seller agrees to defend and shall indemnify and hold Buyer harmless from any and
all liabilities resulting from the claims of creditors of Seller arising out of
or connected with its failure to comply with the requirements of any laws
relating to bulk transfers or the failure of Seller to discharge such claims.
13. Accounts Receivable.
Buyer shall not be under any obligation to collect Accounts Receivable,
however, Buyer shall promptly forward to Seller within ten (10) days of receipt
any monies paid to Buyer on any Accounts Receivable. Buyer shall furnish
information that Seller may reasonably request from time to time with respect to
such receipts of Accounts Receivable.
14. Representations and Warranties of the Parties.
Seller and Buyer each respectively represent and warrant to one another (it
being understood that each of the entities included within the term Buyer is
jointly and severally making the representation as to itself and the others):
14.1 Good Standing.
It is duly incorporated, validly existing and in good standing under
the laws of its state of formation and possesses full corporate power to own and
operate its properties and carry on business as it is currently conducting it.
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14.2 Corporate Authority.
All requisite corporate action has been, or will be taken by it before
the Initial Closing, in order to authorize the execution and delivery of this
Agreement and, as the case may be, the assignment, transfer, conveyance and
acceptance of the Store Leases, the Contracts, the Real Property, the Labor
Agreements, the remaining Assets, the Assumed Liabilities and all other
properties as herein provided, the payment of all sums payable hereunder, and
the consummation of the transactions contemplated by this Agreement, and
compliance with the terms and provisions hereof (assuming all necessary consents
are obtained) will not conflict with or result in a breach of any terms and
provisions of, or constitute a default under, its Articles or Certificate of
Incorporation or By-Laws or of any material indenture, mortgage, contract or
other agreement to which it or any of its affiliates is a party or by which any
of such person's properties are bound, or any existing material applicable law,
rule, regulation, judgment, order or decree of any governmental instrumentality
or court.
14.3 Binding Obligation.
It has duly and validly executed and delivered this Agreement and,
upon due and valid execution and delivery by the other Party, this Agreement
constitutes its legal, valid and binding obligation (assuming this Agreement is
a valid and binding obligation of the other Party), enforceable against it in
accordance with its terms, subject, however, to all bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditor's rights, to general principles of equity, and to judicial
limits on the rights of specific performance.
15. Representations and Warranties of Seller.
In this Agreement, any reference to a party's "knowledge" means, in the
case of Seller, the actual knowledge of the Chief Executive Officer, the Chief
Financial Officer or the General Counsel of Seller, as such knowledge may exist
without inquiry into the matter and, in the case of Buyer, the actual knowledge
of the Chief Executive Officer, the Chief Financial Officer or the General
Counsel of Buyer, as such knowledge may exist without inquiry into the matter.
Seller represents and warrants to Buyer the following:
15.1 "As Is" Condition.
Except as otherwise specifically set forth in this Agreement, all of
the Assets are being purchased by Buyer and sold by the Sellers, and the Store
Properties (including the Real Property, if applicable) which are the subject
matter of this Agreement are being delivered, in an "AS IS, WHERE IS" CONDITION
ON THE RESPECTIVE CLOSING DATE, AND IN THEIR THEN PRESENT CONDITION, "WITH ALL
FAULTS", INCLUDING, BUT NOT LIMITED TO, BOTH LATENT AND PATENT DEFECTS, AND
BUYER SHALL RELY UPON ITS OWN EXAMINATION THEREOF. OTHER THAN AS SET FORTH
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EXPRESSLY IN THIS AGREEMENT, NO WARRANTIES, EXPRESS OR IMPLIED, ARE MADE BY
SELLERS CONCERNING THE ASSETS, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY.
15.2 Pending Litigation.
Except as disclosed in Exhibit P hereto, there is no litigation,
proceeding or investigation by any third party or governmental authority or
agency pending or, to Seller's knowledge, threatened as of the date of this
Agreement which materially adversely affects the Sellers' ownership or title to
the Assets or consummation of the transactions contemplated in this Agreement,
which has a reasonable likelihood of resulting in an adverse material change in
the condition or value of the Assets or which could reasonably be expected to
prevent, enjoin, materially alter or delay the consummation of the transactions
contemplated by this Agreement.
15.3 Store Leases.
To Seller's knowledge, Seller has made available to Buyer correct and
complete copies of the Store Leases (including all material amendments,
modifications and supplements thereto) under which Seller uses or occupies or
has the right to use or occupy, now or in the future, the Store Leases.
15.4 Zoning.
To Seller's knowledge, except as set forth in Exhibit P hereto, there
is no action, pending or threatened, to change the zoning affecting any of the
Store Properties which would materially adversely affect the conduct of a
supermarket business at the Store Properties as it is presently conducted, or
any pending or threatened condemnation of any of the Store Properties.
15.5 Title to Personalty; Liens.
With respect to the Assets constituting personal property which are
owned by the Sellers, good and marketable title to such Assets will be
transferred to Buyer at each respective Closing free and clear of any lien,
charge, claim or other encumbrance of any nature whatsoever, except for real and
personal property taxes and assessments not yet due and payable, and the
following liens and encumbrances: (i) claims of materialmen, carriers, landlords
and others not yet, or as of the respective Closing Date to be then not due and
payable; (ii) liens securing obligations of the Sellers to creditors which shall
be released on the respective Closing Date; and (iii) claims listed on Exhibit P
hereto.
15.6 Environmental Laws.
Notwithstanding any other provision in this Agreement, this Section
15.6 contains the exclusive representations of Seller concerning environmental
matters.
Except as disclosed on Exhibit P hereto, to Seller's knowledge:
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(a) Each of the Sellers is in compliance in all material respects
with all applicable Environmental Laws with respect to the Store Properties.
(b) There have been no material releases or threatened releases of
Hazardous Materials by any of the Sellers or their affiliates at, on, or under
the Store Properties which would, individually or in the aggregate, be
reasonably likely to require remediation under applicable Environmental Laws.
(c) There exists no writ, injunction, decree, order, judgment,
lawsuit, claim, proceeding, citation, directive, or summons, pending or
threatened, against any of the Sellers under any Environmental Law with respect
to the Store Properties.
15.7 Definitions
For the purposes of this Section 15, the following terms shall have
the meanings indicated:
"Environmental Laws" means all federal, state or local laws, statutes,
ordinances, rules or regulations relating to (i) the protection of the
environment or (ii) the generation, use, storage, treatment, processing,
disposal, release or threatened release of Hazardous Materials, in each case as
in effect at the Initial Closing Date.
"Hazardous Material" means any pollutants, contaminants, toxic or
hazardous substances, materials, wastes, constituents, compounds or chemicals
(including, without limitation, petroleum or any by-products or fractions
thereof, any form of natural gas, lead, urea formaldehyde, polychlorinated
biphenyls ("PCBs") and PCB-containing equipment, radon and other radioactive
elements, ionizing radiation, electromagnetic field radiation and other non-
ionizing radiation) that are regulated by any Environmental Laws.
15.8 Buyer's Representations and Warranties.
Seller has no knowledge that any of the Buyer's representations and
warranties are untrue in any material respect.
16. Representations and Warranties of Buyer.
Buyer represents and warrants to Seller the following it being understood
that each of the entities included within the term Buyer is jointly and
severally making representation as to itself and to the other.
16.1 Pending Litigation.
Except as disclosed in Exhibit Q hereto, there is no litigation
proceeding or investigation by any governmental authority or agency pending or,
to Buyer's knowledge, threatened as of the date of this Agreement which has a
reasonable likelihood of resulting in an adverse material change in the
financial condition of Buyer, or which could reasonably be expected to prevent,
enjoin, materially alter or delay the consummation of the transactions
contemplated by this Agreement.
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16.2 "As Is" Condition.
(a) Buyer acknowledges that, pursuant to Section 21.1 and 22.2.8,
Buyer accepts the Assets in an "AS IS, WHERE IS" CONDITION ON THE RESPECTIVE
CLOSING DATE, AND IN THEIR THEN PRESENT CONDITION, "WITH ALL FAULTS", INCLUDING,
BUT NOT LIMITED TO, BOTH LATENT AND PATENT DEFECTS, AND BUYER SHALL RELY UPON
ITS OWN EXAMINATION THEREOF. OTHER THAN AS SET FORTH EXPRESSLY IN THIS
AGREEMENT, NO WARRANTIES, EXPRESS OR IMPLIED, ARE MADE BY SELLERS CONCERNING
SUCH ITEMS, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY.
(b) Buyer hereby affirms and acknowledges that neither Seller nor any
Affiliated Seller nor any of their officers, directors, agents, employees,
accountants, advisors and/or attorneys (collectively the "Exculpated Parties")
have made nor has Buyer relied upon any representation, warranty or promise
whether oral or written, express or implied, by operation of law or otherwise,
with respect to the Assets or any other subject matter of this Agreement except
as otherwise expressly set forth in this Agreement. Without limitation, Buyer
acknowledges that, except as specifically set forth to the contrary in this
Agreement, no warranties or representations, expressed or implied, of any kind
whatsoever have been made by any of the Exculpated Parties, or will be relied
upon, and Buyer hereby releases the Exculpated Parties from any claims with
respect to the Financial Information (as defined in Section 18.3), the Files and
Records, the general plan designation, zoning, value, use, tax status or
physical condition of the Assets including, without limitation, the Store
Properties, or any part thereof, including, without limitation, the flood
elevations, drainage patterns, soil and subsoils composition and compaction
level, and other conditions at the Store Properties, or with respect to the
existence or non-existence of toxic or hazardous materials on or under such
property, or with respect to the accuracy of any boundary survey or other
survey, title report or commitment, soils report or any other plans or reports,
or with respect to the revenues and expenses generated by or associated with the
Store Properties, or otherwise in any way relating to the Store Properties or
the transactions contemplated hereby. Except as specifically provided in this
Agreement, Buyer further acknowledges that all materials which have been
provided to Buyer by any of the Exculpated Parties have been provided without
any warranty or representation, expressed or implied, as to their content,
suitability for any purpose, accuracy, truthfulness or completeness and Buyer
shall not have any recourse against Seller or any of the other Exculpated
Parties in the event of any errors therein or omissions therefrom. Buyer is
acquiring the Store Properties based solely on its own independent investigation
and inspection of the Store Properties and in no way in reliance on any
information
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provided by Seller or any of the other Exculpated Parties other than
the specified representations and warranties expressly contained herein.
(c) No representation whatsoever is given or made by Seller under
this Agreement that any distributor, supplier, contractor or service provider
who serves any of the Sellers on the date hereof will continue to serve Buyer or
any of the Store Properties after the Initial Closing or the respective
Subsequent Closing.
16.3 Financing.
Buyer either has or will have at and after the Initial Closing funds
available to it sufficient to consummate its purchase of the Assets and the
transactions contemplated by this Agreement.
16.4 Competitive Capability.
Buyer has the intent and capability of competing effectively in the
supermarket business and to use the Assets in order to do the same and believes
that it is a buyer that should be viewed as an acceptable acquiror to the
Federal Trade Commission and any relevant State Attorneys General.
16.5 Seller's Representations and Warranties.
Buyer has no knowledge that any of Seller's representations and
warranties are untrue in any material respect.
17. Indemnification.
17.1 Seller's Indemnification.
Subject to Section 17.3, Seller hereby covenants and agrees, from and
after the Initial Closing, to indemnify and to hold harmless Buyer, its
affiliates and their respective officers and directors, employees and agents
(collectively, the "Buyer Indemnified Party") from and against all claims,
losses, liabilities, damages, fines, penalties, costs and expenses, reasonable
fees and disbursements of counsel, including counsel fees incurred to enforce
its rights hereunder, (net in all cases of tax benefits and net of any benefits
paid to an Indemnified Party by an insurance carrier in respect of any loss,
liability, obligation, damage, deficiency or expense) (collectively, the
"Losses"), sustained or incurred by the Buyer Indemnified Party as follows:
(a) All Losses sustained or incurred by any Buyer Indemnified Party
in respect of Excluded Liabilities.
(b) All Losses sustained or incurred by any Buyer Indemnified Party
resulting from any breach of any representation or warranty on the part of
Seller or any Affiliated Seller under this Agreement.
(c) All Losses sustained or incurred by any Buyer Indemnified Party
resulting from any breach of any of Seller's covenants or agreements contained
herein.
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(d) Notwithstanding the provisions of this Section 17.1, Seller shall
have no obligation for any claim for indemnification pursuant to Section 17.1
unless Buyer has provided Seller with written notice of such claim (containing a
reasonable description of the facts and circumstances constituting the basis of
such claim) prior to the expiration of the Survival Period.
For the purposes of this Agreement (including Section 17.2), Losses
shall not include lost profits, consequential damages or punitive damages.
17.2 Buyer's Indemnification.
Subject to Section 17.3, Buyer hereby covenants and agrees, from and
after the Initial Closing, to indemnify and to hold harmless Seller and any
Affiliated Seller, their affiliates and their respective officers, directors,
employees and agents (collectively, the "Seller Indemnified Party") from and
against all Losses sustained or incurred by the Seller Indemnified Party as
follows:
(a) All Losses sustained or incurred by any Seller Indemnified Party
in respect of any Assumed Liabilities.
(b) All Losses sustained or incurred by any Seller Indemnified Party
resulting from any breach by Buyer of any of its representations or warranties.
(c) All Losses sustained or incurred by any Seller Indemnified Party
resulting from any breach of any of Buyer's covenants or agreements contained
herein.
(d) all Losses sustained or incurred by any Seller Indemnified Party
(excluding Deloitte & Touche and Ernst & Young) in respect of Buyer's use of the
Financial Information (as defined in Section 18.3).
(e) Notwithstanding the provisions of this Section 17.2, Buyer shall
have no obligation for any claim for indemnification pursuant to Section 17.2
unless Seller has provided Buyer with written notice of such claim (containing a
reasonable description of the facts and circumstances constituting the basis of
such claim) prior to the expiration of the Survival Period.
17.3 Procedure for Indemnification.
(a) Any party making a claim for indemnification hereunder (an
"Indemnitee") shall notify the indemnifying party (an "Indemnitor") of the claim
in writing, describing the claim, the amount thereof, and the basis therefor.
(b) In case any legal, arbitration or governmental proceeding is
brought against any Indemnitee, the Indemnitor shall be entitled to assume the
defense thereof, by written notice to the Indemnitee within thirty (30) calendar
days after receipt of notice from the Indemnitee of the claim for
indemnification, with counsel reasonably satisfactory to the Indemnitee (subject
to the requirements of any insurance carrier covering the subject matter of the
proceeding) and at the Indemnitor's own expense. However, notwithstanding the
assumption by an Indemnitor of the defense of any claim as provided in this
Section 17.3, the Indemnitee shall be permitted to join in
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such defense and to employ counsel at its own expense. The Indemnitor shall be
entitled to control the defense of any claim unless it is determined that there
is a conflict of interest between the Indemnitor and the Indemnitee, in which
case the Indemnitee shall be permitted to retain control of the conduct its own
defense. Neither Party shall be entitled to settle a claim without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld or delayed.
(c) Seller shall not be liable to Buyer and Buyer shall
not be liable to Seller for indemnification pursuant to this Section 17 unless
(i) the amount of any individual Loss or series of related Losses exceeds the
sum of $100,000 (such Losses in excess of $100,000 are each called "Permitted
Losses") and (ii) the aggregate amount of all Permitted Losses exceeds a sum
equal to 4.0% of the Purchase Price (the "Floor"), in which event the
indemnified party shall be entitled to indemnification for all amounts in excess
of the Floor; provided,however, that the Floor and limitation on Losses are not
------- -------
applicable to claims arising from the failure (i) to satisfy any payment
obligation under the Store Leases or Permitted Exceptions, or in respect of the
Assumed Liabilities or the Excluded Liabilities (ii) to pay the Purchase Price,
(iii) to satisfy any obligations arising under Section 20, and (iv) to pay or
reimburse the other Party for apportionments provided for herein.
17.4 Survival.
The Parties hereby agree, notwithstanding any contrary provision of
this Agreement, that the representations and warranties of the Parties set forth
in this Agreement shall survive the Initial Closing for a period of one (1)
year, and shall thereafter be of no further force and effect (the "Survival
Period"); provided, however, that notwithstanding the above and foregoing: (i)
Buyer agrees that Seller's representations, warranties and agreements contained
in Section 15.3 and Section 15.4 shall not survive the Initial Closing; (ii)
Seller agrees that its representations, warranties and agreements regarding
Taxes and those contained in Section 12 regarding bulk sales shall survive the
Initial Closing Date until the expiration of the relevant statute of limitations
period (including any extensions thereof); (iii) Seller agrees that its
representations, warranties and agreements regarding Environmental Laws
contained in Section 15.6 shall survive the Initial Closing Date for a period of
three (3) years; and (iv) the covenants and obligations of the Parties contained
herein (including obligations with respect to Excluded Liabilities and Assumed
Liabilities) that contemplate performance after the Initial Closing shall
survive the closing until the expiration of the relevant statute of limitations.
17.5 Indemnification as Exclusive Remedy.
After the Initial Closing, the indemnification provisions set forth in
this Section 17 constitute the sole and exclusive remedy of any Party for any
breach or default or other action brought in respect of this Agreement and the
transaction contemplated hereby, except for
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covenants to be performed following the Initial Closing, with respect to which
the Parties may seek specific performance to the extent that a remedy at law is
inadequate.
18. Consents
18.1 Consents and Approvals.
Seller will use commercially reasonable efforts to obtain any and all
consents and approvals required to authorize and permit the assignment, transfer
and conveyance to Buyer of the Assets and the Store Leases being conveyed
hereunder including, without limitation, "HSR Clearance" which shall be defined
to mean that (a) the waiting period (or extension thereof) under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), shall have
expired or been terminated; and (b) no order, decree or injunction shall have
been entered or issued which is in effect and has the effect of making the
Merger illegal or otherwise prohibits consummation of the Merger, provided that
nothing in this Agreement shall require Seller to take any actions with respect
to the sale or divestiture or operation of any of its (or any of its
affiliates') assets in response to a request of any regulatory authority which
Seller believes to be commercially unreasonable or not in its best business
interests. Buyer shall indemnify and hold harmless Seller with respect to
Buyer's obligations under the Store Leases, the Contracts, the Labor Agreements,
the Permits and any other Assumed Liabilities after the Initial Closing in
accordance with Section 17.
18.2 Further Cooperation.
Buyer agrees to cooperate with Seller and each of the Affiliated
Sellers with respect to (A) obtaining the preliminary and final approval of the
state Attorneys General and the Federal Trade Commission to the sale of the
Assets to Buyer by (i) providing such antitrust agencies with any information
within its possession or control which such agencies duly request, (ii) taking
such actions as may be reasonably sought by such governmental agencies in
consideration of this Agreement and the Merger including responding to such
governmental agencies' requests and attending meetings with such governmental
agencies upon reasonable notice in connection with Seller's efforts to obtain
such approval, (iii) filing an HSR Notification and Report Form within ten (10)
days of receipt of notice from Seller that Seller deems it appropriate to file
an HSR Notification and Report Form in connection with the Agreement, and
thereafter promptly making any other required submissions under the HSR Act,
(iv) promptly notifying Seller of any communication concerning this Agreement or
the Merger with any governmental authority, and furnishing Seller with copies of
all correspondence, filings, and communications (and memoranda setting forth the
substance thereof) between Buyer and their representatives on the one hand, and
the FTC or a state Attorneys General or their respective staffs on the other
hand, with respect to this Agreement or the Merger, and (B) obtaining the
consent of any landlord or sublessor or other person as may be required in
connection with the
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transaction, including, without limitation, providing such persons with
information, as may be requested, relating to Buyer's financial status and
experience in operating supermarkets, and such other information as may be
reasonably requested by such landlords, sublessors or other persons.
18.3 Financial Information
Seller agrees to cooperate with Buyer with respect to providing Buyer
with financial information relating to the Store Properties to the extent
necessary for Buyer to comply with its disclosure and filing obligations under
the Securities Exchange Act of 1934 ("Financial Information"). Seller will use
its best efforts to engage Deloitte & Touche and/or Ernst & Young to assist
Seller in this process and Buyer shall promptly reimburse Seller for any
reasonable costs and expenses Seller incurs in complying with this Section,
including the fees and expenses of Deloitte & Touche and/or Ernst & Young.
Seller shall not be deemed to make and has not made any representation or
warranty to Buyer with respect to such Financial Information.
18.4 Reasonable Efforts.
On the terms and subject to the conditions set forth in this
Agreement, each of the Parties agrees to use all commercially reasonable efforts
to take or cause to be taken all actions and do, or cause to be done, and to
assist and cooperate with the other Party in doing, all things necessary or
appropriate to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated hereby.
19. Casualty.
19.1 Damage.
The risk of destruction, loss or damage by fire or other casualty to
any Asset between the date hereof and the respective Closing to the extent that
the operation of a Store Property ceases (a "Damage") shall be treated as
follows:
(A) If a Damage to Improvements at a Store Property is covered under
Seller's insurance policies, Buyer shall take possession of such Store Property
at the Closing of such Store Property and, except to the extent Seller has, or
has caused to be, repaired such Store Property prior to such Closing, Seller or
any Affiliated Seller shall (x) assign to Buyer (or to the landlord if required
by the applicable Store Lease, and subject to any right of the landlord to
terminate the Store Lease) any right it has to any unexpended insurance proceeds
relating to such Damage (with Seller responsible for any deductible payable
under the insurance policy covering such Damage and (y) to the extent that such
insurance proceeds are not sufficient, Seller shall pay any additional amount
necessary to repair, replace and restore the Improvements at such Store Property
to pre-damage condition); it being understood that no adjustment to the Purchase
Price shall occur as a result thereof.
In the event that Damage occurs prior to Closing, and subsequent to
the Closing Buyer is prevented from rebuilding or substantially restoring the
Improvements by a governmental
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authority or other third party (providing Buyer has used its best efforts to
obtain any necessary consents or approvals), Seller will refund to Buyer, if
appropriate, an equitable portion of the Purchase Price relating to such Store
Property after taking into consideration any insurance proceeds assigned, and
any other amounts paid by third parties, to Buyer or for its benefit.
If a landlord has a proper right to terminate a Store Lease which has
not been exercised at the time of the respective Closing of such Store Lease,
due to such Damage occurring prior to such Closing, the Parties shall
nonetheless proceed to such Closing. In the event that a landlord subsequently
exercises such a right to terminate a Store Lease by reason of the Damage which
occurred prior to such Closing, Seller will refund to Buyer, if appropriate, an
equitable portion of the Purchase Price relating to such Store Lease after
taking into consideration any insurance proceeds assigned, and any other amounts
paid by third parties, to Buyer or for its benefit.
If Seller has a right to terminate a Store Lease due to such Damage
occurring prior to Closing, Seller shall only exercise such right if Buyer so
directs in writing prior to Closing. In such event the Store Property shall not
be transferred at Closing and shall become an Excluded Asset and the Purchase
Price shall be reduced by an amount mutually agreed upon between Buyer and
Seller with respect to such Store Property and the related Assets located
thereat. If such Store Lease is not terminated, the Parties shall proceed to
Closing in accordance with this Section.
(B) If a Damage to Improvements at a Store Property is not covered
under Seller's insurance policies, Seller shall have the right, unless Buyer has
agreed to assume the Seller's obligations relating to such Damage by written
notice to Seller within ten days after Buyer's receipt of Seller's written
notice of termination, to either (i) terminate this Agreement as to such Store
Property or (ii) pay to Buyer an amount allowing Buyer to repair, replace and
restore the Improvements at such Store Property to pre-damage condition;
provided, however, in the event that the landlord is responsible for such
- -------- -------
repairs, loss or destruction pursuant to the terms of the relevant Store Lease,
Buyer shall take possession of such Store Property and close on such Store
Property (subject to any right of the landlord to terminate the Store Lease) at
the respective Closing without any indemnification obligation by Seller and
Seller or any Affiliated Seller shall assign to Buyer any claim it has under
such Store Lease with respect thereto.
(C) If any Equipment is damaged prior to Closing, Seller or any
Affiliated Seller shall assign to Buyer any right it has to any unexpended
insurance proceeds relating to such damaged Equipment (with Seller responsible
for any deductible payable under the insurance policy covering such damaged
Equipment and any additional amount necessary to repair, replace and restore the
Equipment to pre-damage condition); it being understood that no adjustment to
the Purchase Price shall occur as a result thereof. If such damaged Equipment is
not covered
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under the Sellers' insurance policies, then the Parties shall proceed to the
respective Closing and an appropriate adjustment shall be made to the Purchase
Price as it relates to such damaged Equipment.
19.2 Condemnation.
In the event a Store Property or any part thereof is taken in
condemnation or by the exercise of eminent domain prior to the respective
Closing Date for such Store Property, Buyer shall take possession of the Store
Property or any portion thereof and close on such Store Property (subject to any
right of the landlord to terminate the Store Lease) and Seller or any Affiliated
Seller shall assign to Buyer any right it has to any condemnation award relating
to such condemnation (it being understood that no adjustment to the Purchase
Price shall occur as a result thereof). Seller shall not settle any condemnation
proceeding relating to a Store Property without Buyer's prior consent (which
consent shall not be unreasonably withheld).
19.3 Store Encumbrances; Leases.
(a) With respect to any Owned Store subject to a mortgage, security
interest or other encumbrances (a "Monetary Encumbrance"), Seller shall use its
reasonable efforts (without being obligated to pay any prepayment premium or
penalty or other payment beyond the principal amount thereof or incur any
additional liability) to repay and obtain the release, discharge or satisfaction
of such Monetary Encumbrance or, in Seller's sole discretion, substitute or
cause to be substituted collateral under such Monetary Encumbrance so as to be
able to obtain a release and reconveyance of such Owned Store from such Monetary
Encumbrance, in each case so as to be able to convey to Buyer fee simple title
to such Owned Store, free and clear of such Monetary Encumbrance at the
respective Closing. If Seller is unable to convey any Owned Store to Buyer at
the respective Closing free and clear of the related Monetary Encumbrance, then
Seller may elect either (i) that the Store Property shall not be transferred at
the respective Closing and shall become an Excluded Asset and the Purchase Price
shall be reduced by an amount mutually agreed upon between Buyer and Seller with
respect to such Store Property and the related Assets located thereat, or (ii)
to indemnify and hold harmless Buyer from any Losses incurred by Buyer directly
as a result of such Monetary Encumbrance. In the event Seller elects to so
indemnify Buyer, the Parties shall proceed to the respective Closing and such
indemnification will be governed by the terms of Section 17 (except that such
indemnification shall be first dollar indemnification and shall not be subject
to the provisions of Section 17 regarding the Floor or Permitted Losses and
provided further that the amount of such Losses shall not be considered a
Permitted Loss and shall not be taken into account for purposes of determining
if the Floor has been satisfied with respect to other claims). In the event that
a Store Property becomes an Excluded Asset, the Escrow Holder shall release to
Seller all documents
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held regarding such Store Property and release to Buyer the agreed portion of
the Purchase Price referred to in this Section 19.3(a).
(b) If any party whose consent is required to assign the Store Leases
to Buyer refuses or fails to give its written consent to an assignment of any
Store Lease, or conditions its consent on terms unacceptable to Seller or Buyer,
then Seller may elect either: (i) that the Store Property shall not be
transferred at the respective Closing and shall become an Excluded Asset and the
Purchase Price shall be reduced by an amount mutually agreed upon between Buyer
and Seller with respect to such Store Property and the related Assets located
thereat, or (ii) to indemnify and hold harmless Buyer from any Losses incurred
by Buyer directly as a result of such failure to obtain consent. In the event
Seller elects to so indemnify Buyer, the Parties shall proceed to the respective
Closing and such indemnification will be governed by the terms of Section 17
(except that such indemnification shall be first dollar indemnification and
shall not be subject to the provisions of Section 17 regarding the Floor or
Permitted Losses and shall not be considered a Permitted Loss; and provided
further that such Losses shall not be taken into account to determine if the
Floor has been satisfied with respect to other claims). In the event that a
Store Property becomes an Excluded Asset, the Escrow Holder shall release to
Seller all documents held regarding such Store Property and release to Buyer the
agreed portion of the Purchase Price referred to in this Section 19.3(b).
20. Employee Relations.
At all times prior to each respective Closing, Seller shall be solely and
exclusively responsible for compliance with all legal or contractual obligations
including but not limited to the Labor Agreements with respect to its employees
at the Store Properties. Subsequent to each respective Closing, Buyer shall be
solely and exclusively responsible for compliance with all contractual and legal
obligations with respect to its employees at the Store Properties. Seller shall
lay off, transfer or terminate all employees at the Store Properties prior to or
at each respective Closing. At the time of termination of the Seller's
employees, Seller shall pay to such employees all vacation, sick leave, personal
time, union bonuses and other similar benefits which have accrued or to which
the employees are otherwise entitled with respect to their employment up to the
respective Closing (except for WARN responsibilities as described below).
Buyer shall have sole and exclusive responsibility for compliance with the
Worker Adjustment and Retraining Notification Act (WARN Act) and any equivalent
state statutory requirements to the extent the WARN Act and any equivalent state
statutory requirements places such responsibility on Buyer, although, if the
WARN Act is applicable to the transactions contemplated by this Agreement,
Seller agrees to provide any additional information necessary for Buyer to
provide required notice to employees on Buyer's request as Buyer's agent.
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Except for the above, neither Buyer nor Seller shall be authorized to
represent or speak for the other with respect to any employment or labor matters
and specifically with respect to communications to employees and/or unions as to
the transactions contemplated by this Agreement.
Buyer acknowledges that Seller has notified it of the Labor Agreements.
Buyer agrees to assume the Labor Agreements applicable to bargaining unit
employees at the Store Properties and to apply their terms and conditions to
operations of the Store Properties subsequent to each respective Closing.
Buyer additionally agrees to maintain seniority and a fringe benefit status
of all bargaining unit employees it hires from among the former employees of
Seller to staff its operations at the Store Properties and otherwise to comply
with all obligations imposed on a Buyer by the Labor Agreements.
As soon as possible after the date of this Agreement, Seller will arrange
for the production of an interview schedule (the "Interview Schedule") for
interviews of employees of the Sellers employed at the Store Properties.
Employees who are interested in applying for work with the Buyer will be invited
to sign up for a twenty-minute interview slot during a 2-3 day period
established by Seller and to complete any forms or applications provided by
Buyer (such forms to be provided by Buyer to Seller as soon as possible after
the date of this Agreement).
Seller will provide the Interview Schedule to Buyer. Within fifteen (15)
days of receipt of the Interview schedule, Buyer will (i) interview all
interested employees at an off-site location reserved and paid for by Seller,
and (ii) will have extended any job offers to such employees in Buyer's sole and
absolute discretion. Such job offers may remain open for acceptance by the
employee for no longer than five (5) days. Within twenty (20) days of receiving
the Interview Schedule, Buyer will notify Seller in writing of the list of
employees who have accepted employment offers with Buyer. Seller will provide
Buyer with the Employee Payroll Records promptly after the date of this
Agreement and at least ten (10) days before each respective Closing.
21. Confidentiality and Access.
21.1 Access.
Subject to any limitations arising, or consents required, under or
related to this Agreement, authorized representatives of Buyer shall, upon terms
and at times reasonably acceptable to Seller, have access during normal business
hours, at Buyer's expense, to the Store Properties and, at the Seller's offices,
to the Files and Records (which, pursuant to Section 1.1 and 1.2, does not
include any financial records relating to the Store Properties or Seller (the
sole rights in relation to the Financial Information are set forth in Section
18.3)) provided, such representatives shall not interfere with the personnel or
operations of any of the Store Properties,
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and provided further that all information so disclosed in the Files and Records
shall be subject to the terms and provisions of the Confidentiality Agreement
referred to below.
21.2 Confidentiality.
The Parties acknowledge that Buyer and Seller have previously executed
the Confidentiality Agreement dated November 11, 1998 (the "Confidentiality
Agreement"), which Confidentiality Agreement shall continue in full force and
effect in accordance with its terms except that the 18-month period referred to
in the seventh full paragraph on Page 3 of the Confidentiality Agreement shall
be deemed to commence on the date of this Agreement.
21.3 Cooperation on Tax Matters.
Buyer and Seller shall cooperate fully, as and to the extent
reasonably requested by the other Party, in connection with any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other Party's request) the timely provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder.
21.4 Notice.
Buyer shall promptly notify Seller in writing of any event, condition
or circumstance occurring prior to the Initial Closing or any of the Subsequent
Closings that would constitute a breach of this Agreement, other than items
arising in the ordinary course of business which would not render any
representation or warranty of Buyer materially misleading.
22. Conditions to Closing.
22.1 Conditions to Obligations of Each Party.
The obligations of Seller and Buyer to consummate the transactions
contemplated hereby shall, for each Party at such Party's option, be subject to
satisfaction, at or prior to the Initial Closing Date, or such earlier period as
provided herein with respect to certain conditions, of the following conditions:
22.1.1 No Order or Injunction.
No temporary restraining order, preliminary injunction or
injunction shall be in effect prohibiting the transactions contemplated by this
Agreement.
22.1.2 Compliance with Law.
There shall have been obtained such Permits, approvals, and
consents of all governmental bodies or agencies including, but not limited to,
HSR Clearance (all such Permits, approvals and consents are referred to
collectively herein as the "Approvals"), which are reasonably necessary so that
consummation of the transactions contemplated by this Agreement will be in
material compliance with applicable laws; provided, however, that the Parties
agree that (i) nothing in this Section 22.1.2 shall limit, waive, release or
abate Buyer's obligations to use
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reasonable diligent efforts to obtain such Approvals pursuant to Sections 7 and
18 hereof, and (ii) Buyer shall not be permitted to refuse to close because of
Buyer's inability or failure to obtain any Approval on or before the Initial
Closing Date if, under applicable laws, rules and regulations, Buyer may operate
such Store Properties pending Buyer's receipt of such Approval, and (iii) the
closing of this transaction in respect of any Store Property is not conditioned
on Buyer obtaining any liquor license to operate the Store Properties.
22.2 Conditions to Obligations of Buyer.
The obligation of Buyer to consummate the transactions contemplated
hereby shall be, at the option of Buyer, subject to the fulfillment, at or prior
to the Initial Closing Date, of the following additional conditions:
22.2.1 Representations and Warranties True.
The representations and warranties of Seller contained in this
Agreement or in any other document of Seller delivered pursuant hereto shall be
true and correct in all material respects when made and on the Initial Closing
Date as if made on that date unless specifically made as of an earlier date, and
Seller shall have delivered a certificate to such effect to the Escrow Agent,
addressed to Buyer, executed by a duly authorized officer of Seller.
22.2.2 Seller's Performance.
Each of the obligations of Seller to be performed by it on or
before the Initial Closing Date pursuant to the terms of this Agreement shall
have been duly performed in all material respects on or before the Initial
Closing Date and at the Initial Closing Seller shall have delivered to the
Escrow Agent a certificate addressed to Buyer to such effect signed by a duly
authorized officer of Seller.
22.2.3 Opinion of Seller's Counsel.
Escrow Agent shall have been furnished at the Initial Closing
with an opinion of the General Counsel of Seller, dated the Initial Closing
Date, addressed to Buyer, to the effect that:
(a) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and is
qualified to do business in the States where the Store Properties are located;
(b) Seller has full corporate power to carry out the
transactions provided for in this Agreement, and this Agreement and all other
instruments to be executed by Seller in connection herewith have been duly and
validly authorized, executed and delivered by Seller and constitute valid and
binding obligations of Seller (assuming this Agreement and such other
instruments are valid and binding obligations of Buyer), enforceable against it
in accordance with its terms, subject, however, to all bankruptcy, insolvency,
reorganization, moratorium and
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other laws of general applicability relating to or affecting creditor's rights,
to general principles of equity and to judicial limits on the rights of specific
performance; and
(c) Neither the execution and delivery by Seller of this
Agreement nor the documents to be executed and delivered by Seller in connection
herewith violates or conflicts with the Articles or Certificate of Incorporation
or By-Laws of Seller or any material agreement known to such counsel which has
not theretofore been delivered to Buyer or its counsel.
22.2.4 Consents.
Except to the extent otherwise provided in this agreement
(including Section 18, Section 19, or as specified in the opinion referred to
above) there shall have been received the consents of all persons required to be
delivered at the Initial Closing pursuant to the provisions herein for the
transfer of all of the material Assets, the Store Leases and the Contracts to
Buyer.
22.2.5 Closing Documentation.
Except to the extent provided in Section 19.3 hereof, at the
respective Closing, Seller shall have transferred, or cause to be transferred,
to Buyer (i) each parcel of Real Property by the Deeds in proper form for
recording in the records of the county in which such parcel lies, and (ii)
Seller's right, title and interest in the Store Leases by the Assignment.
22.2.6 Title Insurance.
Buyer shall have received an owner's standard coverage policy of
title insurance with respect to each parcel of Real Property and leasehold
standard coverage policy of title insurance with respect to each Store Property
subject to a Store Lease (the "Title Policies"), in each case issued on the
Initial Closing Date or the respective Subsequent Closing Date by First American
Title Company (the "Title Company"). Each such Title Policy shall insure Buyer's
ownership of fee title (with respect to the Real Property) or leasehold title
(with respect to the Store Leases), in an amount to be determined pursuant to
Section 9.5, subject to the Schedule B standard preprinted exceptions to the
extent customarily and commercially utilized in the State of California and free
and clear of all other exceptions to or exclusions from coverage except those
approved in writing by Buyer; provided, however, that Buyer shall not be
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permitted to object to any of the following, all of which shall be deemed
"Permitted Exceptions," (i) liens for taxes and installments of special
assessments not yet due and payable or the validity of which is being contested
in good faith by the Sellers through appropriate proceedings (including any
interest, penalties or additions to any such taxes or assessments); (ii)
encumbrances (which shall not include any options to purchase or rights of first
refusal) consisting of zoning restrictions, easements and other restrictions on
the use of the Store Properties, provided that such items do not materially and
adversely impair the continued use of such property by Buyer for the purposes
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used by the Sellers on the date of this Agreement; (iii) any laws, rules,
regulations, statutes or ordinances affecting the Store Properties; (iv) any
utility company rights, easements and franchises for electricity, water, steam,
gas, telephone or other service or the right to use and maintain poles, lines,
wires, cables, pipes, boxes and other fixtures and facilities in, over, under
and upon the Store Properties, provided that the same do not materially
adversely affect the use of any Store Property for the material current use at
that Store Property; (v) all encroachments of stoops, areas, cellar steps, trim
and cornices, if any, upon any street or highway; (vi) all violations of laws,
rules, regulations, statutes, ordinances, orders or other legal requirements
affecting the Store Properties which do not have a material adverse effect on
the use or value of the affected Store Property; (vii) landlord liens for rental
not yet due and payable under the Store Leases; (viii) all non-monetary liens,
covenants, charges, easements, restrictions and encumbrances contained (or
otherwise disclosed or identified in sufficient detail such that Buyer is put on
notice regarding the material facts of such liens, covenants, charges,
easements, restrictions and encumbrances) in the property and lease files
furnished to Buyer by Seller prior to the date hereof, including, without
limitation, (A) all matter, conditions and states of fact so disclosed or
identified in title reports, surveys, correspondence or other documents located
in such files and (B) all leases, subleases, licenses, concessions or service
contracts, common area maintenance, reciprocal easement agreements, or other
operating, maintenance or development agreements contained (or so disclosed or
identified) in such files; (ix) with respect to any asset which consists of a
leasehold estate or possessory interest in real property, all mortgages or deeds
of trust to which the underlying fee estate in such real property is subject
provided either (i) the holder of such mortgage or deed of trust would not be
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entitled to foreclose upon or otherwise terminate such leasehold estate or
possessory interest in the event of a foreclosure upon the underlying fee
estate, (ii) an effective non-disturbance agreement exists, or (iii) Seller
agrees to indemnify Buyer against such mortgage or deed of trust; and (x) all
mechanics', carriers', workers', repairers' and similar liens (provided Seller
agrees to indemnify Buyer against such liens). The Title Policies shall contain
such endorsements as may be reasonably requested by counsel to Buyer without
expense to Seller and shall otherwise be in form reasonably satisfactory to
counsel to Buyer.
Prior to or concurrently with the execution of this Agreement Seller has
obtained a commitment for title insurance (the "Title Commitment") issued by the
Title Company for issuance of the Title Policies and has delivered a copy of
such Commitment to Buyer. Each Title Commitment lists as exceptions all
easements, covenants, restrictions, liens, encumbrances, tenancies and other
exceptions to title affecting title to the applicable item of Real Property or
Store Leases (collectively, the "Exceptions") and includes copies of all
instruments creating such Exceptions.
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Buyer has reviewed each Title Commitment, including copies of all
instruments shown as Exceptions in such Title Commitments. All Exceptions (or
portions thereof) to which Buyer has not provided Seller with a written notice
of objection within the earlier of fifteen (15) days after receipt of the Title
Commitment (and all related documents) and fifteen days after the date of this
Agreement, shall be deemed to be included within the Permitted Exceptions. With
respect to any Exception (or portions thereof) to which Buyer objects, Seller
may (but not without any obligation to do so) (i) elect to cure, remove or
otherwise satisfy such objection, and in such event Seller shall diligently,
attempt to cure, remove or otherwise satisfy such Exception, or (ii) elect to
indemnify and hold harmless Buyer (or the Title Company so as to permit deletion
of such Exception from the Title Policy) from any Losses incurred by Buyer (or
the Title Company as the case may be) directly as a result of such Exception. In
the event Seller elects to indemnify Buyer (or the Title Company) in relation to
an Exception the Parties shall proceed to the respective Closing and such
indemnification if given to Buyer will be governed by the terms of Section 17
(except that such indemnification shall be first dollar indemnification and
shall not be subject to the provisions of Section 17 regarding the Floor or
Permitted Losses and shall not be considered a Permitted Loss and shall not be
taken into account to determine if the Floor has been satisfied with respect to
other claims). In the event that Seller elects to cure any Exception, the
Parties agree that the respective Closing may, if necessary, be extended (for a
period not to exceed thirty (30) days) without the action of either Party being
required to effect such extension until the day next following the date that
Seller notifies Buyer that its objections to such Exception have been cured,
removed or otherwise satisfied. In the event Seller is unable to cure any such
Exception, or elects not to do so (and not to indemnify Buyer or the Title
Company), Seller shall notify Buyer thereof in writing and Buyer shall have the
right, upon written notice to Seller within five (5) days after receipt of
written notice of Seller's election, to (i) waive all objectionable Exceptions
to title which have not been cured in which event all uncured Exceptions shall
be deemed Permitted Exceptions, or (ii) terminate this Agreement and the
transaction contemplated hereby.
Anything in this Section 22.2.6 to the contrary notwithstanding, Buyer
shall not have the right to terminate this Agreement pursuant to clause (ii)
above for Seller's failure to cure any objectionable Exception to title within
the designated cure period if such Exception is terminated, satisfied and
released of record on or prior to the later of the Initial Closing or the
Subsequent Closing with respect to the relevant Store Property, or Seller has
agreed to indemnify Buyer or the Title Company in relation to such Exception,
and Seller has advised Buyer by written notice of its intent either at or prior
to the respective Closing to terminate, satisfy and release of record, or
indemnify Buyer (or the Title Company) in relation to the said Exception.
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The cost of the Title Commitments and Title Policies, including any
cancellation fees resulting from termination of this Agreement, shall be paid by
Seller.
22.2.7 FIRPTA Affidavit.
Buyer shall have received on or prior to the Initial Closing Date
an affidavit (a "FIRPTA Affidavit") of an officer of Seller, sworn to under
penalty of perjury, setting forth Seller's name, address and federal tax
identification number and stating that Seller is not a "foreign person" within
the meaning of Section 1445 of the Internal Revenue Code of 1986 and applicable
regulations (the "Code"). If, on or before the Initial Closing Date, Buyer shall
not have received such affidavit, Buyer may withhold from the Purchase Price
paid into the Escrow such sums as are required to be withheld therefrom under
Section 1445 of the Code.
22.2.8 Condition of Stores.
(A) Inspections. Subject to any limitations arising, or consents
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required, under or related to the Merger Agreement, within fifteen (15) days
after written notice from Seller (whether before or after of the date of this
Agreement), Buyer may, if Buyer so elects, conduct an inspection of the Store
Properties at Buyer's expense, to ascertain if (x) the roof (including membrane
and structural elements) of each Store Property is watertight, (y) the
Improvements are structurally sound and (z) to inspect the Equipment at each
Store Property. Seller shall provide reasonable access to the Store Properties
for purposes of such inspections and shall otherwise provide all reasonable
cooperation and assistance in connection with same. Buyer shall give Seller
reasonable prior written notice of the date, time and place of such inspections
(or of site visits to do any of the foregoing). The Parties agree, subject to
the requirements of applicable law, to keep confidential any and all information
resulting from such inspections in accordance with the terms and provisions of
the Confidentiality Agreement.
(B) Termination and Reinstatement. In the event Buyer's
-----------------------------
indicates that the estimated cost to bring the Store Properties into compliance
with this Section 22.2.8 (so that the roof of each Store Property is watertight
and the Improvements are structurally sound) exceeds, in the aggregate, an
amount equal to 4% of the Purchase Price, then Buyer shall have the option
(subject to Seller's right of reinstatement) of terminating this Agreement by
delivering written notice of such election (the "Termination Notice") to Seller
on or before the expiration of the fifteen (15) day period referred to in
Section 22.2.8(A), above. The Termination Notice will include reasonable detail
of the following: (x) whether the inspections revealed that, in Buyer's
reasonable judgment, the roof of any Store Properties or the structural elements
of any Improvements shall not be in the condition required by this Section
22.2.8, and (y) based upon the inspections, the method reasonably satisfactory
to Buyer to satisfy or cure any such non-compliance and the estimated cost of
remedying such non-compliance. Buyer at such time shall also provide Seller with
a copy of the inspection report or draft inspection report as to
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all Store Properties. Within five (5) days of Seller's receipt the Termination
Notice, Seller may reinstate this Agreement by agreeing, at Seller's election
either:
(i) to remedy those matters which render the Store
Properties not in compliance with this Section 22.2.8, in which event Buyer
shall pay the first 4% of the Purchase Price of the cost of bringing the Store
Properties into such compliance and Seller shall pay all amounts in excess of 4%
of the Purchase Price; or
(ii) to reduce the Purchase Price payable at the
respective Closing by an amount equal to that amount by which the cost of
bringing the Store Properties into compliance with this Section 22.2.8 exceeds
4% of the Purchase Price.
If Seller elects to reinstate, Seller shall be permitted twenty
(20) days to suggest to Buyer in writing alternative forms of remediation
together with the estimated cost of such remediation. In the event Buyer and
Seller cannot agree within such twenty (20) day period as to the form and cost
of remediation, such dispute shall be submitted to an engineer mutually
agreeable to the parties (the "Engineer") the expense of which shall be borne
equally by the Parties. Within ten (10) days of the Engineer's selection, the
Engineer shall decide which form of remediation is the most cost-effective
solution based on the age and condition of the Store Properties and such
decision shall be binding upon the Parties for purposes of the calculation
described in this Section.
If Buyer elects to terminate (and Seller does not reinstate) this
Agreement pursuant to the foregoing provisions of this section, the Parties
shall have no further obligations to each other under this Agreement. Further,
in connection with the above, and subject to any limitations arising, consents
required, or obligations imposed under or related to the Merger Agreement or any
other agreement encumbering any of the Store Properties, Seller hereby grants
Buyer a license to enter in and upon the Real Property and Store Leases
(including all Improvements located thereon) at reasonable times for the purpose
of conducting the inspections required to meet the conditions set forth in this
Section 22.2.8, at Buyer's sole cost and expense, and Buyer agrees to indemnify,
defend and hold harmless Seller and all other persons required to be indemnified
from any and all liability, claims, damages, expenses (including reasonable
attorneys' fees and reasonable attorneys' fees on any appeal), judgments,
proceedings and causes of action arising out of or in any way connected with
Buyer's exercise of the license granted herein, unless caused by the willful or
negligent act or omission of Seller, its agents, tenants, subtenants,
contractors or employees.
(C) Scope Limitation. This Section 22.2.8 shall not apply to
----------------
the roof and other structural repairs which are the landlord's responsibility
under the applicable Store Lease. Seller shall not have any obligation to
remediate any condition relating thereto deemed not
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satisfactory by Buyer and Buyer shall not be entitled to terminate this
Agreement as a result thereof.
22.2.9 Warranties and Guarantees.
Seller shall have provided Buyer with copies, together with
an assignment and assumption agreement in the form attached hereto as Exhibit M,
of all warranties and guarantees, if any, held by Seller for the Assets or
Improvements.
22.2.10 Landlord Estoppels.
To the extent necessary, Buyer shall have received from each
landlord under the Store Leases estoppel certificates in substantially the form
attached hereto as Exhibit I, or, if not so received from the landlord, subject
to hereto 19.3 hereof estoppel certificates from Seller confirming that the
documents constituting the Store Leases set forth in Exhibit B hereto are
complete and that such documents have not been amended or modified in any
respect without Buyer's consent and that no termination notice has been received
with respect to such Store Lease (each estoppel certificate from Seller to
survive until the earlier of the term of the corresponding Store Lease and the
time that such estoppel certificate is provided by the landlord under such Store
Lease).
22.3 Conditions to Obligations of Seller.
The obligation of Seller to consummate the transactions
contemplated hereby shall be, at the option of Seller, subject to the
fulfillment, at or prior to the Initial Closing Date, of the following
additional conditions:
22.3.1 Merger Agreement.
All conditions to closing contained in the Merger Agreement
shall have been satisfied or waived and, concurrently with or prior to the
Initial Closing of this transaction, the Merger shall have been consummated. In
the event, whether before or after the Initial Closing or any respective
Subsequent Closings, that the FTC or a State Attorney General withdraws its
final approval of the contemplated Provisional Consent Decree or conditions or
modifies such Provisional Consent Decree in a manner considered by Seller in its
sole discretion to be adverse to Seller, or such Provisional Consent Decree does
not become a final consent decree, Seller will have the right to require that
the transactions contemplated pursuant to this Agreement be rescinded and this
Agreement be terminated.
22.3.2 Representations and Warranties.
The representations and warranties of Buyer contained in
this Agreement or in any other document of Buyer delivered pursuant hereto shall
be true and correct in all material respects when made and on the Initial
Closing Date as if made on that date (except to the extent that they are made as
of an earlier date) and Buyer shall have delivered to the Escrow
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Holder a certificate addressed to Seller to such effect to Seller executed by a
duly authorized officer of Buyer.
22.3.3 Buyer's Performance.
Each of the obligations of Buyer to be performed on or
before the Initial Closing Date pursuant to the terms of this Agreement shall
have been duly performed in all material respects on or before the Initial
Closing Date, and at the Initial Closing Buyer shall have delivered to the
Escrow Holder certificate addressed to Seller to such effect signed by a duly
authorized officer of Buyer.
22.3.4 Opinion of Buyer's Counsel.
Escrow Holder shall have been furnished with an opinion of
Varner, Saleson & Dobler LLP, counsel to Buyer, dated the Initial Closing Date,
addressed to Seller, in form and substance reasonably satisfactory to Seller, to
the effect that:
(a) Stater Bros. Markets is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
California;
(b) Stater Bros. Holdings Inc. is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware;
(c) Both Buyer corporations have full corporate power
to carry out the transactions provided for in this Agreement, and this Agreement
and all other instruments to be executed by Buyer in connection herewith have
been duly and validly authorized, executed and delivered by Buyer, and
constitute valid and binding obligations of Buyer, as the case may be (assuming
this Agreement and such other instruments are valid and binding obligations of
Seller), enforceable against it in accordance with its terms, subject, however,
to all bankruptcy, insolvency, reorganization, moratorium and other laws of
general applicability relating to or affecting creditor's rights, to general
principles of equity and to judicial limits on the rights of specific
performance; and
(d) Neither the execution and delivery by Buyer
(respectively) of this Agreement nor the documents to be executed and delivered
by Buyer in connection herewith violates, or conflicts with the respective
Articles or Certificate of Incorporation or By-laws of Buyer (respectively).
22.3.5 Sales Tax Resale Exemption Certificate.
Seller shall have received from Buyer a Sales Tax Resale
Exemption Certificate from each state in which the Store Properties are located.
22.3.6 Consents.
Except as otherwise provided in this Agreement (including
Section 18 and Section 19), Seller shall have received the consents of all
persons required for the transfer of the Assets, the Contracts, the Store Leases
and the Permits to Buyer, except where such consents are
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not material when considered in connection with the transactions as a whole
contemplated by this Agreement.
23. Termination.
This Agreement may be terminated at any time prior to the Initial
Closing:
(a) by mutual written consent of the Parties at any time prior to the
Initial Closing; or
(b) by Buyer, in its sole discretion, if any one or more of the
conditions precedent to its obligations herein shall not have been waived or
fulfilled in all material respects by December 31, 1999, provided that if on
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such date the Merger has not been consummated because of failure to obtain all
appropriate governmental consents and approvals, or by reason of the fact that
any person or entity is challenging the Merger, then such date shall be June 30,
2000; provided further that such right to terminate this Agreement shall not be
--------
available to Buyer if Buyer is at that time in material breach of this
Agreement;
(c) by Seller, in its sole discretion, if any one or more of the
conditions precedent to its obligations herein shall not have been waived or
fulfilled in all material respects by December 31, 1999, provided that if on
--------
such date the Merger has not been consummated because of failure to obtain all
appropriate governmental consents and approvals, or by reason of the fact that
any person or entity is challenging the Merger, then such date shall be June 30,
2000; provided further that such right to terminate this Agreement shall not be
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available to Seller if Seller is at that time in material breach of this
Agreement; or
Termination pursuant to clause (b) or (c) of this Section shall not
relieve any Party of liability for breach of its obligations under this
Agreement.
If the Initial Closing occurs, the right to terminate under (b) or (c)
above shall be terminated.
24. Miscellaneous.
24.1 Notices.
All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed given when delivered personally to or
when received by commercial delivery service or sent by facsimile (with
confirmation of receipt) by the Parties, their successors in interest or their
assignees at the following addresses, or at such other addresses as the Parties
may designate by written notice in the manner aforesaid:
"Buyer" Stater Bros. Holdings Inc./Stater Bros. Markets
21700 Barton Road
Colton, CA 92324
Attn: Chief Financial Officer
Fax: (909) 783-5098
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With copy to:
Varner, Saleson & Dobler LLP
3750 University Avenue, Suite 610
Riverside, CA 92501
Attn: Bruce D. Varner, Esq.
Fax: (909) 274-7770
"Seller" Albertson's, Inc.
250 Parkcenter Boulevard
Boise, Idaho 83726
Attn: Legal Department
Fax: (208) 395-6225
With copy to:
Ryan, Swanson & Cleveland, PLLC
1201 Third Avenue, Suite 3400
Seattle, Washington 98101
Attn: Michael Tronquet
Fax: (206) 621-7568
24.2 Assignability and Parties in Interest.
This Agreement shall not be assignable by any of the Parties without
the prior written consent of the other Party; provided, however: (i) Seller may
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by written notice assign this Agreement in whole or in part to American Stores
Company, and (ii) Buyer or Seller may assign this Agreement to any affiliated
company, provided that in the event of an assignment, the assignor remains bound
and the assignee is able to fully discharge all of the assignor's obligations
under this Agreement. This Agreement shall inure to the benefit of and be
binding upon Buyer and Seller and their respective permitted successors and
assigns. No person other than the Parties and their assignees shall have any
rights or benefits hereunder. In the event that the whole or a portion of this
Agreement is assigned to American Stores Company, the amount of the Purchase
Price used to determine the Floor in Section 17.3 shall be the aggregate of the
purchase prices resulting from the consummation of the transactions contemplated
by both agreements and the determination of whether the Floor was exceeded shall
be made by including all Permitted Losses arising from both agreements.
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24.3 Governing Law.
This Agreement shall be governed by, and construed and enforced in
accordance with the laws of the State of California without regard to its choice
of laws rules.
24.4 Counterparts.
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute but one and the same instrument.
24.5 Indemnification for Brokerage.
Buyer and Seller each represent and warrant to the other that no
broker or finder has acted on its behalf in connection with this Agreement or
the transactions contemplated hereby. Each Party agrees to indemnify and hold
and save harmless the other from any claim or demand for commissions or other
compensation by any broker, finder or similar agent claiming to have been
employed by or on behalf of such Party.
24.6 Publicity.
All publicity relating to this Agreement and the sale of Assets
hereunder shall be released subject to the terms of the Confidentiality
Agreement and only after prior consultation with the other Party. The Parties
agree not to disclose publicly (except as required by law, including any
applicable securities law or other legal disclosure obligations of such Party or
any consolidated group of which it is a part or except as may be required by
debt instruments and/or financing or credit agreements by which the Parties are
bound) any financial information in connection with the sale of Assets
hereunder. This provision shall survive the closing and the termination of this
Agreement without limitation.
24.7 Complete Agreement.
This Agreement, its Exhibits, and the other documents delivered or to
be delivered pursuant to this Agreement and the Confidentiality Agreement
contain or will contain the entire agreement between the Parties with respect to
the transactions contemplated herein and shall supersede all previous oral or
written agreements and all contemporaneous oral negotiations, commitments, and
understandings.
24.8 Modifications. Amendments and Waivers.
At any time prior to the Initial Closing Date or termination of this
Agreement, the Parties may, by written agreement:
(a) Extend the time for the performance of any of the obligations
or other acts of the Parties;
(b) Waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement;
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(c) Waive compliance with any of the covenants or agreements
contained in this Agreement; and
(d) Amend or supplement any of the provisions of this Agreement.
24.9 Interpretation.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. All Exhibits and Schedules attached to this Agreement are
incorporated as part of this Agreement as if fully set forth herein.
24.10 Subsidiaries.
All references in this Agreement to Buyer or Seller shall be deemed to
include reference to their respective affiliates and subsidiaries.
24.11 Expenses.
24.11.1 Transaction Expenses.
Except as provided in Section 9.4, 17, or 24.11.2 hereof, all
other fees, costs and expenses incurred by Buyer or Seller in connection with
the transactions contemplated by this Agreement shall be borne by the Party
incurring the same.
24.11.2 Litigation Expenses.
In the event of litigation between the Parties relating to this
Agreement, the party that is determined by a final non appealable order of a
court of competent jurisdiction to be the prevailing party shall be entitled to
be reimbursed by the other party for all of the reasonable legal fees and
disbursements such prevailing party has incurred in connection with such
litigation, including any appeal therefrom.
24.12 No Use of Names.
Buyer agrees that it shall not use the name or logo of Seller or any
similar name or logo, except as provided in Section 1.2(f) hereof or in
connection with the temporary use (not to exceed ninety (90) days) thereof
pending removal or replacement of such name or logo from the Assets. Seller
shall, at Seller's expense, remove its name or logo from pylons and building
signs (which shall remain Seller's property) from the Store Properties within
five (5) days after the Closing Date for each respective Store Property.
Notwithstanding anything to the contrary contained herein, Buyer shall not have
the right to use affirmatively the name or logo of Seller for advertising
purposes or otherwise for Buyer's benefit.
24.13 Time is of the Essence.
Time is of the essence of each and every provision of this Agreement.
24.14 Third Party Beneficiary Rights.
Except as may be otherwise provided herein, this Agreement is not
intended to create, nor shall it be in any way interpreted or construed to
create, any third party beneficiary rights in any person not a Party hereto.
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24.15 Further Assurance.
Provided the same does not result in any expense or liability to the
requested Party in addition to that specifically provided elsewhere or
contemplated in this Agreement, each Party will from time to time after the
Initial Closing Date and the respective Subsequent Closing Dates, upon the
request of the other Party, do, execute, acknowledge and deliver such further
acts, deeds, assignments, assumptions, transfers and conveyances as may be
reasonably required to consummate the transactions contemplated herein or to
convey, transfer, assign and vest in Buyer all of Seller's right, title and
interest in and to the Assets.
24.16 1031 Exchange.
Buyer and Seller acknowledge that either party may wish to structure
this transaction as a tax deferred exchange of like-kind property within the
meaning of Section 1031 of the Code. Each party agrees to reasonably cooperate
with the other party to effect such an exchange; provided, however, that
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(i) the cooperating party shall not be required to acquire or take title to any
exchange property, (ii) the cooperating party shall not be required to incur any
expense (excluding attorneys' fees) or liability whatsoever in connection with
the exchange, including, without limitation, any obligation for the payment of
any escrow, title, brokerage or other costs incurred with respect to the
exchange, (iii) no substitution of the effectuating party shall release said
party from any of its obligations, warranties or representations set forth in
this Agreement or from liability for any prior or subsequent default under this
Agreement by the effectuating party, its successors or assigns, which
obligations shall continue as the obligations of a principal and not of a surety
or guarantor, (iv) the effectuating party shall give the cooperating party at
least five (5) business days prior notice of the proposed changes required to
effect such exchange and the identity of any party to be substituted in the
Escrow, (v) the effectuating party shall be responsible for preparing all
additional agreements, documents and escrow instructions (collectively, the
"Exchange Documents") required by the exchange, at its sole cost and expense,
and (vi) the effectuating party shall be responsible for making all
determinations as to the legal sufficiency, tax considerations and other
considerations relating to the proposed exchange, the Exchange Documents and the
transactions contemplated thereby, and the cooperating party shall in no event
be responsible for, or in any way be deemed to warrant or represent any tax or
other consequences of the exchange transaction arising by reason of the
cooperating party's performance of the acts required hereby.
24.17 Joint and Several Liability.
The Parties acknowledge that Stater Bros. Markets, a California
corporation and Stater Bros. Holdings Inc., a Delaware corporation are jointly
and severally liable for the obligations of and performance by Buyer under this
Agreement.
-46-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
ALBERTSON'S, INC., a Delaware
corporation
/s/ Thomas R. Soldin
By: Thomas R. Soldin
Title: Executive Vice President and
General Counsel
STATER BROS. MARKETS, a
California corporation
/s/ Jack H. Brown
By: Jack H. Brown
Title: Chairman of the Board,
President and CEO
STATER BROS. HOLDINGS INC.,
a Delaware corporation
/s/ Bruce D. Varner
By: Bruce D. Varner
Title: Secretary
-47-
<PAGE>
EXHIBIT A
Owned Stores
<TABLE>
<S> <C> <C>
Store LU #458 2535 East Avenue South Palmdale, CA
Palmdale, CA 93550
Store LU #504 25050 Hancock Avenue Murrieta- Temecula, CA
Murrieta Hot Springs, CA
92562
Store AL #607 3325 E. Chapman Avenue Orange, CA
Orange, CA 92669
Store AL #627 8640 E. Alondra Blvd. Paramount, CA
Paramount, CA 90723
Store AL #681 26900 Sierra Highway Santa Clarita, CA
Santa Clarita, CA 91355
Store AL #683 1717 Visto Chino Palm Springs, CA
Palm Springs, CA
Store AL #1627 78-630 Highway 111 La Quinta, CA
La Quinta, CA 92253
Store AL #1630 1674 Main Street Romona, CA
Ramona, CA 92065
Store AL #1631 1451 North Santa Fe Vista, CA
Vista, CA 92083
Store AL #1634 37218 47th Street East Palmdale, CA
Palmdale, CA 93552
Store AL #1648 7511 East Orangethorp Buena Park, CA
Buena Park, CA 90621
Store AL #1672 635 N. Broadway Escondido, CA
Escondido, CA 92025
Store AL #1673 22351 El Toro Road El Toro, CA
El Toro, CA 92630
Store AL #1677 26892 La Paz Road Laguna Hills, CA
Laguna Hills, CA 92653
Store AL #1687 780 Sycamore Avenue Vista, CA
Vista, CA 92083
Store AL #1692 Mission & Pepper Falbrook, CA (LAND)
Fallbrook, CA
</TABLE>
-1-
<PAGE>
EXHIBIT B
Store Leases
<TABLE>
<S> <C> <C>
Store SS #231 3770 Mission Avenue Oceanside, CA
Oceanside, CA 92054
Store LU #298 2170 Vista Way Oceanside, CA
Oceanside, CA 92054
Store LU #425 333 N. Euclid Avenue Fullerton, CA
Fullerton, CA 92632
Store LU #442 17220 S. Lakewood Blvd. Bellflower, CA
Bellflower, CA 90706
Store LU #473 11750 E. Whittier Blvd. Whittier, CA
Whittier, CA 90601
Store LU #553 9909 Carmel Mountain Rd. San Diego, CA
San Diego, CA 92129
Store LU #561 1330 Mission Road San Marcos, CA
San Marcos, CA 92069
Store AL # 613 1048 N. El Camino Real Encinitas, CA
Encinitas, CA 92024
Store AL #619 31813 Highway 79 South Temecula, CA
Temecula, CA 92592
Store AL #620 610 South Brookhurst Anaheim, CA
Anaheim, CA 92804
Store LU #624 616 Camino De Los Mares San Clemente, CA
San Clemente, CA 92673
Store AL #629 851 North Harbor Blvd. La Habra, CA
La Habra, CA 90631
Store AL #651 11815 Artesia Boulevard Artesia, CA
Artesia, CA 90701
Store AL #666 1131 State College Blvd. Anaheim, CA
Anaheim, CA 92806
Store AL #1601 7814 E. Firestone Blvd. Downey, CA
Downey, CA 90241
Store AL #1604 1111 E. Imperial Hwy. Placentia, CA
Placentia, CA 92670
</TABLE>
-1-
<PAGE>
<TABLE>
<S> <C> <C>
Store AL #1608 10051 Valley View Street Cypress, CA
Cypress, CA 90630
Store AL #1619 1840 East Avenue "J" Lancaster, CA
Lancaster, CA 93535
Store AL #1623 69255 Ramon Road Cathedral City, CA
Cathedral City, CA 92234
Store AL #1635 1040 E. Bastanchury Road Fullerton, CA
Fullerton, CA 92635
Store AL #1641 6501 East Spring Long Beach, CA
Long Beach, CA 90806
Store AL #1644 13589 Poway Road Poway, CA
Poway, CA 92064
Store AL #1652 12800 La Mirada Boulevard La Mirada, CA
La Mirada, CA 90638
Store AL #1656 10114 Adams Street Huntington Beach, CA
Huntington Beach, CA 92646
Store AL #1662 20677 Amar Road Walnut, CA
Walnut, CA 91789
Store AL #1668 7101 Warner Avenue Huntington Beach, CA
Huntington Beach, CA 92647
Store AL #1670 2845 West Avenue "L" Lancaster, CA
Lancaster, CA 93534
Store AL #1674 11300 Firestone Blvd. Norwalk, CA
Norwalk, CA 90650
</TABLE>
-2-
<PAGE>
EXHIBIT C
Collective Bargaining Agreements and Union Contracts
((S)1.1(d))
-1-
<PAGE>
EXHIBIT C
ALBERTSON'S INC.
DIVESTITURE OFFER SUMMARY - UNION/NONUNION LIST
<TABLE>
<CAPTION>
U-NU STORE CO. DIV LOCATION BAKERY CLERK MEAT OTHER
#
STATER BROS. (Total: 44 - Albertson's 34; Lucky 10)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 U 231 SS Oceanside, CA NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167, L324, L770, L1036, L1167, 1428
1428 & 1422), UFCW 135 & 1422), UFCW 135
- ----------------------------------------------------------------------------------------------------------------------------------
2 U 298 LU Oceanside, CA NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167, L324, L770, L1036, L1167, 1428
1428 & 1442), UFCW 135 & 1422), UFCW 135
- -----------------------------------------------------------------------------------------------------------------------------------
3 U 425 LU Fullerton, CA NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167, L324, L770, L1036, L1167, 1428
1428 & 1422), UFCW 324 & 1442), UFCW 324
- -----------------------------------------------------------------------------------------------------------------------------------
4 U 442 LU Bellflower, CA NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167, L324, L770, L1036, L1167,
1428 & 1442), UFCW 324 1428 & 1442), UFCW 324
- -----------------------------------------------------------------------------------------------------------------------------------
5 U 458 LU Palmdale, CA NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat, So. Calif Retail Food
Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135, Ind. Agmt. -SEUI
L324, L770, L1036, L1167, L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 770 1428 & 1442), UFCW 1036
- -----------------------------------------------------------------------------------------------------------------------------------
6 U 473 LU Whitter, CA NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167, L324, L770, L1036, L1167,
1428 & 1442), UFCW 324 1428 & 1442), UFCW 770
- ----------------------------------------------------------------------------------------------------------------------------------
7 U 504 LU Murieta NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat,
-Temecula, CA Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167, L324, L770, L1036, L1167,
1428 & 1442), UFCW 1167 1428 & 1442), UFCW 1167
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALBERTSON'S INC.
DIVESTITURE OFFER SUMMARY - UNION/NONUNION LIST
<TABLE>
U-NU STORE CO. DIV LOCATION BAKERY CLERK MEAT OTHER
#
STATER BROS. (Total: 44 - Albertson's 34; Lucky 10)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8 U 553 LU San Diego, CA NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167, L324, L770, L1036, L1167, 1428,
1428 & 1442), UFCW 135 & 1442), UFCW 135
- ----------------------------------------------------------------------------------------------------------------------------------
9 U 561 LU San Marcos, CA NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167, L324, L770, L1036, L1167, 1428
1428 & 1442), UFCW 135 & 1422), UFCW 135
- -----------------------------------------------------------------------------------------------------------------------------------
10 U 607 AL 50600 Chapman Avenue, Retail Handshop So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat, So. Calif.
Orange, CA Agreement, Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135, Retail Food
BC&TW 37 (BO) L324, L770, L1036, L1167, L324, L770, L1036, L1167, Ind. Agmt -
1428 & 1422), UFCW 324 1428 & 1442), UFCW 324 SEUI
Local 1877
- -----------------------------------------------------------------------------------------------------------------------------------
11 U 613 AL 50600 Leucadia & Retail Handshop So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat, So. Calif.
El Camino, Agreement, Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135, Retail Food
Encinitas, CA BC&TW 31 (BO) L324, L770, L1036, L1167, L324, L770, L1036, L1167, Ind. Agmt -
1428 & 1442), UFCW 135 1428 & 1442), UFCW 135 SEUI
Local 1877
- -----------------------------------------------------------------------------------------------------------------------------------
12 U 619 AL 50600 Hwy. 79 & Red Hawk NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat, So. Calif.
Temecula, CA Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135, Retail Food
L324, L770, L1036, L1167, L324, L770, L1036, L1167, 1428 Ind. Agmt -
1428 & 1442), UFCW 1167 & 1442), UFCW 1167 SEUI
Local 1877
- -----------------------------------------------------------------------------------------------------------------------------------
13 U 620 AL 50600 Orange & Brookhurst, NA Calif. Retail Food, Meat, So. Calif. Retail Food, Meat, So. Calif.
Temecula, CA Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135, Retail Food
L324, L770, L1036, L1167, L324, L770, L1036, L1167, Ind. Agmt -
1428 & 1442), UFCW 324 1428 & 1442), UFCW 324 SEUI
Local 1877
- ----------------------------------------------------------------------------------------------------------------------------------
14 U 624 LU San Clemente, CA NA So. Calif. Retail Food, Meat, So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135, Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167, L324, L770, L1036, L1167, 1428
1428 & 1442), UFCW 324 & 1442), UFCW 324
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALBERYDON'S, INC.
DIVERSTITURE OFFER SUMMARY - UNION/NONUNION LIST
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
STORE
U-NU # CO. DIV LOCATION BAKERY CLERK
<S> <C> <C> <C> <C> <C> <C> <C>
15 U 627 AL 50600 Paramount, CA NA So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
16 U 629 AL 50600 La Habra, CA NA So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
17 U 651 AL 50600 Pioneer & Artesia, Artesia, Retail Handshop So. Calif. Retail Food, Meat,
CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
18 U 666 AL 50600 State College, Anaheim, CA Retail Handshop So. Calif. Retail Food, Meat,
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
19 U 681 AL 50600 Sierra & Via Princessa, (BO) So. Calif. Retail Food, Meat,
Santa Clarita, CA Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167,
1428 & 1442), UFCW 770
20 U 683 AL 50600 Vista Chino & Sunrise, Palm (BO) So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167,
1428 & 1442), UFCW 1167
21 U 1601 AL 50600 Downey, CA NA So. Calif. Retail Food, Meat,
Bky, Candy & GM Agmt. (L135,
L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
STORE
U-NU # Meat Other
<S> <C> <C> <C> <C>
15 U 627 So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, 1428 Local 1877
& 1442), UFCW 324
16 U 629 So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, 1428 Local 1877
& 1442), UFCW 324
17 U 651 So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, 1428 Local 1877
& 1442), UFCW 324
18 U 666 So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, 1428 Local 1877
& 1442), UFCW 324
19 U 681 So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, 1428 Local 1877
& 1442), UFCW 770
20 U 683 So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, 1428 Local 1877
& 1442), UFCW 1167
21 U 1601 So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, 1428 Local 1877
& 1442), UFCW 324
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALBERTSON'S, INC.
DIVESTITURE OFFER SUMMARY - UNION/NONUNION LIST
<TABLE>
<CAPTION>
STORE
U-NU # CO DIV LOCATION BAKERY CLERK
<S> <C> <C> <C> <C> <C> <C>
22 U 1604 AL 50600 Placentia, CA Retail Handshop So. Calif. Retail Food, Meat,
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
23 U 1608 AL 50600 Cypress, CA Retail Handshop So. Calif. Retail Food, Meat,
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
24 U 1619 AL 50600 Ave J & 20th East, Retail Handshop So. Calif. Retail Food, Meat,
Lancaster, CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 37 L324, L770, L1036, L1167,
1428 & 1442), UFCW 770
25 U 1623 AL 50600 Date Palm & Ramon, Retail Handshop So. Calif. Retail Food, Meat,
Cathedral City, CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 37 L324, L770, L1036, L1167
1428 & 1442), UFCW 1167
26 U 1627 AL 50600 La Quinta, CA Retail Handshop So. Calif. Retail Food, Meat,
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 37 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 1167
27 U 1630 AL 50600 Ramona, CA Retail Handshop So. Calif. Retail Food, Meat,
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 135
28 U 1631 AL 50600 Santa Fe & Bobier, Retail Handshop So. Calif. Retail Food, Meat,
Vista, CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 135
</TABLE>
<TABLE>
<CAPTION>
STORE
U-NU # CO DIV LOCATION MEAT OTHER
<S> <C> <C> <C> <C> <C> <C>
22 U 1604 AL 50600 Placentia, CA So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
23 U 1608 AL 50600 Cypress, CA So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
24 U 1619 AL 50600 Ave J & 20th East, So. Calif. Retail Food, Meat, So. Calif. Retail Food
Lancaster, CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 1036
25 U 1623 AL 50600 Date Palm & Ramon, So. Calif. Retail Food, Meat, So. Calif. Retail Food
Cathedral City, CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167 Local 1877
1428 & 1442), UFCW 1167
26 U 1627 AL 50600 La Quinta, CA So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 1167
27 U 1630 AL 50600 Ramona, CA So. Calif. Retail Food, Meat, So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 135
28 U 1631 AL 50600 Santa Fe & Bobier, So. Calif. Retail Food, Meat, So. Calif. Retail Food
Vista, CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 135
</TABLE>
4/29/99 9
<PAGE>
ALBERTSON'S, INC.
DIVESTITURE OFFER SUMMARY - UNION/NONUNION LIST
<TABLE>
<CAPTION>
STORE
U-NU # CO DIV LOCATION BAKERY CLERK
<S> <C> <C> <C> <C> <C> <C>
29 U 1634 AL 50600 East Palmdale, Palmdale, Retail Handshop So. Calif Retail Food, Meat
CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 37 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 770
30 U 1635 AL 50600 Bastanchury Rd., Fullerton, Retail Handshop So. Calif Retail Food, Meat
CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
31 U 1641 AL 50600 Palo Verde & Spring, Long Retail Handshop So. Calif Retail Food, Meat
Beach, CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
32 U 1644 AL 50600 Community & Poway, Poway Retail Handshop So. Calif Retail Food, Meat
CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 37 (BO) L324, L770, L1036, L1167
1428 & 1442), UFCW 135
33 U 1648 AL 50600 Buena Park, CA Retail Handshop So. Calif Retail Food, Meat
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 37 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
34 U 1652 AL 50600 La Mirada, CA Retail Handshop So. Calif Retail Food, Meat
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
35 U 1656 AL 50600 Adams & Brookhurst, Retail Handshop So. Calif Retail Food, Meat
Huntington Beach, CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
</TABLE>
<TABLE>
<CAPTION>
STORE
U-NU # CO DIV LOCATION MEAT OTHER
<S> <C> <C> <C> <C> <C> <C>
29 U 1634 AL 50600 East Palmdale, Palmdale So. Calif Retail Food, Meat So. Calif. Retail Food
CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 1036
30 U 1635 AL 50600 Bastanchury Rd., Fuller So. Calif Retail Food, Meat So. Calif. Retail Food
CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
31 U 1641 AL 50600 Palo Verde & Spring, Long So. Calif Retail Food, Meat So. Calif. Retail Food
Beach, CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
32 U 1644 AL 50600 Community & Poway, Poway So. Calif Retail Food, Meat So. Calif. Retail Food
CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167 Local 1877
1428 & 1442), UFCW 135
33 U 1648 AL 50600 Buena Park, CA So. Calif Retail Food, Meat So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
34 U 1652 AL 50600 La Mirada, CA So. Calif Retail Food, Meat So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
35 U 1656 AL 50600 Adams & Brookhurst, So. Calif Retail Food, Meat So. Calif. Retail Food
Huntington Beach, CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
</TABLE>
4/29/99 11
<PAGE>
ALBERTSON'S, INC.
DIVESTITURE OFFER SUMMARY - UNION/NONUNION LIST
<TABLE>
<CAPTION>
STORE
U-NU # CO DIV LOCATION BAKERY CLERK
<S> <C> <C> <C> <C> <C> <C>
36 U 1662 AL 50600 Amar & Grand, Walnut, CA Retail Handshop So. Calif Retail Food, Meat
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 1428
37 U 1668 AL 50600 Goldenwest & Warner Retail Handshop So. Calif Retail Food, Meat
Huntington Beach, CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
38 U 1670 AL 50600 Ave L & 30th West, Retail Handshop So. Calif Retail Food, Meat
Lancaster, CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 37 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 770
39 U 1672 AL 50600 Escondido, CA Retail Handshop So. Calif Retail Food, Meat
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167
1428 & 1442), UFCW 135
40 U 1673 AL 50600 Trabuco Rd., El Toro, CA Retail Handshop So. Calif Retail Food, Meat
Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
41 U 1674 AL 50600 Firestone & Orr-Day, Retail Handshop So. Calif Retail Food, Meat
Norwalk, CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 37 L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
42 U 1677 AL 50600 Aliso Viego, Laguna Hills, Retail Handshop So. Calif Retail Food, Meat
CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 L324, L770, L1036, L1167,
1428 & 1442), UFCW 324
</TABLE>
<TABLE>
<CAPTION>
STORE
U-NU # CO DIV LOCATION MEAT OTHER
<S> <C> <C> <C> <C> <C> <C>
36 U 1662 AL 50600 Amar & Grand, Walnut, CA So. Calif Retail Food, Meat So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 1428
37 U 1668 AL 50600 Goldenwest & Warner So. Calif Retail Food, Meat So. Calif. Retail Food
Huntington Beach, CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
38 U 1670 AL 50600 Ave L & 30th West, So. Calif Retail Food, Meat So. Calif. Retail Food
Lancastet, CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 1036
39 U 1672 AL 50600 Escondido, CA So. Calif Retail Food, Meat So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167 Local 1877
1428 & 1442), UFCW 135
40 U 1673 AL 50600 Trabuco Rd., El Toro, CA So. Calif Retail Food, Meat So. Calif. Retail Food
Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
41 U 1674 AL 50600 Firestone & Orr-Day, So. Calif Retail Food, Meat So. Calif. Retail Food
Norwalk, CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
42 U 1677 AL 50600 Aliso Viego, Laguna Hills, So. Calif Retail Food, Meat So. Calif. Retail Food
CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 324
</TABLE>
4/29/99 11
<PAGE>
ALBERTSON'S, INC.
DIVESTITURE OFFER SUMMARY - UNION/NONUNION LIST
<TABLE>
<CAPTION>
STORE
U-NU # CO DIV LOCATION BAKERY CLERK
<S> <C> <C> <C> <C> <C> <C>
43 U 1687 AL 50600 Sycamore & Shadow Ridge, Retail Handshop So. Calif Retail Food, Meat
Vista, CA Agreement, Bky, Candy & GM Agmt. (L135,
BC&TW 31 (BO) L324, L770, L1036, L1167,
1428 & 1442), UFCW 135
44 1692 AL NO STORE - LAND ONLY
</TABLE>
<TABLE>
<CAPTION>
STORE
U-NU # CO DIV LOCATION MEAT OTHER
<S> <C> <C> <C> <C> <C> <C>
43 U 1687 AL 50600 Sycamore & Shadow Ridge, So. Calif Retail Food, Meat So. Calif Retail Food
Vista, CA Bky, Candy & GM Agmt. (L135, Ind. Agmt. - SEUI
L324, L770, L1036, L1167, Local 1877
1428 & 1442), UFCW 135
</TABLE>
4/29/99 12
<PAGE>
EXHIBIT D
Excluded Equipment
((S)1.2(a))
Unix In-Store Processor
Console Monitor
Console Keyboard
DigiBoard and/or StallionCard
Lexmark Pharmacy Laser Printer
-1-
<PAGE>
EXHIBIT E
Excluded Contracts
((S)1.2(r))
There are no Excluded Contracts
-1-
<PAGE>
EXHIBIT F
Inventory Prices
((S)5.2)
<TABLE>
<CAPTION>
Department Sales Floor Price Back Room Price
- ---------- ----------------- ---------------
<S> <C> <C>
*Grocery Retail Less 24% Retail Less 24%
*General Merchandise Retail Less 28% Retail Less 28%
*Liquor Retail Less 17% Retail Less 17%
*Meat Deli Retail Less 30% Retail Less 30%
*Lobby Retail Less 25% Retail Less 25%
Produce Retail Less 33% Retail Less 33%
Service Deli Retail Less 40% Retail Less 40%
Floral Retail Less 45% Retail Less 45%
Coffee Retail Less 40% Retail Less 40%
Meat Retail Less 25% Cost
Bakery Retail Less 50% Cost
Supplies (All Departments) Cost
</TABLE>
*Denotes departments to be counted by Inventory Service.
-1-
<PAGE>
EXHIBIT G
Form of Special Warranty (or Grant) Deeds
((S)6.2(a))
-1-
<PAGE>
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $..........................................
...Computed on the consideration or value of property conveyed: OR
...Computed on the consideration or value less loans or encumbrances
remaining at time of sale ___________________________________________________
Signature of Registrant or Agent determining tax
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CORPORATION GRANT DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged.
a corporation organized under the laws of the State of does hereby
GRANT to
the real property in the City of State of California, described as
County of
<TABLE>
<S> <C>
Dated______________________________________________________________________ _____________________________________________________
}
STATE OF CALIFORNIA }SS.
COUNTY OF ________________________}
On ______________________________________________________________before me. By __________________________________________________
__________________________________________________________________________. President
personally appeared ______________________________________________________
__________________________________________________________________________.
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within By __________________________________________________
instrument and acknowledged to me that he/she/they executed the same Secretary
in his/her/their authorized capacity(ies), and that by his/her/their signa-
ture(s) on the instrument the person(s) or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature__________________________________________________________________
MAIL TAX STATEMENTS TO:
(This area for official notarial seal)
</TABLE>
<PAGE>
EXHIBIT H
Form of Bill of Sale
((S)6.2(b))
THIS BILL OF SALE is executed and delivered pursuant to the terms of that
certain Asset Purchase Agreement dated ___________, 1999 ("APA"), by and between
Albertson's, Inc., a Delaware corporation ("Seller") and _______________
("Buyer")
KNOW ALL MEN BY THESE PRESENTS: that Seller, for and in consideration of
the sum of Ten Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, does by these presents
grant, bargain, sell and deliver unto Buyer all of Seller's right, title and
interest in and to the Inventory and Equipment, excluding the Excluded Equipment
and any and all other personal property specifically excluded by any provision
of the APA or disposed of in the ordinary course of business prior to Closing.
The personal property being transferred pursuant to this Bill of Sale
("Personal Property") is being purchased by Buyer and sold by Seller and is
being delivered by Seller to Buyer in an "AS IS, WHERE IS" CONDITION ON THE
CLOSING DATE, AND IN THEIR THEN PRESENT CONDITION, "WITH ALL FAULTS", INCLUDING,
BUT NOT LIMITED TO, BOTH LATENT AND PATENT DEFECTS, AND BUYER SHALL RELY UPON
ITS OWN EXAMINATION THEREOF. OTHER THAN AS SET FORTH EXPRESSLY IN THIS BILL OF
SALE, NO WARRANTIES, EXPRESS OR IMPLIED ARE MADE BY SELLERS CONCERNING THE
ASSETS, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTIBILITY OR FITNESS
FOR A PARTICULAR PURPOSE, OR QUALITY.
The Seller herein covenants, agrees and warrants that it is the owner of
said Personal Property and that the same is free and clear of all liens and
encumbrances, except of personal property taxes not yet due and payable, and
that Seller will defend the sale of said Personal Property against all and every
person or persons whomsoever lawfully claiming the same or any part thereof.
Unless a different meaning is specifically set forth herein, all of the
terms set forth in this Bill of Sale shall have the same meanings ascribed to
such terms in the APA. This Bill of Sale shall be effective on and after the
date of Closing established pursuant to the APA.
EXECUTED at ________________, this ____ day of ___________, 1999.
________________________________
a _____________ corporation
By: ____________________________
Its: _______________________
-1-
<PAGE>
EXHIBIT I
Form of Estoppel Certificate
((S)6.2(c))
(Store #____________)
TO: ________________________________________________
RE: Lease dated: ___________________
Lease Amendments dated: ________________________
LANDLORD: ________________________________________________
TENANT: ________________________________________________
PREMISES: Tenant's store in the _________________________ Shopping Center
("Shopping Center"), located in ___________________________.
As Landlord under the above-described Lease (the "Lease"), the undersigned
hereby acknowledges for the benefit of _______________________________________
("Buyer"), which is about to acquire by assignment the Tenant's interest in the
Lease, the truth and accuracy, as of the date hereof, of the following
statements pertaining to the Lease:
1. Tenant has accepted and is in possession of said Premises, including
any improvements, additions and alterations thereto required to be made by
Landlord under the Lease.
2. The Lease is in full force and effect, and Tenant commenced the payment
of rent thereunder on or about ________________________.
3. To Landlord's knowledge, Tenant is not presently in default under any
of the terms, covenants, conditions or provisions of the Lease, except as
follows:
_________________________________________________________________
_________________________________________________________________
4. The fixed annual rent under the Lease is $___________ and, except to
the extent required by the Lease, no monies have been paid to Landlord more than
thirty (30) days in advance of the due date therefor set forth in the Lease,
except: ________________________________________________. The fixed rent has
been paid through ___________________, 1999.
5. The Lease is for a term of __________________ years, and the term
expires on ___________________. Tenant has the option to extend the Lease term
for ________ additional periods of _________ years each.
6. Landlord acknowledges (a) that there have been no modifications or
amendments to the Lease, except as noted above, and (b) that the Lease (together
with any and all modifications and amendments thereto) represents the entire
agreement between Landlord and Tenant with respect to the Premises, except for
the following additional agreements with respect thereto:
_______________________________________________________________________
_______________________________________________________________________
-2-
<PAGE>
7. The statements herein contained are made to induce Buyer to acquire
Tenant's interest in the Lease and may be relied upon by Buyer and Tenant and
only with respect to such acquisition.
DATED: __________________________, 1999.
"LANDLORD" __________________________________
a ____________________________
By: ______________________________
Its: _________________________
-3-
<PAGE>
EXHIBIT J
Form of Assignment and Assumption Agreement (Store Leases)
((S)6.2(d))
(Store #_______)
This Assignment and Assumption Agreement ("Agreement") is made this ____
day of ____________, 1999, between _________________________________, a
___________ corporation ("Seller"), and _____________________________________, a
____________ corporation ("Buyer").
WITNESSETH:
Whereas, Seller is a tenant of premises at _______________________________
pursuant to a lease (the "Lease") with _______________________________________.
The premises which are the subject of the Lease are located on a portion of the
real property more fully described on Exhibit 1 attached hereto. As used herein,
the term "Lease" shall mean and include the Lease and all amendments,
modifications and supplements thereto, all as more fully described on Exhibit 2
attached hereto; and
Whereas, this Agreement is executed and delivered pursuant to the terms of
that certain Asset Purchase Agreement dated _________________, 1999 ("APA"), by
and between Albertson's, Inc., a Delaware corporation ("Seller") and
______________________________ __________________ ("Buyer"); and
Whereas, Seller desires to assign the Lease to Buyer and Buyer desires that
the Lease be assigned to it and to assume the obligations of the tenant under
the Lease.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, effective on the
Effective Date Seller hereby assigns the Lease, and all its right, title and
interest therein, to Buyer, and Buyer hereby assumes and agrees to pay when due
all sums payable under the Lease and further agrees to be bound at all times
hereafter by all terms, conditions and provisions of the Lease and to perform
and discharge all of Seller's obligations as tenant under the Lease arising from
and after the Effective Date.
Buyer agrees to and does hereby indemnify, defend and hold harmless Seller,
its successors and assigns, from and against any and all liabilities,
obligations, damages, losses, claims, costs, expenses, actions and causes of
action (including, without limitation, attorneys' fees and the reasonable cost
of investigation) of any kind, fixed or contingent, known or unknown, incurred
by or asserted against Seller, its successors and assigns, accruing under the
Lease or arising from or pertaining to Buyer's use, non-use, operation or
occupation of the premises on or subsequent to the Effective Date. Buyer shall
not be released from any of its obligations under the Lease or this Assignment
by the subsequent assignment of the Lease or the subsequent subletting of all or
any portion of the premises.
Seller agrees to and does hereby indemnify, defend and hold harmless Buyer,
its successors and assigns, from and against any and all liabilities,
obligations, damages, losses, claims, costs, expenses, actions and causes of
action (including, without limitation, attorneys' fees
-4-
<PAGE>
and the reasonable cost of investigation) of any kind, fixed or contingent,
known or unknown, incurred by or asserted against Buyer, its successors and
assigns, accruing under the Lease or arising from or pertaining to Seller's use,
non-use, operation or occupation of the premises prior to the Effective Date
The Lease, and the land, buildings, fixtures and other improvements which
are the subject of the Lease, are being transferred to Buyer in an "AS IS, WHERE
IS" CONDITION AND IN THEIR THEN CONDITION, "WITH ALL FAULTS", INCLUDING, BUT NOT
LIMITED TO, BOTH LATENT AND PATENT DEFECTS, AND BUYER SHALL RELY UPON ITS OWN
EXAMINATION THEREOF. NO WARRANTIES, EXPRESS OR IMPLIED, ARE MADE BY SELLER
CONCERNING THE LEASE OR THE LAND, BUILDING, FIXTURES OR OTHER IMPROVEMENTS
SUBJECT TO THE LEASE, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and counterpart signature pages may be assembled to form a
single original document. Unless a different meaning is specifically set forth
herein, all of the terms set forth in this Agreement shall have the same
meanings ascribed to such terms in the APA.
As used herein, the term "Effective Date" shall mean and refer to the date
of Closing established pursuant to the APA.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
set forth above.
"SELLER" _____________________________________
a __________________ corporation
By_________________________________
Its:_____________________
"BUYER" _____________________________________
a ___________________ corporation
By_________________________________
Its:_____________________
-5-
<PAGE>
STATE OF ______________ )
) ss.
COUNTY OF _____________ )
I certify that I know or have satisfactory evidence that ________________
signed this instrument, on oath stated that he was authorized to execute the
instrument as the ________________________________ of _______________________, a
_______________ corporation, and acknowledged it to be the free and voluntary
act and deed of said corporation, for the uses and purposes mentioned in the
instrument.
WITNESS my hand and official seal hereto affixed on _____________________,
1999.
------------------------------------------
(Signature of Notary)
------------------------------------------
(Print or stamp name of Notary)
NOTARY PUBLIC in and for the
State of ________________________________
My Appointment Expires: _________________
STATE OF ______________ )
) ss.
COUNTY OF _____________ )
I certify that I know or have satisfactory evidence that ________________
signed this instrument, on oath stated that he was authorized to execute the
instrument as the ________________________________ of _______________________, a
___________________ corporation, and acknowledged it to be the free and
voluntary act and deed of said corporation, for the uses and purposes mentioned
in the instrument.
WITNESS my hand and official seal hereto affixed on _________________,
1999.
------------------------------------------
(Signature of Notary)
------------------------------------------
(Print or stamp name of Notary)
NOTARY PUBLIC in and for the
State of ________________________________
My Appointment Expires: _________________
-6-
<PAGE>
EXHIBIT 1
---------
Legal Description
-7-
<PAGE>
EXHIBIT 2
---------
Description of Lease
-8-
<PAGE>
EXHIBIT K
Form of Assignment and Assumption Agreement (Contracts)
(Section 6.2(e))
This Assignment and Assumption Agreement ("Agreement") is made this ____
day of ____________, 1999, between _________________________________, a
___________ corporation ("Seller"), and _____________________________________, a
____________ corporation ("Buyer").
WITNESSETH:
Whereas, this Agreement is executed and delivered pursuant to the terms of
that certain Asset Purchase Agreement dated _________________, 1999 ("APA"), by
and between Seller and Buyer; and
Whereas, Seller desires to assign to Buyer the contracts ("Contracts")
defined and described on Exhibit 1 attached hereto and Buyer desires that the
Contracts be assigned to it and to assume the obligations of Seller thereunder.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, effective on the
Effective Date (a) Seller hereby sells, assigns and transfers to Buyer all of
Seller's right, title and interest in and to the Contracts, and (b) Buyer hereby
accepts the above assignment and agrees to be bound by all of the terms,
conditions and provisions of the Contracts from and after the Effective Date.
Buyer agrees to and does hereby indemnify and hold harmless Seller, its
successors and assigns, from and against any and all liabilities, obligations,
damages, losses, claims, costs, expenses, actions and causes of action
(including, without limitation, attorneys' fees and the reasonable cost of
investigation) of any kind, fixed and contingent, known or unknown, incurred by
or asserted against Seller, its successors and assigns, accruing under the
Contracts on or subsequent to the Effective Date.
Seller agrees and does hereby indemnify and hold harmless Buyer, its
successors and assigns, from and against any and all liabilities, obligations,
damages, losses, claims, costs, expenses, actions and causes of action
(including, without limitation, attorneys' fees and the reasonable cost of
investigation) of any kind, fixed and contingent, known or unknown, incurred by
or asserted against Seller, its successors and assigns, accruing under the
Contracts prior to the Effective Date.
The Contracts being transferred pursuant to this Agreement are being
transferred to Buyer in an "AS IS, WHERE IS" CONDITION ON THE CLOSING DATE, AND
IN THEIR THEN PRESENT CONDITION, "WITH ALL FAULTS", INCLUDING, BUT NOT LIMITED
TO, BOTH LATENT AND PATENT DEFECTS, AND BUYER SHALL RELY UPON ITS OWN
EXAMINATION THEREOF. OTHER THAN AS SET FORTH EXPRESSLY HEREIN, NO WARRANTIES,
EXPRESS OR IMPLIED, ARE MADE BY SELLER CONCERNING THE CONTRACTS, INCLUDING, BUT
NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR QUALITY.
-9-
<PAGE>
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and counterpart signature pages may be assembled to form a
single original document. Unless a different meaning is specifically set forth
herein, all of the terms set forth in this Agreement shall have the same
meanings ascribed to such terms in the APA.
As used herein, the term "Effective Date" shall mean and refer to the date
of Closing established pursuant to the APA
DATED: ________________, 1999.
"SELLER" _________________________________________
a ______________ corporation
By: ____________________________
Its: _______________________
"BUYER" _________________________________________
a ________________ corporation
By: ____________________________
Its: _______________________
-10-
<PAGE>
EXHIBIT 1
To Assignment and Assumption Agreement (Contracts)
List of Contracts
-11-
<PAGE>
EXHIBIT L
Form of Assignment and Assumption Agreement (Labor Agreements)
(Section 6.2(f))
This Assignment and Assumption Agreement ("Agreement") is made this ____
day of ____________, 1999, between _________________________________, a
___________ corporation ("Seller"), and _____________________________________, a
____________ corporation ("Buyer").
WITNESSETH:
Whereas, this Agreement is executed and delivered pursuant to the terms of
that certain Asset Purchase Agreement dated _________________, 1999 ("APA"), by
and between Seller and Buyer; and
Whereas, Seller desires to assign to Buyer the collective bargaining
agreement ("CBA") defined and described on Exhibit 1 attached hereto and Buyer
desires that the CBA be assigned to it and to assume the obligations of Seller
thereunder.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, effective on the
Effective Date (a) Seller hereby sells, assigns and transfers to Buyer all of
Seller's right, title and interest in and to the CBA, and (b) Buyer hereby
accepts the above assignment and agrees to be bound by all of the terms,
conditions and provisions of the CBA from and after the Effective Date
Buyer agrees to and does hereby indemnify, defend and hold harmless Seller,
its successors and assigns, from and against any and all liabilities,
obligations, damages, losses, claims, costs, expenses, actions and causes of
action (including, without limitation, attorneys' fees and the reasonable cost
of investigation) of any kind, fixed or contingent, known or unknown, incurred
by or asserted against Seller, its successors and assigns, accruing under the
CBA, arising from or pertaining to any legal or contractual obligation with
respect to employees of Buyer on or subsequent to the Effective Date.
Seller agrees to and does hereby indemnify, defend and hold harmless Buyer,
its successors and assigns, from and against any and all liabilities,
obligations, damages, losses, claims, costs, expenses, actions and causes of
action (including, without limitation, attorneys' fees and the reasonable cost
of investigation) of any kind, fixed or contingent, known or unknown, incurred
by or asserted against Buyer, its successors and assigns, accruing under the
CBA, arising from or pertaining to any legal or contractual obligation with
respect to employees of Buyer prior to the Effective Date.
The CBA being transferred pursuant to this Agreement is being transferred
to Buyer in an "AS IS, WHERE IS" CONDITION ON THE CLOSING DATE, AND IN THEIR
THEN PRESENT CONDITION, "WITH ALL FAULTS", INCLUDING, BUT NOT LIMITED TO, BOTH
LATENT AND PATENT DEFECTS, AND BUYER SHALL RELY UPON ITS OWN EXAMINATION
THEREOF. OTHER THAN AS SET FORTH EXPRESSLY HEREIN, NO WARRANTIES, EXPRESS OR
IMPLIED, ARE MADE BY SELLER CONCERNING THE CBA, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY.
-12-
<PAGE>
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and counterpart signature pages may be assembled to form a
single original document. Unless a different meaning is specifically set forth
herein, all of the terms set forth in this Agreement shall have the same
meanings ascribed to such terms in the APA. As used herein, the term "Effective
Date" shall mean and refer to the date of Closing established pursuant to the
APA.
DATED: ________________, 1999.
"SELLER" _________________________________________
a ______________ corporation
By: ____________________________
Its: _______________________
"BUYER" _________________________________________
a ________________ corporation
By: ____________________________
Its: _______________________
-13-
<PAGE>
EXHIBIT 1
To Assignment and Assumption Agreement (Labor Agreements)
List of CBA
-14-
<PAGE>
EXHIBIT M
Form of Assignment and Assumption Agreement (Guarantees)
(Section 6.2(g))
FOR VALUE RECEIVED, ___________________________________, a _____________
corporation ("Seller"), hereby sells, assigns and transfers to
________________________________, a ______________ corporation ("Buyer"), all
assignable guarantees and warranties (collectively, the "Guarantees") to the
extent that they relate specifically to the ownership or operation of the Store
Properties and not to the extent that they relate to other properties or
operations of the Seller; provided, however, that to the extent any Guarantees
-------- -------
relate to the ownership or operation of the Store Properties, and also to
properties of the Seller other than the Store Properties, such Guarantees shall
be included in this Agreement solely to the extent the portion of such
Guarantees related to the ownership or operation of the Store Properties is
separately assignable. Such Guarantees shall include, but are not limited to,
warranties and guaranties of contractors, suppliers, materialmen and
manufacturers.
The Guarantees being transferred pursuant to this Assignment are being
transferred to Buyer in an "AS IS, WHERE IS" CONDITION ON THE CLOSING DATE, AND
IN THEIR THEN PRESENT CONDITION, "WITH ALL FAULTS", INCLUDING, BUT NOT LIMITED
TO, BOTH LATENT AND PATENT DEFECTS, AND BUYER SHALL RELY UPON ITS OWN
EXAMINATION THEREOF. OTHER THAN AS SET FORTH EXPRESSLY HEREIN, NO WARRANTIES,
EXPRESS OR IMPLIED, ARE MADE BY ASSIGNOR CONCERNING THE GUARANTEES, INCLUDING,
BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR QUALITY.
This Assignment may be executed in counterparts, each of which shall be
deemed an original, and counterpart signature pages may be assembled to form a
single original document.
This Assignment is executed and delivered pursuant to the terms of that
certain Asset Purchase Agreement dated _________________, 1999 ("APA") by and
between Seller and Buyer and, unless a different meaning is specifically set
forth herein, all of the terms set forth in this Assignment shall have the same
meanings ascribed to such terms in the APA.
This Assignment shall be effective on and after the date of Closing
established pursuant to the APA.
DATED: ____________________, 1999.
"SELLER" _________________________________________
a ______________ corporation
By: ____________________________
Its: _______________________
-15-
<PAGE>
EXHIBIT N
Form of Assignment and Assumption Agreement (Prepaid Expenses)
(Section 6.2(h))
FOR VALUE RECEIVED, ___________________________________, a _____________
corporation ("Seller"), hereby sells, assigns and transfers to
______________________________________, a ______________ corporation ("Buyer"),
all assignable deposits, prepaid rent and prepaid expenses (the "Prepaid
Expenses") made by Seller pursuant to Seller's leases for, or otherwise in
respect of the Store Properties.
The Prepaid Expenses being transferred pursuant to this Assignment are
being transferred to Buyer in an "AS IS, WHERE IS" CONDITION ON THE CLOSING
DATE, AND IN THEIR THEN PRESENT CONDITION, "WITH ALL FAULTS", INCLUDING, BUT NOT
LIMITED TO, BOTH LATENT AND PATENT DEFECTS, AND BUYER SHALL RELY UPON IT OWN
EXAMINATION THEREOF. OTHER THAN AS SET FORTH EXPRESSLY HEREIN, NO WARRANTIES,
EXPRESS OR IMPLIED, ARE MADE BY ASSIGNOR CONCERNING THE PREPAID EXPENSES,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR QUALITY.
This Assignment may be executed in counterparts, each of which shall be
deemed an original, and counterpart signature pages may be assembled to form a
single original document.
This Assignment is executed and delivered pursuant to the terms of that
certain Asset Purchase Agreement dated _________________, 1999 ("APA") by and
between Seller and Buyer and, unless a different meaning is specifically set
forth herein, all of the terms set forth in this Assignment shall have the same
meanings ascribed to such terms in the APA.
This Assignment shall be effective on and after the date of Closing
established pursuant to the APA.
DATED: ____________________, 1999.
"SELLER" _________________________________________
a ______________ corporation
By: ____________________________
Its: _______________________
-16-
<PAGE>
EXHIBIT O
Stater Bros. List of Stores
<TABLE>
<S> <C> <C>
Store SS #231 Oceanside, CA $1,246,522
Store LU #298 Oceanside, CA $3,331,723
Store LU #425 Fullerton, CA $815,500
Store LU #442 Bellflower, CA $2,347,000
Store LU #473 Whittier, CA $286,507
Store LU #553 San Diego, CA $250,000
Store LU #561 San Marcos, CA $172,267
Store AL #613 Encinitas, CA $4,083,144
Store AL #619 Temecula, CA $4,443,583
Store AL #620 Anaheim, CA $131,503
Store LU #624 San Clemente, CA $719,160
Store AL #629 La Habra, CA $1,812,036
Store AL #651 Artesia, CA $118,344
Store AL #666 Anaheim, CA $146,326
Store AL #1601 Downey, CA $505,803
Store AL #1604 Placentia, CA $1,731,635
Store AL #1608 Cypress, CA $121,729
Store AL #1619 Lancaster, CA $1,679,945
Store AL #1623 Palm Springs- Indio, CA $1,795,955
Store AL #1635 Fullerton, CA $240,133
Store AL #1641 Long Beach, CA $2,171,042
Store AL #1644 Poway, CA $465,126
Store AL #1652 La Mirada, CA $95,852
Store AL #1656 Huntington Beach, CA $347,274
Store AL #1662 Walnut, CA $521,874
Store AL #1668 Huntington Beach, CA $788,286
Store AL #1670 Lancaster, CA $513,706
Store AL #1674 Norwalk, CA $2,009,071
Store LU #458 Palmdale, CA $3,879,435
Store LU #504 Murrieta- Temecula, CA $4,894,015
Store AL #607 Orange, CA $4,580,070
Store AL #627 Paramount, CA $5,322,337
Store AL #681 Santa Clarita, CA $4,803,843
Store AL #683 Palm Springs, CA $7,003,493
</TABLE>
-17-
<PAGE>
<TABLE>
<S> <C> <C>
Store AL #1627 La Quinta, CA $3,539,058
Store AL #1630 Romona, CA $5,316,204
Store AL #1631 Vista, CA $4,814,196
Store AL #1634 Palmdale, CA $3,591,687
Store AL #1648 Buena Park, CA $1,071,073
Store AL #1672 Escondido, CA $2,947,439
Store AL #1673 El Toro, CA $2,713,708
Store AL #1677 Laguna Hills, CA $2,359,737
Store AL #1687 Vista, CA $2,544,203
Store AL #1692 Falbrook, CA $2,641,694
</TABLE>
-18-
<PAGE>
EXHIBIT P
Seller Disclosure Schedule
(Section 15)
Litigation
- ----------
Store AL Store No. 1634 Albertson v. City of Palmdale
Disputes
- --------
Store LU Store No. 472 Mistaken Term Sheet. Letter Agreement sent
March 9, 1999
-19-
<PAGE>
EXHIBIT Q
Buyer Disclosure Schedule
(Section 16)
-1-
<PAGE>
EXHIBIT R
Permitted Exceptions/Title Policies
(Section 22.2.6)
-1-
<PAGE>
EXHIBIT 4.6
_______________________________________________________________________________
_____________________________________
_____________________________________
STATER BROS. HOLDINGS INC.
SERIES A AND SERIES B
10 3/4% SENIOR NOTES DUE 2006
________________________
INDENTURE
Dated as of August 6, 1999
________________________
IBJ WHITEHALL BANK & TRUST COMPANY
Trustee
______________
_______________________________________________________________________________
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Act Section Indenture Section
- -----------
<S> <C>
310 (a)(1).................................................... 7.10
(a)(2)........................................................ 7.10
(a)(3)........................................................ N.A.
(a)(4)........................................................ N.A.
(a)(5)........................................................ 7.10
(b)........................................................... 7.10
(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)(2)........................................................ 7.07
(c)........................................................... 7.06;
10.02
(d)........................................................... 7.06
314(a)........................................................ 4.03;
10.02
(c)(1)........................................................ 10.04
(c)(2)........................................................ 10.04
(c)(3)........................................................ N.A.
(e)........................................................... 10.05
(f)........................................................... NA
315 (a)....................................................... 7.01
(b)........................................................... 7.05,
10.02
(c)........................................................... 7.01
(d)........................................................... 7.01
(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
(c)........................................................... 2.12
317 (a)(1).................................................... 6.08
(a)(2)........................................................ 6.09
(b)........................................................... 2.04
318 (a)....................................................... 10.01
(b)........................................................... N.A.
(c)........................................................... 10.01
N.A. means not applicable.
</TABLE>
*This Cross-Reference Table is not part of this Indenture.
<PAGE>
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............................................................................... 19
Section 1.03. Trust Indenture Act Definitions................................................................. 19
Section 1.04. Rules of Construction........................................................................... 20
ARTICLE 2. THE NOTES............................................................................................. 20
Section 2.01. Form and Dating................................................................................. 20
Section 2.02. Execution and Authentication.................................................................... 21
Section 2.03. Registrar and Paying Agent...................................................................... 22
Section 2.04. Paying Agent to Hold Money in Trust............................................................. 22
Section 2.05. Holder Lists.................................................................................... 23
Section 2.06. Transfer and Exchange........................................................................... 23
Section 2.07. Replacement Notes............................................................................... 34
Section 2.08. Outstanding Notes............................................................................... 34
Section 2.09. Treasury Notes.................................................................................. 35
Section 2.10. Temporary Notes................................................................................. 35
Section 2.11. Cancellation.................................................................................... 35
Section 2.12. Defaulted Interest.............................................................................. 35
Section 2.13. CUSIP Numbers................................................................................... 36
ARTICLE 3. REDEMPTION AND PREPAYMENT............................................................................. 36
Section 3.01. Notices to Trustee.............................................................................. 36
Section 3.02. Selection of Notes to Be Redeemed............................................................... 36
Section 3.03. Notice of Redemption............................................................................ 37
Section 3.04. Effect of Notice of Redemption.................................................................. 37
Section 3.05. Deposit of Redemption Price..................................................................... 37
Section 3.06. Notes Redeemed in Part.......................................................................... 38
Section 3.07. Optional Redemption............................................................................. 38
Section 3.08. Mandatory Redemption............................................................................ 39
Section 3.09. Offer to Purchase by Application of Excess Proceeds............................................. 39
ARTICLE 4. COVENANTS............................................................................................ 40
Section 4.01. Payment of Notes................................................................................ 40
Section 4.02. Maintenance of Office or Agency................................................................. 41
Section 4.03. Reports......................................................................................... 41
Section 4.04. Compliance Certificate.......................................................................... 42
Section 4.05. Taxes........................................................................................... 43
Section 4.06. Stay, Extension and Usury Laws.................................................................. 43
Section 4.07. Restricted Payments............................................................................. 43
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.................................. 46
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock...................................... 47
Section 4.10. Asset Sales..................................................................................... 50
Section 4.11. Transactions with Affiliates.................................................................... 52
Section 4.12. Liens........................................................................................... 52
Section 4.13. Corporate Existence............................................................................. 52
Section 4.14. Offer to Repurchase Upon Change of Control...................................................... 53
Section 4.15. Limitation On Issuances And Sales Of Equity Interests In Wholly-Owned Subsidiaries (Other Than
An Unrestricted Subsidiary)..................................................................... 54
Section 4.16. Limitation on Issuances of Guarantees of Indebtedness........................................... 54
Section 4.17. Designation of Restricted and Unrestricted Subsidiaries......................................... 54
Section 4.18. Payments For Consent............................................................................ 55
ARTICLE 5. SUCCESSORS............................................................................................ 55
Section 5.01. Merger, Consolidation, or Sale of Assets........................................................ 55
Section 5.02. Successor Corporation Substituted............................................................... 56
ARTICLE 6. DEFAULTS AND REMEDIES................................................................................. 56
Section 6.01. Events of Default............................................................................... 56
Section 6.02. Acceleration.................................................................................... 57
Section 6.03. Other Remedies.................................................................................. 58
Section 6.04. Waiver of Past Defaults......................................................................... 58
Section 6.05. Control by Majority............................................................................. 59
Section 6.06. Limitation on Suits............................................................................. 59
Section 6.07. Rights of Holders of Notes to Receive Payment................................................... 59
Section 6.08. Collection Suit by Trustee...................................................................... 59
Section 6.09. Trustee May File Proofs of Claim................................................................ 59
Section 6.10. Priorities...................................................................................... 60
Section 6.11. Undertaking for Costs........................................................................... 60
ARTICLE 7. TRUSTEE............................................................................................... 61
Section 7.01. Duties of Trustee............................................................................... 61
Section 7.02. Rights of Trustee............................................................................... 62
Section 7.03. Individual Rights of Trustee.................................................................... 62
Section 7.04. Trustee's Disclaimer............................................................................ 62
Section 7.05. Notice of Defaults.............................................................................. 63
Section 7.06. Reports by Trustee to Holders of the Notes...................................................... 63
Section 7.07. Compensation and Indemnity...................................................................... 63
Section 7.08. Replacement of Trustee.......................................................................... 64
Section 7.09. Successor Trustee by Merger, etc................................................................ 65
Section 7.10. Eligibility; Disqualification................................................................... 65
Section 7.11. Preferential Collection of Claims Against Stater Bros........................................... 66
Section 7.12. Trustee Risk.................................................................................... 66
Section 7.13. Appointment Of Co-Trustee....................................................................... 66
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE................................................................ 67
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.......................................... 67
Section 8.02. Legal Defeasance and Discharge.................................................................... 67
Section 8.03. Covenant Defeasance............................................................................... 67
Section 8.04. Conditions to Legal or Covenant Defeasance........................................................ 68
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions..... 69
Section 8.06. Repayment to Stater Bros.......................................................................... 70
Section 8.07. Reinstatement..................................................................................... 70
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER........................................................................ 70
Section 9.01. Without Consent of Holders of Notes............................................................... 70
Section 9.02. With Consent of Holders of Notes.................................................................. 71
Section 9.03. Compliance with Trust Indenture Act............................................................... 72
Section 9.04. Revocation and Effect of Consents................................................................. 72
Section 9.05. Notation on or Exchange of Notes.................................................................. 72
Section 9.06. Trustee to Sign Amendments, etc................................................................... 73
ARTICLE 10. MISCELLANEOUS......................................................................................... 73
Section 10.01. Trust Indenture Act Controls...................................................................... 73
Section 10.02. Notices........................................................................................... 73
Section 10.03. Communication by Holders of Notes with Other Holders of Notes..................................... 75
Section 10.04. Certificate and Opinion as to Conditions Precedent................................................ 75
Section 10.05. Statements Required in Certificate or Opinion..................................................... 75
Section 10.06. Rules by Trustee and Agents....................................................................... 76
Section 10.07. No Personal Liability of Directors, Officers, Employees and Stockholders.......................... 76
Section 10.08. Governing Law..................................................................................... 76
Section 10.09. No Adverse Interpretation of Other Agreements..................................................... 76
Section 10.10. Successors........................................................................................ 76
Section 10.11. Severability...................................................................................... 76
Section 10.12. Counterpart Originals............................................................................. 76
Section 10.13. Table of Contents, Headings, etc.................................................................. 77
</TABLE>
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
iii
<PAGE>
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
iv
<PAGE>
INDENTURE dated as of August 6, 1999 between Stater Bros. Holdings
Inc., a Delaware corporation ("Stater Bros.") and IBJ Whitehall Bank & Trust
Company, as trustee (the "Trustee").
Stater Bros. and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 10 3/4%
Series A Senior Notes due 2006 (the "Series A Notes") and the 10 3/4% Series B
Senior Notes due 2006 (the "Series B Notes" and, together with the Series A
Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note substantially in the form of
Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement
- -----------
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person: (1)
Indebtedness of any other Person existing at the time such other Person is
merged with or into, became a Subsidiary of, or substantially all of its
business and assets were acquired by, such specified Person, whether or not such
Indebtedness is incurred in connection with, or in contemplation of, such other
Person merging with or into, becoming a Subsidiary of, or substantially all of
its business and assets being acquired by, such specified Person; and (2)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.
"Acquisition" means the acquisition by Stater Bros. of 43 supermarkets
and one future store site pursuant to the Asset Purchase Agreement.
"Additional Notes" means up to $100.0 million in aggregate principal
amount of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the
------------- ----
Initial Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided, that beneficial ownership of 5% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings. For purposes of this definition, but
solely with respect to clause (b) of the first paragraph of Section 4.07, Santee
---------- ------------
LLC shall not be deemed to be an Affiliate of Stater Bros.
<PAGE>
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Purchase Agreement" means the Asset Purchase Agreement dated as
of May 7, 1999, among Stater Bros., Stater Bros. Markets and Albertson's, Inc.
"Asset Sale" means: (1) the sale, lease, conveyance or other
disposition of any assets or rights (including but not limited to sale and
leaseback transactions), other than any such sale or other disposition in the
ordinary course of business; provided that the sale, conveyance or other
disposition of all or substantially all of the assets of Stater Bros. and its
Subsidiaries taken as a whole shall be governed by the provisions of Section
-------
4.14 hereof and/or the provisions of Article 5 hereof and not by the provisions
- ---- ---------
of Sections 3.09 and 4.10 hereof; and (2) the issuance of Equity Interests by
------------- ----
any of Stater Bros.' Restricted Subsidiaries or the sale of Equity Interests in
any of its Subsidiaries.
Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (1) any single transaction or series of related transactions
that involves assets having a fair market value of less than $1.0 million; (2) a
transfer of assets between or among Stater Bros. and its Wholly-Owned
Subsidiaries (other than an Unrestricted Subsidiary); (3) an issuance of Equity
Interests by a Restricted Subsidiary to Stater Bros. or to another Wholly-Owned
Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros.; (4) the sale
or lease of equipment, inventory, accounts receivable or other assets in the
ordinary course of business; (5) 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; (6) the sale or other disposition of cash or
Cash Equivalents; and (7) a Restricted Payment or Permitted Investment that is
permitted by Section 4.07 hereof.
------------
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only after the passage of time or upon the occurrence of a
subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned"
shall have a corresponding meaning.
"Board of Directors" means: (1) with respect to a corporation, the
board of directors of the corporation; (2) with respect to a partnership, the
board of directors of the general partner of the partnership; and (3) with
respect to any other Person, the board or committee of such Person serving a
similar function.
2
<PAGE>
"Business Day" means any day other than a Legal Holiday.
"Calculation Date" has the meaning specified in the definition of
"Fixed Charge Coverage Ratio."
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means: (1) in the case of a corporation, corporate
stock; (2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and (4) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means: (1) United States dollars; (2) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided, that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than one year from the date of acquisition; (3)
certificates of deposit and eurodollar time deposits with maturities of one year
or less from the date of acquisition, bankers' acceptances with maturities not
exceeding one year and overnight bank deposits, in each case, with any domestic
commercial bank having capital and surplus in excess of $500.0 million and a
Thomson Bank Watch Rating of "B" or better; (4) repurchase obligations for
underlying securities of the types described in clauses (2) and (3) above
----------- ---
entered into with any financial institution meeting the qualifications specified
in clause (3) above; (5) commercial paper having the highest rating obtainable
----------
from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in
each case maturing within six months after the date of acquisition; and (6)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (1) through (5) of this
----------- ---
definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (1)
the direct or indirect sale, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of Stater
Bros. and its Restricted Subsidiaries taken as a whole to any "person" or
"group" of persons (as such terms are used in Section 13(d)(3) of the Exchange
Act) other than either La Cadena Investments or any La Cadena Successor; (2) the
adoption of a plan relating to the liquidation or dissolution of Stater Bros.;
(3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" or "group" (as
defined above), other than La Cadena Investments or any La Cadena Successor,
becomes the Beneficial Owner, directly or indirectly, of more than 50% of the
Voting Stock of Stater Bros., measured by voting power rather than number of
shares; (4) the first day on which a majority of the members of the Board of
Directors of Stater Bros. are not Continuing Directors; (5) Stater Bros.
consolidates with, or merges with or into, any Person, or any Person
3
<PAGE>
consolidates with, or merges with or into, Stater Bros., in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of Stater
Bros. or such other Person is converted into or exchanged for cash, securities
or other property, other than any such transaction where all or a portion of the
Voting Stock of Stater Bros. outstanding immediately prior to such transaction
is converted into or exchanged for Voting Stock (other than Disqualified Stock)
of the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance); or (6) at any time prior to the date that
a La Cadena Successor is the Beneficial Owner of more than 50% of the Voting
Stock of Stater Bros., Jack H. Brown shall cease to (A) be a general partner or
managing member of La Cadena Investments, (B) have the power to vote the
majority of the Capital Stock of La Cadena Investments, (C) be the Beneficial
Owner of at least 35% of the Equity Interests in La Cadena Investments, or (D)
be the Beneficial Owner of a higher percentage of the Equity Interests in La
Cadena Investments than any other "person" or "group" of persons (as such terms
are used in Section 13(d)(3) of the Exchange Act).
"Commission" means the Securities and Exchange Commission.
"Consolidated Cash Flow" means, with respect to any specified Person
for any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus the amount of any net loss
realized by such Person or any of its Consolidated Subsidiaries in connection
with (A) an Asset Sale, or (B) the disposition of any securities by such Person
or any of its Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries, in each case to the extent such losses were
deducted in computing such Consolidated Net Income; plus (2) provision for taxes
based on income or profits of such Person and its Consolidated Subsidiaries for
such period, to the extent that such provision for taxes was deducted in
computing such Consolidated Net Income; plus (3) consolidated interest expense
of such Person and its Consolidated Subsidiaries for such period, whether paid
or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net of the
effect of all payments made or received pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income; plus (4) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Consolidated
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash expenses were deducted in computing such Consolidated Net
Income; minus (5) non-cash items increasing such Consolidated Net Income for
such period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in accordance
with GAAP.
4
<PAGE>
Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and other non-cash
expenses of, a Consolidated Subsidiary of Stater Bros. shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of Stater Bros. only
to the extent that a corresponding amount would be permitted at the date of
determination to be dividended to Stater Bros. by such Consolidated Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Consolidated Subsidiary or its
stockholders.
"Consolidated Net Income" means, with respect to any specified Person
for any period, the aggregate of the Net Income of such Person and its
Consolidated Subsidiaries for such period, on a consolidated basis, determined
in accordance with GAAP; provided that: (1) the Net Income (but not loss) of
Santee LLC and any Person that is not a Consolidated Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid in cash to the specified
Person or a Restricted Subsidiary thereof; (2) the Net Income of any
Consolidated Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by such Consolidated Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Consolidated Subsidiary or its stockholders; (3) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded; and (4) the cumulative effect of a change
in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any specified Person
as of any date, the sum of: (1) the consolidated equity of the common
stockholders of such Person and its Consolidated Subsidiaries as of such date;
plus (2) (a) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of such preferred
stock, less (b) the sum of (i) all write-ups (other than write-ups resulting
from foreign currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such business)
subsequent to the date of this Indenture in the book value of any asset owned by
such Person or a Consolidated Subsidiary of such Person; (ii) the book value of
all intangible assets (as determined in accordance with GAAP) of such Person and
its Consolidated Subsidiaries; (iii) 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 any of its Subsidiaries; (iv) all
investments in Persons that are not Consolidated Subsidiaries; and (v) all
unamortized debt discount and expense and unamortized deferred charges, all of
the foregoing determined in accordance with GAAP.
5
<PAGE>
"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 Stater Bros. shall not be included as
Consolidated Subsidiaries of Stater Bros. 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 (as such term is defined herein) of a
Person shall not be included as a Consolidated Subsidiary of such Person,
regardless of whether such Person is, or in accordance with GAAP, should be
accounted for as a consolidated subsidiary.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of Stater Bros. who: (1) was a member of such
Board of Directors on the date of this Indenture; or (2) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
-------------
Trustee may give notice to Stater Bros.
"Credit Facilities" means one or more debt facilities (including,
without limitation, the Revolving Credit Facility) or commercial paper
facilities, in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special-purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part (whether by revolving or other long-term Indebtedness) from
time to time.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
------------
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
-----------
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the 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 Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the
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<PAGE>
option of the holder thereof), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date that is 91 days after the date on which the Notes mature.
Notwithstanding the preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require
Stater Bros. to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale shall not constitute Disqualified Stock if the terms of
such Capital Stock provide that Stater Bros. may not repurchase or redeem any
such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with Section 4.07 hereof.
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"DTC" means The Depository Trust Company, a New York corporation.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
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"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means up to $6.0 million in aggregate
principal amount of Indebtedness of Stater Bros. and its Restricted Subsidiaries
(other than Indebtedness under the Revolving Credit Facility) in existence on
the date of this Indenture, until such amounts are repaid.
"Fixed Charge Coverage Ratio" means, with respect to any specified
Person for any period, the ratio of the Consolidated Cash Flow of such Person
for such period to the Fixed Charges of such Person for such period. In the
event that the specified Person or any of its Restricted Subsidiaries incurs,
assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than
ordinary working capital borrowings) or issues, repurchases or redeems preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated and on or prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable four-quarter reference
period.
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In addition, for purposes of calculating the Fixed Charge Coverage
Ratio: (1) acquisitions that have been made by the specified Person or any of
its Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be given pro forma effect as if they had occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated on a pro forma basis in accordance with Regulation S-
X under the Securities Act, but without giving effect to clause (3) of the
proviso set forth in the definition of Consolidated Net Income; (2) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded; and (3) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the specified Person or any of its Subsidiaries following
the Calculation Date.
"Fixed Charges" means, with respect to any specified Person for any
period, the sum, without duplication, of: (1) the consolidated interest expense
of such Person and its Consolidated Subsidiaries for such period, whether paid
or accrued, including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
excluding (A) the amortization of any debt issuance costs and (B) the effect of
all payments made or received pursuant to Hedging Obligations; plus (2) the
consolidated interest of such Person and its Consolidated Subsidiaries that was
capitalized during such period; plus (3) any interest expense on Indebtedness of
another Person that is Guaranteed by such Person or one of its Consolidated
Subsidiaries or secured by a Lien on assets of such Person or one of its
Consolidated Subsidiaries, whether or not such Guarantee or Lien is called upon;
plus (4) all dividends, whether paid or accrued and whether or not in cash, on
any series of preferred stock of such Person or any of its Consolidated
Subsidiaries, other than dividends on Equity Interests payable solely in Equity
Interests of Stater Bros. (other than Disqualified Stock) or to Stater Bros. or
a Consolidated Subsidiary of Stater Bros.
"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 have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
--------- ------------ -----------
2.06(d)(ii) or 2.06(f) hereof.
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"Global Note Legend" means the legend set forth in Section
-------
2.06(g)(ii), which is required to be placed on all Global Notes issued under
- -----------
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under: (1) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements; and (2) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means each holder of the Notes.
"IAI Global Note" means the global Note substantially in the form of
Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement
- -----------
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold to Institutional Accredited
Investors.
"Indebtedness" means, with respect to any specified Person and without
duplication, any liability of such Person, whether or not contingent: (1) for
borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof); (3) in
respect of banker's acceptances; (4) representing Capital Lease Obligations; (5)
representing the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable; or (6) representing any Hedging Obligations; if and to the extent any
of the preceding items (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of the specified Person
prepared in accordance with GAAP. In addition, the term "Indebtedness" includes
all Indebtedness of others secured by a Lien on any asset of the specified
Person (whether or not such Indebtedness is assumed by the specified Person)
and, to the extent not otherwise included, the Guarantee by the specified Person
of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and (2) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case of any other
Indebtedness.
For the avoidance of doubt, the Santee Financing and the Santee
Documents, as amended, modified, renewed, refunded or replaced from time to time
(provided, that the terms of
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<PAGE>
such documents as so amended, modified, renewed, refunded or replaced are at
least as favorable to the Holders of Notes as those contained in the Santee
Documents as in effect on the date of this Indenture) will be deemed not to
constitute, nor to have given rise to, the incurrence of any Indebtedness of
Stater Bros. or any of its Subsidiaries; provided, however, that if Santee LLC
or Santee becomes a Restricted Subsidiary, and at such time, the Santee
Financing would otherwise qualify as "Indebtedness" of Santee under this
definition, the Santee Financing shall not fail to so qualify solely because of
the provisions of this sentence.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means the first $450 million in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all direct or
indirect investments by such Person in other Persons (including Affiliates) in
the forms of loans (including Guarantees or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Stater
Bros. or any Restricted Subsidiary of Stater Bros. sells or otherwise disposes
of any Equity Interests of any direct or indirect Restricted Subsidiary of
Stater Bros. such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of Stater Bros., then Stater Bros. shall
be deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of pursuant to such sale or disposition in an amount determined
as provided in the final paragraph of Section 4.07 hereof. If Stater Bros. or
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any Restricted Subsidiary of Stater Bros. designates a Restricted Subsidiary to
be an Unrestricted Subsidiary pursuant to the provisions of this Indenture, then
Stater Bros. shall be deemed to have made an Investment on the date of such
designation equal to the fair market value of the Equity Interests of such
Subsidiary in an amount determined as provided in the final paragraph of
Section 4.07 hereof. The acquisition by Stater Bros. or any Restricted
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Subsidiary of Stater Bros. of a Person that holds an Investment in any third
Person shall be deemed to be an Investment by Stater Bros. or such Subsidiary in
such third Person in an amount equal to the fair market value of the Investment
held by the acquired Person in such third Person in an amount determined as
provided in the final paragraph of Section 4.07.
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"La Cadena Investments" means La Cadena Investments, a California
general partnership.
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<PAGE>
"La Cadena Successor" means a partnership or limited liability company
(other than La Cadena Investments) with respect to which (1) Jack H. Brown is a
general partner or managing member, (2) Jack H. Brown has the power to vote the
majority of the Capital Stock, (3) Jack H. Brown is the Beneficial Owner of at
least 35% of the Equity Interests therein and (4) Jack H. Brown is the
Beneficial Owner of a higher percentage of the Equity Interests therein than any
other "person" or "group" of persons (as such terms are used in Section 13(d)(3)
of the Exchange Act).
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by Stater Bros. and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 4 of the Registration Rights Agreement.
"Markets Preferred Stock" means the $11.00 Cumulative Preferred Stock
issued by Stater Bros. Markets.
"Net Income" means, with respect to any specified Person, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however: (1) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with: (A) any Asset Sale; or (B) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries;
and (2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by Stater
Bros. or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in each
case after taking into
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<PAGE>
account any available tax credits or deductions and any tax sharing arrangements
and amounts required to be applied to the repayment of Indebtedness, other than
Indebtedness under the Revolving Credit Facility, secured by a Lien on the asset
or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of Stater
Bros. by two Officers of Stater Bros., one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of Stater Bros., that meets the requirements of
Section 10.05 hereof.
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"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of
Section 10.05 hereof. The counsel may be an employee of or counsel to Stater
- -------------
Bros., any Subsidiary of Stater Bros. or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Construction Indebtedness" means Indebtedness of Stater
Bros. or any Restricted Subsidiary representing the deferred purchase price, 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 Stater Bros. 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 $250,000
per project site.
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"Permitted Investments" means: (1) any Investment in Stater Bros. or
in a Restricted Subsidiary (including any Person who becomes a Subsidiary as a
result of any Investment, other than an Unrestricted Subsidiary), provided that
any Indebtedness evidencing such Investment in a Restricted Subsidiary is not
subordinated to any Indebtedness or other obligation of such Restricted
Subsidiary; (2) the making of Investments in Stater Bros. by any Subsidiary
(provided that any Indebtedness evidencing such Investment is subordinated and
junior to the Notes); (3) any Investment in Cash Equivalents; (4) any Investment
by Stater Bros. or any Restricted Subsidiary in a Person, if as a result of such
Investment: (A) such Person becomes a Wholly-Owned Subsidiary (other than an
Unrestricted Subsidiary) of Stater Bros.; or (B) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, Stater Bros. or a Restricted
Subsidiary of Stater Bros.; (5) any Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Sections 3.09 and 4.10; (6) any acquisition of assets or any
------------- ----
Investment in any Person solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of Stater Bros.; (7) the making of Investments
in Santee LLC of up to $25.0 million; (8) 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; (9) the
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; and (10) Hedging Obligations.
"Permitted Liens" means: (1) Liens of Stater Bros. and any Restricted
Subsidiary securing Indebtedness and other Obligations (A) under the Revolving
Credit Facility and (B) under other Credit Facilities that, in each case, were
permitted by the terms of this Indenture to be incurred; (2) Liens in favor of
Stater Bros. or any Restricted Subsidiary; (3) Liens on property of a Person
existing at the time such Person is merged with or into or consolidated with
Stater Bros. or any Restricted Subsidiary of Stater Bros.; provided, that such
Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with Stater Bros. or the Restricted Subsidiary; (4)
Liens on property existing at the time of acquisition thereof by Stater Bros. or
any Restricted Subsidiary of Stater Bros., provided, that such Liens were in
existence prior to the contemplation of such acquisition and do not extend to
any assets other than such acquired property; (5) Liens or deposits to secure
the performance of bids, trade contracts (other than for borrowed money),
leases, statutory obligations, surety or appeal bonds, performance bonds or
other obligations of a like nature incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease Obligations and
Permitted Construction Indebtedness) permitted by clauses (b), (d), (e), (h),
----------- --- --- ---
(k), (m), (n) and (o) of the second paragraph of Section 4.09 covering only the
- --- --- --- --- ------------
assets acquired with or improved with the proceeds of such Indebtedness; (7)
Liens securing the Notes; (8) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided, that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (9) Liens
incurred in the ordinary course of business of Stater Bros. or any Restricted
Subsidiary with respect to obligations that do not exceed $5.0 million at any
one time outstanding; (10) Liens existing on the date of this Indenture and
renewals, extensions and replacements thereof,
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<PAGE>
provided, that such renewals, extensions or replacements will not apply to any
property or assets not previously subject to such Liens or increase the
principal amount of obligations secured thereby; (11) Liens on deposits made in
the ordinary course of business; (12) Liens in favor of collecting banks having
a right of setoff, revocation, refund or chargeback with respect to money or
instruments of Stater Bros. or any Restricted Subsidiary on deposit with or in
possession of such banks; (13) Liens in respect of Permitted Refinancing
Indebtedness; provided, that the terms of such liens in respect of such
Permitted Refinancing Indebtedness are not less favorable to the Holders of the
Notes than the terms of the Liens securing the indebtedness being refinanced and
do not extend to any assets not securing such indebtedness; (14) 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; (15) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation; (16) easements,
rights-of-way, restrictions and 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 Stater Bros. or its Subsidiaries, as the case may be, and any
exceptions to title set forth in any title policies; (17) 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; and (18) any Liens relating solely to property leased by Stater
Bros. or any Subsidiary and arising solely out of the lease for such property.
"Permitted Refinancing Indebtedness" means any Indebtedness of Stater
Bros. or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Stater Bros. or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided, that: (1) the principal
amount (or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus all accrued interest thereon and the amount of all
expenses and premiums incurred in connection therewith); (2) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the holders of the Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (4) such Indebtedness is incurred either by Stater
Bros. or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
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"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
limited liability company or government or other entity.
"Petrolane Leases" means that certain Amended and Restated Sublease
Agreement between ARM Leasing Corp., as Lessor and Stater Bros. Markets, as
Lessee dated as of June 1, 1963, that certain Amended and Restated Sublease
Agreement between Clipse Leasing Corp., as Lessor and Stater Bros. Markets, as
Lessee dated as of May 2, 1983, that certain Sublease Agreement between ARM
Leasing Corp., as Lessor and Stater Bros. Markets, as Lessee dated as of
December 1, 1983, and that certain Amended and Restated Sublease Agreement
between Wren Leasing Corp., as Lessor and Stater Bros. Markets, as Lessee dated
as of June 1, 1983, in each case as amended, modified, renewed, refunded or
replaced from time to time; provided, that the terms of such documents as so
amended, modified, renewed, refunded or replaced are at least as favorable to
the Holders of Notes as those contained in the Petrolane Leases as in effect on
the date of this Indenture.
"Private Placement Legend" means the legend set forth in Section
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2.06(g)(i) to be placed on all Notes issued under this Indenture except where
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otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified La Cadena Investment" means an Investment made in Stater
Bros. by La Cadena Investments or any La Cadena Successor for the purpose of
providing funds to either Stater Bros. 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 will be (a) unsecured Indebtedness, and (b)
subordinated Indebtedness.
"Qualified Santee LLC Interest Sale" means a sale by Stater Bros.
Markets of all or any portion of its interest in Santee LLC.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of August 6, 1999, by and among Stater Bros. and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between Stater Bros. and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by Stater Bros. to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
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"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
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Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Private Placement Legend and
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deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day distribution compliance period as
defined in Regulation S.
"Restricted Subsidiary" means any Subsidiary of Stater Bros. that is
not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the credit facility governed by that
certain Credit Agreement, dated as of August 6, 1999, by and among Stater Bros.
Markets, Stater Bros., the lenders from time to time party thereto, and Bank of
America, N.A., as agent, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time, including any such amendment, restatement, modification, renewal,
refunding, replacement, or refinancing facility that alters the maturity
thereof.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
16
<PAGE>
"Rule 904" means Rule 904 promulgated the Securities Act.
"Santee" means Santee Dairies, Inc., a California corporation, a
wholly-owned Subsidiary of Santee LLC.
"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, that certain
Letter Agreement between Stater Bros. and each of the Santee Noteholders and all
documents effecting and ancillary to the Santee Financing.
"Santee Financing" means the issuance by Santee of up to $80,000,000
in principal amount of notes pursuant to that certain Note Purchase Agreement
dated as of July 30, 1997, as amended through and including the date of this
Indenture, and all transactions incident and ancillary thereto.
"Santee LLC" means Santee Dairies, LLC, a Delaware limited liability
company.
"Santee Noteholders" means the holders 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.
"Series A Notes" has the meaning assigned to it in the preamble to
this Indenture.
"Series B Notes" has the meaning assigned to it in the preamble to
this Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stater Bros. Markets" means Stater Bros. Markets, a California
corporation.
"Subsidiary" means, with respect to any specified Person: (1) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof); and (2) any partnership (a) the sole general partner or
the managing
17
<PAGE>
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"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 serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
-----------
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means (1) if and at such time as such
Persons become Subsidiaries of Stater Bros., Santee LLC and Santee (provided,
however, that the board of directors of Stater Bros. may at such time, if any,
as such Persons become such Subsidiaries designate either or both of them as
Restricted Subsidiaries by board resolution in accordance with the terms of this
Indenture), (2) any Subsidiary of Stater Bros. that is designated by the board
of directors of Stater Bros. as an Unrestricted Subsidiary pursuant to a board
resolution in accordance with the terms of this Indenture, and (3) any
Subsidiary of an Unrestricted Subsidiary.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing: (1) the sum
of the products obtained by multiplying (A) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (B) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; by (2) the then outstanding principal
amount of such Indebtedness.
"Wholly-Owned Subsidiary" of any specified Person means 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 or another Wholly-Owned Subsidiary of
18
<PAGE>
such Person, and with respect to Stater Bros., shall include Stater Bros.
Markets so long as Stater Bros. or any Wholly-Owned Subsidiary of Stater Bros.
owns all of the outstanding shares of Capital Stock of Stater Bros. Markets
other than the Markets Preferred Stock.
Section 1.02. Other Definitions.
<TABLE>
Defined in
Term Section
---- -------
<S> <C>
"Acceleration Notice".............. 6.02
"Affiliate Transaction"............ 4.11
"Asset Sale Offer"................. 3.09
"Authentication Order"............. 2.02
"Change of Control Offer".......... 4.14
"Change of Control Payment"........ 4.14
"Change of Control Payment Date"... 4.14
"Consummation Date"................ 4.10
"Covenant Defeasance".............. 8.03
"Event of Default"................. 6.01
"Excess Proceeds".................. 4.10
"incur"............................ 4.09
"Legal Defeasance"................. 8.02
"Offer Amount"..................... 3.09
"Offer Period"..................... 3.09
"Paying Agent"..................... 2.03
"Payment Default".................. 6.01
"Permitted Debt"................... 4.09
"Purchase Date".................... 3.09
"Redemption Date".................. 3.07
"Registrar"........................ 2.03
"Restricted Payments".............. 4.07
</TABLE>
Section 1.03. Trust Indenture Act Definitions
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:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
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<PAGE>
"obligor" on the Notes means Stater Bros. and any successor.
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; (2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in
the singular include the plural, and in the plural include the singular; (5)
provisions apply to successive events and transactions; and (6) references to
sections of or rules under the Securities Act shall be deemed to include
substitute, replacement of successor sections or rules adopted by the SEC from
time to time.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may have notations,
---------
legends or endorsements required by law, stock exchange rule or usage. Each
Note shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and Stater Bros. and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form of
Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon
- ------------ ---
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend thereon and
- -----------
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes
20
<PAGE>
represented thereby shall be made by the Trustee or the Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
------------
(c) Temporary Global Notes.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or the nominee of the Depositary for the accounts
of designated agents holding on behalf of Euroclear or Cedel Bank, duly executed
by Stater Bros. and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedel Bank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note or an IAI Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate
-------------------
from Stater Bros. Following the termination of the Restricted Period,
beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication
of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation
S Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for Stater Bros. by manual or
facsimile signature. Stater Bros.' seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
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<PAGE>
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of Stater Bros. signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
------------
The Trustee may appoint an authenticating agent acceptable to Stater
Bros. to authenticate Notes. An authenticating agent may authenticate 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 shall have the same rights as an Agent to deal with Holders
or an Affiliate of Stater Bros.
Section 2.03. Registrar and Paying Agent.
Stater Bros. shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
Stater Bros. may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. Stater Bros. may change
any Paying Agent or Registrar without notice to any Holder. Stater Bros. shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If Stater Bros. fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. Stater Bros. or
any of its Subsidiaries may act as Paying Agent or Registrar.
Stater Bros. initially appoints DTC to act as Depositary with respect
to the Global Notes.
Stater Bros. initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
Stater Bros. shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by Stater Bros. in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. Stater Bros. 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 Stater Bros. or a
Subsidiary) shall have no further liability for the money. If Stater Bros. or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy
22
<PAGE>
or reorganization proceedings relating to Stater Bros., the Trustee shall serve
as Paying Agent for the Notes.
Section 2.05. Holder 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
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, Stater Bros. shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and Stater Bros. shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by Stater Bros. for Definitive
Notes if (i) Stater Bros. delivers to the Trustee notice from the Depositary
that it is unwilling or unable to continue to act as Depositary or that it is no
longer a clearing agency registered under the Exchange Act and, in either case,
a successor Depositary is not appointed by Stater Bros. within 120 days after
the date of such notice from the Depositary or (ii) Stater Bros. in its sole
discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such effect to
the Trustee; provided, that in no event shall the Regulation S Temporary Global
Note be exchanged by Stater Bros. for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities
Act. Upon the occurrence of either of the preceding events in (i) or (ii)
above, Definitive Notes shall be issued in such names as the Depositary shall
instruct the Trustee. Global Notes also may be exchanged or replaced, in whole
or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note
------------- ----
authenticated and delivered in exchange for, or in lieu of, a Global Note or any
portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof,
------------ ------------ ----
shall be authenticated and delivered in the form of, and shall be, a Global
Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
---------------
may be transferred and exchanged as provided in Section 2.06(b), (c) or (f)
--------------- --- ---
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the
23
<PAGE>
Securities Act. Transfers of beneficial interests in the Global Notes also shall
require compliance with either subparagraph (i) or (ii) below, as applicable, as
--------------- ---
well as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the same
Restricted Global Note in accordance with the transfer restrictions set forth
in the Private Placement Legend; provided, however, that prior to the
expiration of the Restricted Period, transfers of beneficial interests in the
Temporary Regulation S Global Note may not be made to a U.S. Person or for
the account or benefit of a U.S. Person (other than an Initial Purchaser).
Beneficial interests in any Unrestricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b)(i).
------------------
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor of
------------------
such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in another
Global Note in an amount equal to the beneficial interest to be transferred
or exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase or (B) (1) a written order from a Participant or
an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to the
Registrar containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above; provided, that in no event shall Definitive Notes
be issued upon the transfer or exchange of beneficial interests in the
Regulation S Temporary Global Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903 under the Securities Act. Upon consummation of
an Exchange Offer by Stater Bros. in accordance with Section 2.06(f) hereof,
---------------
the requirements of this Section 2.06(b)(ii) shall be deemed to have been
-------------------
satisfied upon receipt by the Registrar of the instructions contained in the
Letter of Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes contained in
this Indenture and the Notes or otherwise applicable under the Securities
Act, the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h) hereof.
---------------
(iii) Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer
24
<PAGE>
complies with the requirements of Section 2.06(b)(ii) above and the Registrar
------------------
receives the following: (A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
---------
certifications in item (1) thereof; (B) if the transferee will take delivery
in the form of a beneficial interest in the Regulation S Temporary Global
Note or the Regulation S Permanent Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
---------
certifications in item (2) thereof; and (C) if the transferee will take
delivery in the form of a beneficial interest in the IAI Global Note, then
the transferor must deliver a certificate in the form of Exhibit B hereto,
---------
including the certifications and certificates and Opinion of Counsel required
by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Note for Beneficial Interests in the Unrestricted Global Note. A beneficial
interest in any Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer
-------------------
is effected pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144)
of Stater Bros.; (B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange
Offer Registration Statement in accordance with the Registration Rights
Agreement; or (D) the Registrar receives the following: (1) if the holder of
such beneficial interest in a Restricted Global Note proposes to exchange
such beneficial interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C hereto,
---------
including the certifications in item (1)(a) thereof; or (2) if the holder of
such beneficial interest in a Restricted Global Note proposes to transfer
such beneficial interest to a Person who shall take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of Exhibit B hereto, including the
---------
certifications in item (4) thereof, and, in each such case set forth in this
subparagraph (D), if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form reasonably acceptable to
the Registrar to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
---------------- ---
above at a time when an Unrestricted Global Note has not yet been issued, Stater
Bros. shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
------------
Unrestricted Global Notes in an aggregate principal amount equal to the
25
<PAGE>
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation: (A) if the holder
of such beneficial interest in a Restricted Global Note proposes to exchange
such beneficial interest for a Restricted Definitive Note, a certificate from
such holder in the form of Exhibit C hereto, including the certifications in
---------
item (2)(a) thereof; (B) if such beneficial interest is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
---------
item (1) thereof; (C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof; (D) if
---------
such beneficial interest is being transferred pursuant to an exemption from
the registration requirements of the Securities Act in accordance with Rule
144 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if
---------
such beneficial interest is being transferred to an Institutional Accredited
Investor in reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B hereto, including
---------
the certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable; (F) if such beneficial interest is being transferred
to Stater Bros. or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
---------
thereof; or (G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications in
---------
item (3)(c) thereof, the Trustee shall cause the aggregate principal amount
of the applicable Global Note to be reduced accordingly pursuant to Section
-------
2.06(h) hereof, and Stater Bros. shall execute and the Trustee shall
-------
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive Note
issued in exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c) shall be registered in such name or names
---------------
and in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such Notes
are so registered. Any Definitive Note issued in exchange for a beneficial
26
<PAGE>
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
------------------
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Regulation S Temporary Global Note to
Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
---------------------- ---
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes delivery
thereof in the form of a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except
in the case of a transfer pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if: (A) such
exchange or transfer is effected pursuant to the Exchange Offer in accordance
with the Registration Rights Agreement and the holder of such beneficial
interest, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144)
of Stater Bros.; (B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange
Offer Registration Statement in accordance with the Registration Rights
Agreement; or (D) the Registrar receives the following: (1) if the holder of
such beneficial interest in a Restricted Global Note proposes to exchange
such beneficial interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of Exhibit C
---------
hereto, including the certifications in item (1)(b) thereof; or (2) if the
holder of such beneficial interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who shall take delivery thereof
in the form of a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit B hereto,
---------
including the certifications in item (4) thereof; and, in each such case set
forth in this subparagraph (D), if the Registrar so requests or if the
Applicable Procedures so require, an Opinion of Counsel in form reasonably
acceptable to the Registrar to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer required
in order to maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
-------------------
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and Stater Bros. shall
---------------
execute and the Trustee shall authenticate and
27
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deliver to the Person designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered
-------------------
in such name or names and in such authorized denomination or denominations as
the holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect Participant.
The Trustee shall deliver such Definitive Notes to the Persons in whose names
such Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the
-------------------
Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation: (A) if
the Holder of such Restricted Definitive Note proposes to exchange such Note
for a beneficial interest in a Restricted Global Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications in
---------
item (2)(b) thereof; (B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
---------
certifications in item (1) thereof; (C) if such Restricted Definitive Note is
being transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications in
---------
item (2) thereof; (D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
---------
item (3)(a) thereof; (E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
---------
certificates and Opinion of Counsel required by item (3) thereof, if
applicable; (F) if such Restricted Definitive Note is being transferred to
Stater Bros. or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
---------
thereof; or (G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
---------
certifications in item (3)(c) thereof, the Trustee shall cancel the
Restricted Definitive Note, increase or cause to be increased the aggregate
principal amount of, in the case of clause (A) above, the appropriate
Restricted Global Note, in the case of clause (B) above, the 144A Global
Note, in the case of clause (c) above, the Regulation S Global Note, and in
all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such
Note for a beneficial interest in an Unrestricted Global Note or transfer
such Restricted Definitive Note to a Person who
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takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if: (A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of Stater Bros.; (B) such transfer is effected pursuant
to the Shelf Registration Statement in accordance with the Registration
Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or (D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange such Notes
for a beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications in
---------
item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
---------
certifications in item (4) thereof; and, in each such case set forth in this
subparagraph (D), if the Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form reasonably acceptable to
the Registrar to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
-------------------
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any time.
Upon receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to
be increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
Stater Bros. shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
------------
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
---------------
register the transfer or exchange of
29
<PAGE>
Definitive Notes. Prior to such registration of transfer or exchange, the
requesting Holder shall present or surrender to the Registrar the Definitive
Notes duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by his attorney,
duly authorized in writing. In addition, the requesting Holder shall provide any
additional certifications, documents and information, as applicable, required
pursuant to the following provisions of this Section 2.06(e).
---------------
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following: (A) if the transfer will be
made pursuant to Rule 144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
---------
certifications in item (1) thereof; (B) if the transfer will be made pursuant
to Rule 903 or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in item (2)
---------
thereof; and (C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
---------
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if: (A) such
exchange or transfer is effected pursuant to the Exchange Offer in accordance
with the Registration Rights Agreement and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of Stater Bros.; (B) any
such transfer is effected pursuant to the Shelf Registration Statement in
accordance with the Registration Rights Agreement; (C) any such transfer is
effected by a Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement; or (D) the
Registrar receives the following: (1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the form of Exhibit C
---------
hereto, including the certifications in item (1)(d) thereof; or (2) if the
Holder of such Restricted Definitive Notes proposes to transfer such Notes to
a Person who shall take delivery thereof in the form of an Unrestricted
Definitive Note, a certificate from such Holder in the form of Exhibit B
---------
hereto, including the certifications in item (4) thereof; and, in each such
case set forth in this subparagraph (D), if the Registrar so requests, an
Opinion of Counsel in form reasonably acceptable to Stater Bros. to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance with
the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery
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<PAGE>
thereof in the form of an Unrestricted Definitive Note. Upon receipt of a
request to register such a transfer, the Registrar shall register the
Unrestricted Definitive Notes pursuant to the instructions from the Holder
thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, Stater Bros. shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02, the Trustee shall
------------
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons that certify in the
applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they
are not participating in a distribution of the Exchange Notes and (z) they are
not affiliates (as defined in Rule 144) of Stater Bros., and accepted for
exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Trustee shall cause the aggregate principal amount
of the applicable Restricted Global Notes to be reduced accordingly, and Stater
Bros. shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global Notes and
Definitive Notes issued under this Indenture unless specifically stated
otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend. (A) Except as permitted by subparagraph (B)
below, each Global Note and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the 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 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
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(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 (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."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
------------
issued in exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"This Global Note is held by the Depositary (as defined in the
Indenture governing this Note) or its nominee in custody for the benefit of
the beneficial owners hereof, and is not transferable to any person under any
circumstances except that (i) the Trustee may make such notations hereon as
may be required pursuant to Section 2.07 of the Indenture, (ii) this Global
Note may be exchanged in whole but not in part pursuant to Section 2.06(a) of
the Indenture, (iii) this Global Note may be delivered to the Trustee for
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<PAGE>
cancellation pursuant to Section 2.11 of the Indenture, and (iv) this Global
Note may be transferred to a successor depositary with the prior written
consent of Stater Bros."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"The rights attaching to this Regulation S Temporary Global Note,
and the conditions and procedures governing its exchange for Certificated
Notes, are as specified in the Indenture (as defined herein). Neither the
Holder nor the Beneficial Owners of this Regulation S Temporary Global Note
shall be entitled to receive payment of interest hereon."
(h) Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests in a particular Global Note
have been exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Note shall be returned to or retained and canceled by the Trustee in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
------------
beneficial interest in a Global Note is exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Trustee or by the Depositary at the direction of
the Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, Stater Bros. shall
execute and the Trustee shall authenticate Global Notes and Definitive Notes
upon Stater Bros.' order or at the Registrar's request. (ii) No service
charge shall be made to a holder of a beneficial interest in a Global Note or
to a Holder of a Definitive Note for any registration of transfer or
exchange, but Stater Bros. may require payment of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09,
------------- ---- ----
4.10, 4.14 and 9.05 hereof). (iii) The Registrar shall not be required to
---- ---- ----
register the transfer of or exchange any Note selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part. (iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of Stater Bros., evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Global Notes or
Definitive Notes surrendered upon such registration of transfer or exchange.
(v) Stater Bros. shall not be required (A) to issue, to register the transfer
of or to exchange any Notes during a period beginning at the opening of
business 15 days before the day of any selection of Notes for
33
<PAGE>
redemption under Section 3.02 hereof and ending at the close of business on
------------
the day of selection, (B) to register the transfer of or to exchange any Note
so selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part or (C) to register the transfer of or to
exchange a Note between a record date and the next succeeding Interest
Payment Date. (vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and Stater Bros. may deem and
treat the Person in whose name any Note is registered as the absolute owner
of such Note for the purpose of receiving payment of principal of and
interest on such Notes and for all other purposes, and none of the Trustee,
any Agent or Stater Bros. shall be affected by notice to the contrary. (vii)
The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof. (viii) All
------------
certifications, certificates and Opinions of Counsel required to be submitted
to the Registrar pursuant to this Section 2.06 to effect a registration of
transfer or exchange may be submitted by facsimile.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or Stater Bros.
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, Stater Bros. shall issue and the Trustee, upon receipt of
an Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or Stater Bros., an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and Stater Bros. to protect Stater Bros., the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. Stater Bros. may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of Stater Bros. and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
------------
does not cease to be outstanding because Stater Bros. or an Affiliate of Stater
Bros. holds the Note; however, Notes held by Stater Bros. or a Subsidiary of
Stater Bros. shall not be deemed to be outstanding for purposes of Section
-------
3.07(b) hereof.
- -------
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
------------
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
-------
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
- ----
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<PAGE>
If the Paying Agent (other than Stater Bros., a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by Stater
Bros., or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with Stater Bros., shall be considered
as though 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 Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, Stater
Bros. may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that Stater Bros.
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, Stater Bros. shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION.
Stater Bros. 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 and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to Stater Bros. Stater Bros. 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 Stater Bros. defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. Stater Bros. shall notify the Trustee
------------
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. Stater Bros. shall fix or cause to be
fixed each such special record date and payment date; provided, that no such
special record date shall be less than 10 days prior
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<PAGE>
to the related payment date for such defaulted interest. At least 15 days before
the special record date, Stater Bros. (or, upon the written request of Stater
Bros., the Trustee in the name and at the expense of Stater Bros.) shall mail or
cause to be mailed to Holders a notice that states the special record date, the
related payment date and the amount of such interest to be paid.
SECTION 2.13. CUSIP NUMBERS.
Stater Bros. in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Holders; provided, that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or the
omission of such numbers. Stater Bros. shall promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If Stater Bros. elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
------------
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture or the
Notes pursuant to which the redemption shall occur, (ii) the redemption date,
(iii) the principal amount of Notes to be redeemed and (iv) the redemption
price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select Notes for redemption as follows: (a) if the Notes are
listed, in compliance with the requirements of the principal national securities
exchange on which the Notes are listed; or (b) if the Notes are not so listed,
on a pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate.
In the event of partial redemption by lot, the particular Notes to be
redeemed shall be selected, unless otherwise provided herein, not less than 30
nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify Stater Bros. in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
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SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
------------
not more than 60 days before a redemption date, Stater Bros. shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date; (b) the redemption price; (c) if any Note is being
redeemed in part, the portion of the principal amount of such Note to be
redeemed and that, after the redemption date upon surrender of such Note, a new
Note or Notes in principal amount equal to the unredeemed portion shall be
issued upon cancellation of the original Note; (d) the name and address of the
Paying Agent; (e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price; (f) that, unless Stater Bros.
defaults in making such redemption payment, interest on Notes called for
redemption ceases to accrue on and after the redemption date; (g) the paragraph
of the Notes and/or Section of this Indenture pursuant to which the Notes called
for redemption are being redeemed; and (h) that no representation is made as to
the correctness or accuracy of the CUSIP number, if any, listed in such notice
or printed on the Notes.
At Stater Bros.' request, the Trustee shall give the notice of
redemption in Stater Bros.' name and at its expense; provided, however, that
Stater Bros. shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
------------
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, Stater Bros. shall
deposit with the Trustee or with the Paying Agent, in immediately available
funds, money sufficient to pay the redemption price of and accrued interest and
Liquidated Damages, if any, on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to Stater Bros. any money
deposited with the Trustee or the Paying Agent by Stater Bros. in excess of the
amounts necessary to pay the redemption price of, and accrued interest and
Liquidated Damages, if any, on, all Notes to be redeemed.
If Stater Bros. complies with the provisions of the preceding
paragraph, on and after the redemption date, interest and Liquidated Damages, if
any, shall cease to accrue on the Notes or the portions of Notes called for
redemption. If a Note is redeemed on or after an interest record date but on or
prior to the related interest payment date, then any accrued and
37
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unpaid interest shall be paid to the Person in whose name such Note was
registered at the close of business on such record date. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of Stater Bros. to comply with the preceding paragraph, interest and
Liquidated Damages, if any, shall be paid on the unpaid principal, from the
redemption date until such principal is paid, and to the extent lawful on any
interest and Liquidated Damages, if any, not paid on such unpaid principal, in
each case at the rate provided in the Notes and in Section 4.01 hereof.
------------
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, Stater Bros. shall
issue and, upon Stater Bros.' written request, the Trustee shall authenticate
for the Holder at the expense of Stater Bros., a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Prior to August 15, 2002, Stater Bros. may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes issued under this
Indenture at a redemption price of 110.750% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of one or more sales of Capital
Stock of Stater Bros. resulting, for each such sale, in net cash proceeds to
Stater Bros. in excess of $25.0 million; provided, that: (i) at least 65% of
the aggregate principal amount of Notes issued under this Indenture remains
outstanding immediately after the occurrence of such redemption (excluding Notes
held by Stater Bros. and its Subsidiaries); and (ii) the redemption must occur
within 45 days of the date of the closing of such sale.
(b) Except pursuant to the preceding paragraph, the Notes will not be
redeemable at Stater Bros.' option prior to August 15, 2003.
After August 15, 2003, Stater Bros. may redeem all or a part of the Notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003......................................105.3750%
2004......................................102.6875%
2005 and thereafter.......................100.0000%
</TABLE>
(c) Any redemption pursuant to this Section 3.07 shall be made
------------
pursuant to the provisions of Section 3.01 through 3.06 hereof.
------------ ----
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SECTION 3.08. MANDATORY REDEMPTION.
Stater Bros. shall not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, Stater Bros. shall
------------
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), Stater Bros. shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
------------
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, Stater Bros. shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
------------
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
------------
open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that
any Note not tendered or accepted for payment shall continue to accrue interest
and Liquidated Damages, if any; (d) that, unless Stater Bros. defaults in making
such payment, any Note accepted for payment pursuant to the Asset Sale Offer
shall cease to accrue interest and Liquidated Damages, if any, after the
Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased; (f) that Holders electing
to have a Note purchased pursuant to any Asset Sale Offer shall be required to
surrender the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, or transfer by book-entry transfer, to
Stater Bros., a depositary, if appointed by Stater Bros., or a Paying Agent at
the address specified in the notice at least three days before the Purchase
Date; (g) that Holders shall be entitled to withdraw their election if Stater
Bros., the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter
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setting forth the name of the Holder, the principal amount of the Note the
Holder delivered for purchase and a statement that such Holder is withdrawing
his election to have such Note purchased; (h) that, if the aggregate principal
amount of Notes surrendered by Holders exceeds the Offer Amount, Stater Bros.
shall select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by Stater Bros. so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, Stater Bros. shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by Stater Bros. in
accordance with the terms of this Section 3.09. Stater Bros., the Depositary or
------------
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by Stater Bros. for purchase, and Stater Bros. shall promptly issue a
new Note, and the Trustee, upon written request from Stater Bros., shall
authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not
so accepted shall be promptly mailed or delivered by Stater Bros. to the Holder
thereof. Stater Bros. shall publicly announce the results of the Asset Sale
Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
------------
pursuant to this Section 3.09 shall be made pursuant to the provisions of
------------
Sections 3.01 through 3.06 hereof.
- ------------- ----
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
Stater Bros. shall pay or cause to be paid the principal of, premium,
if any, and interest and Liquidated Damages, if any, on the Notes on the dates
and in the manner provided in the Notes. Principal, premium, if any, and
interest and Liquidated Damages, if any, shall be considered paid on the date
due if the Paying Agent, if other than Stater Bros. or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by Stater
Bros. in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest and Liquidated Damages, if any,
then due. Except as otherwise provided in this Indenture or the Notes, Stater
Bros. shall pay all Liquidated Damages, if any, in the same manner on the dates
and in the amounts set forth in the Registration Rights Agreement, without
duplication.
Stater Bros. shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of
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the then applicable interest rate on the Notes to the extent lawful; it shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace period) at the same rate to the extent
lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
Stater Bros. shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon Stater Bros. in respect of the Notes and this Indenture may
be served. Stater Bros. shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time Stater Bros. 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 Corporate Trust
Office of the Trustee.
Stater Bros. may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve
Stater Bros. of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. Stater Bros. shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
Stater Bros. hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of Stater Bros. in accordance with Section
-------
2.03.
- ----
SECTION 4.03. REPORTS.
Whether or not required by the Commission, so long as any Notes are
outstanding, Stater Bros. shall furnish to the Holders of Notes, within the time
periods specified in the Commission's rules and regulations:
(a) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if
Stater Bros. were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by Stater Bros.' certified independent accountants; and
(b) all current reports that would be required to be filed with the
Commission on Form 8-K if Stater Bros. were required to file such reports.
In addition, whether or not required by the Commission, Stater Bros.
shall file a copy of all of the information and reports referred to in clauses
-------
(a) and (b) above with the Commission for public availability within the time
- --- ---
periods specified in the Commission's rules
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and regulations (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors upon
request. Moreover, Stater Bros. agrees that, for so long as any Notes remain
outstanding, it shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) Stater Bros. shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of Stater Bros. and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether Stater Bros. has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge Stater Bros.
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, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action Stater Bros. is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action Stater Bros. is taking or proposes to take with respect thereto. For
purposes this paragraph, such compliance shall be determined without regard to
any period of grace or requirement of notice under this Indenture.
(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, Stater Bros. shall cause
---------------
to be delivered to the Trustee a letter or statement of Stater Bros.'
independent accountants who shall have certified the financial statements of
Stater Bros. for its preceding fiscal year in connection with the annual report
of Stater Bros. 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 Stater Bros.
was not in compliance with any of the terms or conditions contained in Sections
--------
4.01, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.15, 4.16, 4.18 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 examinations was not directed primarily toward obtaining
knowledge of such noncompliance.
(c) Stater Bros. shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action Stater Bros. is taking or proposes to take with
respect thereto.
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SECTION 4.05. TAXES.
Stater Bros. shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
Stater Bros. covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and Stater Bros. (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
Stater Bros. shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other payment or distribution
on account of Stater Bros.' or any of its Restricted Subsidiaries' Equity
Interests (including, without limitation, any such payment in connection with
any merger or consolidation involving Stater Bros. or any of its Restricted
Subsidiaries) or to the direct or indirect holders of Stater Bros.' or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of Stater Bros. or payable to Stater Bros. or a Restricted
Subsidiary of Stater Bros.);
(b) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving
Stater Bros.) any Equity Interests of Stater Bros. or any direct or indirect
parent or Affiliate of Stater Bros.;
(c) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes, except a payment of interest or principal at the Stated Maturity
thereof; or
(d) make any Restricted Investment (all such payments and other actions set
forth in clauses (a) through (d) above being collectively referred to as
"Restricted Payments"),
unless such Restricted Payment occurs on or after September 27, 1999 and, at the
time of and after giving effect to such Restricted Payment:
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(i) no Default or Event of Default shall have occurred or be continuing
or would occur as a consequence thereof; and
(ii) Stater Bros. would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of Section 4.09;
------------
and
(iii) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Stater Bros. and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted Payments
permitted by clauses (b), (c), (d), (e), (f), (g), (i), (j) and (k) of the
next succeeding paragraph), is less than the sum, without duplication, of:
(A) 50% of the Consolidated Net Income of Stater Bros. for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of this Indenture to the end of
Stater Bros.' most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus
(B) 100% of the aggregate net cash proceeds received by Stater Bros.
since the date of this Indenture as a contribution to its common equity
capital or from the issue or sale of Equity Interests of Stater Bros.
(other than Disqualified Stock) or from the issue or sale of convertible
or exchangeable Disqualified Stock or convertible or exchangeable debt
securities of Stater Bros. that have been converted into or exchanged for
such Equity Interests (other than Equity Interests (or Disqualified Stock
or debt securities) sold to a Restricted Subsidiary of Stater Bros. or to
Santee or Santee LLC), plus
(C) to the extent that any Restricted Investment that was made after
the date of this Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (I) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (II) the initial amount of such Restricted Investment; plus
(D) an amount equal to the fair market value of the Equity Interests
of each Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary pursuant to the terms of this Indenture; provided,
that such amount shall not in any case exceed the amount of Restricted
Investments previously made by Stater Bros. or any Restricted Subsidiary
in such Person; plus
(E) $5.0 million.
The preceding paragraph shall not prohibit:
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(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(b) if no Default or Event of Default shall have occurred and be continuing
or would be caused thereby, the redemption, repurchase, retirement, defeasance
or other acquisition of any subordinated Indebtedness of Stater Bros. or of any
Equity Interests of Stater Bros. in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of Stater Bros.) of, Equity Interests of Stater Bros. (other than
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (iii)(B) of the preceding
paragraph;
(c) if no Default or Event of Default shall have occurred and be continuing
or would be caused thereby, the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness of Stater Bros. with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(d) the payment of any dividend by a Restricted Subsidiary of Stater Bros.
to the holders of its Equity Interests on a pro rata basis;
(e) the payment to La Cadena Investments of an amount equal to 1% of the
aggregate principal amount of the Notes issued on the date of this Indenture for
advisory services rendered in connection therewith;
(f) the payment of any costs and expenses (including any related premium)
in connection with:
(i) the offering of the Notes and the tender offer and consent
solicitation for Stater Bros.' 11% Senior Notes due 2001 and 9% Senior
Subordinated Notes due 2004 and
(ii) the acquisition of certain supermarkets and one store site pursuant
to the Asset Purchase Agreement, including all costs and expenses incidental
to the foregoing;
(g) the payment to La Cadena Investments or any La Cadena Successor 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
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(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;
(h) if no Default or Event of Default shall have occurred and be continuing
or would be caused thereby, other Investments in any Person having an aggregate
fair market value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (h) since the date of this
----------
Indenture not to exceed $5 million;
(i) if no Default or Event of Default shall have occurred and be continuing
or would be caused thereby, the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of Stater Bros. held by any key
employee of Stater Bros. or its Restricted Subsidiaries (other than any key
employee that is a partner of or otherwise holds any Equity Interest in La
Cadena Investments or any La Cadena Successor) upon any such person's death,
disability or termination of employment and pursuant to any management equity
subscription agreement, stock option agreement or other incentive compensation
plan or agreement entered into in the ordinary course of business; provided that
the aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $500,000, which aggregate amount shall
increase by $500,000 on each anniversary of the date of this Indenture;
(j) payment of dividends on the Markets Preferred Stock as outstanding and
in effect on the date of this Indenture not to exceed $5,000 per year; and
(k) any redemption or repurchase of the Markets Preferred Stock outstanding
on the date of this Indenture, provided that the aggregate cash payments made
with respect to such redemption or repurchase shall not exceed $50,000.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by Stater Bros. or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this Section 4.07 shall be determined by a majority of Stater Bros.'
------------
directors whose resolution with respect thereto shall be delivered to the
Trustee. Not later than the date of making any Restricted Payment (other than
Restricted Payments permitted pursuant to clauses (a), (d), (e), (f), (j) and
----------- --- --- --- ---
(k) of the preceding paragraph), Stater Bros. shall deliver to the Trustee an
- ---
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
-------
4.07 were computed.
- ----
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
Stater Bros. shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction of any kind: (i) on the
ability of any Restricted Subsidiary to: (A) pay dividends or make any other
distributions on its Capital Stock to Stater Bros. or any of its Restricted
Subsidiaries, or with respect to any other interest or participation in, or
measured by, its profits,
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or pay any indebtedness owed to Stater Bros. or any of its Restricted
Subsidiaries; (B) make loans or advances to Stater Bros. or any of its
Restricted Subsidiaries; or (C) transfer any of their respective properties or
assets to Stater Bros. or any of its Restricted Subsidiaries; (ii) on the
ability of Stater Bros. or any of its Restricted Subsidiaries to receive or
retain any such: (A) dividends, payments or distributions, (B) loans or
advances, or (C) transfer of property (any such restriction being referred to
herein as a "Payment Restriction").
However, the restrictions in the preceding paragraph shall not apply
to encumbrances or restrictions existing under or by reason of: (i) agreements
in effect as of the date of this Indenture and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof (provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in such Existing
Indebtedness, as in effect on the date of this Indenture) or any provisions of
any articles of incorporation or certificate of incorporation with respect to
Stater Bros. or any Restricted Subsidiary (including without limitation the
rights, preferences and privileges of any class or series of preferred stock
included therein) in effect as of the date of this Indenture; (ii) this
Indenture and the Notes; (iii) applicable law; (iv) any instrument governing
Indebtedness or Capital Stock of a Person acquired by Stater Bros. or any of its
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred; (v) customary non-assignment provisions in leases and other
contracts entered into in the ordinary course of business; (vi) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions on the property so acquired of the nature described in clause (C)
----------
of the preceding paragraph; (vii) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced; (viii)
the Revolving Credit Facility; (ix) Liens securing Indebtedness that limit the
right of the debtor to dispose of the assets subject to such Lien; and (x)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
Stater Bros. shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and Stater Bros. shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, 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, Stater Bros. may incur Indebtedness (including Acquired Debt)
or issue Disqualified Stock if the Fixed Charge
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Coverage Ratio for Stater Bros.' most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 2.0 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period.
The first paragraph of this Section 4.09 shall not prohibit the
------------
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(a) the incurrence by Stater Bros. or its Restricted Subsidiaries of
Indebtedness in an aggregate principal amount not to exceed $50.0 million at any
time outstanding under any Credit Facilities or any replacement facility
thereof;
(b) the incurrence by Stater Bros. and its Restricted Subsidiaries of the
Existing Indebtedness;
(c) the incurrence by Stater Bros. of Indebtedness represented by the
Initial Notes and the Exchange Notes to be issued pursuant to the Registration
Rights Agreement;
(d) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of
Acquired Debt represented by Capital Lease Obligations, with respect to assets
acquired pursuant to the Acquisition, in an amount not to exceed $15.0 million
in the aggregate, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this clause
------
(d);
- ---
(e) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations or of Permitted
Construction Indebtedness in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (e), not to exceed $25.0 million
----------
at any time outstanding;
(f) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by this Indenture to be incurred under the
first paragraph of this Section 4.09 or clauses (a), (b) or (c) of this
------------
paragraph;
(g) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Stater Bros. and any of its Wholly-
Owned Subsidiaries (other than an Unrestricted Subsidiary); provided, however,
that: (i) if Stater Bros. is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment in full in cash
of all Obligations with respect to the Notes; and (ii)(A) any subsequent
issuance or transfer of Equity Interests that results in any such Indebtedness
being held by a Person other than Stater Bros. or a Restricted Subsidiary
thereof and (B) any sale or other transfer of any such Indebtedness to a Person
that is not either Stater Bros. or a Wholly-
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Owned Subsidiary (other than an Unrestricted Subsidiary) thereof, shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by Stater
Bros. or such Restricted Subsidiary, as the case may be, that was not permitted
by this clause (g);
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(h) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(i) the guarantee by Stater Bros. of Indebtedness of Stater Bros. or a
Restricted Subsidiary of Stater Bros. that was permitted to be incurred by
another provision of this Section 4.09;
------------
(j) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of Section 4.09; provided, in each
------------
such case, that the amount thereof is included in Fixed Charges of Stater Bros.
as accrued;
(k) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of
Indebtedness to secure workers' compensation and other insurance coverages, not
to exceed the minimum amount required by Stater Bros.' or any of its Restricted
Subsidiaries' insurance carriers or applicable regulatory agencies (which may be
Indebtedness under Credit Facilities in addition to that permitted under clause
------
(a));
- ---
(l) the incurrence by Stater Bros. of Indebtedness to La Cadena Investments
incurred by Stater Bros. 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 4.07;
------------
(m) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of
Indebtedness represented by letters of credit entered into as security for the
obligations of Stater Bros. or any of its Restricted Subsidiaries pursuant to
any or all of the Petrolane Leases;
(n) the incurrence of Indebtedness arising from agreements of Stater Bros.
or any Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, or from guarantees or letters of credit,
surety bonds or performance bonds securing any obligations of Stater Bros. or
any Restricted Subsidiary pursuant to such agreements, incurred or assumed in
connection with the disposition of any business, assets or Subsidiary of Stater
Bros. or any Restricted Subsidiary, other than guarantees or similar credit
support by Stater Bros. or such Restricted Subsidiary 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 (n) shall not exceed the net proceeds actually received in
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connection with any such disposition; and
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(o) the incurrence by Stater Bros. or any of its Restricted Subsidiaries of
other Indebtedness not to exceed $25.0 million (which may be Indebtedness under
Credit Facilities in addition to that permitted by clause (a)).
----------
Stater Bros. shall not incur any Indebtedness (including Permitted Debt)
that is contractually subordinated in right of payment to any other Indebtedness
of Stater Bros. unless such Indebtedness is also contractually subordinated in
right of payment to the Notes on substantially identical terms; provided,
however, that no Indebtedness of Stater Bros. shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of
Stater Bros. solely by virtue of being unsecured.
For purposes of determining compliance with this Section 4.09, in the
------------
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (a) through (o) above,
or is entitled to be incurred pursuant to the first paragraph of this Section
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4.09, Stater Bros. shall be permitted to classify such item of Indebtedness on
- ----
the date of its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this Section 4.09.
------------
Indebtedness under the Revolving Credit Facility outstanding on the
date on which Notes are first issued and authenticated under this Indenture
shall be deemed to have been incurred on such date in reliance on the exception
provided by clause (a) of the definition of Permitted Debt above.
Section 4.10. Asset Sales
Stater Bros. shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale (other than a Qualified Santee LLC
Interest Sale) unless: (a) Stater Bros. (or such Restricted Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or Equity Interests issued or sold
or otherwise disposed of; (b) such fair market value is evidenced by (i) for any
Asset Sale resulting in Net Proceeds less than or equal to $1.0 million, an
Officers' Certificate delivered to the Trustee or (ii) for any Asset Sale
resulting in Net Proceeds in excess of $1.0 million, a resolution of Stater
Bros.' Board of Directors set forth in an Officers' Certificate delivered to the
Trustee; and (c) at least 75% of the consideration therefor received by Stater
Bros. or such Restricted Subsidiary is in the form of cash. For purposes of
this provision, each of the following shall be deemed to be cash: (a) any
liabilities (as shown on Stater Bros.' or such Restricted Subsidiary's most
recent balance sheet) of Stater Bros. or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases Stater Bros. or such Restricted
Subsidiary from further liability; and (b) any securities, notes or other
obligations received by Stater Bros. or any such Restricted Subsidiary from such
transferee that are contemporaneously (subject to ordinary settlement periods)
converted by Stater Bros. or such Restricted Subsidiary into cash (to the extent
of the cash received in that conversion); provided, that any non-cash
consideration that becomes Net
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Proceeds shall thereafter be subject to the provisions of the second paragraph
of this Section 4.10.
Upon the date of consummation of any Asset Sale by Stater Bros. or any
Restricted Subsidiary which, taken individually or together with all such Asset
Sales since the date of this Indenture, results in the receipt of Net Proceeds
in excess of $10.0 million, such Net Proceeds and all Net Proceeds from all such
Asset Sales consummated concurrently therewith or consummated thereafter (such
first consummation date and each such date thereafter, a "Consummation Date")
shall be applied by Stater Bros. or such Restricted Subsidiary within 12 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: (a) investments in assets or businesses in the same line of
business as Stater Bros. or such Restricted Subsidiary; (b) the permanent
repayment of (and permanent reduction of commitments, if any, under) any
Indebtedness (i) that is secured by or incurred to construct such assets or (ii)
of a Restricted Subsidiary; (c) a combination of payment and investment
permitted by the foregoing clauses (a) and (b); or (d) pending the final
----------- ---
application of any such Net Proceeds, the temporary reduction of revolving
credit borrowings or other investment of such Net Proceeds in any manner that is
not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in clauses (a), (b) or (c) of the preceding paragraph shall constitute
----------- --- ---
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0
million, Stater Bros. shall make an Asset Sale Offer in accordance with Section
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3.09 to all Holders of Notes and all holders of other Indebtedness that is pari
- ----
passu with the Notes containing provisions similar to those set forth in this
Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets to purchase the maximum principal amount of Notes and such other
pari passu Indebtedness that may be purchased out of such Excess Proceeds. The
offer price in any Asset Sale Offer will be equal to 100% of principal amount
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, Stater Bros. or such Restricted Subsidiary
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of such
Excess Proceeds, the Trustee shall select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis based on the principal amount
of Notes and such other pari passu Indebtedness tendered. Upon completion of
each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Stater Bros. shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of this Indenture, Stater Bros. shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the Asset Sale provisions of this Indenture by virtue of such
conflict.
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Section 4.11. Transactions with Affiliates.
Stater Bros. shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless: (a) such
Affiliate Transaction is on terms that are consistent with industry practice and
no less favorable to Stater Bros. or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by Stater Bros.
or such Restricted Subsidiary with an unrelated Person; and (b) with respect to
any Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, Stater Bros. delivers to the
Trustee a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been approved by a majority of
the members of the Board of Directors.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, shall not be subject to the provisions of the prior paragraph:
(a) transactions, to the extent not otherwise prohibited under this Indenture,
between or among Stater Bros. and/or its Wholly-Owned Subsidiaries; (b)
transactions contemplated by the Santee Documents, as amended, modified,
renewed, refunded or replaced from time to time; provided, that such
transactions are not otherwise prohibited by this Indenture; (c) payment of
reasonable directors fees to directors of Stater Bros.; (d) sales of Equity
Interests (other than Disqualified Stock) to Affiliates of Stater Bros.; (e)
payment to La Cadena Investments of an amount equal to 1% of the aggregate
principal amount of the Initial Notes for advisory services rendered in
connection therewith; and (f) Restricted Payments that are permitted by the
provisions of Section 4.07 hereof.
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Section 4.12. Liens.
Stater Bros. shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind on any asset now owned or hereafter acquired, except
Permitted Liens.
Section 4.13. Corporate Existence.
Subject to Article 5 hereof, Stater Bros. shall do or cause to be done
---------
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of Stater Bros. or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of Stater Bros. and its Subsidiaries; provided, however, that Stater Bros. shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors of Stater Bros. shall determine that the preservation thereof
is no longer desirable in the conduct of the business of Stater Bros. and its
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Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
Section 4.14. Offer to Repurchase Upon Change of Control.
If a Change of Control occurs, each Holder of Notes will have the
right to require Stater Bros. to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of that Holder's Notes pursuant to a Change of
Control Offer. In the Change of Control Offer, Stater Bros. shall offer a
payment in cash equal to 101% of the aggregate principal amount of Notes
repurchased plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of purchase (the "Change of Control Payment"). Within 30
days following any Change of Control, Stater Bros. shall mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes on the date specified in such notice
(the "Change of Control Payment Date"), which date shall be no earlier than 30
days and no later than 60 days from the date such notice is mailed, pursuant to
the procedures required by this Indenture and described in such notice. Stater
Bros. shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.14, Stater Bros.
------------
will comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 4.14 by virtue of
------------
such conflict.
On the Change of Control Payment Date, Stater Bros. shall, to the
extent lawful: (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered; and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
Stater Bros.
The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof.
Prior to complying with any of the provisions of this Section 4.14,
------------
but in any event within 90 days following a Change of Control, Stater Bros.
shall either (i) cause each of its Restricted Subsidiaries to obtain the
requisite consents, if any, under all agreements governing outstanding
Indebtedness of such Restricted Subsidiary to permit the repurchase of Notes
required by this Section 4.14 or (ii) if any of such requisite consents cannot
------------
be obtained, cause the applicable Restricted Subsidiary or Restricted
Subsidiaries to repay the Indebtedness pursuant to which such consent is
required.
Stater Bros. shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
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Stater Bros. shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Section 4.14 and purchases all Notes validly tendered and not
------------
withdrawn under such Change of Control Offer.
Section 4.15. Limitation On Issuances And Sales Of Equity Interests In Wholly-
Owned Subsidiaries (Other Than An Unrestricted Subsidiary).
Stater Bros. shall not, and shall not permit any of its Wholly-Owned
Subsidiaries (other than an Unrestricted Subsidiary) to, transfer, convey, sell,
lease or otherwise dispose of any Equity Interests in any Wholly-Owned
Subsidiary (other than an Unrestricted Subsidiary) of Stater Bros. to any Person
(other than Stater Bros. or a Wholly-Owned Subsidiary of Stater Bros.), unless:
(a) such transfer, conveyance, sale, lease or other disposition is of all the
Equity Interests in such Restricted Subsidiary; and (b) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Sections 3.09 and 4.10. In addition, Stater Bros. shall not
------------- ----
permit any Wholly-Owned Subsidiary (other than an Unrestricted Subsidiary) of
Stater Bros. to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to Stater Bros. or a Wholly-Owned Subsidiary (other than an
Unrestricted Subsidiary) of Stater Bros.
Section 4.16. Limitation on Issuances of Guarantees of Indebtedness.
Stater Bros. shall not permit any of its Restricted Subsidiaries,
directly or indirectly, to Guarantee or pledge any assets to secure the payment
of any other Indebtedness of Stater Bros. with a principal amount in excess of
an aggregate of $10.0 million unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture providing for the Guarantee of
the payment of the Notes by such Restricted Subsidiary, which Guarantee shall be
senior to or pari passu with such Subsidiary's Guarantee of or pledge to secure
such other Indebtedness.
Section 4.17. Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors of Stater Bros. may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of any Wholly-Owned
Subsidiary of Stater Bros. other than a Wholly-Owned Subsidiary of such
Subsidiary; provided, that Stater Bros. shall have provided the Trustee with an
Officers' Certificate accompanied by a resolution of the Board of Directors of
Stater Bros. stating that (x) such designation complies with Section 4.07 hereof
------------
and (y) such designation shall not otherwise result in any Default or Event of
Default. The Board of Directors of Stater Bros. may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving
effect to such designation, Stater Bros. is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
Section 4.09 hereof and (y) immediately before and immediately after giving
- ------------
effect to such designation, no Default or Event of Default shall have occurred
and be continuing. Any such designation by the Board of Directors of Stater
Bros. shall be evidenced to the Trustee by promptly providing the
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Trustee a copy of the board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with this
Section 4.17.
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Section 4.18. Payments For Consent.
Stater Bros. shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
and is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
Stater Bros. shall not, directly or indirectly: (x) consolidate or
merge with or into another Person (whether or not Stater Bros. is the surviving
corporation); or (y) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of Stater Bros. and its
Restricted Subsidiaries taken as a whole, in one or more related transactions,
to another Person; unless:
(a) either: (i) Stater Bros. would be the surviving corporation; or (ii)
the Person formed by or surviving any such consolidation or merger (if other
than Stater Bros.) or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made would be a corporation organized or
existing under the laws of the United States, any state thereof or the District
of Columbia;
(b) the Person formed by or surviving any such consolidation or merger (if
other than Stater Bros.) or the Person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all the obligations
of Stater Bros. under the Notes, this Indenture and the Registration Rights
Agreement pursuant to agreements reasonably satisfactory to the Trustee;
(c) immediately after giving effect to such transaction (including giving
effect to any Indebtedness incurred or anticipated to be incurred in connection
with or in respect of such transaction) no Default or Event of Default would
exist or be continuing; and
(d) Stater Bros. or the Person formed by or surviving any such
consolidation or merger (if other than Stater Bros.), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made: (i)
would have Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of Stater Bros. immediately preceding
the transaction; and (ii) would, on the date of such transaction after giving
pro forma effect thereto and any related financing transactions as if the same
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of
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additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09; and
------------
(e) Stater Bros. or such Person shall have delivered to the Trustee (i) an
Officers' Certificate of Stater Bros. and an Opinion of Counsel (which counsel
may not be in-house counsel of Stater Bros.), each stating that such
consolidation, merger, conveyance, transfer or lease 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 in
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this Indenture relating to such transaction have been satisfied and (ii) a
certificate from Stater Bros.' independent certified public accountants stating
that Stater Bros. has made the calculations required by clause (d) above in
accordance with the terms of this Indenture.
In addition, Stater Bros. shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, lease all or substantially
all of its properties or assets, in one or more related transactions, to any
other Person.
Notwithstanding the foregoing, this Section 5.01 shall not apply to a
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sale, assignment, transfer, conveyance or other disposition of assets between or
among Stater Bros. and any of its Restricted Subsidiaries.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of Stater Bros. in accordance with Section 5.01 hereof, the successor
------------
corporation formed by such consolidation or into or with which Stater Bros. is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to "Stater Bros." shall
refer instead to the successor corporation and not to Stater Bros.), and may
exercise every right and power of Stater Bros. under this Indenture with the
same effect as if such successor Person had been named as Stater Bros. herein;
provided, however, that the predecessor Stater Bros. shall not be relieved from
the obligation to pay the principal of and interest on the Notes except in the
case of a sale of all of Stater Bros.' assets that meets the requirements of
Section 5.01 hereof.
- ------------
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following shall constitute an "Event of Default": (i)
default for 30 days in the payment when due of interest on, or Liquidated
Damages with respect to, the Notes; (ii) default in payment when due of the
principal of, or premium, if any, on the Notes; (iii) failure by Stater Bros. or
any of its Restricted Subsidiaries to comply with Section 3.09, 4.10, 4.14 or
------------ ---- ----
5.01; (iv) failure by Stater Bros. or any of its Restricted Subsidiaries for 60
- ----
days after notice to
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comply with any of the other agreements in this Indenture or the Notes (other
than a default set forth in clauses (i), (ii) or (iii) above); (v) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
Stater Bros. or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by Stater Bros. or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of this
Indenture, if that default: (A) is caused by a failure to pay principal of, or
interest or premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default"); or (B) results in the acceleration of such Indebtedness
prior to its express maturity, and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more; (vi) failure by
Stater Bros. or any of its Restricted Subsidiaries to pay final judgments to the
extent not covered by insurance underwritten by third parties aggregating in
excess of $2.0 million, which judgments shall not have been paid, discharged or
stayed for a period of 60 days; (vii) Stater Bros. or any of its Restricted
Subsidiaries pursuant to or within the meaning of 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 they become due; or (viii) a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law that: (A) is for relief
against Stater Bros. or any of its Restricted Subsidiaries in an involuntary
case; (B) appoints a custodian of Stater Bros. or any of its Restricted
Subsidiaries or for all or substantially all of the property of Stater Bros. or
any of its Restricted Subsidiaries; or (C) orders the liquidation of Stater
Bros. or any of its Restricted Subsidiaries; and the order or decree remains
unstayed and in effect for 60 consecutive days.
Section 6.02. Acceleration.
If any Event of Default other than an Event of Default described in
clauses (vii) or (viii) above occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare the principal of and accrued interest and Liquidated Damages, if any, on
all the Notes to be due and payable immediately by notice in writing to Stater
Bros. and the Trustee specifying the respective Event of Default and that such
notice is a "notice of acceleration" (the "Acceleration Notice"), and the same
shall become immediately and automatically due and payable. Notwithstanding the
foregoing, if an Event of Default specified in clause (vii) of Section 6.01
------------
hereof occurs with respect to Stater Bros., all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or Liquidated Damages that has become due solely because of
the acceleration) have been cured or waived.
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If an Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of Stater Bros. with the
intention of avoiding payment of the premium that Stater Bros. would have had to
pay if Stater Bros. then had elected to redeem the Notes pursuant to Section
-------
3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall
- ----
also become and be immediately due and payable, to the extent permitted by law,
anything in this Indenture or in the Notes to the contrary notwithstanding. If
an Event of Default occurs prior to August 15, 2003 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of Stater Bros. with
the intention of avoiding the prohibition on redemption of the Notes prior to
such date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable to the extent permitted by law in
an amount, for each of the years beginning on August 15 of the years set forth
below, as set forth below (expressed as a percentage of the principal amount of
the Notes on the date of payment that would otherwise be due but for the
provisions of this sentence):
Year Percentage
---- ----------
1999 .................................. 116.1250%
2000 .................................. 113.4375%
2001 .................................. 110.7500%
2002 .................................. 108.0625%
2003 .................................. 105.3750%
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest and Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note 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.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase). Upon any
such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
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Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if: (a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default; (b) the Holders of at least 25% in
principal amount of the then outstanding Notes make a written request to the
Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes
offer and, if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense; (d) the Trustee does not comply
with the request within 60 days after receipt of the request and the offer and,
if requested, the provision of indemnity; and (e) during such 60-day period the
Holders of a majority in principal amount of the then outstanding Notes do not
give the Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(i) or (ii) occurs and
--------------- ----
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against Stater Bros. for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including
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any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Holders of the Notes allowed in
any judicial proceedings relative to Stater Bros. (or any other obligor upon the
Notes), its creditors or its property and shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims and any custodian in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To
------------
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 hereof out of the estate in any such proceeding,
------------
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
- ------------
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to Stater Bros. or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
------------
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as 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
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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 does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
------------
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
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 its exercise as a prudent person would
exercise or use under the circumstances in the conduct of its own affairs.
(b) Except during the continuance of an Event of Default: (i) the duties
of the Trustee shall be determined solely by the express provisions of this
Indenture and the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied covenants or
obligations 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, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities 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; (ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible 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 hereof.
------------
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights or powers under this Indenture at the
request or direction of any Holders, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss, costs,
liabilities and/or expenses that might be incurred by it in connection with such
request or direction.
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(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with Stater Bros. 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 conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may 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. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from Stater Bros. shall be sufficient if signed by
an Officer of Stater Bros.
(f) The Trustee shall be under no obligation to exercise any of its rights
or powers under this Indenture at the request or direction of any of the Holders
unless such Holders shall have offered to the Trustee security or indemnity
satisfactory to it against any loss, costs, liabilities and/or expenses that
might be incurred by it in connection with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with Stater Bros. or any
Affiliate of Stater Bros. with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest as described in the TIA as then in effect, it must eliminate such
conflict within 90 days, apply to the SEC for permission to continue as trustee
or resign. Any Agent may do the same with like rights and duties. The Trustee
is also subject to Sections 7.10 and 7.11 hereof.
------------- ----
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Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for Stater Bros.' use of the proceeds from the Notes or any money
paid to Stater Bros. or upon Stater Bros.' direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest or Liquidated Damages, if any, on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA (S) 313(a) (but if no event described in
TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
(S) 313(b)(2). The Trustee shall also transmit by mail all reports as required
by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to Stater Bros. and , if such report is prepared after the
Exchange Offer Registration Statement or the Shelf Registration Statement has
been declared effective by the SEC, filed with the SEC and each stock exchange
on which the Notes are listed in accordance with TIA (S) 313(d). Stater Bros.
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
Stater Bros. shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. Stater Bros. shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
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Stater Bros. shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against Stater Bros. (including
this Section 7.07) and defending itself against any claim (whether asserted by
------------
Stater Bros. or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify Stater Bros. promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify
Stater Bros. shall not relieve Stater Bros. of its obligations hereunder.
Stater Bros. shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and Stater Bros. shall pay the
reasonable fees and expenses of such counsel. Stater Bros. need not pay for any
settlement made without its consent, which consent shall not be unreasonably
delayed or withheld.
The obligations of Stater Bros. under this Section 7.07 shall survive
------------
the satisfaction and discharge of this Indenture.
To secure Stater Bros.' payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(vii) or (viii) hereof occurs, the expenses and
----------------- ------
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to
the extent applicable.
Stater Bros.' obligations under this Section 7.07 and any claim
------------
arising hereunder shall survive the resignation or removal of any Trustee, the
discharge of Stater Bros.' obligations pursuant to Article 8 hereof and any
---------
rejection or termination under any Bankruptcy Law.
Section 7.08. Replacement of Trustee.
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 in writing at any time and be discharged from
the trust hereby created by so notifying Stater Bros. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and Stater Bros. in writing. Stater Bros.
may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10
------------
hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for
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relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a
custodian or public officer takes charge of the Trustee or its property; or (d)
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, Stater Bros. shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by Stater
Bros.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Stater Bros., or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
-------
7.10, such Holder of a Note 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 Stater Bros. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
------------
pursuant to this Section 7.08, Stater Bros.' obligations under Section 7.07
------------ ------------
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and 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.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
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Section 7.11. Preferential Collection of Claims Against Stater Bros.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
Section 7.12. Trustee Risk.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it. Whether
or not expressly provided herein, every provision of this Indenture relating to
the conduct or affecting the liability of or affording protection to the Trustee
shall be subject to Section 7.01 hereof and the requirements of the TIA as then
------------
in effect.
Section 7.13. Appointment Of Co-Trustee.
It is the purpose of this Indenture that there shall be no violation
of any law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as trustee in such
jurisdiction. It is recognized that in case of litigation under this Indenture,
and in particular in case of the enforcement of any such document on default, or
in case the Trustee deems that by reason of any present or future law of any
jurisdiction it may not exercise any of the powers, rights or remedies herein
granted to the Trustee or hold title to the properties in trust, as herein
granted, or take any other action which may be desirable or necessary in
connection therewith, it may be necessary that the Trustee appoint an additional
individual or institution as a separate or co-trustee (the "Co-Trustee"). The
following provisions of this Section 7.13 are adopted to these ends.
------------
The Trustee shall, upon the prior written consent of Stater Bros.,
which shall not be unreasonably delayed or withheld, appoint an additional
individual or institution as a Co-Trustee. The Co-Trustee shall deliver a
written acceptance of its appointment to Stater Bros. Thereupon, the Co-Trustee
shall have all the rights, powers and duties of the Trustee under this
Indenture. The Trustee shall mail a notice of the appointment of the Co-Trustee
to Holders of the Notes.
In the event that the Trustee appoints a Co-Trustee, each and every
remedy, power, right, claim, demand, cause of action, immunity, estate, title,
interest and lien expressed or intended by this Indenture to be exercised by or
vested in or conveyed to the Trustee with respect thereto shall be exercisable
by and vested in such Co-Trustee but only to the extent necessary to enable such
Co-Trustee to exercise such powers, rights, and remedies, and every covenant and
obligation necessary to the exercise thereof by such Co-Trustee shall run to and
be enforceable by either of them.
Should any instrument in writing be required by the separate Co-
Trustee so appointed by the Trustee for fuller and more certain vesting in and
confirming to him or it such
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properties, rights, powers, trusts, duties and obligations, any and all such
instruments in writing shall, on request, be executed, acknowledged and
delivered by Stater Bros. In case any separate Co-Trustee, or a successor to
either, shall die, become incapable of acting, resign or be removed, all the
estates, properties, rights, powers, trusts, duties and obligations of such Co-
Trustee, so far as permitted by law, shall vest in and be exercised by the
Trustee until the appointment of a new trustee or successor to such Co-Trustee.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
Stater Bros. may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
------------ ----
compliance with the conditions set forth below in this Article 8.
---------
Section 8.02. Legal Defeasance and Discharge.
Upon Stater Bros.' exercise under Section 8.01 hereof of the option
------------
applicable to this Section 8.02, Stater Bros. shall, subject to the satisfaction
------------
of the conditions set forth in Section 8.04 hereof, be deemed to have been
------------
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that Stater Bros. shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
------------
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of Stater Bros., shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders
of outstanding Notes to receive solely from the trust fund described in Section
-------
8.04 hereof, and as more fully set forth in such Section, payments in respect of
- ----
the principal of, premium, if any, and interest and Liquidated Damages, if any,
on such Notes when such payments are due, (b) Stater Bros.' obligations with
respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights,
--------- ------------
powers, trusts, duties and immunities of the Trustee hereunder and Stater Bros.'
obligations in connection therewith and (d) this Article 8. Subject to
---------
compliance with this Article 8, Stater Bros. may exercise its option under this
---------
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03
- ------------ ------------
hereof.
Section 8.03. Covenant Defeasance.
Upon Stater Bros.' exercise under Section 8.01 hereof of the option
------------
applicable to this Section 8.03, Stater Bros. shall, subject to the satisfaction
------------
of the conditions set forth in Section 8.04 hereof, be released from its
------------
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
--------------------------------
4.11, 4.12, 4.13, 4.14, 4.16, 4.17 and 4.18 hereof and clauses (c)
- ---------------------------------- ----
67
<PAGE>
and (d) of Section 5.01 hereof with respect to the outstanding Notes on and
------------
after the date the conditions set forth in Section 8.04 are satisfied
------------
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, Stater Bros. 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 hereof, but, except as specified
------------
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon Stater Bros.' exercise under Section 8.01 hereof of
------------
the option applicable to this Section 8.03 hereof, hereof to the satisfaction of
------------
the conditions set forth in Section 8.04 hereof, Sections 5.01(c) and 5.01(d)
------------ ---------------- -------
and Sections 6.01(iii) through 6.01(vi) hereof shall not constitute Events of
------------------ --------
Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
-------
8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal
- ---- ----
Defeasance or Covenant Defeasance: (a) Stater Bros. must irrevocably deposit
with the Trustee, in trust, for the benefit of the Holders, cash in United
States dollars, non-callable Government Securities, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium, if
any, and interest and Liquidated Damages, if any on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may be and
Stater Bros. must specify whether the Notes are being defeased to maturity or to
a particular redemption date; (b) in the case of an election under Section 8.02
------------
hereof, Stater Bros. shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming that (A)
Stater Bros. has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) 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, and based thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding 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 amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (c) in
the case of an election under Section 8.03 hereof, Stater Bros. shall have
------------
delivered to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (d) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the incurrence of
Indebtedness all or a portion of the proceeds of
68
<PAGE>
which will be used to defease the Notes pursuant to this Article 8 concurrently
---------
with such incurrence) or insofar as Sections 6.01(vii) or 6.01(viii) hereof is
------------------ ----------
concerned, at any time in the period ending on the 91st day after the date of
deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material agreement or
instrument (other than this Indenture) to which Stater Bros. or any of its
Subsidiaries is a party or by which Stater Bros. or any of its Subsidiaries is
bound; (f) Stater Bros. shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (g) Stater Bros. shall have delivered to
the Trustee an Officers' Certificate stating that the deposit was not made by
Stater Bros. with the intent of preferring the Holders over any other creditors
of Stater Bros. or with the intent of defeating, hindering, delaying or
defrauding any other creditors of Stater Bros. or others; and (h) Stater Bros.
shall have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for or relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
------------
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
------------
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
------------
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including Stater Bros. acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
Stater Bros. shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
------------
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
---------
Trustee shall deliver or pay to Stater Bros. from time to time upon the request
of Stater Bros. any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
------------
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
- ---------------
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
69
<PAGE>
Section 8.06. Repayment to Stater Bros.
Any money deposited with the Trustee or any Paying Agent, or then held
by Stater Bros., in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to Stater Bros. on its request or (if then held by Stater Bros.) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to Stater Bros. for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of Stater Bros. as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of Stater Bros. cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to Stater Bros.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
------------
8.03 hereof, as the case may be, by reason of any order or judgment of any court
- ----
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then Stater Bros.' obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
- ------------ ----
permitted to apply all such money in accordance with Section 8.02 or 8.03
------------ ----
hereof, as the case may be; provided, however, that, if Stater Bros. makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, Stater Bros. shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, Stater Bros. and the
------------
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
---------
related definitions) in a manner that does not materially adversely affect any
Holder; (c) to provide for the assumption of Stater Bros.' obligations to the
Holders of the Notes by a successor to Stater Bros. pursuant to Article 5 or
---------
Article 11 hereof; (d) to make any change that would provide any additional
- ----------
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Note; (e) to comply with
requirements of the Commission in order to effect or maintain the qualification
of this Indenture
70
<PAGE>
under the TIA; or (f) to provide for the issuance of Additional Notes in
accordance with the limitations set forth in this Indenture as of the date
hereof.
Upon the request of Stater Bros. accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
-------
7.02 hereof, the Trustee shall join with Stater Bros. in the execution of any
- ----
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, Stater Bros. and the
------------
Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10
------------- ----
and 4.14 hereof), and the Notes with the consent of the Holders of at least a
----
majority in principal amount of the Notes (including Additional Notes, if any)
then outstanding voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
------------- ----
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture, or the Notes may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Notes (including Additional Notes, if any) voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes). Without the consent of at least 75% in principal
amount of the Notes then outstanding (including consents obtained in connection
with a tender offer or exchange offer for, or purchase of, such Notes), no
waiver or amendment to this Indenture may make any change in the provisions of
Article 10 hereof that adversely affects the rights of any Holder of Notes.
- ----------
Section 2.08 hereof shall determine which Notes are considered to be
- ------------
"outstanding" for purposes of this Section 9.02.
------------
Upon the request of Stater Bros. accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
------------
join with Stater Bros. in the execution of such amended or supplemental
Indenture unless such amended or supplemental Indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
------------
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
71
<PAGE>
After an amendment, supplement or waiver under this Section becomes
effective, Stater Bros. shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
Stater Bros. to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
------------- ----
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
particular instance by Stater Bros. with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a non-
------------
consenting Holder): (a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver; (b) reduce the principal of or
change the fixed maturity of any Note or alter or waive any of the provisions
with respect to the redemption of the Notes, other than provisions relating to
Section 3.09, 4.10 or 4.14 hereof; (c) reduce the rate of or change the time for
- ------------ ---- ----
payment of interest, including default interest, on any Note; (d) waive a
Default or Event of Default in the payment of principal of or premium, if any,
or interest on the Notes (except a rescission of acceleration of the Notes by
the Holders of at least a majority in aggregate principal amount of the then
outstanding Notes (including Additional Notes, if any) and a waiver of the
payment default that resulted from such acceleration); (e) make any Note payable
in money other than that stated in the Notes; (f) make any change in the
provisions of this Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes; (g) waive a redemption payment with respect to any Note,
other than a payment required by Section 3.09, 4.10 or 4.14 hereof; or (h) make
------------ ---- ----
any change in Section 6.04 or 6.07 hereof or in the preceding amendment and
------------ ----
waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. Stater Bros. in
exchange for all Notes may issue
72
<PAGE>
and the Trustee shall, upon receipt of an Authentication Order, authenticate new
Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
---------
adversely affect the rights, duties, liabilities or immunities of the Trustee.
Stater Bros. may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
------------
shall be fully protected in relying upon, in addition to the documents required
by Section 10.04 hereof, an Officer's Certificate and an Opinion of Counsel
-------------
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.
Section 10.02. Notices.
Any notice or communication by Stater Bros. or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address
73
<PAGE>
If to Stater Bros.:
Stater Bros. Holdings Inc.
21700 Barton Road
Colton, California 92324
Attention: Dennis N. Beal
Chief Financial Officer
with copies to:
Varner, Saleson & Dobler LLP
3750 University Avenue, Suite 610
Riverside, California 92501
Attention: Bruce D. Varner, Esq.
and
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue, Suite 4800
Los Angeles, California 90071-3197
Attention: Andrew E. Bogen, Esq.
If to the Trustee:
IBJ Whitehall Bank & Trust Company
One State Street
New York, New York 10004
Telecopier No.: (212) 858-2952
Attention: Corporate Trust Administration
With a copy to:
Riordan & McKinzie
695 Town Center Drive
Suite 1500
Costa Mesa, California 92626
Telecopier No.: (714) 433-2611
Attention: Michael P. Whalen
Stater Bros. or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back,
74
<PAGE>
if telexed; when receipt acknowledged, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If Stater Bros. mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 10.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. Stater Bros.,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Stater Bros. to the Trustee to take
any action under this Indenture, Stater Bros. shall furnish to the Trustee: (a)
an Officers' Certificate in form and substance reasonably satisfactory to the
Trustee (which shall include the statements set forth in Section 10.05 hereof)
-------------
stating that, in the opinion of the signers, all conditions precedent and
covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and (b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set
forth in Section 10.05 hereof) stating that, in the opinion of such counsel, all
-------------
such conditions precedent and covenants have been satisfied.
Section 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include: (a) a statement that the Person making such
certificate or opinion has read such covenant or condition; (b) 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; (c) a statement that, in the opinion of such Person, he or she 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
satisfied; and (d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
75
<PAGE>
Section 10.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 10.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator
or stockholder of Stater Bros., as such, shall have any liability for any
obligations of Stater Bros. under the Notes, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
Section 10.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 10.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of Stater Bros. or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 10.10. Successors.
All agreements of Stater Bros. in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 10.11. Severability.
In case any provision in this Indenture or in the 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 10.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
76
<PAGE>
Section 10.13. 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 of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
77
<PAGE>
IN WITNESS WHEREOF, we have set our hands on this Indenture as of the
6th day of August, 1999.
STATER BROS. HOLDINGS INC.
By: /s/ Jack H. Brown
--------------------------------
Jack H. Brown
Chairman of the Board, President
and Chief Executive Officer
By: /s/ Bruce D. Varner
--------------------------------
Bruce D. Varner
Secretary
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Terence Rawlins
--------------------------------
Name: Terence Rawlins
Title: Assistant Vice President
<PAGE>
EXHIBIT A-1
(Face of Note)
===============================================================================
CUSIP _________
ISIN __________
10 3/4% Senior Notes due 2006
No. ___ $___________
Stater Bros. Holdings Inc.
promises to pay to ___________, or registered assigns, the principal sum of
_______________________ _____________Dollars ($__________) on August 15, 2006.
Interest Payment Dates: February 15 and August 15, commencing February 15,
2000.
Record Dates: February 1 and August 1.
Dated: __________
Stater Bros. Holdings Inc.
By:
--------------------------------
Jack H. Brown
Chairman of the Board, President
and Chief Executive Officer
By:
--------------------------------
Bruce D. Varner
Secretary
This is one of the
Notes referred to in the
within-mentioned Indenture:
IBJ Whitehall Bank & Trust Company
By:
------------------------------
Authorized Signatory
Dated: __________, ____
===============================================================================
A-1-1
<PAGE>
(Back of Note)
10 3/4% [Series A] [Series B] Senior Notes due 2006
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Stater Bros. Holdings Inc., a Delaware corporation
("Stater Bros."), promises to pay interest on the principal amount of this Note
at 10 3/4% per annum from August 6, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 4 of the Registration Rights
Agreement referred to below. Stater Bros. shall pay interest and Liquidated
Damages semi-annually on February 15 and August 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). 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
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be February 15, 2000. Stater Bros. shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any, (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. Method of Payment. Stater Bros. will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the February 1 or
August 1 next preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. If a Holder has given wire transfer instructions to Stater Bros.,
Stater Bros. will pay all principal, interest and premium and Liquidated
Damages, if any, on that Holder's Notes in accordance with those instructions in
immediately available funds. All other payments on Notes will be made at the
office or agency of the Paying Agent and Registrar within the City and State of
New York unless Stater Bros. elects to make payments of interest and Liquidated
Damages, if any, by check mailed to the Holders at their addresses set forth in
the register of Holders. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. Paying Agent and Registrar. Initially, IBJ Whitehall Bank & Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. Stater Bros. may change any Paying Agent or Registrar without notice
to any Holder. Stater Bros. or any of its Subsidiaries may act as Paying Agent
or Registrar.
4. Indenture. Stater Bros. issued the Notes under an Indenture,
dated as of August 6, 1999 (the "Indenture"), among Stater Bros. 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
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<PAGE>
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of Stater Bros. limited to
$550 million in aggregate principal amount.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at Stater Bros.'s option prior to August 15, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
Stater Bros., in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on August 15 of the years indicated below:
Year Percentage
---- ----------
2003........................................... 105.3750%
2004........................................... 102.6875%
2005 and thereafter............................ 100.0000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, prior to August 15, 2002, Stater Bros. may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes originally
issued under the Indenture at a redemption price of 110.750% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the redemption date, with the net cash proceeds of one or more sales
of Capital Stock of Stater Bros. resulting, for each such sale, in net cash
proceeds to Stater Bros. in excess of $25.0 million; provided that: (i) at
least 65% of the aggregate principal amount of Notes issued under the Indenture
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by Stater Bros. and its Subsidiaries); and (ii) the
redemption shall occur within 45 days of the date of the closing of any such
sale.
6. Mandatory Redemption. Except as set forth in paragraph 7 below,
Stater Bros. shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) If a Change of Control occurs, each Holder of Notes will have the
right to require Stater Bros. to make an offer (a "Change of Control Offer") to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
each Holder's Notes pursuant to a Change of Control Offer at a purchase price
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
Stater Bros. shall mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice.
(b) When the aggregate amount of Excess Proceeds exceeds $10.0
million, Stater Bros. will make an Asset Sale Offer to all Holders of Notes and
all holders of other Indebtedness that is
A-1-3
<PAGE>
pari passu with the Notes containing provisions similar to those set forth in
this Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets to purchase the maximum principal amount of Notes and such other
pari passu Indebtedness that may be purchased out of the Excess Proceeds. The
offer price in any Asset Sale Offer will be equal to 100% of the principal
amount plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase, and will be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, Stater Bros. may use such Excess
Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount of Notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase will receive an Asset Sale Offer from Stater Bros. prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes.
8. Notice of Redemption. Notice of redemption will be mailed, by
first class mail, at least 30 days but not more than 60 days before the
redemption date to each Holder whose Notes are to be redeemed at its registered
address. Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The 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. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and Stater Bros. may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. Stater Bros. need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, Stater Bros.
need not issue, exchange or register the transfer of any Notes for a period of
15 days before a selection of Notes to be redeemed or during the period between
a record date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes (including Additional Notes, if any) voting as a single class, and, except
for any Default or Event of Default in the payment of the principal of, premium
and Liquidated Damages, if any, or interest on, the Notes (including in
connection with an offer to purchase), any existing default or compliance with
any provision of the Indenture or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes
(including Additional Notes, if any) voting as a single class. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes or to
alter the provisions of Article 2 of the Indenture (including the related
definitions) in a manner that does not materially adversely affect any Holder,
to provide for the assumption of Stater Bros.' obligations to Holders of the
Notes in case of a merger, consolidation, or sale of assets, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the
A-1-4
<PAGE>
legal rights under the Indenture of any such Holder, to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act, or to provide for the issuance
of Additional Notes in accordance with the limitations set forth in the
Indenture.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest, on, or Liquidated Damages with
respect to, the Notes; (ii) default in payment when due of the principal of, or
premium, if any, on the Notes; (iii) failure by Stater Bros. or any of its
Restricted Subsidiaries to comply with Section 3.09, 4.10, 4.14 or 5.01 of the
Indenture; (iv) failure by Stater Bros. or any of its Restricted Subsidiaries
for 60 days after notice to comply with any of the other agreements in the
Indenture or the Notes (other than a default set forth in clauses (i), (ii) or
(iii) above); (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Stater Bros. or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by Stater Bros. or any of
its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists,
or is created after the date of the Indenture, if that default: (A) is caused
by a failure to pay principal of, or interest or premium, if any, on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default"); or (B) results
in the acceleration of such Indebtedness prior to its express maturity, and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$5.0 million or more; (vi) failure by Stater Bros. or any of its Restricted
Subsidiaries to pay final judgments to the extent not covered by insurance
underwritten by third parties aggregating in excess of $2.0 million, which
judgments shall not have been paid, discharged or stayed for a period of 60
days; (vii) Stater Bros. or any of its Restricted Subsidiaries pursuant to or
within the meaning of 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 they become
due; or (viii) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (A) is for relief against Stater Bros. or any of its
Restricted Subsidiaries in an involuntary case; (B) appoints a custodian of
Stater Bros. or any of its Restricted Subsidiaries or for all or substantially
all of the property of Stater Bros. or any of its Restricted Subsidiaries; or
(C) orders the liquidation of Stater Bros. or any of its Restricted
Subsidiaries; and the order or decree remains unstayed and in effect for 60
consecutive days. If any Event of Default other than an Event of Default
described in clauses (vii) or (viii) above occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare the principal of and accrued interest and Liquidated Damages, if
any, on all the Notes to be due and payable immediately by notice in writing to
Stater Bros. and the Trustee specifying the respective Event of Default and that
such notice is a "notice of acceleration" (the "Acceleration Notice"), and the
same shall become immediately and automatically due and payable.
Notwithstanding the foregoing, if an Event of Default specified in clauses (vii)
or (viii) above occurs, all outstanding Notes shall become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal of, premium and Liquidated Damages, if any, or interest on any Note)
if and so long as a committee of its Responsible Officers in good faith
determines that withholding notice is in the interests of the Holders of the
Notes. The Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
A-1-5
<PAGE>
consequences under the Indenture except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes. Stater Bros. is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and Stater Bros.
is required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
13. Trustee Dealings with STATER BROS. The Trustee in its individual
or any other capacity may become the owner or Pledgee of Notes and may otherwise
deal with Stater Bros. or any Affiliate of Stater Bros. with the same rights it
would have if it were not Trustee.
14. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator or stockholder of Stater Bros., as such, shall
have any liability for any obligations of Stater Bros. under the Notes, the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of 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 Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes (other than Additional Notes) shall have all the rights set
forth in the Registration Rights Agreement, dated as of August 6, 1999, between
Stater Bros. and the parties named on the signature pages thereof or, in the
case of Additional Notes, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have the rights set forth in one or more registration
rights agreements, if any, between Stater Bros. and the other parties thereto,
relating to rights given by Stater Bros. to the purchasers of any Additional
Notes (collectively, the "Registration Rights Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Stater Bros. has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-1-6
<PAGE>
Stater Bros. will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Stater Bros. Holdings Inc.
21700 Barton Road
P.O. Box 150
Colton, California 92324
Telephone No.: (909) 783-5000
Attention: Corporate Secretary
A-1-7
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to:
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Note on the books of Stater Bros.. The agent may substitute
another to act for him.
________________________________________________________________________________
Date:__________________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:____________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-1-8
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by Stater Bros.
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ]Section 4.10 [ ]Section 4.14
If you want to elect to have only part of the Note purchased by Stater
Bros. pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $________
Date:_________________
Your Signature:__________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:___________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-1-9
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Amount
Amount of decrease Amount of increase of this Global Signature of
in Principal in Principal Note following authorized officer
Amount of this Amount of this such decrease (or of Trustee or Note
Date of Exchange Global Note Global Note increase) Custodian
- ----------------- ------------------ ------------------ ----------------- ------------------
</TABLE>
A-1-10
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
CUSIP ________
ISIN ________
10 3/4% Senior Notes due 2006
No. ___ $____________
Stater Bros. Holdings Inc.
promises to pay to _________, or registered assigns, the principal sum of
_______________________ Dollars ($__________) on August 15, 2006.
Interest Payment Dates: February 15 and August 15, commencing February 15,
2000.
Record Dates: February 1 and August 1.
Dated: __________________
Stater Bros. Holdings Inc.
By: _______________________________
Jack H. Brown
Chairman of the Board, President
and Chief Executive Officer
By: _______________________________
Bruce D. Varner
Secretary
This is one of the
Notes referred to in the
within-mentioned Indenture:
IBJ Whitehall Bank & Trust Company
as Trustee
By: _______________________________
Authorized Signatory
Dated: August 6, 1999
================================================================================
A-2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
10 3/4% [Series A] [Series B] Senior Notes due 2006
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
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 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 (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 STATER BROS. 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
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<PAGE>
(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.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(A) OF
THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE, AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF STATER BROS.
This Global Note is held by the Depositary (as defined in the
Indenture governing this Note) or its nominee in custody for the benefit of the
beneficial owners hereof, and is not transferable to any person under any
circumstances except that (i) the Trustee may make such notations hereon as may
be required pursuant to Section 2.07 of the Indenture, (ii) this Global Note may
be exchanged in whole but not in part pursuant to Section 2.06(a) of the
Indenture, (iii) this Global Note may be delivered to the Trustee for
cancellation pursuant to Section 2.11 of the Indenture, and (iv) this Global
Note may be transferred to a successor depositary with the prior written consent
of Stater Bros.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Stater Bros. Holdings Inc., a Delaware corporation
("Stater Bros."), promises to pay interest on the principal amount of this Note
at 10 3/4% per annum from August 6, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 4 of the Registration Rights
Agreement referred to below. Stater Bros. shall pay interest and Liquidated
Damages semi-annually on February 15 and August 15 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). 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
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be February 15, 2000. Stater Bros. shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any, (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. Stater Bros. will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at
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<PAGE>
the close of business on the February 1 or August 1 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. If a Holder has given wire
transfer instructions to Stater Bros., Stater Bros. will pay all principal,
interest and premium and Liquidated Damages, if any, on that Holder's Notes in
accordance with those instructions in immediately available funds. All other
payments on Notes will be made at the office or agency of the Paying Agent and
Registrar within the City and State of New York unless Stater Bros. elects to
make payments of interest and Liquidated Damages, if any, by check mailed to the
Holders at their addresses set forth in the register of Holders. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Whitehall Bank &
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. Stater Bros. may change any Paying Agent or Registrar without notice
to any Holder. Stater Bros. or any of its Subsidiaries may act as Paying Agent
or Registrar.
4. INDENTURE. Stater Bros. issued the Notes under an Indenture,
dated as of August 6, 1999 (the "Indenture"), among Stater Bros. 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 (S)(S) 77aaa-77bbbb). The Notes are subject to all such
terms and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of Stater Bros. limited to $550 million
in aggregate principal amount.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at Stater Bros.'s option prior to August 15, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
Stater Bros., in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003............................................................ 105.3750 %
2004............................................................ 102.6875 %
2005 and thereafter............................................. 100.0000 %
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, prior to August 15, 2002, Stater Bros. may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes originally
issued under the Indenture at a redemption price of 110.750% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the redemption date, with the net cash proceeds of one or more sales
of Capital Stock of Stater Bros. resulting, for each such sale, in net cash
proceeds to Stater Bros. in excess of $25.0 million; provided that: (i) at
least 65% of the aggregate principal amount of Notes issued under the Indenture
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by Stater Bros.
A-2-4
<PAGE>
and its Subsidiaries); and (ii) the redemption shall occur within 45 days of the
date of the closing of any such sale.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
Stater Bros. shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If a Change of Control occurs, each Holder of Notes will have the
right to require Stater Bros. to make an offer (a "Change of Control Offer") to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
each Holder's Notes pursuant to a Change of Control Offer at a purchase price
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
Stater Bros. shall mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice.
(b) When the aggregate amount of Excess Proceeds exceeds $10.0
million, Stater Bros. will make an Asset Sale Offer to all Holders of Notes and
all holders of other Indebtedness that is pari passu with the Notes containing
provisions similar to those set forth in this Indenture with respect to offers
to purchase or redeem with the proceeds of sales of assets to purchase the
maximum principal amount of Notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds. The offer price in any Asset Sale
Offer will be equal to 100% of the principal amount plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase, and will be
payable in cash. If any Excess Proceeds remain after consummation of an Asset
Sale Offer, Stater Bros. may use such Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other pari passu Indebtedness to be purchased on a pro rata basis. Holders
of Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from Stater Bros. prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed, by
first class mail, at least 30 days but not more than 60 days before the
redemption date to each Holder whose Notes are to be redeemed at its registered
address. Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The 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. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and Stater Bros. may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. Stater Bros. need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, Stater Bros.
need not issue, exchange or register the transfer of any Notes for a period of
15 days before a
A-2-5
<PAGE>
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes (including Additional Notes, if any) voting as a single class, and, except
for any Default or Event of Default in the payment of the principal of, premium
and Liquidated Damages, if any, or interest on, the Notes (including in
connection with an offer to purchase), any existing default or compliance with
any provision of the Indenture or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes
(including Additional Notes, if any) voting as a single class. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes or to
alter the provisions of Article 2 of the Indenture (including the related
definitions) in a manner that does not materially adversely affect any Holder,
to provide for the assumption of Stater Bros.' obligations to Holders of the
Notes in case of a merger, consolidation, or sale of assets, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, or to provide for the issuance of Additional Notes in accordance with the
limitations set forth in the Indenture.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest, on, or Liquidated Damages with
respect to, the Notes; (ii) default in payment when due of the principal of, or
premium, if any, on the Notes; (iii) failure by Stater Bros. or any of its
Restricted Subsidiaries to comply with Section 3.09, 4.10, 4.14 or 5.01 of the
Indenture; (iv) failure by Stater Bros. or any of its Restricted Subsidiaries
for 60 days after notice to comply with any of the other agreements in the
Indenture or the Notes (other than a default set forth in clauses (i), (ii) or
(iii) above); (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Stater Bros. or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by Stater Bros. or any of
its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists,
or is created after the date of the Indenture, if that default: (A) is caused
by a failure to pay principal of, or interest or premium, if any, on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default"); or (B) results
in the acceleration of such Indebtedness prior to its express maturity, and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$5.0 million or more; (vi) failure by Stater Bros. or any of its Restricted
Subsidiaries to pay final judgments to the extent not covered by insurance
underwritten by third parties aggregating in excess of $2.0 million, which
judgments shall not have been paid, discharged or stayed for a period of 60
days; (vii) Stater Bros. or any of its Restricted Subsidiaries pursuant to or
within the meaning of 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 they become
due; or (viii) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (A) is for relief against Stater Bros. or any of its
A-2-6
<PAGE>
Restricted Subsidiaries in an involuntary case; (B) appoints a custodian of
Stater Bros. or any of its Restricted Subsidiaries or for all or substantially
all of the property of Stater Bros. or any of its Restricted Subsidiaries; or
(C) orders the liquidation of Stater Bros. or any of its Restricted
Subsidiaries; and the order or decree remains unstayed and in effect for 60
consecutive days. If any Event of Default other than an Event of Default
described in clauses (vii) or (viii) above occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare the principal of and accrued interest and Liquidated Damages, if
any, on all the Notes to be due and payable immediately by notice in writing to
Stater Bros. and the Trustee specifying the respective Event of Default and that
such notice is a "notice of acceleration" (the "Acceleration Notice"), and the
same shall become immediately and automatically due and payable.
Notwithstanding the foregoing, if an Event of Default specified in clauses (vii)
or (viii) above occurs, all outstanding Notes shall become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal of, premium and Liquidated Damages, if any, or interest on any Note)
if and so long as a committee of its Responsible Officers in good faith
determines that withholding notice is in the interests of the Holders of the
Notes. The Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes. Stater Bros. is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and Stater Bros.
is required upon becoming aware of any Default or Event of Default, to deliver
to the Trustee a statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH STATER BROS. The Trustee in its individual
or any other capacity may become the owner or Pledgee of Notes and may otherwise
deal with Stater Bros. or any Affiliate of Stater Bros. with the same rights it
would have if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of Stater Bros., as such, shall
have any liability for any obligations of Stater Bros. under the Notes, the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of 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 Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes (other than Additional Notes) shall have all the rights set
forth in the Registration Rights Agreement, dated as of August 6, 1999, between
Stater Bros. and the parties named on the signature pages thereof or, in the
case of Additional
A-2-7
<PAGE>
Notes, Holders of Restricted Global Notes and Restricted Definitive Notes shall
have the rights set forth in one or more registration rights agreements, if any,
between Stater Bros. and the other parties thereto, relating to rights given by
Stater Bros. to the purchasers of any Additional Notes (collectively, the
"Registration Rights Agreement").
18. CUSIP NUMBERS. `Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Stater Bros. has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-2-8
<PAGE>
Stater Bros. will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Stater Bros. Holdings Inc.
21700 Barton Road
P.O. Box 150
Colton, California 92324
Telephone No.: (909) 783-5000
Attention: Corporate Secretary
A-2-9
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to:
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of Stater Bros.. The agent may substitute
another to act for him.
________________________________________________________________________________
Date: ____________________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:____________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-10
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by Stater Bros.
pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box
below:
[ ]Section 4.10 [ ]Section 4.14
If you want to elect to have only part of the Note purchased by Stater
Bros. pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
_______________________________________________________________________________
Date:________________
Your Signature:__________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:___________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-11
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Amount
Amount of Amount of increase of this Global Note Signature of
decrease in in Principal following such authorized officer
Principal Amount Amount of this decrease (or of Trustee or Note
Date of Exchange of this Global Note Global Note increase) Custodian
- ---------------- ------------------- -------------- ------------ ------------------
</TABLE>
A-2-12
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Stater Bros. Holdings Inc.
21700 Barton Road
P.O. Box 150
Colton, California 92324
Telephone: (909) 783-5000
Attention: Corporate Secretary
IBJ Whitehall Bank & Trust Company
One State Street
NewYork NY 10004
Telephone No.: (212) 858-2103
Attention: Corporate Trust Administration
Re: 10 3/4% Senior Notes due 2006
------------------------------
Reference is hereby made to the Indenture, dated as of August 6, 1999
(the "Indenture"), among State Bros. Holdings Inc., as issuer ("Stater Bros.")
and IBJ Whitehall Bank & Trust Company, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a beneficial interest in the
----------------------------------------------------------------------
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
- -----------------------------------------------------------
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] Check if Transferee will take delivery of a beneficial interest in the
----------------------------------------------------------------------
Temporary Regulation S Global Note, the Regulation S Global Note or a Definitive
- --------------------------------------------------------------------------------
Note pursuant to
- -----------------
B-1
<PAGE>
Regulation S. The Transfer is being effected pursuant to and in accordance with
- ------------
Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor
hereby further certifies that (i) the Transfer is not being made to a person in
the United States and (x) at the time the buy order was originated, the
Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note, the Temporary
Regulation S Global Note and/or the Definitive Note and in the Indenture and the
Securities Act.
3. [ ] Check and complete if Transferee will take delivery of a beneficial
-------------------------------------------------------------------
interest in the IAI Global Note or a Definitive Note pursuant to any provision
- ------------------------------------------------------------------------------
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
- ----------------------------------------------------------
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to Stater Bros. or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount of Notes
at the time of transfer of less than $100,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this
B-2
<PAGE>
certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
4. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of Stater Bros.
_________________________________________
[Insert Name of Transferor]
By:______________________________________
Name:
Title:
B-3
<PAGE>
Dated: ,
--------- ------
B-4
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP 857555 AF 3), or
-----------
(ii) [ ] Regulation S Global Note (CUSIP U85853 AA 8); or
-----------
(iii) [ ] IAI Global Note (CUSIP 857555 AG 1); or
-----------
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP 857555 AF 3), or
-----------
(ii) [ ] Regulation S Global Note (CUSIP U85853 AA 8), or
-----------
(iii) [ ] IAI Global Note (CUSIP 857555 AG 1); or
-----------
(iv) [ ] Unrestricted Global Note (CUSIP 857555 AH 9); or
-----------
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Stater Bros. Holdings Inc.
21700 Barton Road
P.O. Box 150
Colton, California 92324
Telephone: (909) 783-5000
Attention: Corporate Secretary
IBJ Whitehall Bank & Trust Company
One State Street
NewYork NY 10004
Telephone No.: (212) 858-2103
Attention: Corporate Trust Administration
Re: 10 3/4% Senior Notes due 2006
-----------------------------
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of August 6, 1999
(the "Indenture"), among Stater Bros. Holdings Inc., as issuer ("Stater Bros."),
and IBJ Whitehall Bank & Trust Company, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
-------------------------------------------------------------
Global Note to beneficial interest in an Unrestricted Global Note. In
- -----------------------------------------------------------------
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [ ] Check if Exchange is from beneficial interest in a Restricted
-------------------------------------------------------------
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
- -------------------------------------------
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
C-1
<PAGE>
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) [ ] Check if Exchange is from Restricted Definitive Note to
-------------------------------------------------------
beneficial interest in an Unrestricted Global Note. In connection with the
- --------------------------------------------------
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Note to
-------------------------------------------------------
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
- ----------------------------
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
-------------------------------------------------------------
Global Note to Restricted Definitive Note. In connection with the Exchange of
- -----------------------------------------
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [ ] Check if Exchange is from Restricted Definitive Note to
--------------------------------------------------------
beneficial interest in a Restricted Global Note. In connection with the
- -----------------------------------------------
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] 144A Global Note, Regulation S Global Note, IAI Global Note with
an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note
C-2
<PAGE>
and in the Indenture and the Securities Act.
C-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of Stater Bros..
___________________________________
[Insert Name of Owner]
By: _______________________________
Name:
Title:
Dated: __________, ____
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Stater Bros. Holdings Inc.
21700 Barton Road
P.O. Box 150
Colton, California 92324
Telephone: (909) 783-5000
Attention: Corporate Secretary
IBJ Whitehall Bank & Trust Company
One State Street
NewYork NY 10004
Telephone No.: (212) 858-2103
Attention: Corporate Trust Administration
Re: 10 3/4% Senior Notes due 2006
-----------------------------
Reference is hereby made to the Indenture, dated as of August 6, 1999
(the "Indenture"), among Stater Bros. Holdings Inc., as issuer (the "Stater
Bros."), and IBJ Whitehall Bank & Trust Company, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to Stater Bros., (B) in accordance with Rule 144A under
the Securities Act to a "qualified institutional buyer" (as defined therein),
(C) to an institutional "accredited investor" (as defined below)
C-1
<PAGE>
that, prior to such transfer, furnishes (or has furnished on its behalf by a
U.S. broker-dealer) to you and to Stater Bros. a signed letter substantially in
the form of this letter and, if such transfer is in respect of a principal
amount of Notes, at the time of transfer of less than $100,000, an Opinion of
Counsel in form reasonably acceptable to Stater Bros. to the effect that such
transfer is in compliance with the Securities Act, (D) outside the United States
in accordance with Rule 904 of Regulation S under the Securities Act, (E) in
accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if Stater Bros. so
requests) or (F) pursuant to an effective registration statement under the
Securities Act, and, in each case, in accordance with any application securities
laws of any state of the United States or any other applicable jurisdiction, and
we further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and Stater
Bros. such certifications, legal opinions and other information as you and
Stater Bros. may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Notes purchased
by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and Stater Bros. are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
__________________________________________
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: __________________, ____
D-2
<PAGE>
EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
dated as of August 6, 1999
between
STATER BROS. HOLDINGS INC.,
as Issuer
and
BANC OF AMERICA SECURITIES LLC,
as Initial Purchaser
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. Definitions............................................................. 1
2. Exchange Offer.......................................................... 4
3. Shelf Registration...................................................... 7
4. Liquidated Damages...................................................... 8
5. Registration Procedures................................................. 9
6. Registration Expenses...................................................17
7. Indemnification.........................................................18
8. Rules 144 and 144A......................................................21
9. Underwritten Registrations..............................................21
10. Miscellaneous...........................................................21
</TABLE>
<PAGE>
This Registration Rights Agreement (the "Agreement") is dated as of
August 6, 1999, by and between Stater Bros. Holdings Inc., a Delaware
corporation, as the issuer ("Stater Bros."), and Banc of America Securities LLC,
as the initial purchaser (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of August 2, 1999, between Stater Bros. and the Initial
Purchaser (the "Purchase Agreement") relating to the sale by Stater Bros. to the
Initial Purchaser of $450,000,000 aggregate principal amount of Stater Bros.' 10
3/4% Senior Notes due 2006 (the "Notes"). In order to induce the Initial
Purchaser to enter into the Purchase Agreement, Stater Bros. has agreed to
provide the registration rights set forth in this Agreement for the equal
benefit of the Initial Purchaser and its respective direct and indirect
transferees. The execution and delivery of this Agreement is a condition to the
Initial Purchaser's obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the
following meanings:
"Advice": See Section 5.
"Applicable Period": See Section 2.
"Closing Date": The closing of the offering of the Notes to the
Initial Purchaser.
"Commission": The Securities and Exchange Commission.
"Effectiveness Date": The 150th day after the Closing Date.
"Effectiveness Target Date": See Section 4.
"Effectiveness Period": See Section 3.
"Event Date": See Section 4.
"Exchange Act": The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Exchange Deadline": See Section 2.
"Exchange Notes": See Section 2.
"Exchange Offer": See Section 2.
<PAGE>
"Exchange Offer Registration Statement": See Section 2.
"Filing Date": The 30th day after the Closing Date.
"Holder": Any holder of Transfer Restricted Securities.
"Holders Counsel": See Section 5.
"Indenture": The Indenture, dated as of August 6, 1999, between
Stater Bros. and IBJ Whitehall Bank & Trust Company, as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
"Initial Purchaser": See the introductory paragraph to this
Agreement.
"Initial Shelf Registration Statement": See Section 3.
"Inspectors": See Section 5.
"Liquidated Damages": See Section 4.
"NASD": See Section 5.
"Notes": See the introductory paragraphs to this Agreement.
"Participant": See Section 7.
"Participating Broker-Dealer": See Section 2.
"Person": An individual, trustee, corporation, partnership, joint
stock company, limited liability company, trust, unincorporated association,
union, business association, firm or other legal entity.
"Private Exchange": See Section 2.
"Private Exchange Notes": See Section 2.
"Prospectus": The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Transfer Restricted Securities covered by such Registration Statement,
and all other amendments and supplements to the Prospectus, including post-
effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Records": See Section 5.
2
<PAGE>
"Registration Default": See Section 4.
"Registration Statement": Any registration statement of Stater Bros.,
including, but not limited to, the Exchange Offer Registration Statement, that
covers any of the Transfer Restricted Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
"Rule 144": Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"Rule 144A": Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the Commission providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"Rule 415": Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"Securities Act": The Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Selling Holders": See Section 5.
"Shelf Notice": See Section 2.
"Shelf Registration Statement": See Section 3.
"Stater Bros.": See the introductory paragraph to this Agreement.
"Subsequent Shelf Registration Statement": See Section 3.
"TIA": The Trust Indenture Act of 1939, as amended.
"Transfer Restricted Security": Each Note until:
(i) the date on which such Note has been exchanged by a Person
other than a broker-dealer for an Exchange Note in the Exchange Offer;
(ii) following the exchange by a broker-dealer in the Exchange Offer
of a Note for an Exchange Note, the date on which such Exchange Note is
sold to a purchaser who
3
<PAGE>
receives from such broker-dealer on or prior to the date of such sale a
copy of the Prospectus contained in the Exchange Offer Registration
Statement;
(iii) the date on which such Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement; or
(iv) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Securities Act.
"Trustee": The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
"Underwritten registration or underwritten offering": A registration
in which securities of Stater Bros. are sold to an underwriter for reoffering to
the public.
2. EXCHANGE OFFER
--------------
(a) Stater Bros. agrees to file with the Commission as soon as
practicable after the Closing Date, but in no event later than the Filing Date,
an offer to exchange (the "Exchange Offer") any and all of the Transfer
Restricted Securities for a like aggregate principal amount of debt securities
of Stater Bros., the terms of which are substantially identical to the Notes
(the "Exchange Notes") (and which are entitled to the benefits of the Indenture
or a trust indenture which is identical to the Indenture (other than such
changes to the Indenture or any such identical trust indenture as are necessary
to comply with any requirements of the Commission to effect or maintain the
qualification thereof under the TIA) in all material respects and which, in
either case, has been qualified under the TIA), except that the Exchange Notes
shall have been registered pursuant to an effective Registration Statement under
the Securities Act. The Exchange Offer will be registered under the Securities
Act on the appropriate form (the "Exchange Offer Registration Statement") and
will comply with all applicable tender offer rules and regulations under the
Exchange Act. Unless the Exchange Offer would not be permitted by applicable law
or Commission policy, Stater Bros. will commence the Exchange Offer and use its
best efforts to (x) cause the Exchange Offer Registration Statement to become
declared effective under the Securities Act on or before the Effectiveness Date;
(y) keep the Exchange Offer open for at least 30 days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders; and (z) issue, on or prior to the later of (1) the 30th business day
following the date on which the Exchange Offer Registration Statement was
declared effective by the Commission, and (2) the earliest possible date
following such 30th business day if a longer period is required by federal
securities laws (such later date being the "Exchange Deadline"), Exchange Notes
in exchange for all Notes tendered prior thereto in the Exchange Offer. Each
Holder who participates in the Exchange Offer will be required to represent that
any Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes,
and that such Holder is not an affiliate of Stater Bros. within the meaning of
the Securities Act. Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
4
<PAGE>
mutatis mutandis, solely with respect to Transfer Restricted Securities that are
Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers,
and Stater Bros. shall have no further obligation to register Transfer
Restricted Securities (other than Private Exchange Notes) pursuant to Section 3
of this Agreement.
(b) Stater Bros. shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the Staff of the Commission
with respect to the potential "underwriter" status of any broker-dealer that is
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the Staff of the Commission or such positions or
policies, in the judgment of the Initial Purchaser, represent the prevailing
views of the Staff of the Commission. Such "Plan of Distribution" section shall
also allow the use of the Prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating Broker-
Dealers, and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes.
Stater Bros. shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes, provided that such period shall not
exceed 180 days (or such longer period if extended pursuant to the last
paragraph of Section 5) (the "Applicable Period").
If, prior to the commencement or consummation of the Exchange Offer,
the Initial Purchaser holds any Notes acquired by it and having the status as an
unsold allotment in the initial distribution, Stater Bros., upon the request of
the Initial Purchaser, shall issue and deliver to the Initial Purchaser, in
exchange (the "Private Exchange") for such Notes held by the Initial Purchaser,
a like principal amount of debt securities of Stater Bros. that are identical to
the Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant
to the same indenture as the Exchange Notes). The Private Exchange Notes shall
bear the same CUSIP number as the Exchange Notes. Interest on the Exchange
Notes and Private Exchange Notes will accrue from the last interest payment date
on which interest was paid to the Initial Purchaser on the Notes surrendered in
exchange therefor or, if no interest has been paid on the Notes, from the date
of original issue.
In connection with the Exchange Offer, Stater Bros. shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
5
<PAGE>
(ii) utilize the services of a Depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York; and
(iii) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, Stater Bros. shall:
(1) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to
each Holder of Notes, Exchange Notes or Private Exchange Notes, as the case
may be, equal in principal amount to the Notes of such Holder so accepted
for exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(A) the Indenture or (B) an indenture substantially identical to the Indenture,
which in either event will provide that the Exchange Notes will not be subject
to the transfer restrictions set forth in the Indenture and that the Exchange
Notes, the Private Exchange Notes and the Notes will vote and consent together
on all matters as one class and that neither the Exchange Notes, the Private
Exchange Notes nor the Notes will have the right to vote or consent as a
separate class on any matter.
(c) If (i) the Exchange Offer is not permitted by applicable law or
Commission policy, (ii) any Holder of Transfer Restricted Securities notifies
Stater Bros. prior to the 20th day following the Exchange Offer that (A) such
Holder is prohibited by law or Commission policy from participating in the
Exchange Offer; (B) such Holder may not resell the Exchange Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is neither
appropriate nor available for such resales; or (C) it is a broker-dealer and
owns Notes acquired directly from Stater Bros. or an affiliate of Stater Bros.
or (iii) the Exchange Offer is commenced and not consummated within 180 days
after the Closing Date for any reason, then Stater Bros. shall promptly deliver
to the Holders and the Trustee written notice thereof (the "Shelf Notice") and
shall file an Initial Shelf Registration Statement pursuant to Section 3.
Following the delivery of a Shelf Notice to the Holders of Transfer Restricted
Securities (only in the circumstances contemplated by clause (i) of the
preceding sentence and only if Stater Bros. shall have satisfied its
obligations, if any, pursuant to Section 5(w) below), Stater Bros. shall not
have any further obligation to conduct the Exchange Offer or the Private
Exchange under this Section 2.
6
<PAGE>
3. SHELF REGISTRATION
------------------
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Initial Shelf Registration Statement. Stater Bros. shall
------------------------------------
carefully prepare and file with the Commission a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Transfer Restricted Securities (the "Initial Shelf Registration Statement").
Stater Bros. shall use its best efforts to file such Initial Shelf Registration
Statement with the Commission as promptly as practicable after such obligation
arises and to cause the Shelf Registration Statement to be declared effective by
the Commission on or prior to 120 days after such obligation arises. The Initial
Shelf Registration Statement shall be on Form S-3 or another appropriate form
permitting registration of such Transfer Restricted Securities for resale by
such Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). Stater Bros. shall not permit
any securities other than the Transfer Restricted Securities to be included in
the Initial Shelf Registration Statement or any Subsequent Shelf Registration
Statement. No Holder of Transfer Restricted Securities may include any of its
Transfer Restricted Securities in any Shelf Registration Statement pursuant to
this Agreement unless and until such Holder furnishes to Stater Bros. in
writing, within 15 business days after receipt of a request therefor, such
information as Stater Bros. may reasonably request for use in connection with
any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be entitled
to Liquidated Damages pursuant to Section 4 hereof unless and until such Holder
shall have used its best efforts to provide all such reasonably requested
information. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to Stater Bros. all information to be
disclosed in order to make the information previously furnished to Stater Bros.
by such Holder not materially misleading. Stater Bros. shall use its best
efforts to cause the Initial Shelf Registration Statement to be declared
effective under the Securities Act on or prior to the Effectiveness Date and to
keep the Initial Shelf Registration Statement continuously effective under the
Securities Act until the date which is 24 months from the Effectiveness Date
(subject to extension pursuant to the last paragraph of Section 5 hereof) (the
"Effectiveness Period"), or such shorter period ending when (i) all Transfer
Restricted Securities covered by the Initial Shelf Registration Statement have
been sold in the manner set forth and as contemplated in the Initial Shelf
Registration Statement, (ii) a Subsequent Shelf Registration Statement covering
all of the Transfer Restricted Securities has been declared effective under the
Securities Act or (iii) during any period in which all Transfer Restricted
Securities may be sold pursuant to Rule 144(k) under the Securities Act.
(b) Subsequent Shelf Registration Statements. If the Initial Shelf
----------------------------------------
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), Stater
Bros. shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend the Shelf Registration Statement in a
manner reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Registration Statement pursuant to
Rule 415 covering all of the Transfer Restricted
7
<PAGE>
Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf
Registration Statement is filed, Stater Bros. shall use its best efforts to
cause the Subsequent Shelf Registration Statement to be declared effective as
soon as practicable after such filing and to keep such Registration Statement
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration Statement or any Subsequent Shelf Registration Statement was
previously continuously effective. As used herein, the term "Shelf Registration
Statement" means the Initial Shelf Registration Statement and any Subsequent
Shelf Registration Statement.
(c) Supplements and Amendments. Stater Bros. shall promptly
--------------------------
supplement and amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration Statement, if required by the Securities Act, or if requested
by the Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities covered by such Registration Statement or by any
underwriter of such Transfer Restricted Securities.
4. LIQUIDATED DAMAGES
------------------
(a) If (i) any Registration Statement required by this Agreement is
not filed with the Commission on or prior to the applicable filing deadline
specified for such filing, (ii) any such Registration Statement has not been
declared effective by the Commission on or prior to the date specified herein
for such effectiveness (the "Effectiveness Target Date"), (iii) the Exchange
Offer has not been consummated within 30 days of the Effectiveness Target Date
with respect to such Exchange Offer Registration Statement or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective immediately (each such event referred to in clauses
(i) through (iv), a "Registration Default"), then Stater Bros. hereby agrees to
pay to each Holder of Transfer Restricted Securities affected thereby liquidated
damages (the "Liquidated Damages") in an amount equal to $.05 per week per
$1,000 in principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues for the
first 90-day period immediately following the occurrence of such Registration
Default. The amount of the Liquidated Damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $.50 per week
per $1,000 in principal amount of Transfer Restricted Securities; provided that
Stater Bros. shall in no event be required to pay Liquidated Damages for more
than one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4)
8
<PAGE>
upon the filing of a post-effective amendment to the Registration Statement or
an additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the Liquidated
Damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
(b) Stater Bros. shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Liquidated Damages are required to be paid (an "Event Date"). Liquidated Damages
shall be paid by depositing with the Trustee, in trust, for the benefit of the
Holders thereof, on or before the applicable semi-annual interest payment date,
immediately available funds in sums sufficient to pay the Liquidated Damages
then due to Holders of Notes with respect to which the Trustee serves. The
Liquidated Damages due shall be payable on each interest payment date to the
record Holder of Notes entitled to receive the interest payment to be paid on
such date as set forth in the Indenture. Each obligation to pay Liquidated
Damages shall be deemed to accrue on the applicable Event Date. The amount of
Liquidated Damages will be determined by multiplying the applicable Liquidated
Damages rate by the principal amount of the Notes, multiplied by a fraction, the
----------
numerator of which is the number of days such Liquidated Damages 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.
5. REGISTRATION PROCEDURES
-----------------------
In connection with the registration of any Transfer Restricted
Securities or Private Exchange Notes pursuant to Sections 2 or 3 hereof, Stater
Bros. shall effect such registrations to permit the sale of such Transfer
Restricted Securities or Private Exchange Notes in accordance with the intended
method or methods of disposition thereof, and, pursuant thereto, Stater Bros.
shall:
(a) Prepare and file with the Commission, as soon as practicable
after the date hereof but in any event prior to the Filing Date, a Registration
Statement or Registration Statements as prescribed by Section 2 or 3, and use
its best efforts to cause each such Registration Statement to become effective
and remain effective as provided herein; provided, that, if (1) such filing is
pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, Stater Bros.
shall, if requested, furnish to and afford the Holders of the Transfer
Restricted Securities and each such Participating Broker-Dealer (the "Selling
Holders"), as the case may be, covered by such Registration Statement, one
special counsel for the Selling Holders (the "Holders Counsel") and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (at least 5 business days
prior to such filing). Stater Bros. shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which the
Holders must be afforded an
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opportunity to review prior to the filing of such document, if the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities
covered by such Registration Statement, or such Participating Broker-Dealer, as
the case may be, the Holders Counsel, or the managing underwriters, if any,
shall reasonably object.
(b) Use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for the
period specified in Section 2 or 3 of this Agreement, as applicable. Upon the
occurrence of any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain an untrue statement of material fact
or omit to state any material fact necessary to make the statements therein not
misleading or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, Stater Bros.
shall file promptly an appropriate amendment to such Registration Statement
curing such defect, and, if Commission review is required, use its best efforts
to cause such amendment to be declared effective as soon as practicable.
(c) Prepare and file with the Commission such amendments and post-
effective amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period or
the Applicable Period, as the case may be; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to it with respect to the disposition of all securities
covered by such Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any securities being
sold by a Participating Broker-Dealer covered by any such Prospectus. Stater
Bros. shall be deemed not to have used its best efforts to keep a Registration
Statement effective during the Applicable Period if it voluntarily takes any
action that would result in Selling Holders of the Transfer Restricted
Securities covered thereby or Participating Broker-Dealers seeking to sell
Exchange Notes not being able to sell such Transfer Restricted Securities or
such Exchange Notes during that period unless such action is required by
applicable law.
(d) If (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, Stater Bros. shall notify the selling
Holders of Transfer Restricted Securities, or each such Participating Broker-
Dealer, as the case may be, the Holders Counsel and the managing underwriters,
if any, promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective
(including in such notice a written statement that any Holder may, upon request,
obtain, without charge, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference and
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exhibits), (ii) of the issuance by the Commission of any stop order suspending
the effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a prospectus is required
by the Securities Act to be delivered in connection with sales of the Transfer
Restricted Securities the representations and warranties of Stater Bros.
contained in any agreement (including any underwriting agreement) contemplated
by Section 5(o) below cease to be true and correct, (iv) of the receipt by
Stater Bros. of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Transfer Restricted Securities or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of Stater Bros.' reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(e) If (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its best efforts to prevent the issuance
of any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Transfer
Restricted Securities or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued,
to use its best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(f) If a Shelf Registration Statement is filed pursuant to Section 3
and if requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities
being sold in connection with an underwritten offering, (i) promptly incorporate
in a prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or counsel reasonably request to
be included therein, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after Stater
Bros. has received notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to such Registration Statement.
(g) If (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is
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required to be delivered under the Securities Act by any Participating Broker-
Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to
each selling Holder of Transfer Restricted Securities and to each such
Participating Broker-Dealer who so requests and to the Holders Counsel and each
managing underwriter, if any, without charge, one conformed copy of the
Registration Statement or Registration Statements and each post-effective
amendment thereto, including financial statements and schedules, and, if
requested, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(h) If (1) a Shelf Registration Statement is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, deliver to each selling Holder of Transfer Restricted
Securities or each such Participating Broker-Dealer, as the case may be, their
counsel, and the underwriters, if any, without charge, as many copies of the
Prospectus or Prospectuses (including each form of preliminary prospectus) and
each amendment or supplement thereto and any documents incorporated by reference
therein as such Persons may reasonably request; and, subject to the last
paragraph of this Section 5, Stater Bros. hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders of Transfer Restricted Securities or each such Participating Broker-
Dealer, as the case may be, and the underwriters or agents, if any, and dealers
(if any), in connection with the offering and sale of the Transfer Restricted
Securities covered by or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to such Prospectus and any amendment or supplement
thereto.
(i) Prior to any public offering of Transfer Restricted Securities or
any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, to use its best efforts to register or qualify,
and to cooperate with the selling Holders of Transfer Restricted Securities or
each such Participating Broker-Dealer, as the case may be, the underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Transfer Restricted Securities for offer and sale under the securities or Blue
Sky laws of such jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer, or the managing underwriters reasonably request in
writing; provided, that where Exchange Notes held by Participating Broker-
Dealers or Transfer Restricted Securities are offered other than through an
underwritten offering, Stater Bros. agrees to cause its counsel to perform Blue
Sky investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(i); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things reasonably necessary or advisable to enable the disposition in
such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the Transfer Restricted Securities covered by the applicable Registration
Statement; provided, further, that Stater Bros. shall not be required to (A)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C) subject
itself to taxation in excess of a nominal dollar amount in any such
jurisdiction.
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(j) If a Shelf Registration Statement is filed pursuant to Section 3,
cooperate with the selling Holders of Transfer Restricted Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Transfer Restricted Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such Transfer
Restricted Securities to be in such denominations and registered in such names
as the managing underwriters, if any, or Holders may reasonably request.
(k) Use its best efforts to cause the Transfer Restricted Securities
covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Transfer Restricted Securities, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case Stater Bros. will cooperate in all reasonable respects with the
filing of such Registration Statement and the granting of such approvals.
(l) If (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(d)(v) or 5(d)(vi) above, as promptly as practicable
prepare and (subject to Section 5(a) above) file with the Commission, at the
expense of Stater Bros., a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Transfer Restricted Securities being sold thereunder or to the purchasers of
the Exchange Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(m) Use its best efforts to cause the Transfer Restricted Securities
covered by a Registration Statement or the Exchange Notes, as the case may be,
to be rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate principal amount of Transfer Restricted Securities
covered by such Registration Statement or the Exchange Notes, as the case may
be, or the managing underwriters, if any.
(n) Prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities, (i) provide the Trustee with
printed certificates for the Transfer Restricted Securities in a form eligible
for deposit with The Depository Trust Company and (ii) provide a CUSIP number
for the Transfer Restricted Securities.
(o) In the event of an underwritten offering of Transfer Restricted
Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings and take all
such other actions as are reasonably requested by the
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managing underwriters in order to expedite or facilitate the registration or the
disposition of such Transfer Restricted Securities, and in such connection, (i)
make such representations and warranties to the underwriters, with respect to
the business of Stater Bros. and its subsidiaries and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if and
when requested; (ii) obtain opinions of counsel to Stater Bros. and updates
thereof in form and substance reasonably satisfactory to the managing
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by underwriters; (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants of
Stater Bros. (and, if necessary, any other independent certified public
accountants of any subsidiary of Stater Bros. or of any business acquired by
Stater Bros. for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each of
the underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings and such other matters as reasonably requested by
underwriters; and (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures no less favorable than
those set forth in Section 7 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal amount of Transfer
Restricted Securities covered by such Registration Statement and the managing
underwriters or agents) with respect to all parties to be indemnified pursuant
to said Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(p) If (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any selling
Holder of such Transfer Restricted Securities being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter participating
in any such disposition of Transfer Restricted Securities, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of Stater Bros. and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers, directors and
employees of Stater Bros. and its subsidiaries to supply all information in each
case reasonably requested by any such Inspector in connection with such
Registration Statement. Records which Stater Bros. determines, in good faith, to
be confidential and any Records which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction or
(iii) the information in such Records has been made generally available to the
public. Each selling Holder of such Transfer Restricted
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Securities and each such Participating Broker-Dealer will be required to agree
that information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of Stater Bros. unless and until such is made
generally available to the public. Each selling Holder of such Transfer
Restricted Securities and each such Participating Broker-Dealer will be required
to further agree that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to Stater Bros. and
allow Stater Bros. to undertake appropriate action to prevent disclosure of the
Records deemed confidential at their expense.
(q) Provide an indenture trustee for the Transfer Restricted
Securities or the Exchange Notes, as the case may be, and cause the Indenture or
the trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange Offer
or the first Registration Statement relating to the Transfer Restricted
Securities; and in connection therewith, cooperate with the trustee under any
such indenture and the Holders of the Transfer Restricted Securities, to effect
such changes to such indenture as may be required for such indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use its best
efforts to cause such trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be filed with
the Commission to enable such indenture to be so qualified in a timely manner.
(r) Comply with all applicable rules and regulations of the
Commission and make generally available to its securityholders earnings
statements satisfying the provisions of Section 1 l(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Transfer Restricted Securities are sold
to underwriters in a firm commitment or best efforts underwritten offering and
(ii) if not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of Stater Bros. after the effective date of a
Registration Statement, which statements shall cover said 12-month periods.
(s) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to Stater Bros. addressed to the Trustee for the
benefit of all Holders of Transfer Restricted Securities participating in the
Exchange Offer or the Private Exchange, as the case may be, and which includes
an opinion that (i) Stater Bros. has duly authorized, executed and delivered the
Exchange Notes and Private Exchange Notes and the related indenture, and (ii)
each of the Exchange Notes or the Private Exchange Notes, as the case may be,
and related indenture constitute a legal, valid and binding obligation of Stater
Bros., enforceable against Stater Bros. in accordance with its respective terms
(with customary exceptions).
(t) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Transfer Restricted Securities by Holders to Stater Bros.
(or to such other Person as directed by Stater Bros.) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, Stater Bros.
shall mark, or cause to be marked, on such Transfer Restricted Securities that
such Transfer Restricted Securities are being cancelled in exchange for the
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Exchange Notes or the Private Exchange Notes, as the case may be; in no event
shall such Transfer Restricted Securities be marked as paid or otherwise
satisfied.
(u) Cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(v) Use its best efforts to take all other steps necessary to effect
the registration of the Transfer Restricted Securities covered by a Registration
Statement contemplated hereby.
(w) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange Offer,
that in the reasonable opinion of counsel to Stater Bros. raises a substantial
question as to whether the Exchange Offer is permitted by applicable federal
law, seek a no-action letter or other favorable decision from the Commission
allowing Stater Bros. to Consummate an Exchange Offer for such Transfer
Restricted Securities. Stater Bros. hereby agrees to pursue the issuance of such
a decision to the Commission staff level. In connection with the foregoing,
Stater Bros. hereby agrees to take all such other actions as may be requested by
the Commission or otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to Stater Bros. setting forth the legal bases, if
any, upon which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be favorable)
by the Commission staff.
Stater Bros. may require each seller of Transfer Restricted Securities
or Participating Broker-Dealer as to which any registration is being effected to
furnish to Stater Bros. such information regarding such seller or Participating
Broker-Dealer and the distribution of such Transfer Restricted Securities or
Exchange Notes to be sold by such Participating Broker-Dealer, as the case may
be, as Stater Bros. may, from time to time, reasonably request including,
without limitation, a written representation to Stater Bros. (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement or Shelf Registration Statement, as applicable) stating
that (A) it is not an affiliate of Stater Bros., (B) the amount of Transfer
Restricted Securities held by such Holder prior to the Exchange Offer, (C) the
amount of Transfer Restricted Securities owned by such Holder to be exchanged in
the Exchange Offer and representing that such Holder is not engaged in, and does
not intend to engage in, and has no arrangement or understanding with any Person
to participate in, a distribution of the Exchange Notes to be issued and (D) it
is acquiring the Exchange Notes in its ordinary course of business. Stater
Bros. may exclude from such registration the Transfer Restricted Securities of
any seller or Participating Broker-Dealer who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
Each Holder of Transfer Restricted Securities and each Participating
Broker-Dealer agrees by acquisition of such Transfer Restricted Securities or
Exchange Notes to be sold by such Participating Broker-Dealer, as the case may
be, that, upon receipt of any notice from
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Stater Bros. of the happening of any event of the kind described in Section
5(d)(ii), 5(d)(iv), 5(d)(v), or 5(d)(vi), such Holder will forthwith discontinue
disposition of such Transfer Restricted Securities covered by such Registration
Statement or Prospectus or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 5(l), or until it
is advised in writing (the "Advice") by Stater Bros. that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event Stater Bros. shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Transfer Restricted
Securities covered by such Registration Statement or Exchange Notes to be sold
by such Participating Broker-Dealer, as the case may be, shall have received (x)
the copies of the supplemented or amended Prospectus contemplated by Section
5(l) or (y) the Advice.
6. REGISTRATION EXPENSES
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by Stater Bros. shall be borne by Stater Bros.,
whether or not the Exchange Offer or a Shelf Registration Statement is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of its counsel
in connection with Blue Sky qualifications of the Transfer Restricted Securities
or Exchange Notes and determination of the eligibility of the Transfer
Restricted Securities or Exchange Notes for investment under the laws of such
jurisdictions (x) where the Holders of Transfer Restricted Securities are
located, in the case of the Exchange Notes, or (y) as provided in Section 5(i),
in the case of Transfer Restricted Securities or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses (A) of printing certificates
for the Notes in a form eligible for deposit with The Depository Trust Company
and (B) of printing prospectuses if the printing of prospectuses is requested by
(I) the managing underwriters, if any, or, (II) in respect of Notes to be sold
by any Participating Broker-Dealer during the Applicable Period, by the Holders
of a majority in aggregate principal amount of the Notes included in any
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for Stater Bros. and fees and disbursements of
the Holders Counsel (subject to the provisions of Section 6(b)), (v) fees and
all independent certified public accountants referred to in Section 5(o)(iii)
(including, without limitation, the expenses of any special audit and cold
comfort" letters required by or incident to such performance), (vi) the fees and
expenses of any "qualified independent underwriter" or other independent
appraiser participating in an offering pursuant to the rules and regulations of
the NASD, (vii) rating agency fees, (viii) Securities Act liability insurance,
if Stater Bros. desires such insurance, (ix) fees and expenses of all other
Persons retained by Stater Bros., (x) internal expenses of Stater Bros.
(including, without limitation, all salaries and expenses of officers and
employees of Stater Bros. performing legal or accounting duties), (xi) the
expense of any annual or special audit, (xii) the fees and expenses incurred in
connection with the listing of the securities to be registered on any
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securities exchange and (xiii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration Statement hereunder,
Stater Bros. shall reimburse the Holders of the Transfer Restricted Securities
being registered in such registration for the fees and disbursements of the
Holders' Counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Transfer Restricted
Securities to be included in such Registration Statement and other out-of-pocket
expenses of the Holders of Transfer Restricted Securities incurred in connection
with the registration of the Transfer Restricted Securities.
7. INDEMNIFICATION
---------------
(a) Stater Bros. will indemnify and hold harmless each Holder of
Transfer Restricted Securities and each Participating Broker-Dealer selling
Exchange Notes during the Applicable Period, the directors, officers, employees
and agents of each person, and each person, if any, who controls any such person
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (each a "Participant") from and against any and all losses, claims,
liabilities, expenses and damages (including any and all investigative, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement of, any action, suit or proceeding or any claim asserted), to
which they, or any of them, may become subject under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus or any amendment or supplement thereto or any preliminary prospectus
or the omission or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading; provided, that a Participant will not be entitled to any such
indemnification hereunder to the extent that such loss, claim, liability,
expense or damage arises from and is based on an untrue statement or omission or
alleged untrue statement or omission made in reliance on and in conformity with
information relating to such Participant furnished in writing to Stater Bros. by
such Participant expressly for inclusion therein or in the case of a
Participating Broker-Dealer, if the person asserting any such loss, claim,
liability, expense or damage purchased the Exchange Notes from such
Participating Broker-Dealer but was not sent or given a copy of the Prospectus
at or prior to the written confirmation of the sale of Exchange Notes to such
person and such untrue statement or omission or alleged untrue statement or
omission was cured in the Prospectus.
(b) Each Participant will indemnify and hold harmless Stater Bros.,
each person, if any, who controls Stater Bros. within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, each director of Stater
Bros. and each officer of Stater Bros. to the same extent as the foregoing
indemnity from Stater Bros. to each Participant, but only insofar as losses,
claims, liabilities, expenses or damages arise out of or are based on any untrue
statement or omission or alleged untrue statement or omission made in reliance
on and in conformity with
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information relating to such Participant furnished in writing to Stater Bros. by
such Participant expressly for use in any Registration Statement or Prospectus
or any amendment or supplement thereto or any preliminary prospectus. The
liability of any Participant under this paragraph shall in no event exceed the
proceeds received by such Participant from sales of Transfer Restricted
Securities giving rise to such obligations.
(c) Any party that proposes to assert the right to be indemnified
under this Section 7 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 7, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 7 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by
delivering written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified party, jointly
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel satisfactory to the indemnified party, and after notice
from the indemnifying party to the indemnified party of its election to assume
the defense, the indemnifying party will not be liable to the indemnified party
for any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 7 is applicable
19
<PAGE>
in accordance with its terms but for any reason is held to be unavailable from
Stater Bros. or any Participant, Stater Bros. and each Participant will
contribute to the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received
by Stater Bros. from persons other than a Participant, such as persons who
control Stater Bros. within the meaning of the Securities Act, officers of
Stater Bros. and directors of Stater Bros., who also may be liable for
contribution) to which Stater Bros. and each Participant may be subject in such
proportion as is appropriate to reflect the relative benefits received by Stater
Bros. on the one hand and each Participant on the other. The relative benefits
received by Stater Bros. on the one hand and each Participant on the other shall
be deemed to be equal to (i) with respect to Stater Bros., the total net
proceeds from the initial offering (before deducting expenses) received by
Stater Bros., (ii) with respect to the initial purchaser in such offering, the
total purchase discount and commissions, (iii) with respect to any other Holder
of Transfer Restricted Securities, the value of such Notes and (iv) with respect
to any underwriter, the total underwriting discounts and commissions with
respect to such underwriting, in each case of clauses (i), (ii) or (iv), as set
forth on the cover page of the applicable offering memorandum or prospectus. If,
but only if, the allocation provided by the foregoing sentence is not permitted
by applicable law, the allocation of contribution shall be made in such
proportion as is appropriate to reflect not only the relative benefits referred
to in the foregoing sentence but also the relative fault of Stater Bros. on the
one hand and each Participant on the other, with respect to the statements or
omissions which resulted in such loss, claim, liability, expense or damage, or
action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by Stater Bros. or a Participant, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. Stater Bros. and each Participant
shall agree that it would not be just and equitable if contributions pursuant to
this Section 7(d) were to be determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 7(d) shall be deemed to
include, for purpose of this Section 7(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7(d), a Participant shall not be required to contribute any amount in
excess of the amount by which proceeds received by such Participant from sales
of Transfer Restricted Securities exceeds the amount of any damages that such
Participant has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no person found
guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of
the Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7(d),
any person who controls a party to this Agreement within the meaning of the
Securities Act will have the same rights to contribution as that party, and each
officer of Stater Bros. will have the same rights to contribution as Stater
Bros., subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice
20
<PAGE>
of commencement of any action against such party in respect of which a claim for
contribution may be made under this Section 7(d), will notify any such party or
parties from whom contribution may be sought, but the omission so to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 7(d). No party will be
liable for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the indemnifying persons
may otherwise have to the indemnified persons referred to above.
8. RULES 144 AND 144A
------------------
Stater Bros. covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder in a timely manner and, if at
any time Stater Bros. is not required to file such reports, it will, upon the
request of any Holder of Transfer Restricted Securities, make publicly available
other information so long as necessary to permit sales pursuant to Rule 144 and
Rule 144A under the Securities Act. Stater Bros. further covenants that it will
take such further action as any Holder of Transfer Restricted Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
and Rule 144A under the Securities Act, as such Rules may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the
Commission.
9. UNDERWRITTEN REGISTRATIONS
--------------------------
If any of the Transfer Restricted Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of a majority in aggregate
principal amount of such Transfer Restricted Securities included in such
offering and reasonably acceptable to Stater Bros.
No Holder of Transfer Restricted Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. MISCELLANEOUS
-------------
(a) Remedies. In the event of a breach by Stater Bros. of any of its
--------
obligations under this Agreement, each Holder of Transfer Restricted Securities,
in addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchaser, in the Purchase Agreement or
granted by law, including recovery of damages, will be entitled to
21
<PAGE>
specific performance of its rights under this Agreement. Stater Bros. agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of any of the provisions of this Agreement and
hereby further agrees that, in the event of any action for specific performance
in respect of such breach, it shall waive the defense that a remedy at law would
be adequate.
(b) No Inconsistent Agreements. Stater Bros. has not, as of the date
--------------------------
hereof, and Stater Bros. shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Transfer Restricted Securities in this
Agreement or otherwise conflicts with the provisions hereof. Stater Bros. has
not entered or will not enter into any agreement with respect to any of its
securities which will grant to any Person piggy-back rights with respect to a
Registration Statement.
(c) Adjustments Affecting Transfer Restricted Securities. Stater
----------------------------------------------------
Bros. shall not, directly or indirectly, take any action with respect to the
Transfer Restricted Securities as a class that would adversely affect the
ability of the Holders of Transfer Restricted Securities to include such
Transfer Restricted Securities in a registration undertaken pursuant to this
Agreement.
(d) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless Stater Bros. has obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount of Transfer Restricted Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of Transfer Restricted
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect, impair, limit or compromise the
rights of other Holders of Transfer Restricted Securities may be given by
Holders of at least a majority in aggregate principal amount of the Transfer
Restricted Securities being sold by such Holders pursuant to such Registration
Statement; provided, that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(e) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier.
(i) if to a Holder of Transfer Restricted Securities, at the most
current address given by the Trustee to Stater Bros.; and
(ii) if to Stater Bros., at:
Stater Bros. Holdings Inc.
21700 Barton Road
Colton, California 92324
Telecopy No.: (909) 783-5098
Attention: Chief Executive Officer
22
<PAGE>
with copies to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Telecopy No.: (213) 229-7520
Attention: Andrew E. Bogen, Esq.
and
Varner, Saleson, & Dobler LLP
3750 University Avenue Suite 610
Riverside, California 92501
Telecopy No.: (909) 274-7777
Attention: Bruce D. Varner, Esq.
All such notices and communications shall be deemed to have been duty
given: when delivered by hand, if personally delivered; five business days after
being deposited in the postage prepaid, if mailed; one business day after being
timely delivered to a next-day air courier; and when receipt is acknowledged by
the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the trustee under the
Indenture at the address specified in such Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, that with
respect to the indemnity and contribution agreements in Section 7, each Holder
of Transfer Restricted Securities subsequent to the Initial Purchasers shall be
bound by the terms thereof if (i) such Holder elects to include Transfer
Restricted Securities in a Shelf Registration Statement and (ii) such Holder is
advised expressly by Stater Bros. of the provisions contained in Section 7 and
that such Holder's election to include Transfer Restricted Securities in a Shelf
Registration Statement shall be deemed such Holder's agreement to be bound by
such provisions.
(g) Counterparts. This Agreement 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.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
23
<PAGE>
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ ah alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(k) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(l) Notes Held by Stater Bros. or Its Affiliates. Whenever the
--------------------------------------------
consent or approval of Holders of a specified percentage of Transfer Restricted
Securities is required hereunder, Transfer Restricted Securities held by Stater
Bros. or its affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
STATER BROS. HOLDINGS INC.
BY: /s/ Jack H. Brown
------------------------------
Jack H. Brown
Chairman of The Board, President
and Chief Executive Officer
BY: /s/ Bruce D.Varner
------------------------------
Bruce D.Varner
Secretary
BANC OF AMERICA SECURITIES LLC
BY: /s/ Bruce R. Thompson
------------------------------
Bruce R. Thompson
Managing Director
25
<PAGE>
EXHIBIT 4.8
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE dated as of July 16, 1999 (this "Supplemental
Indenture") between STATER BROS. HOLDINGS INC., a Delaware corporation (the
"Company"), and IBJ WHITEHALL BANK & TRUST COMPANY, a New York banking
corporation, as trustee (the "Trustee") for the securities issued under the
indenture dated as of March 8, 1994 between the Company and the Trustee (the
"1994 Indenture"), as amended by the First Supplemental Indenture dated as of
July 22, 1997 (the "First Supplemental Indenture" and together with the 1994
Indenture, the "Indenture").
W I T N E S S E T H
WHEREAS, pursuant to and in accordance with the terms of the Indenture, the
Company established and issued $165,000,000 in aggregate principal amount of
debt securities denominated as the "11% Senior Notes due 2001" (the "Notes");
WHEREAS, the Company has offered to purchase all of the Notes (the "Offer")
and has solicited the consents (the "Solicitation") to certain amendments (the
"Amendments") to the Indenture pursuant to the Company's Offer to Purchase and
Consent Solicitation Statement dated as of July 1, 1999;
WHEREAS, in accordance with Section 9.02 of the Indenture, the Company has
obtained the written consent of the holders of Notes representing not less than
a majority in principal amount of the outstanding Notes to the Amendments to the
Indenture; and
WHEREAS, the Amendments are, in substance, set forth herein.
NOW, THEREFORE, for and in consideration of the premises herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is mutually covenanted and agreed as follows:
Agreements
----------
Section 1. Defined Terms. Capitalized terms not otherwise defined
-------------
herein shall have the meanings ascribed to them in the Indenture.
Section 2. Effectiveness; Operative Date. This Supplemental Indenture
-----------------------------
shall become effective as of the date hereof. The terms of this Supplemental
Indenture will become operative only upon acceptance for purchase by the Company
of Notes validly tendered (and not withdrawn) pursuant to the terms of the
Offer. The date that this Supplemental Indenture becomes operative shall be
denominated herein as the "Operative Date."
Section 3. Amendment to Indenture.
----------------------
(a) The Indenture is hereby amended by deleting therefrom the following
provisions in their entirety and any references to those provisions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Existing Section Number Caption
- -----------------------------------------------------------------------------------------
<S> <C>
Section 4.02 SEC Reports
- -----------------------------------------------------------------------------------------
Section 4.03 Compliance Certificate
- -----------------------------------------------------------------------------------------
Section 4.05 Limitations on Restricted Payments and Investments
- -----------------------------------------------------------------------------------------
Section 4.06 Continued Existence
- -----------------------------------------------------------------------------------------
Section 4.07 Taxes
- -----------------------------------------------------------------------------------------
Section 4.08 Maintenance of Properties
- -----------------------------------------------------------------------------------------
Section 4.09 Insurance
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
Section 4.12 Limitation on Indebtedness
- -------------------------------------------------------------------------------------------------------
Section 4.14 Limitations on Liens
- -------------------------------------------------------------------------------------------------------
Section 4.15 Limitation on Payment Restrictions Affecting Subsidiaries
- -------------------------------------------------------------------------------------------------------
Section 4.16 Limitation on Issuance and Sale of Capital Stock of Subsidiaries
- -------------------------------------------------------------------------------------------------------
Section 4.17 Limitations on Transactions with Related Persons
- -------------------------------------------------------------------------------------------------------
Section 4.18 Compliance with Laws
- -------------------------------------------------------------------------------------------------------
Section 4.19 Stay, Extension and Usury Laws
- -------------------------------------------------------------------------------------------------------
Section 4.21 Further Assurance to the Trustee
- -------------------------------------------------------------------------------------------------------
Section 5.01 Merger, Consolidation, Etc.
- -------------------------------------------------------------------------------------------------------
</TABLE>
(b) The Indenture is hereby amended by deleting therefrom, and any
reference to therein, subsections (e) and (f) of Section 6.01 captioned "Events
of Default."
(c) Each of the following provisions of the Indenture, and any reference
thereto, is hereby renumbered as indicated below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Existing Section Number New Section Number Caption
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
4.04 4.02 Maintenance of Office or Agency
- ---------------------------------------------------------------------------------------------------
4.10 4.03 Investment Company Act
- ---------------------------------------------------------------------------------------------------
4.11 4.04 Change of Control
- ---------------------------------------------------------------------------------------------------
4.20 4.05 Limitation on Sales of Assets
- ---------------------------------------------------------------------------------------------------
5.02 5.01 Successor Corporation Substituted
- ---------------------------------------------------------------------------------------------------
5.03 5.02 Purchase Offer on Change of Control
- ---------------------------------------------------------------------------------------------------
6.01(g) 6.01(e)
- ---------------------------------------------------------------------------------------------------
</TABLE>
(d) Any definitions used exclusively in the deleted provisions of the
Indenture set forth in paragraphs (a) or (b) of this Section 3 are hereby
deleted in their entirety from the Indenture.
Section 4. Waiver. To the extent permitted by the Indenture, the
------
application of the provisions of Articles 4, 5 and 6 of the Indenture are hereby
waived to the extent that such provisions might otherwise interfere with the
ability of the Company to enter into agreements contemplated by, or to
consummate, the Company's proposed acquisition (the "Acquisition") of certain
assets of Albertson's, Inc., a Delaware corporation, or to enter into, or to
consummate, any arrangements by the Company to obtain funds sufficient to fund
the Acquisition, the Offer and the Solicitation; provided, however, that such
-------- -------
waiver shall not apply to any default in the payment of the principal of,
premium, if any, or interest on, or an offer to purchase required under the
Indenture with respect to, any Note (except a rescission of acceleration of the
Notes and a wavier of the payment default that resulted from such acceleration).
Section 5. 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 6. Counterparts. This Supplemental Indenture 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 7. Supplemental Indenture is an Amendment to Indenture. This
---------------------------------------------------
Supplemental Indenture is an amendment to the Indenture. The Indenture and this
Supplemental Indenture shall be read together from and after the Operative Date.
Section 8. Compliance with the Trust Indenture Act. This Supplemental
---------------------------------------
Indenture shall be interpreted to comply in every respect with the Trust
Indenture Act of 1939, as amended (the "TIA"). If any
2
<PAGE>
provision of this Supplemental Indenture limits, qualifies or conflicts with the
duties imposed by the TIA, the imposed duties shall control.
Section 9. Governing Law. This Supplemental Indenture shall be governed
-------------
by and construed in accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.
STATER BROS. HOLDINGS INC.,
a Delaware corporation
By: /s/ Dennis N. Beal
---------------------------------
Name: Dennis N. Beal
Title: Vice President, Finance and
Chief Financial Officer
By: /s/ Bruce D. Varner
---------------------------------
Name: Bruce D. Varner
Title: Secretary
IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By: /s/ Terence Rawlins
--------------------------------
Name: Terence Rawlins
Title: Assistant Vice President
3
<PAGE>
EXHIBIT 10.12(c)
EXECUTION VERSION
================================================================================
Credit Agreement
among
STATER BROS. MARKETS,
STATER BROS. HOLDINGS INC.
and
BANK OF AMERICA, N.A.
as Administrative Agent,
and
Letter of Credit Issuing Lender
and
The Other Financial
Institutions Party Hereto
Dated as of August 6, 1999
Banc of America Securities LLC,
as
Sole Arranger and Sole Book Manager
[LOGO APPEARS HERE]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section....................................................................................Page
<C> <S> <C>
Section 1. DEFINITIONS AND ACCOUNTING TERMS.......................................................1
1.01 Defined Terms.....................................................................1
1.02 Use of Certain Terms.............................................................19
1.03 Accounting Terms.................................................................20
1.04 Rounding.........................................................................20
1.05 Exhibits and Schedules...........................................................20
1.06 References to Agreements, Exhibits and Laws......................................20
Section 2. THE COMMITMENTS AND EXTENSIONS OF CREDIT..............................................21
2.01 Committed Loans..................................................................21
2.02 Borrowings, Conversions and Continuations of Committed Loans.....................22
2.03 [intentionally omitted]..........................................................23
2.04 Letters of Credit................................................................23
2.05 Prepayments......................................................................28
2.06 Reduction or Termination of Commitments..........................................28
2.07 Principal and Interest...........................................................29
2.08 Fees.............................................................................29
2.09 Computation of Interest and Fees.................................................29
2.10 Making Payments..................................................................30
2.11 Funding Sources..................................................................31
Section 3. TAXES, YIELD PROTECTION AND ILLEGALITY................................................31
3.01 Taxes............................................................................31
3.02 Illegality.......................................................................32
3.03 Inability to Determine Rates.....................................................32
3.04 Increased Cost and Reduced Return; Capital Adequacy..............................32
3.05 Breakfunding Costs...............................................................33
3.06 Matters Applicable to all Requests for Compensation..............................33
3.07 Survival.........................................................................34
Section 4. CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT..........................................34
4.01 Conditions of Initial Extension of Credit........................................34
4.02 Conditions to all Extensions of Credit...........................................39
Section 5. REPRESENTATIONS AND WARRANTIES........................................................39
5.01 Existence and Qualification; Power; Compliance with Laws.........................39
5.02 Power; Authorization; Enforceable Obligations....................................40
5.03 No Legal Bar.....................................................................40
5.04 Financial Statements; No Material Adverse Effect.................................40
5.05 Litigation.......................................................................41
5.06 No Default.......................................................................41
5.07 Ownership of Property; Liens.....................................................41
5.08 Taxes............................................................................41
5.09 Margin Regulations; Investment Company Act; Public Utility Holding Company Act...41
5.10 ERISA Compliance.................................................................42
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
5.11 Intangible Assets................................................................42
5.12 Compliance With Laws.............................................................42
5.13 Environmental Compliance.........................................................42
5.14 Insurance........................................................................43
5.15 Year 2000........................................................................43
5.16 Related Agreements...............................................................43
5.17 Management Agreements and Stockholders Agreements................................44
5.18 Disclosure.......................................................................44
Section 6. AFFIRMATIVE COVENANTS.................................................................44
6.01 Financial Statements.............................................................44
6.02 Certificates, Notices and Other Information......................................46
6.03 Payment of Taxes.................................................................47
6.04 Preservation of Existence........................................................47
6.05 Maintenance of Properties........................................................47
6.06 Maintenance of Insurance.........................................................47
6.07 Compliance With Laws.............................................................48
6.08 Inspection Rights................................................................48
6.09 Keeping of Records and Books of Account..........................................48
6.10 Compliance with ERISA............................................................48
6.11 Compliance With Agreements.......................................................48
6.12 Use of Proceeds..................................................................48
6.13 Further Assurances...............................................................48
6.14 Execution of Subsidiary Guaranty by Future Subsidiaries..........................48
6.15 Landlord Waivers.................................................................49
Section 7. NEGATIVE COVENANTS....................................................................50
7.01 Indebtedness.....................................................................50
7.02 Liens and Negative Pledges.......................................................51
7.03 Fundamental Changes..............................................................51
7.04 Dispositions.....................................................................51
7.05 Investments......................................................................52
7.06 Lease Obligations................................................................52
7.07 Restricted Payments..............................................................52
7.08 ERISA............................................................................52
7.09 Change in Nature of Business.....................................................53
7.10 Transactions with Affiliates.....................................................53
7.11 Hostile Acquisitions.............................................................53
7.12 [intentionally omitted]..........................................................53
7.13 Limitations on Upstreaming.......................................................53
7.14 Financial Covenants..............................................................53
7.15 Change in Auditors...............................................................54
7.16 Amendments or Waivers of Related Agreements......................................54
7.17 Use of Capital Contributions.....................................................54
Section 8. HOLDINGS COVENANTS....................................................................54
8.01 Indebtedness.....................................................................54
8.02 Restricted Payments..............................................................55
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
8.03 Change in Nature of Business; Ownership of Assets................................55
8.04 Transactions with Affiliates.....................................................56
8.05 Amendments or Waivers of Related Agreements and Existing Holdings Indenture......56
8.06 Maintenance of Availability......................................................56
8.07 Execution of Development Guaranty by Future Subsidiaries.........................57
8.08 Maintenance of Separate Corporate Identity.......................................57
8.09 Albertsons Acquisition...........................................................57
8.10 Capital Expenditure Funds........................................................58
8.11 Existing Holdings Notes Sinking Funds............................................58
8.12 Use of Proceeds of Repayments of Indebtedness by Borrower to Holdings............58
Section 9. EVENTS OF DEFAULT AND REMEDIES........................................................58
9.01 Events of Default................................................................58
9.02 Remedies Upon Event of Default...................................................61
Section 10. ADMINISTRATIVE AGENT..................................................................62
10.01 Appointment and Authorization of Administrative Agent............................62
10.02 Delegation of Duties.............................................................63
10.03 Liability of Administrative Agent................................................63
10.04 Reliance by Administrative Agent.................................................63
10.05 Notice of Default................................................................64
10.06 Credit Decision; Disclosure of Information by Administrative Agent...............64
10.07 Indemnification of Administrative Agent..........................................65
10.08 Administrative Agent in Individual Capacity......................................65
10.09 Successor Administrative Agent...................................................65
Section 11. MISCELLANEOUS.........................................................................66
11.01 Amendments; Consents.............................................................66
11.02 Transmission and Effectiveness of Notices and Signatures.........................67
11.03 Attorney Costs, Expenses and Taxes...............................................67
11.04 Binding Effect; Assignment.......................................................68
11.05 Set-off..........................................................................69
11.06 Sharing of Payments..............................................................70
11.07 No Waiver; Cumulative Remedies...................................................70
11.08 Usury............................................................................71
11.09 Counterparts.....................................................................71
11.10 Integration......................................................................71
11.11 Nature of Lenders' Obligations...................................................71
11.12 Survival of Representations and Warranties.......................................72
11.13 Indemnity by Borrower............................................................72
11.14 Nonliability of Lenders..........................................................72
11.15 No Third Parties Benefited.......................................................73
11.16 Severability.....................................................................73
11.17 Confidentiality..................................................................73
11.18 Further Assurances...............................................................74
11.19 Headings.........................................................................74
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
11.20 Time of the Essence..............................................................74
11.21 Foreign Lenders and Participants.................................................74
11.22 [intentionally omitted]..........................................................75
11.23 Governing Law....................................................................75
11.24 Waiver of Right to Trial by Jury.................................................76
11.25 Entire Agreement.................................................................76
</TABLE>
iv
<PAGE>
EXHIBITS
Form of
A Request for Extension of Credit
B Compliance Certificate
C Committed Loan Note
D Notice of Assignment and Acceptance
E-1 Opinion of Varner, Saleson, and Dobler LLP
E-2 Opinion of Gibson, Dunn & Crutcher LLP (regarding use of proceeds
of loans)
E-3 Opinion of Gibson, Dunn & Crutcher LLP (regarding increase in
facility size)
F-1 Development Guaranty
F-2 Subsidiary Guaranty
SCHEDULES
2.01 Revolving Loan Commitments, Letter of Credit Commitments, and
Pro Rata Shares
4.01(f) Corporate and Capital Structure
7.01 Existing Indebtedness, Liens and Negative Pledges
11.02 Offshore and Domestic Lending Offices, Addresses for Notices
v
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT ("Agreement") is entered into as of August 6, 1999 by
---------
and among STATER BROS. MARKETS, a California corporation ("Borrower"), STATER
--------
BROS. HOLDINGS INC., a Delaware corporation ("Holdings"), each lender from time
--------
to time party hereto (collectively, "Lenders" and individually, a "Lender"), and
------- ------
BANK OF AMERICA, N.A., as Administrative Agent and Issuing Lender.
RECITALS
WHEREAS, on or before the Closing Date, Holdings (this and other
capitalized terms used in these recitals without definition being used as
defined in Section 1.01) will issue and sell Holdings Senior Notes in an
------------
aggregate principal amount not less than $440,000,000 and not more than
$450,000,000; provided that the minimum aggregate principal amount of Holdings
--------
Senior Notes shall be reduced by an amount, not to exceed $6,000,000, equal to
the amount of Existing Holdings Notes that will remain outstanding after the
Closing Date;
WHEREAS, on the Closing Date, Holdings will use the net proceeds of the
Holdings Senior Notes to repay certain debt, to purchase a portion of the
Albertsons Properties pursuant to the Albertsons Acquisition Agreement, to
deposit money into escrow pursuant to the Albertsons Acquisition Agreement to be
applied after the Closing Date to purchase the remaining Albertsons Properties,
and to make capital expenditures related thereto;
WHEREAS, not more than 45 days after the Closing Date, Holdings will
contribute to Borrower as an equity contribution the Albertsons Properties and
the net cash proceeds received by Holdings from the issuance of the Holdings
Senior Notes that have not been used by Holdings to pay for Acquisition
Financing Requirements, to redeem Existing Holdings Notes, or to fund certain
other accounts as provided herein;
WHEREAS, Lenders have agreed to extend certain revolving loan and letter of
credit facilities to Borrower, the proceeds of which will be used to provide
financing for working capital and other general corporate purposes of Borrower
and its Subsidiaries;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Holdings, Borrower, Lenders and
Administrative Agent agree as follows:
SECTION 1.
DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms. As used in this Agreement, the following terms shall have
the meanings set forth below:
"Acquisition Financing Requirements" means the aggregate of all amounts
----------------------------------
necessary (i) to pay for the purchase of the Albertsons Properties pursuant to
the Albertsons Acquisition Agreement (including all amounts required to be
deposited into escrow thereunder) and (ii) to pay Transaction Costs.
-1-
<PAGE>
"Administrative Agent" means Bank of America, N.A., in its capacity as
--------------------
Administrative agent under any of the Loan Documents, or any successor
administrative agent.
"Administrative Agent's Office" means Administrative Agent's address and,
-----------------------------
as appropriate, account as set forth on Schedule 11.02, or such other address or
--------------
account as Administrative Agent hereafter may designate by written notice to
Borrower and Lenders.
"Administrative Agent-Related Persons" means Administrative Agent
------------------------------------
(including any successor agent), together with its Affiliates (including, in the
case of Administrative Agent, the Arranger), and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Affiliate" means any Person directly or indirectly controlling, controlled
---------
by, or under direct or indirect common control with, Borrower. A Person shall
be deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power (a) to vote 10% or more of the securities (on a
fully diluted basis) having ordinary voting power for the election of directors
or managing general partners; or (b) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agreement" means this Credit Agreement, as amended, restated, extended,
---------
supplemented or otherwise modified in writing from time to time.
"Albertsons" means Albertson's, Inc., a Delaware corporation.
----------
"Albertsons Acquisition" means the transactions contemplated by the
----------------------
Albertsons Acquisition Agreement.
"Albertsons Acquisition Agreement" means that certain Asset Purchase
--------------------------------
Agreement by and among Albertsons, Holdings and Borrower dated as of May 7,
1999, in the form delivered to Administrative Agent and Lenders prior to their
execution of this Agreement and as such agreement may be amended from time to
time thereafter to the extent permitted under Sections 7.16 and 8.05(b).
------------- -------
"Albertsons Properties" means 43 supermarkets more fully identified on
---------------------
Exhibits A and B to the Albertsons Acquisition Agreement, an additional store
site, and all fixtures, licenses, and other property to be purchased by Holdings
under the Albertsons Acquisition Agreement in connection therewith.
"Annualized" means (i) with respect to the fiscal quarter of Borrower
----------
ending on or about the fourth Sunday in March, 2000, the applicable amount for
such fiscal quarter multiplied by four, (ii) with respect to the fiscal quarter
of Borrower ending on or about the fourth Sunday in June, 2000, the applicable
amount for such fiscal quarter and the immediately preceding fiscal quarter
multiplied by two, and (iii) with respect to the fiscal quarter of Borrower
ending on or about the fourth Sunday in September, 2000, the applicable amount
for such fiscal quarter and the immediately preceding two fiscal quarters
multiplied by one and one-third.
-2-
<PAGE>
"Applicable Amount" means a per annum rate equal to:
-----------------
(a) with respect to Base Rate Loans, 1.00 percent;
(b) with respect to Offshore Rate Loans, 2.25 percent;
(c) with respect to the Commitment fee, 0.25 percent; and
(d) with respect to standby Letters of Credit, 1.25 percent.
"Arranger" means Banc of America Securities LLC, in its capacity as sole
--------
arranger and sole book manager.
"Attorney Costs" means and includes all reasonable fees and disbursements
--------------
of any law firm or other external counsel and the allocated cost of internal
legal services and all disbursements of internal counsel.
"Audited Financial Statements" means the audited consolidated balance sheet
----------------------------
of Borrower and its Subsidiaries for the fiscal year ended September 27, 1998
and the related consolidated statements of income and cash flows for such fiscal
year of Borrower.
"Bank of America" means Bank of America, N.A. .
---------------
"Base Rate" means a fluctuating rate per annum equal to the higher of (a)
---------
the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for
such day as publicly announced from time to time by Bank of America as its
"prime" or "reference rate." Such rate is a rate set by Bank of America based
upon various factors including Bank of America's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate. Any change in such rate announced by Bank of America shall take effect at
the opening of business on the day specific in the public announcement of such
change.
"Base Rate Loan" means a Loan which bears interest based on the Base Rate.
--------------
"Borrower" has the meaning set forth in the introductory paragraph hereto.
--------
"Borrower Party" means Holdings, Borrower, each Guarantor, or any Person
--------------
other than Lenders and any Affiliates of Lenders, Administrative Agent, and
Issuing Lender from time to time party to a Loan Document.
"Borrowing" and "Borrow" each mean, a borrowing hereunder consisting of
--------- ------
Loans of the same type made on the same day and, other than in the case of Base
Rate Loans, having the same Interest Period.
"Borrowing Date" means the date that a Loan is made, which shall be a
--------------
Business Day.
-3-
<PAGE>
"Business Day" means any day other than a Saturday, Sunday, or other day on
------------
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, the Governing State where Lender's lending office is located and, if
such day relates to any Offshore Rate Loan, means any such day on which dealings
in Dollar deposits are conducted by and between banks in the offshore Dollar
interbank market.
"Closing Date" means the date all the conditions precedent in Section 4.01
------------ ------------
are satisfied or waived in accordance with Section 4.01.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time.
"Committed Loan" means a Loan of any type made to Borrower by Lenders in
--------------
accordance with its Pro Rata Share pursuant to Section 2.01, except as otherwise
------------
provided herein.
"Committed Loan Note" means a promissory note made by Borrower in favor of
-------------------
a Lender evidencing Committed Loans made by such Lender, substantially in the
form of Exhibit C (collectively, the "Committed Loan Notes").
--------- --------------------
"Commitments" means, as to each Lender, the Revolving Loan Commitment and
-----------
the Letter of Credit Commitment of such Lender, and the "combined Commitments"
means all such commitments collectively.
"Compliance Certificate" means a certificate in the form of Exhibit B,
---------------------- ---------
properly completed and signed by a Responsible Officer of Borrower.
"Consolidated EBITDA" means, for any period, for Borrower and its
-------------------
Subsidiaries on a consolidated basis, an amount equal to the sum of (a)
Consolidated Net Income, plus (b) Consolidated Interest Charges deducted in
----
determining such Consolidated Net Income plus (c) the amount of taxes, based on
----
or measured by income, used or included in the determination of such
Consolidated Net Income, plus (d) the amount of depreciation and amortization
----
expense deducted in determining such Consolidated Net Income, and excluding, to
the extent not excluded in clauses (a)-(d) above, any extraordinary gains that
were included in Consolidated Net Income.
"Consolidated Interest Charges" means, for any period, for Borrower and its
-----------------------------
Subsidiaries on a consolidated basis, the sum of (a) all interest, premium
payments, fees, charges and related expenses payable by Borrower and its
Subsidiaries in connection with borrowed money (including capitalized interest)
or in connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP and (b) the portion of rent
payable by Borrower and its Subsidiaries with respect to such period under
capital leases that is treated as interest in accordance with GAAP.
"Consolidated Net Income" means, for any period, for Borrower and its
-----------------------
Subsidiaries on a consolidated basis, the net income of Borrower and its
Subsidiaries from continuing operations after extraordinary items (excluding
gains or losses from Dispositions of assets) for that period.
-4-
<PAGE>
"Consolidated Net Worth" means, as of any date of determination, for
----------------------
Borrower and its Subsidiaries on a consolidated basis, Shareholders' Equity of
Borrower and its Subsidiaries on that date.
"Continuation" and "Continue" mean, with respect to any Offshore Rate Loan,
------------ --------
the continuation of such Offshore Rate Loan as an Offshore Rate Loan on the last
day of the Interest Period for such Loan.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Conversion" and "Convert" mean, with respect to any Loan, the conversion
---------- -------
of such Loan from or into another type of Loan.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
------------------
America, and all other liquidation, conservatorship, bankruptcy, assignment for
the benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States of America or
other applicable jurisdictions from time to time in effect affecting the rights
of creditors generally.
"Default" means any event that, with the giving of any notice, the passage
-------
of time, or both, would be an Event of Default.
"Default Rate" means an interest rate equal to the Base Rate plus the
------------ ----
Applicable Amount, if any, applicable to Base Rate Loans plus 2% per annum, to
----
the fullest extent permitted by applicable Laws; provided, however, that with
-------- -------
respect to an Offshore Rate Loan, the Default Rate shall be an interest rate
equal to the interest rate (including any Applicable Amount) otherwise
applicable to such Loan plus 2% per annum.
"Designated Deposit Account" means a deposit account to be maintained by
--------------------------
Borrower with Bank of America, as from time to time designated by Borrower by
written notification to Administrative Agent.
"Development" means Stater Bros. Development, Inc., a California
-----------
corporation that is a Wholly-Owned Subsidiary of Holdings.
"Development Guaranty" means the Guaranty executed and delivered by
--------------------
Development on the Closing Date and to be executed and delivered by additional
Subsidiaries of Development from time to time thereafter in accordance with
Section 8.07, substantially in the form of Exhibit F-1 annexed hereto, as such
- ------------- -----------
Guaranty may hereafter be amended, supplemented or otherwise modified from time
to time.
"Disposition" or "Dispose" means the sale, transfer, license or other
----------- -------
disposition (including any sale and leaseback transaction) of any property by
any Person, including any sale, assignment,
-5-
<PAGE>
transfer or other disposal with or without recourse of any notes or accounts
receivable or any rights and claims associated therewith.
"Dollar" and "$" means lawful money of the United States of America.
------ -
"Domestic Subsidiary" means, with respect to any Person, any Subsidiary of
-------------------
such Person incorporated in a jurisdiction of the United States of America.
"Eligible Assignee" means (a) a financial institution organized under the
-----------------
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States; (c)
a Person that is primarily engaged in the business of commercial banking and
that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a
Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; and
(d) another Lender.
"Environmental Laws" means all foreign, federal, state or local laws,
------------------
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case relating to environmental, health, safety and land use matters
applicable to any property.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
-----
regulations issued pursuant thereto, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
---------------
under common control with Borrower within the meaning of Sections 414(b) or (c)
of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
-----------
(b) a withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of
operations that is treated as such a withdrawal under Section 4062(e) of ERISA;
(c) a complete or partial withdrawal by Borrower or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or
the commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
or (f) the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or
any ERISA Affiliate.
-6-
<PAGE>
"Event of Default" means any of the events specified in Section 9.
---------------- ---------
"Existing Credit Agreement" means that certain Credit Agreement between
-------------------------
Borrower and Bank of America, N.A., dated as of March 8, 1994, as amended to the
date of this Agreement.
"Existing Holdings Indenture" means that certain Indenture dated as of
---------------------------
March 8, 1994, by and between Holdings and IBJ-Whitehall Bank & Trust Company, a
New York banking corporation and successor in interest IBD Schroder Bank & Trust
Company, as Trustee, as such Indenture has been amended or supplemented to the
date hereof.
"Existing Holdings Notes" means the 11% Notes of Holdings due 2001 issued
-----------------------
under the Existing Holdings Indenture in the original principal amount of
$165,000,000.
"Existing Letter of Credit" means each Letter of Credit (as defined in the
-------------------------
Existing Credit Agreement) outstanding on the Closing Date that has not expired
or been cancelled as of the Closing Date.
"Extension of Credit" means (a) the Borrowing of Loans, (b) the Conversion
-------------------
or Continuation of any Loans, (c) the issuance of any Letter of Credit, or (d)
any Letter of Credit Action which has the effect of increasing the amount of any
Letter of Credit, extending the maturity of any Letter of Credit or making any
material modification to any Letter of Credit or the reimbursement of drawings
thereunder (collectively, the "Extensions of Credit").
--------------------
"Federal Funds Rate" means, for any day, the rate per annum (rounded
------------------
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate
--------
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to Bank of America on
such day on such transactions as determined by Administrative Agent.
"GAAP" means, as of any date of determination, generally accepted
----
accounting principles and practices in effect as of such date in respect of a
business conducting a business the same as or similar to that of Borrower,
including, without limitation, those set forth in applicable bulletins,
opinions, pronouncements, statements and interpretations issued by the
Accounting Principles Board, the American Institute of Certified Public
Accountants and the Financial Accounting Standard Board, consistently applied.
"Governing State" means the State of California.
---------------
"Governmental Authority" means (a) any international, foreign, federal,
----------------------
state, county or municipal government, or political subdivision thereof, (b) any
governmental or quasi-
-7-
<PAGE>
governmental agency, authority, board, bureau, commission, department,
instrumentality, central bank or public body, or (c) any court, administrative
tribunal or public utility.
"Guaranties" means the Development Guaranty and the Subsidiary Guaranty.
----------
"Guaranty Obligation" means, as to any Person, without duplication, any (a)
-------------------
guaranty by that Person of Indebtedness of, or other obligation payable or
performable by, any other Person or (b) assurance, agreement, letter of
responsibility, letter of awareness, undertaking or arrangement given by that
Person to an obligee of any other Person with respect to the payment or
performance of an obligation by, or the financial condition of, such other
Person, whether direct, indirect or contingent, including any purchase or
repurchase agreement covering such obligation or any collateral security
therefor, any agreement to provide funds (by means of loans, capital
contributions or otherwise) to such other Person, any agreement to support the
solvency or level of any balance sheet item of such other Person or any "keep-
well" or other arrangement of whatever nature given for the purpose of assuring
or holding harmless such obligee against loss with respect to any obligation of
such other Person; provided, however, that the term Guaranty Obligation shall
-------- -------
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Guaranty Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, covered by such Guaranty Obligation,
without duplication, or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by the Person in good
faith.
"Guarantor" means Development and each of its Subsidiaries that becomes a
---------
party to the Development Guaranty, and each Subsidiary of Borrower that becomes
a party to the Subsidiary Guaranty.
"Holdings" means Stater Bros. Holdings Inc., a Delaware corporation.
--------
"Holdings Consolidated Net Income" means, for any period, for Holdings and
--------------------------------
its Subsidiaries on a consolidated basis, the net income of Holdings and its
Subsidiaries from continuing operations after extraordinary items for that
period.
"Holdings Senior Note Indenture" means the indenture pursuant to which the
------------------------------
Holdings Senior Notes are issued, as such indenture may be amended from time to
time to the extent permitted under Section 8.05(a).
---------------
"Holdings Senior Notes" means the 10.75% Senior Notes due 2006 of Holdings
---------------------
in an aggregate principal amount not to exceed $450,000,000 issued pursuant to
the Holdings Senior Note Indenture, including any Exchange Notes, as such term
is defined in the Holdings Senior Note Indenture.
"Indebtedness" means as to any Person at a particular time, all items which
------------
would, in conformity with GAAP, be classified as liabilities on a balance sheet
of such Person as at such time (excluding trade and other accounts payable in
the ordinary course of business in accordance
-8-
<PAGE>
with customary trade terms and which are not overdue for a period of more than
60 days and excluding deferred taxes), but in any event including:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) any direct or contingent obligations of such Person arising under
letters of credit (including standby and commercial), banker's acceptances,
bank guaranties, surety bonds and similar instruments;
(c) net obligations under any Swap Contract in an amount equal to (i)
if such Swap Contract has been closed out, the termination value thereof,
or (ii) if such Swap Contract has not been closed out, the mark-to-market
value thereof determined on the basis of readily available quotations
provided by any recognized dealer in such Swap Contract;
(d) whether or not so included as liabilities in accordance with GAAP,
all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse;
(e) lease obligations under capital leases or Synthetic Lease
Obligations; and
(f) all Guaranty Obligations of such Person, without duplication, in
respect of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer, unless such Indebtedness is
expressly made non-recourse to such Person except for customary exceptions
acceptable to the Requisite Lenders.
"Indemnified Liabilities" has the meaning set forth in Section 11.13.
----------------------- -------------
"Interest Payment Date" means, (a) as to any Base Rate Loan, the first
---------------------
Business Day of each calendar month; (b) as to any Offshore Rate Loan, the first
Business Day of each calendar month, the last day of the relevant Interest
Period and any date that such Loan is prepaid in whole or in part; and (c) as to
all Loans, the Maturity Date; provided, further, that interest accruing at the
-------- -------
Default Rate shall be payable from time to time at any time upon demand of
Administrative Agent.
"Interest Period" means, for each Offshore Rate Loan, (a) initially, the
---------------
period commencing on the date such Offshore Rate Loan is disbursed, Continued
as, or Converted into, an Offshore Rate Loan and (b) thereafter, the period
commencing on the last day of the preceding Interest
-9-
<PAGE>
Period, and ending, in each case, on the earlier of (x) the Maturity Date, or
(y) one, two, three or six months thereafter, as requested by Borrower;
provided that:
- --------
(i) any Interest Period that would otherwise end on a day that is not
a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day;
(ii) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period; and
(iii) unless Administrative Agent otherwise consents, there may not
be more than five Interest Periods in effect at any time.
"Investment" means, as to any Person, any acquisition or any investment by
----------
such Person, whether by means of the purchase or other acquisition of stock or
other securities of any other Person or by means of a loan, creating a debt,
capital contribution, guaranty or other debt or equity participation or interest
in any other Person, including any partnership and joint venture interests in
such other Person. For purposes of covenant compliance, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.
"IRS" means the Internal Revenue Service.
---
"Issuing Lender" means Bank of America, or any successor issuing lender
--------------
hereunder.
"Laws" or "Law" means, collectively, all international, foreign, federal,
---- ---
state and local statutes, treaties, rules, guidelines, regulations, ordinances,
codes and administrative or judicial precedents or authorities, including
without limitation the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or
administration thereof, in each case whether or not having the force of law.
"Lender" means each lender from time to time party hereto and Issuing
------
Lender.
"Lending Office" means, as to any Lender, the office or offices of such
--------------
Lender described as such on Schedule 11.02, or such other office or offices as
--------------
such Lender may from time to time notify Borrower and Administrative Agent.
"Letter of Credit" means any letter of credit issued or outstanding
----------------
hereunder.
"Letter of Credit Action" means the issuance, supplement, amendment,
-----------------------
renewal, extension, modification or other action relating to a Letter of Credit.
"Letter of Credit Application" means an application for a Letter of Credit
----------------------------
Action as shall at any time be in use by Issuing Lender.
-10-
<PAGE>
"Letter of Credit Cash Collateral Account" means a blocked deposit account
----------------------------------------
at Bank of America with respect to which Borrower hereby grants a security
interest in such account to Administrative Agent for and on behalf of Lenders as
security for Letter of Credit Usage and with respect to which Borrower agrees to
execute and deliver from time to time such documentation as Administrative Agent
may reasonably request to further assure and confirm such security interest.
"Letter of Credit Commitment" means, for each Lender, the obligation of
---------------------------
such Lender to purchase participations in Letters of Credit issued by Issuing
Lender hereunder in an aggregate principal amount not exceeding the amount set
forth opposite such Lender's name on Schedule 2.01 as such Lender's Letter of
-------------
Credit Commitment at any one time outstanding, as such amount may be reduced or
adjusted from time to time in accordance with this Agreement (collectively, the
"combined Letter of Credit Commitments") and means, for Issuing Lender, the
-------------------------------------
obligation to issue Letters of Credit in an aggregate face amount not exceeding
the combined Letter of Credit Commitments and take other Letter of Credit
Actions within the combined Letter of Credit Commitments in accordance with
Section 2.04.
- ------------
"Letter of Credit Commitment Termination Date" means the Maturity Date.
--------------------------------------------
"Letter of Credit Expiration Date" means the date that is one year after
--------------------------------
the Maturity Date.
"Letter of Credit Usage" means, as at any date of determination, the
----------------------
aggregate undrawn face amount of outstanding Letters of Credit plus the
----
aggregate amount of all drawings under the Letters of Credit honored by Issuing
Lender and not reimbursed to Issuing Lender by Borrower or converted into
Committed Loans.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement (in the nature of compensating balances, cash collateral accounts or
security interests), encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable Laws
of any jurisdiction), including the interest of a purchaser of accounts
receivable.
"Loan" means any advance made by any Lender to Borrower as provided in
----
Section 2 (collectively, the "Loans").
- ---------- -----
"Loan Documents" means this Agreement, the Guaranties, and any Note,
--------------
certificate, fee letter, and other instrument, document or agreement from time
to time delivered in connection with this Agreement.
"Material Adverse Effect" means any set of circumstances or events which
-----------------------
(a) has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of any Loan Document, (b) is or
could reasonably be expected to be material and adverse to the condition
(financial or otherwise), business, assets, operations or prospects of any
-11-
<PAGE>
Borrower Party, or (c) materially impairs or could reasonably be expected to
materially impair the ability of any Borrower Party to perform the Obligations.
"Maturity Date" means August 6, 2002, as it may be earlier terminated in
-------------
accordance with the terms hereof.
"Minimum Amount" means, with respect to each of the following actions, the
--------------
minimum amount and any multiples in excess thereof set forth opposite such
action:
<TABLE>
<CAPTION>
Minimum Multiples in
Type of Action Amount excess thereof
-----------------------------------------------------------------------------
<S> <C> <C>
Borrowing of, prepayment of, or Conversion $ 100, 000 $ 500,000
into, Base Rate Loans
Borrowing of, prepayment of, Continuation $5,000,000 $1,000,000
of, or Conversion into, Offshore Rate
Loans
Reduction in Commitments $1,000,000 $ 500,000
Assignments $1,000,000 N.A.
</TABLE>
"Multiemployer Plan" means any employee benefit plan of the type described
------------------
in Section 4001(a)(3) of ERISA.
"Negative Pledge" means a Contractual Obligation that restricts Liens on
---------------
property.
"Notes" means the Committed Loan Notes.
-----
"Notice of Assignment and Acceptance" means a Notice of Assignment and
-----------------------------------
Acceptance substantially in the form of Exhibit D.
---------
"Obligations" means all advances to, and debts, liabilities, obligations,
-----------
covenants and duties of, any Borrower Party arising under any Loan Document,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and
including interest and fees that accrues after the commencement of any
proceeding under any Debtor Relief Laws by or against any Borrower Party or any
Subsidiary of any Borrower Party.
"Offshore Base Rate" has the meaning set forth in the definition of
------------------
Offshore Rate.
"Offshore Rate" means for any Interest Period with respect to any Offshore
-------------
Rate Loan, a rate per annum determined by Administrative Agent pursuant to the
following formula:
Offshore Rate = Offshore Base Rate
------------------------------------
1.00 - Eurodollar Reserve Percentage
-12-
<PAGE>
Where,
"Offshore Base Rate" means, for such Interest Period:
------------------
(a) the rate per annum (carried out to the fifth decimal place) equal
to the rate determined by Administrative Agent to be the offered rate that
appears on the page of the Telerate Screen that displays an average British
Bankers Association Interest Settlement Rate (such page currently being
page number 3750) for deposits in dollars (for delivery on the first day of
such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, or
(b) in the event the rate referenced in the preceding subsection (a)
does not appear on such page or service or such page or service shall cease
to be available, the rate per annum (carried to the fifth decimal place)
equal to the rate determined by Administrative Agent to be the offered rate
on such other page or other service that displays an average British
Bankers Association Interest Settlement Rate for deposits in dollars (for
delivery on the first day of such Interest Period) with a term equivalent
to such Interest Period, determined as of approximately 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest Period, or
(c) in the event the rates referenced in the preceding subsections (a)
and (b) are not available, the rate per annum determined by Administrative
Agent as the rate of interest at which dollar deposits (for delivery on the
first day of such Interest Period) in same day funds in the approximate
amount of the applicable Offshore Rate Loan and with a term equivalent to
such Interest Period would be offered by its London Branch to major banks
in the offshore dollar market at their request at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest
Period.
"Eurodollar Reserve Percentage" means, for any day during any Interest
-----------------------------
Period, the reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1%) in effect on such day, whether or not applicable to
any Lender, under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"). The Offshore Rate for each
outstanding Offshore Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Committed Loan bearing interest based on the
------------------
Offshore Rate.
"Ordinary Course Dispositions" means:
----------------------------
(a) Dispositions of obsolete or worn out property, whether now owned
or hereafter acquired, in the ordinary course of business;
-13-
<PAGE>
(b) Dispositions of cash, cash equivalents, inventory and other
property in the ordinary course of business, other than stores and any
inventory or other property Disposed of in connection with the Disposition
of any stores; and
(c) Dispositions of assets or property by any Subsidiary of Borrower
to Borrower or another Wholly-Owned Subsidiary of Borrower;
provided, however, that no such Disposition shall be for less than the fair
- -------- -------
market value of the property being disposed of.
"Ordinary Course Indebtedness" means:
----------------------------
(a) Indebtedness under the Loan Documents;
(b) intercompany Guaranty Obligations of Borrower or any of its
Subsidiaries guarantying Indebtedness otherwise permitted hereunder of
Borrower or any Wholly-Owned Subsidiary of Borrower; and
(c) Indebtedness arising from the honoring of a check, draft or
similar instrument against insufficient funds.
"Ordinary Course Investments" means:
---------------------------
(a) Investments consisting of cash and cash equivalents;
(b) Investments of Borrower in any of its Subsidiaries and Investments
of any Subsidiary of Borrower in Borrower or another Subsidiary of
Borrower;
(c) Investments consisting of or evidencing the extension of credit to
customers or suppliers of Borrower and its Subsidiaries in the ordinary
course of business and any Investments received in satisfaction or partial
satisfaction thereof; and
(d) Investments consisting of Guaranty Obligations permitted by
Section 7.01.
------------
"Ordinary Course Liens" means:
---------------------
(a) Liens pursuant to any Loan Document;
(b) Liens for taxes not yet due or which are being contested in good
faith and by appropriate proceedings, if adequate reserves with respect
thereto are maintained on the books of the applicable Person in accordance
with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings, if adequate reserves with
respect thereto are maintained on the books of the applicable Person;
-14-
<PAGE>
(d) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation;
(e) 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 a like nature incurred in
the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar
encumbrances affecting real property 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 conduct of the business of any Person;
(g) Liens arising from filing UCC financing statements relating solely
to leases permitted by this Agreement; and
(h) attachment, judgment or other similar Liens arising in connection
with litigation or other legal proceedings (and not otherwise a Default
hereunder) in the ordinary course of business that is currently being
contested in good faith by appropriate proceedings, adequate reserves have
been set aside and no material Property is subject to a material risk of
loss or forfeiture and the claims in respect of such Liens are fully
covered by insurance (subject to ordinary and customary deductibles).
"Organization Documents" means, (a) with respect to any corporation, the
----------------------
certificate or articles of incorporation and the bylaws; (b) with respect to any
limited liability company, the articles of formation and operating agreement;
and (c) with respect to any partnership, joint venture or other form of business
entity, the partnership agreement and any agreement, filing or notice with
respect thereto filed with the secretary of state of the state of its formation,
in each case as amended from time to time.
"Outstanding Obligations" means, as of any date, and giving effect to
-----------------------
making any Extensions of Credit requested on such date and all payments,
repayments and prepayments made on such date, the sum of (a) the aggregate
outstanding principal amount of all Loans, and (b) all Letter of Credit Usage.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
thereto established under ERISA.
"Pension Plan" means any "employee pension benefit plan" (as such term is
------------
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by Borrower or any
ERISA Affiliates or to which Borrower or any ERISA Affiliate contributes or has
an obligation to contribute, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five plan years.
"Permitted Workers Compensation Letters of Credit" means standby Letters of
------------------------------------------------
Credit issued to secure workers' compensation and other insurance coverages for
Borrower and its
-15-
<PAGE>
Subsidiaries not to exceed the minimum amount required by Holdings', Borrowers',
or any of Borrower's Subsidiaries' insurance carriers or applicable regulatory
agencies.
"Person" means any individual, trustee, corporation, general partnership,
------
limited partnership, limited liability company, joint stock company, trust,
unincorporated organization, bank, business association, firm, joint venture,
Governmental Authority, or otherwise.
"Plan" means any employee benefit plan maintained or contributed to by a
----
Borrower Party or by any trade or business (whether or not incorporated) under
common control with a Borrower Party as defined in Section 4001(b) of ERISA and
insured by the Pension Benefit Guaranty Corporation under Title IV of ERISA.
"Pro Rata Share" means, with respect to each Lender, the percentage of the
--------------
combined Commitments set forth opposite the name of that Lender on Schedule
--------
2.01.
- ----
"Quarterly Payment Date" means the last Business Day of each March, June,
----------------------
September and December and the Maturity Date.
"Related Agreements" means, collectively, the Albertsons Acquisition
------------------
Agreement and the Holdings Senior Note Indenture.
"Reportable Event" means any of the events set forth in Section 4043(b) of
----------------
ERISA or the regulations thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA, or a cessation of operations described in Section 4062(e)
of ERISA.
"Request for Extension of Credit" means a written request substantially in
-------------------------------
the form of Exhibit A duly completed and signed by a Responsible Officer, or a
---------
telephonic request followed by such a written request, in each case delivered to
Administrative Agent by Requisite Notice. In the case of a request for a new or
amended Letter of Credit, the written Letter of Credit Application shall be
deemed to be the Request for Extension of Credit.
"Requisite Lenders" means (a) as of any date of determination if the
-----------------
Commitments are then in effect, Lenders having in the aggregate 66-2/3% or more
of the combined Commitments then in effect and (b) as of any date of
determination if the Commitments have then been terminated and there are Loans
and/or Letter of Credit Usage outstanding, Lenders holding Loans and Letter of
Credit Usage aggregating 66-2/3% or more of the aggregate outstanding principal
amount of the Loans and Letter of Credit Usage.
"Requisite Notice" means, unless otherwise provided herein, (a) irrevocable
----------------
written notice to the intended recipient or (b) except with respect to Letter of
Credit actions (which must be in writing), irrevocable telephonic notice to the
intended recipient, promptly followed by a written notice to such recipient.
Such notices shall be (i) delivered to such recipient at the address or
telephone number specified on Schedule 11.02 or as otherwise designated by such
--------------
recipient by Requisite Notice to each other party hereto, and (ii) if made by
any Borrower Party, given or made by a Responsible Officer of such Borrower
Party. Any written notice delivered in connection with any Loan Document shall
be in the form, if any, prescribed in the applicable section hereof or thereof
and may be delivered as provided in Section 11.02. Any notice sent by
-------------
-16-
<PAGE>
other than hardcopy shall be promptly confirmed by a telephone call to the
recipient and, if requested by Administrative Agent, by a manually-signed
hardcopy thereof.
"Requisite Time" means, with respect to any of the actions listed below,
--------------
the time and date set forth below opposite such action (all times are local time
(standard or daylight) as observed in the Governing State):
<TABLE>
<CAPTION>
Type of Action Time Date of Action
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delivery of Request for Extension of Credit
for, or notice for:
. Borrowing of, prepayment of, or Conversion 8:30 a.m. Same date as such Borrowing,
into, Base Rate Loans prepayment or Conversion
. Borrowing of, prepayment of, Continuation 10:00 a.m. 3 Business Days prior to such
of, or Conversion into, Offshore Rate Loans Borrowing, prepayment or Conversion
. Letter of Credit action 10:00 a.m. 5 Business Days prior to such action
. Voluntary reduction in or termination of 10:00 a.m. 2 Business Days prior to such
Commitments reduction or termination
. Payments by Lenders or Borrower to 11:00 a.m. On date payment is due
Administrative Agent
</TABLE>
"Responsible Officer" means the president, chief financial officer,
-------------------
secretary, treasurer or assistant treasurer of a Borrower Party. Any document
or certificate hereunder that is signed by a Responsible Officer of a Borrower
Party shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of such Borrower Party
and such Responsible Officer shall be conclusively presumed to have acted on
behalf of such Borrower Party.
"Restricted Payment" means:
------------------
(a) the declaration or payment of any dividend or distribution by
Holdings or any of its Subsidiaries, either in cash or property, on any
shares of the capital stock of any class of Holdings or any of its
Subsidiaries (except dividends or other distributions payable solely in
shares of capital stock of Holdings or any of its Subsidiaries and
dividends or other distributions payable (including dividends payable in
cash) by a Subsidiary to Holdings or another Wholly-Owned Subsidiary of
Holdings that is a Domestic Subsidiary);
(b) the purchase, redemption or retirement by Holdings or any of its
Subsidiaries of any shares of any class of the capital stock of Holdings or
any of its Subsidiaries of any class or any warrants, rights or options to
purchase or acquire any shares of any class of the capital stock of
Holdings or any of its Subsidiaries whether directly or indirectly;
-17-
<PAGE>
(c) any other payment or distribution by Holdings or any of its
Subsidiaries in respect of any class of capital stock of Holdings or any of
its Subsidiaries, either directly or indirectly (except dividends or other
distributions payable solely in shares of capital stock of Holdings or any
of its Subsidiaries and dividends or other distributions payable (including
dividends payable in cash) by a Subsidiary to Holdings or another Wholly-
Owned Subsidiary of Holdings that is a Domestic Subsidiary);
(d) any Investment other than an Investment otherwise permitted under
any Loan Document; and
(e) the prepayment, repayment, redemption, defeasance or other
acquisition or retirement for value prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Holdings
Senior Notes or any Existing Holdings Notes.
"Revolving Loan Commitment" means, for each Lender, the obligation of such
-------------------------
Lender to make Committed Loans in an aggregate principal amount not exceeding
the amount set forth opposite such Lender's name on Schedule 2.01 as such
-------------
Lender's Revolving Loan Commitment at any one time outstanding, as such amount
may be reduced or adjusted from time to time in accordance with this Agreement
(collectively, the "combined Revolving Loan Commitments").
-------------------------------------
"Santee Dairies Inc." means Santee Dairies Inc., a California corporation.
-------------------
"Santee Dairies LLC" means Santee Dairies LLC, a Delaware limited liability
------------------
corporation.
"Shareholders' Equity" means, as of any date of determination for Borrower
--------------------
and its Subsidiaries on a consolidated basis, shareholders' equity as of that
date determined in accordance with GAAP.
"Starting Consolidated Net Worth" means the Consolidated Net Worth on
-------------------------------
September 26, 1999, plus, to the extent not included therein, the aggregate
----
amount of all contributions to Borrower's capital that are required to be made
by Holdings on or after the Closing Date pursuant to Sections 8.09 and 8.10.
-------- ---- -----
"Subsidiary" means, with respect to any Person, a corporation,
----------
partnership, joint venture, limited liability company or other business entity
of which a majority of the shares of securities or other interests having
ordinary voting power for the election of directors or other governing body
(other than securities or interests having such power only by reason of the
happening of a contingency) are at the time beneficially owned, or the
management of which is otherwise controlled, directly, or indirectly through one
or more intermediaries, or both, by such Person; provided, however, that neither
--------
Santee Dairies LLC nor Santee Dairies Inc. shall be deemed to be a Subsidiary of
Holdings or Borrower for any purposes under this Agreement (including, without
limitation, Sections 6.14, 7.05, 7.10 and 8.04) other than Sections 6.01,
-------- ---- ---- ---- ---- -------- -----
7.14, 8.02, and 9 if either such Person would constitute a Subsidiary of
- ---- ---- -
Holdings or Borrower if this proviso were not given effect.
-18-
<PAGE>
"Subsidiary Guarantor" means each domestic subsidiary of Borrower that
--------------------
executes and delivers a counterpart of the Subsidiary Guaranty after the Closing
Date pursuant to Section 6.14
------------
"Subsidiary Guaranty" means the Guaranty to be executed and delivered by
-------------------
each domestic Subsidiaries of Borrower from time to time formed or acquired
after the Closing Date in accordance with Section 6.14, substantially in the
------------
form of Exhibit F-2 annexed hereto, as such Guaranty may hereafter be amended,
-----------
supplemented or otherwise modified from time to time.
"Swap Agreement" means (a) any and all rate swap transactions, basis swaps,
--------------
forward rate transactions, commodity swaps, commodity options, forward commodity
contracts, equity or equity index swaps or options, bond or bond price or bond
index swaps or options or forward bond or forward bond price or forward bond
index transactions, interest rate options, forward foreign exchange
transactions, cap transactions, floor transactions, collar transactions,
currency swap transactions, cross-currency rate swap transactions, currency
options, or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether or
not any such transaction is governed by or subject to any master agreement, or
(b) any and all transactions of any kind, and the related confirmations, which
are subject to the terms and conditions of, or governed by, any form of master
agreement published by the International Swaps and Derivatives Association,
Inc., or any other master agreement (any such master agreement, together with
any related schedules, as amended, restated, extended, supplemented or otherwise
modified in writing from time to time, a "Master Agreement"), including but not
----------------
limited to any such obligations or liabilities under any Master Agreement.
"Synthetic Lease Obligations" means all monetary obligations of a Person
---------------------------
under (a) a so-called synthetic lease, or (b) an agreement for the use or
possession of property creating obligations which do not appear on the balance
sheet of such Person but which, upon the insolvency or bankruptcy of such
Person, would be characterized as the Indebtedness of such Person (without
regard to accounting treatment).
"to the best knowledge of" means, when modifying a representation, warranty
------------------------
or other statement of any Person, that the fact or situation described therein
is known by such Person (or, in the case of a Person other than a natural
Person, known by any officer of such Person) making the representation, warranty
or other statement, or with the exercise of reasonable due diligence under the
circumstances (in accordance with the standard of what a reasonable Person in
similar circumstances would have done) would have been known by such Person (or,
in the case of a Person other than a natural Person, would have been known by an
officer of such Person).
"Transaction Costs" means the fees, costs and expenses payable by Borrower
-----------------
on or before the Closing Date in connection with the transactions contemplated
by the Loan Documents and the Related Agreements.
"type", when used with respect to any Loan, means the designation of
----
whether such Loan is a Base Rate Loan or an Offshore Rate Loan.
"Unfunded Pension Liability" means the excess of a Pension Plan's benefit
--------------------------
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan's assets, determined in
-19-
<PAGE>
accordance with the assumptions used for funding the Pension Plan pursuant to
Section 412 of the Code for the applicable plan year.
"Wholly-Owned Subsidiary" of any specified Person means 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 or
another Wholly-Owned Subsidiary of such Person, and with respect to Holdings,
shall include Borrower so long as Holdings owns all of the outstanding shares of
capital stock of Borrower other than the shares of Borrower's preferred stock,
no par value, outstanding on the Closing Date.
1.02 Use of Certain Terms.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
or thereto, unless otherwise defined therein.
(b) As used herein, unless the context requires otherwise, the masculine,
feminine and neuter genders and the singular and plural include one another.
(c) The words "herein" and "hereunder" and words of similar import when
------ ---------
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The word "including" when used herein
---------
is not intended to be exclusive and means "including, without limitation."
References herein to a Section, subsection or clause shall refer to the
appropriate Section, subsection or clause in this Agreement.
(d) The term "or" is disjunctive; the term "and" is conjunctive. The term
"shall" is mandatory; the term "may" is permissive. Masculine terms also apply
to females; feminine terms also apply to males. The term "including" is by way
of example and not limitation.
1.03 Accounting Terms. Except as otherwise expressly provided in this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP. Financial statements and
other information required to be delivered by Borrower to Lenders pursuant to
Section 6.01 shall be prepared in accordance with GAAP as in effect at the time
- ------------
of such preparation. Calculations in connection with the definitions, covenants
and other provisions of this Agreement shall utilize accounting principles and
policies in conformity with GAAP as in effect at the time of the preparation of
the financial statement on which such calculations are based. If at any time any
change in GAAP would affect the computation of any financial ratio or
requirement set forth in this Agreement, and either Borrower or Requisite
Lenders shall so request, Administrative Agent, Requisite Lenders and Borrower
shall negotiate in good faith to amend such ratio or requirement to reflect such
change in GAAP (subject to the approval of Requisite Lenders); provided that,
until so amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) Borrower shall
provide to Administrative Agent and Lenders financial statements and other
documents required under this Agreement or as reasonably requested hereunder
setting
-20-
<PAGE>
forth a reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.
1.04 Rounding. Any financial ratios required to be maintained by Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed in this Agreement and rounding
the result up or down to the nearest number (with a round-up if there is no
nearest number) to the number of places by which such ratio is expressed in this
Agreement.
1.05 Exhibits and Schedules. All exhibits and schedules to this Agreement,
either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference. A
matter disclosed on any Schedule shall be deemed disclosed on all Schedules.
1.06 References to Agreements, Exhibits and Laws. Unless otherwise
expressly provided herein, (a) references to agreements (including the Loan
Documents) and other contractual instruments shall include all amendments and
other modifications thereto (unless prohibited by any Loan Document), and (b)
references to any statute or regulation shall include all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
Section 2.
THE COMMITMENTS AND EXTENSIONS OF CREDIT
2.01 Committed Loans
(a) Subject to the terms and conditions set forth in this Agreement, each
Lender severally agrees to make, Convert and Continue Committed Loans until the
Maturity Date as Borrower may from time to time request; provided, however, that
-------- -------
the aggregate outstanding principal amount of all Loans of each Lender shall not
exceed such Lender's Revolving Loan Commitment, and the aggregate outstanding
principal amount of all Loans of all Lenders shall not exceed the combined
Revolving Loan Commitments at any time. Subject to the foregoing and the other
terms and conditions hereof, Borrower may borrow, Convert, Continue, prepay and
reborrow Committed Loans as set forth herein without premium or penalty.
(b) Loans made by each Lender shall be evidenced by one or more loan
accounts or records maintained by such Lender in the ordinary course of
business. Upon the request of any Lender made through Administrative Agent,
such Lender's Loans may be evidenced by one or more Notes, instead of or in
addition to loan accounts. Each such Lender may attach schedules to its Note(s)
and endorse thereon the date, amount and maturity of its Committed Loans and
payments with respect thereto. Such loan accounts, records or Notes shall be
conclusive absent manifest error of the amount of such Loans and payments
thereon. Any failure so to record or any error in doing so shall not, however,
limit or otherwise affect the obligation of Borrower to pay any amount owing
with respect to the Loans.
-21-
<PAGE>
(c) Borrower may use proceeds of Committed Loans solely for the following
working capital and general corporate purposes:
(1) payment of Indebtedness evidenced by a note, bond or similar
instrument owed to Holdings;
(2) borrowings to acquire capital assets;
(3) payment of obligations of Borrower arising from transactions other
than for goods and services (e.g., an acquisition of real estate); payment
of obligations of Borrower to pay dividends following their declaration;
payment of rents for real property; payment of taxes, payment of
obligations pursuant to workers compensation insurance laws; payment of
clean-up obligations arising under environmental laws, and payment of
obligations for personal injury, products liability, and other liabilities
arising under the law of torts; and
(4) any other working capital and general corporate purpose of
Borrower to the extent such use is not restricted by Article IV, Section
6(N) of Borrower's Restated Articles of Incorporation; provided, that prior
--------
to borrowing any Loans for which the proceeds will be used for any purpose
described in this clause (4), Borrower shall provide evidence satisfactory
to Administrative Agent (which evidence may, at the discretion of
Administrative Agent, consist of a legal opinion in form and substance
satisfactory to Administrative Agent) that the proposed use of proceeds of
such Loans is not subject to such restriction.
(d) Anything contained in this Agreement to the contrary notwithstanding,
the Committed Loans and the Revolving Loan Commitments shall be subject to the
following limitations:
(i) for ten consecutive days during the first six fiscal months of
each fiscal year and for ten consecutive days during the last six fiscal
months of each fiscal year, there shall be no Committed Loans outstanding;
and
(ii) the Outstanding Obligations on the last day of each fiscal month
shall not exceed an amount equal to 45% of the aggregate book value of the
inventory of Borrower and its Subsidiaries on such day, measured on a
consolidated basis, using the first-in, first out method, in accordance
with GAAP.
2.02 Borrowings, Conversions and Continuations of Committed Loans.
(a) Borrower may irrevocably request a Borrowing, Conversion or
Continuation of Committed Loans in a Minimum Amount therefor by delivering a
Request for Extension of Credit therefor by Requisite Notice to Administrative
Agent not later than the Requisite Time therefor. All Borrowings, Conversions
and Continuations shall constitute Base Rate Loans unless properly and timely
otherwise designated as set forth in the prior sentence.
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<PAGE>
(b) Following receipt of a Request for Extension of Credit, Administrative
Agent shall promptly notify each Lender of its Pro Rata Share thereof by
Requisite Notice. In the case of a Borrowing of Loans, each Lender shall make
the funds for its Loan available to Administrative Agent at Administrative
Agent's Office not later than the Requisite Time therefor on the Business Day
specified in such Request for Extension of Credit. Upon satisfaction of the
applicable conditions set forth in Section 4, all funds so received shall be
---------
made available to Borrower in like funds received.
(c) Administrative Agent shall promptly notify Borrower and Lenders of the
interest rate applicable to any Loan other than a Base Rate Loan upon
determination of same.
(d) Except as otherwise provided herein, an Offshore Rate Loan may be
Continued or Converted only on the last day of the Interest Period for such
Offshore Rate Loan. No Loans may be requested as, Converted into or Continued
as Offshore Rate Loans during the existence of a Default or Event of Default.
During the existence of a Default or Event of Default, the Requisite Lender may
demand that any or all of the then outstanding Offshore Rate Loans be Converted
immediately into Base Rate Loans. Such Conversion shall be effective upon
notice to Borrower and shall continue so long as such Default or Event of
Default continues to exist.
(e) If a Loan is to be made on the same date that another Loan is due and
payable, Borrower or Lenders, as the case may be, shall make available to
Administrative Agent the net amount of funds giving effect to both such Loans
and the effect for purposes of this Agreement shall be the same as if separate
transfers of funds had been made with respect to each such Loan.
(f) The failure of any Lender to make any Loan on any date shall not
relieve any other Lender of any obligation to make a Loan on such date, but no
Lender shall be responsible for the failure of any other Lender to so make its
Loan.
2.03 [intentionally omitted]
2.04 Letters of Credit.
(a) The Letter of Credit Commitments. Subject to the terms and conditions
hereof, at any time and from time to time from the Closing Date through the
Letter of Credit Commitment Termination Date, Issuing Lender shall take such
Letter of Credit Actions under the Letter of Credit Commitments as Borrower may
request; provided, however, that the aggregate outstanding Letter of Credit
-------- -------
Usage shall not exceed the combined Letter of Credit Commitments at any time.
Each Letter of Credit Action shall be in a form acceptable to Issuing Lender and
shall not violate any policies of Issuing Lender. Standby Letters of Credit
shall be issued only for the purpose of (i) securing workers' compensation and
other insurance coverages for Borrower and its Subsidiaries in an amount not at
any time to exceed the minimum amount required by Holdings', Borrowers', or any
of Borrower's Subsidiaries' insurance carriers or applicable regulatory agencies
and (ii) supporting obligations of Borrower and its Subsidiaries incurred in the
construction of stores and related shopping centers. Commercial Letters of
Credit shall only be issued for the purpose of supporting the purchase of
inventory by Borrower and its Subsidiaries. The Letter of Credit Commitments
shall be subject to the following limitations:
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<PAGE>
(i) The Letter of Credit Usage in respect of standby Letters of Credit
issued to support obligations of Borrower and its Subsidiaries incurred in
the construction of stores and related shopping centers shall not exceed
$2,000,000.
(ii) The Letter of Credit Usage in respect of all Letters of Credit
other than Permitted Workers Compensation Letters of Credit shall not
exceed $5,000,000.
(iii) The Outstanding Obligations on the last day of each fiscal month
shall not exceed an amount equal to 45% of the aggregate book value of the
inventory of Borrower and its Subsidiaries on such day, measured on a
consolidated basis, using the first-in, first out method, in accordance
with GAAP.
(iv) No standby Letter of Credit shall expire more than 12 months after
the issuance thereof. No commercial Letter of Credit shall expire more than
180 days after the issuance thereof. No Letter of Credit shall expire after
the Letter of Credit Expiration Date. If any Letter of Credit Usage remains
outstanding after the Letter of Credit Expiration Date, Borrower shall, not
later than the Letter of Credit Expiration Date, deposit cash in an amount
equal to such Letter of Credit Usage in a Letter of Credit Cash Collateral
Account.
(b) Requesting Letter of Credit Actions. Borrower may irrevocably request
a Letter of Credit Action by delivering a Letter of Credit Application therefor
to Issuing Lender, with a copy to Administrative Agent (who shall notify
Lenders), by Requisite Notice not later than the Requisite Time therefor.
Unless Administrative Agent notifies Issuing Lender that such Letter of Credit
Action is not permitted hereunder or Issuing Lender determines that such Letter
of Credit Action is contrary to any Laws or policies of Issuing Lender or does
not otherwise conform to the requirements of this Agreement, Issuing Lender
shall effect such Letter of Credit Action. This Agreement shall control in the
event of any conflict with any Letter of Credit Application. Upon the issuance
of a Letter of Credit, each Lender shall be deemed to have purchased a pro rata
participation in such Letter of Credit from Issuing Lender in an amount equal to
that Lender's Pro Rata Share.
(c) Reimbursement of Payments Under Letters of Credit. Borrower shall
reimburse Issuing Lender through Administrative Agent for any payment that
Issuing Lender makes under a Letter of Credit on or before the date of such
payment; provided, however, that if the conditions precedent set forth in
-------- -------
Section 4 can be satisfied, Borrower may request a Borrowing of Committed Loans
- ---------
to reimburse Issuing Lender for such payment on or before the date thereof by
complying with Section 2.02, or Borrower may allow a deemed Borrowing of
------------
Committed Loans which are Base Rate Loans to take place on such payment date
pursuant to subsection (e) below.
(d) Funding by Lenders When Issuing Lender Not Reimbursed. If Borrower
fails to timely make the payment required pursuant to subsection (c) above,
Issuing Lender shall notify Administrative Agent of such fact and the amount of
such unreimbursed payment. Administrative Agent shall promptly notify each
Lender of its Pro Rata Share of such amount by Requisite Notice. Each Lender
shall make funds in an amount equal its Pro Rata Share of such amount
-24-
<PAGE>
available to Administrative Agent at Administrative Agent's Office not later
than the Requisite Time on the Business Day specified by Administrative Agent.
The obligation of each Lender to so reimburse Issuing Lender shall be absolute
and unconditional and shall not be affected by the occurrence of an Event of
Default or any other occurrence or event. Any such reimbursement shall not
relieve or otherwise impair the obligation of Borrower to reimburse Issuing
Lender for the amount of any payment made by Issuing Lender under any Letter of
Credit, together with interest as provided herein.
(e) Nature of Lenders' Funding. If the conditions precedent set forth in
Section 4 can be satisfied (except for the giving of a Request for Extension of
- ---------
Credit) on the date Borrower is obligated to make, but fails to make, a
reimbursement of a payment under a Letter of Credit, the funding by Lenders
pursuant to subsection (d) above shall be deemed to be part of a Borrowing of
Committed Loans which are Base Rate Loans (without regard to the Minimum Amount
therefor) requested by Borrower. If the conditions precedent set forth in
Section 4 cannot be satisfied on the date Borrower is obligated to make, but
- ---------
fails to make, a reimbursement of a payment under a Letter of Credit, the
funding by Lenders pursuant to subsection (d) above shall be deemed to be a
funding by each Lender of its participation in such Letter of Credit, and such
funds shall be payable by Borrower upon demand and shall bear interest at the
Default Rate, and each Lender making such funding shall thereupon acquire a pro
rata participation, to the extent of such reimbursement, in the claim of Issuing
Lender against Borrower in respect of such payment and shall share, in
accordance with that pro rata participation, in any payment made by Borrower
with respect to such claim. If Administrative Agent or Issuing Lender is
required at any time to return to Borrower, or to a trustee, receiver,
liquidator, custodian, or any official under any proceeding under Debtor Relief
Laws, any portion of the payments made by Borrower to Administrative Agent for
the account of Issuing Lender pursuant to this subsection in reimbursement of a
payment made under a Letter of Credit or interest or fee thereon, each Lender
shall, on demand of Administrative Agent, forthwith return to Administrative
Agent or Issuing Lender the amount of its Pro Rata Share of any amounts so
returned by Administrative Agent or Issuing Lender plus interest thereon from
the date such demand is made to the date such amounts are returned by such
Lender to Administrative Agent or Issuing Lender, at a rate per annum equal to
the daily Federal Funds Rate.
(f) Special Provisions Relating to Evergreen Letters of Credit. Borrower
may request Letters of Credit that have automatic extension or renewal
provisions ("evergreen" Letters of Credit) so long as Issuing Lender has the
right to not permit any such extension or renewal at least annually within a
notice period of not more than 60 days before the expiration of such Letter of
Credit. Once an evergreen Letter of Credit is issued, unless Administrative
Agent has notified Issuing Lender that all Lenders have elected not to permit
such extension or renewal, the Borrower Parties, Administrative Agent and
Lenders authorize (but may not require) Issuing Lender to, in its sole
discretion, permit the renewal of such evergreen Letter of Credit at any time to
a date not later than the Letter of Credit Expiration Date, and, unless directed
by Issuing Lender, Borrower shall not be required to request such extension or
renewal. Notwithstanding the foregoing, Issuing Lender may, in its sole
discretion elect not to permit an evergreen Letter of Credit to be extended or
renewed at any time.
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<PAGE>
(g) Obligations Absolute. The obligation of Borrower to pay to Issuing
Lender the amount of any payment made by Issuing Lender under any Letter of
Credit shall be absolute, unconditional, and irrevocable. Without limiting the
foregoing, Borrower's obligation shall not be affected by any of the following
circumstances:
(i) any lack of validity or enforceability of the Letter of Credit,
this Agreement, or any other agreement or instrument relating thereto;
(ii) any amendment or waiver of or any consent to departure from the
Letter of Credit, this Agreement, or any other agreement or instrument
relating thereto;
(iii) the existence of any claim, setoff, defense, or other rights
which Borrower may have at any time against Issuing Lender, Administrative
Agent or any Lender, any beneficiary of the Letter of Credit (or any
persons or entities for whom any such beneficiary may be acting) or any
other Person, whether in connection with the Letter of Credit, this
Agreement, or any other agreement or instrument relating thereto, or any
unrelated transactions;
(iv) any demand, statement, or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid, or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect whatsoever so long as any such document appeared to comply with the
terms of the Letter of Credit;
(v) payment by Issuing Lender in good faith under the Letter of Credit
against presentation of a draft or any accompanying document which does not
strictly comply with the terms of the Letter of Credit; or any payment made
by Issuing Lender under any Letter of Credit to any Person purporting to be
a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or successor to
any beneficiary or any transferee of any Letter of Credit, including any
arising in connection with any proceeding under any Debtor Relief Laws;
(vi) the existence, character, quality, quantity, condition, packing,
value or delivery of any Property purported to be represented by documents
presented in connection with any Letter of Credit or for any difference
between any such Property and the character, quality, quantity, condition,
or value of such Property as described in such documents;
(vii) the time, place, manner, order or contents of shipments or
deliveries of Property as described in documents presented in connection
with any Letter of Credit or the existence, nature and extent of any
insurance relative thereto;
(viii) the solvency or financial responsibility of any party issuing
any documents in connection with a Letter of Credit;
(ix) any failure or delay in notice of shipments or arrival of any
Property;
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<PAGE>
(x) any error in the transmission of any message relating to a
Letter of Credit not caused by Issuing Lender, or any delay or interruption
in any such message;
(xi) any error, neglect or default of any correspondent of Issuing
Lender in connection with a Letter of Credit;
(xii) any consequence arising from acts of God, wars, insurrections,
civil unrest, disturbances, labor disputes, emergency conditions or other
causes beyond the control of Issuing Lender;
(xiii) so long as Issuing Lender in good faith determines that the
document appears to comply with the terms of the Letter of Credit, the
form, accuracy, genuineness or legal effect of any contract or document
referred to in any document submitted to Issuing Lender in connection with
a Letter of Credit; and
(xiv) where Issuing Lender has acted in good faith and any other
circumstances whatsoever.
In addition, Borrower will promptly examine a copy of each Letter of Credit
and amendments thereto delivered to it and, in the event of any claim of
noncompliance with Borrower's instructions or other irregularity, Borrower will
immediately notify Issuing Lender in writing. Borrower shall be conclusively
deemed to have waived any such claim against Issuing Lender and its
correspondents unless such notice is given as aforesaid.
(h) Role of Issuing Lender. Each Lender and Borrower Party agree that, in
paying any drawing under a Letter of Credit, Issuing Lender shall not have any
responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. No Administrative Agent-
Related Person nor any of the respective correspondents, participants or
assignees of Issuing Lender shall be liable to any Lender for any action taken
or omitted in connection herewith at the request or with the approval of Lenders
or the Requisite Lenders, as applicable; any action taken or omitted in the
absence of gross negligence or willful misconduct; or the due execution,
effectiveness, validity or enforceability of any document or instrument related
to any Letter of Credit. Borrower hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; provided, however, that this assumption is not intended to, and shall
-------- -------
not, preclude Borrower's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Administrative Agent-Related Person, nor any of the respective correspondents,
participants or assignees of Issuing Lender, shall be liable or responsible for
any of the matters described in subsection (g) above. In furtherance and not in
limitation of the foregoing, Issuing Lender may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary, and Issuing Lender
shall not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.
-27-
<PAGE>
(i) Applicability of ISP98 and UCP. Unless otherwise expressly agreed by
the Issuing Lender and Borrower when a Letter of Credit is issued, performance
under Letters of Credit by the Issuing Lender, its correspondents, and
beneficiaries will be governed by (i) with respect to standby Letters of Credit,
the rules of the "International Standby Practices 1998" (ISP98) or such later
revision as may be published by the International Chamber of Commerce (the
"ICC"), and (ii) with respect to commercial Letters of Credit, the rules of the
---
Uniform Customs and Practice for Documentary Credits, as published in its most
recent version by the ICC on the date any commercial Letter of Credit is issued,
and including the ICC decision published by the Commission on Banking Technique
and Practice on April 6, 1998 regarding the European single currency (euro).
(j) Standby Letter of Credit Fee. On each Quarterly Payment Date and on
the Letter of Credit Expiration Date, Borrower shall pay to Administrative Agent
in arrears, for the account of each Lender in accordance with its Pro Rata
Share, a Letter of Credit fee equal to the Applicable Amount for Letters of
Credit times the actual daily maximum amount available to be drawn under each
-----
standby Letter of Credit since the later of the Closing Date and the previous
Quarterly Payment Date.
(k) Issuance Fee and Documentary and Processing Charges Payable to Issuing
Lender. Concurrently with the issuance of each Letter of Credit, Borrower
shall pay a letter of credit issuance fee to Issuing Lender, for the sole
account of Issuing Lender, in an amount set forth in a letter agreement between
Borrower and Issuing Lender and, in the case of each commercial Letter of
Credit, a fee based on Issuing Lender's standard schedule of fees for the
issuance of commercial letters of credit as then in effect. In addition,
Borrower shall pay directly to Issuing Lender for its sole account its customary
documentary and processing charges in accordance with its standard schedule, as
from time to time in effect, for any amendment, transfer, or other occurrence
relating to a Letter of Credit. Such fee and charges are nonrefundable.
(l) Existing Letters of Credit. Each Existing Letter of Credit outstanding
on the Closing Date shall be deemed to be a Letter of Credit hereunder and all
unpaid reimbursement obligations owed in respect of amounts drawn on Existing
Letters of Credit shall be reimbursement obligations hereunder.
2.05 Prepayments.
(a) Upon Requisite Notice to Administrative Agent not later than the
Requisite Time therefor, Borrower may at any time and from time to time
voluntarily prepay Committed Loans in part in the Minimum Amount therefor or in
full without premium or penalty. Administrative Agent will promptly notify each
Lender thereof and of such Lender's Pro Rata Share of such prepayment. Any
prepayment of an Offshore Rate Loan shall be accompanied by all accrued interest
thereon, together with the costs set forth in Section 3.05.
------------
(b) If for any reason the aggregate outstanding principal amount of all
Loans exceed the combined Revolving Loan Commitments as in effect or as reduced,
or to give effect to the limitations in Section 2.01(d) or because of any other
---------------
limitation set forth in this Agreement or
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<PAGE>
otherwise, Borrower shall immediately prepay Loans in an aggregate amount equal
to such excess.
(c) If for any reason the Letter of Credit Usage at any time exceeds the
combined Letter of Credit Commitments as in effect or as reduced, or to give
effect to the limitations set forth in Section 2.04(a), or because of any other
---------------
limitation set forth in this Agreement or otherwise, Borrower shall immediately
deposit cash in a Letter of Credit Cash Collateral Account in an aggregate
amount equal to such excess.
2.06 Reduction or Termination of Commitments. Upon Requisite Notice to
Administrative Agent not later than the Requisite Time therefor, Borrower may at
any time and from time to time, without premium or penalty, permanently and
irrevocably reduce the Revolving Loan Commitments or the Letter of Credit
Commitments in a Minimum Amount therefor to an amount not less than the
aggregate outstanding principal amount of all Loans or the Letter of Credit
Usage, respectively, at such time or terminate the Revolving Loan Commitments or
the Letter of Credit Commitments. Any such reduction or termination shall be
accompanied by payment of all accrued and unpaid commitment fees with respect to
the portion of the Revolving Loan Commitments or the Letter of Credit
Commitments being reduced or terminated. Administrative Agent shall promptly
notify Lenders of any such request for reduction or termination of the Revolving
Loan Commitments or the Letter of Credit Commitments. Each Lender's Revolving
Loan Commitment or Letter of Credit Commitments, as the case may be, shall be
reduced by an amount equal to such Lender's Pro Rata Share times the amount of
-----
such reduction.
2.07 Principal and Interest.
(a) If not sooner paid, Borrower agrees to pay the outstanding principal
amount of each Committed Loan on the Maturity Date.
(b) Subject to subsection (c) below, Borrower shall pay interest on the
unpaid principal amount of each Loan (before and after default, before and after
maturity, before and after judgment, and before and after the commencement of
any proceeding under any Debtor Relief Laws) from the date borrowed until paid
in full (whether by acceleration or otherwise) on each applicable Interest
Payment Date at a rate per annum equal to the interest rate determined in
accordance with the definition of such type of Loan, plus, to the extent
----
applicable in each case, the Applicable Amount.
(c) If any amount payable by any Borrower Party under any Loan Document is
not paid when due (without regard to any applicable grace periods), it shall
thereafter bear interest (after as well as before entry of judgment thereon to
the extent permitted by law) at a fluctuating interest rate per annum at all
times equal to the Default Rate to the fullest extent permitted by applicable
Law. Accrued and unpaid interest on past due amounts (including, without
limitation, interest on past due interest) shall be payable upon demand.
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<PAGE>
2.08 Fees.
(a) Commitment Fee. Borrower shall pay to Administrative Agent for the
account of each Lender pro rata according to its Pro Rata Share, a Commitment
fee equal to the Applicable Amount times the actual daily amount by which the
-----
sum of the combined Revolving Loan Commitments plus (until the Letter of Credit
Commitment Termination Date) the combined Letter of Credit Commitments exceeds
the sum of the aggregate principal amount of outstanding Loans plus the Letter
of Credit Usage in respect of standby Letters of Credit. The commitment fee
shall accrue at all times from the Closing Date until the Maturity Date and
shall be payable quarterly in arrears on each Quarterly Payment Date and on the
Maturity Date. The commitment fee shall be calculated quarterly in arrears, and
if there is any change in the Applicable Amount during any quarter, the average
daily amount shall be computed and multiplied by the Applicable Amount
separately for each period during such quarter that such Applicable Amount was
in effect.
2.09 Computation of Interest and Fees. Computation of interest on Base Rate
Loans when the Base Rate is determined by Bank of America's "prime rate" or
"reference rate" shall be calculated on the basis of a year of 365 or 366 days,
as the case may be, and the actual number of days elapsed. Computation of all
other types of interest and all fees shall be calculated on the basis of a year
of 360 days and the actual number of days elapsed, which results in a higher
yield to Lenders than a method based on a year of 365 or 366 days. Interest
shall accrue on each Loan for the day on which the Loan is made, and shall not
accrue on a Loan, or any portion thereof, for the day on which the Loan or such
portion is paid, provided that any Loan that is repaid on the same day on which
--------
it is made shall bear interest for one day.
2.10 Making Payments.
(a) Except as otherwise provided herein, all payments by Borrower or any
Lender shall be made to Administrative Agent at Administrative Agent's Office
not later than the Requisite Time for such type of payment. All payments
received after such Requisite Time shall be deemed received on the next
succeeding Business Day. All payments shall be made in immediately available
funds in lawful money of the United States of America. All payments by Borrower
shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff.
(b) Upon satisfaction of any applicable terms and conditions set forth
herein, Administrative Agent shall promptly make any amounts received in
accordance with the prior subsection available in like funds received as
follows: (i) if payable to Borrower, by crediting the Designated Deposit
Account, and (ii) if payable to any Lender, by wire transfer to such Lender at
the address specified in Schedule 11.02.
--------------
(c) Subject to the definition of "Interest Period," if any payment to be
made by any Borrower Party shall come due on a day other than a Business Day,
payment shall instead be considered due on the next succeeding Business Day, and
such extension of time shall be reflected in computing interest and fees.
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<PAGE>
(d) Except as otherwise provided in Section 2.04(c) with respect to
---------------
Borrower reimbursing drawings under Letters of Credit, unless Borrower or any
Lender has notified Administrative Agent prior to the date any payment to be
made by it is due, that it does not intend to remit such payment, Administrative
Agent may, in its discretion, assume that Borrower or Lender, as the case may
be, has timely remitted such payment and may, in its discretion and in reliance
thereon, make available such payment to the Person entitled thereto. If such
payment was not in fact remitted to Administrative Agent in immediately
available funds, then:
(i) if Borrower failed to make such payment, each Lender shall
forthwith on demand repay to Administrative Agent the amount of such
assumed payment made available to such Lender, together with interest
thereon in respect of each day from and including the date such amount was
made available by Administrative Agent to such Lender to the date such
amount is repaid to Administrative Agent at the Federal Funds Rate; and
(ii) if any Lender failed to make such payment, Administrative Agent
shall be entitled to recover such corresponding amount on demand from such
Lender. If such Lender does not pay such corresponding amount forthwith
upon Administrative Agent's demand therefor, Administrative Agent promptly
shall notify Borrower, and Borrower shall pay such corresponding amount to
Administrative Agent. Administrative Agent also shall be entitled to
recover interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by Administrative
Agent to Borrower to the date such corresponding amount is recovered by
Administrative Agent, (A) from such Lender at a rate per annum equal to the
daily Federal Funds Rate. and (B) from Borrower, at a rate per annum equal
to the interest rate applicable to such Borrowing. Nothing herein shall be
deemed to relieve any Lender from its obligation to fulfill its Commitments
or to prejudice any rights which Administrative Agent or Borrower may have
against any Lender as a result of any default by such Lender hereunder.
2.11 Funding Sources. Nothing in this Agreement shall be deemed to obligate
any Lender to obtain the funds for any Loan in any particular place or manner or
to constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.
Section 3.
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) Any and all payments by Borrower to or for the account of
Administrative Agent or any Lender under any Loan Document shall be made free
and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of Administrative Agent
---------
and any Lender, taxes imposed on its income, and franchise taxes imposed on it,
by the jurisdiction under the Laws of which Administrative Agent or such Lender
is organized or any political subdivision thereof (all such non-excluded taxes,
duties, levies, imposts, deductions,
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<PAGE>
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes"). If Borrower shall be required by any Laws to deduct any Taxes
- -----
from or in respect of any sum payable under any Loan Document to Administrative
Agent or any Lender, (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section), Administrative Agent and such
Lender receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable Laws, and (iv) Borrower shall furnish to
Administrative Agent (who shall forward the same to such Lender) the original or
a certified copy of a receipt evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or future stamp
or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under any Loan Document or from
the execution or delivery of, or otherwise with respect to, any Loan Document
(hereinafter referred to as "Other Taxes").
-----------
(c) Borrower agrees to indemnify Administrative Agent and each Lender for
the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section) paid by Administrative Agent and such Lender and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto.
3.02 Illegality. If any Lender determines that any Laws have made it
unlawful, or that any Governmental Authority has asserted that it is unlawful,
for any Lender or its applicable Lending Office to make, maintain or fund
Offshore Rate Loans, or materially restricts the authority of such Lender to
purchase or sell, or to take deposits of, Dollars in the applicable offshore
Dollar market, or to determine or charge interest rates based upon the Offshore
Rate, then, on notice thereof by Lender to Borrower through Administrative
Agent, any obligation of that Lender to make Offshore Rate Loans shall be
suspended until Lender notifies Administrative Agent and Borrower that the
circumstances giving rise to such determination no longer exist. Upon receipt of
such notice, Borrower shall, upon demand from such Lender (with a copy to
Administrative Agent), prepay or Convert all Offshore Rate Loans of that Lender,
either on the last day of the Interest Period thereof, if Lender may lawfully
continue to maintain such Offshore Rate Loans to such day, or immediately, if
Lender may not lawfully continue to maintain such Offshore Rate Loans. Each
Lender agrees to designate a different Lending Office if such designation will
avoid the need for such notice and will not, in the good faith judgment of such
Lender, otherwise be materially disadvantageous to such Lender.
3.03 Inability to Determine Rates. If, in connection with any Extension of
Credit involving any Offshore Rate Loan, Administrative Agent determines that
(a) Dollar deposits are not being offered to banks in the applicable offshore
dollar market for the applicable amount and Interest Period of the requested
Offshore Rate Loan, (b) adequate and reasonable means do not exist for
determining the underlying interest rate for such Offshore Rate Loan, or (c)
such underlying interest rate does not adequately and fairly reflect the cost to
Lender of funding such Offshore Rate Loan, Administrative Agent will promptly
notify Borrower and all Lenders.
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Thereafter, the obligation of all Lenders to make or maintain such Offshore Rate
Loan shall be suspended until Administrative Agent revokes such notice. Upon
receipt of such notice, Borrower may revoke any pending request for a Borrowing
of Offshore Rate Loans or, failing that, be deemed to have converted such
request into a request for a Borrowing of Base Rate Loans in the amount
specified therein.
3.04 Increased Cost and Reduced Return; Capital Adequacy.
(a) If any Lender determines that any Laws:
(i) subject such Lender to any Tax, duty, or other charge with
respect to any Offshore Rate Loans or its obligation to make Offshore Rate
Loans, or change the basis on which taxes are imposed on any amounts
payable to such Lender under this Agreement in respect of any Offshore Rate
Loans;
(ii) shall impose or modify any reserve, special deposit, or similar
requirement (other than the reserve requirement utilized in the
determination of the Offshore Rate) relating to any extensions of credit or
other assets of, or any deposits with or other liabilities or commitments
of, such Lender (including its Commitments); or
(iii) shall impose on such Lender or on the offshore Dollar interbank
market any other condition affecting this Agreement or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender of
making, Converting into, Continuing, or maintaining any Offshore Rate Loans or
to reduce any sum received or receivable by such Lender under this Agreement
with respect to any Offshore Rate Loans, then from time to time upon demand of
Lender (with a copy of such demand to Administrative Agent), Borrower shall pay
to such Lender such additional amounts as will compensate such Lender for such
increased cost or reduction.
(b) If any Lender determines that any change in or the interpretation of
any Laws have the effect of reducing the rate of return on the capital of such
Lender or compliance by such Lender (or its Lending Office) or any corporation
controlling such Lender as a consequence of such Lender's obligations hereunder
(taking into consideration its policies with respect to capital adequacy and
such Lender's desired return on capital), then from time to time upon demand of
such Lender (with a copy to Administrative Agent), Borrower shall pay to such
Lender such additional amounts as will compensate such Lender for such
reduction.
3.05 Breakfunding Costs. Upon demand of any Lender (with a copy to
Administrative Agent) from time to time, Borrower shall promptly compensate such
Lender for and hold such Lender harmless from any loss, cost or expense incurred
by it as a result of:
(a) any Continuation, Conversion, payment or prepayment of any Offshore
Rate Loan on a day other than the last day of the Interest Period for such Loan
(whether voluntary, mandatory, automatic, by reason of acceleration, or
otherwise); or
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(b) any failure by Borrower (for a reason other than the failure of such
Lender to make a Loan) to prepay, borrow, Continue or Convert any Offshore Rate
Loan on the date or in the amount notified by Borrower;
including any loss of anticipated profits and any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such
Offshore Rate Loan or from fees payable to terminate the deposits from which
such funds were obtained. Borrower shall also pay any customary administrative
fees charged by such Lender in connection with the foregoing.
3.06 Matters Applicable to all Requests for Compensation. (a) A certificate
of Administrative Agent claiming compensation under this Section 3 and setting
---------
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of clearly demonstrable error. In determining such
amount, Administrative Agent may use any reasonable averaging and attribution
methods. For purposes of this Section 3, a Lender shall be deemed to have funded
---------
each Offshore Rate Loan at the Offshore Base Rate used in determining the
Offshore Rate for such Loan by a matching deposit or other borrowing in the
offshore Dollar interbank market, whether or not such Offshore Rate Loan was in
fact so funded.
3.07 Survival. All of Borrower's obligations under this Section 3 shall
---------
survive termination of the Commitments and payment in full of all Obligations.
SECTION 4.
CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT
4.01 Conditions of Initial Extension of Credit. The obligation of each
Lender to make the initial Extension of Credit is subject to satisfaction of the
following conditions precedent:
(a) Borrower Party Loan Documents and Corporate Documents. Unless waived
by all Lenders (or by the Administrative Agent with respect to immaterial
matters, or items specified in subsections (v) or (vi) below, that the Borrower
has given assurances satisfactory to the Administrative Agent that they will be
delivered promptly following the Closing Date), the Administrative Agent's
receipt of the following, each of which shall be originals unless otherwise
specified, each properly executed by a Responsible Officer, each dated on or
about the Closing Date and each in form and substance satisfactory to the
Administrative Agent and its legal counsel:
(i) counterparts of this Agreement, sufficient in number for
distribution to Administrative Agent, Lenders and Borrower, executed by
Borrower and Holdings;
(ii) Committed Loan Notes executed by Borrower in favor of each Lender
requesting a Committed Loan Note, each in a principal amount equal to that
Lender's Pro Rata Share;
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(iii) copies of the Development Guaranty substantially in the form of
Exhibit F-1 hereto executed by Development and each of its Subsidiaries;
-----------
(iv) resolutions of the Board of Directors of each Borrower Party
approving and authorizing the execution, delivery and performance of the
Loan Documents and Related Agreements to which it is a party, certified as
of the Closing Date by the corporate secretary or an assistant secretary of
such Person as being in full force and effect without modification or
amendment;
(v) such certificates of incumbency and/or other certificates of
Responsible Officers of each Borrower Party as Administrative Agent may
require to establish the identities of and verify the authority and
capacity of each Responsible Officer thereof authorized to act as a
Responsible Officer thereof;
(vi) such evidence as Administrative Agent may reasonably require to
verify that each Borrower Party is duly organized or formed, validly
existing, in good standing and qualified to engage in business in each
jurisdiction in which it is required to be qualified to engage in business,
including, without limitation, certified copies of each Borrower Party's
---------
Organization Documents, certificates of good standing and/or qualification
to engage in business, tax clearance certificates, and the like;
(vii) such other assurances, certificates, documents, consents or
opinions as Administrative Agent, Issuing Lender or the Requisite Lenders
reasonably may require.
(b) Closing Certificate. Administrative Agent shall have received a
certificate signed by a Responsible Officer of Borrower, dated as of the
Closing Date, stating that (A) the conditions specified in Sections 4.01(c)
----------------
and 4.01(d) have been satisfied and (B) there has been no event or
-------
circumstances since March 28, 1999, which has a Material Adverse Effect.
(c) Representations and Warranties. The representations and warranties made
by Borrower and Holdings herein, or which are contained in any certificate,
document or financial or other statement furnished at any time under or in
connection herewith or therewith, shall be correct on and as of the Closing
Date.
(d) No Default or Event of Default. Each Borrower Party shall be in
compliance with all the terms and provisions of the Loan Documents to which it
is a party, and no Default or Event of Default shall have occurred and be
continuing.
(e) No Material Adverse Effect. Since March 28, 1999, no Material Adverse
Effect (in the sole opinion of Administrative Agent) shall have occurred.
(f) Corporate and Capital Structure, Ownership, Management, Etc.
(i) Corporate Structure. The corporate organizational structure
-------------------
of Holdings and its Subsidiaries, both before and after giving effect to
the Albertsons Acquisition, shall be as set forth on Schedule 4.01(f)
----------------
annexed hereto.
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(ii) Capital Structure and Ownership. The capital structure and
-------------------------------
ownership of Holdings and Borrower, both before and after giving effect to
the Acquisition, shall be as set forth on Schedule 4.01(f) annexed hereto.
----------------
(iii) Management; Employment Contracts; Stockholders Agreements. The
---------------------------------------------------------
management structure of Holdings and Borrower after giving effect to the
Acquisition shall be as set forth on Schedule 4.01(f) annexed hereto.
----------------
(g) Proceeds of Holdings Senior Notes. On or before the Closing Date,
Holdings shall have issued and sold not less than $440,000,000 and not more
than $450,000,000 in aggregate principal amount of Holdings Senior Notes
having an interest rate not in excess of 11.0%; provided that the minimum
--------
aggregate principal amount of Holdings Senior Notes shall be reduced by an
amount, not to exceed $6,000,000, equal to the amount of Existing Holdings
Notes that will remain outstanding after the Closing Date.
(h) Related Agreements; Existing Holdings Indenture.
(i) Form of Holdings Senior Note Indenture. The Holdings Senior
--------------------------------------
Note Indenture shall be in substantially the form described in that certain
Offering Memorandum relating to the Holdings Senior Notes dated August 3,
1999, with such changes thereto, if any, that have been approved by
Administrative Agent and Requisite Lenders.
(ii) Existing Holdings Indenture. If any Existing Holdings Notes
---------------------------
will remain outstanding after the Closing Date, Administrative Agent shall
have received a fully executed copy of the Existing Holdings Indenture, and
all amendments or supplemental indentures thereto, which amendments or
supplemental indentures shall be in form and substance satisfactory to
Administrative Agent.
(iii) Related Agreements in Full Force and Effect. Administrative
-------------------------------------------
Agent shall have received a fully executed or conformed copy of each
Related Agreement and any documents executed in connection therewith, and
each Related Agreement shall be in full force and effect and no provision
thereof shall have been modified or waived in any respect determined by
Administrative Agent to be material, in each case without the consent of
Administrative Agent and Requisite Lenders.
(i) Consummation of the Albertsons Acquisition.
(i) All conditions to the Albertsons Acquisition set forth in the
Albertsons Acquisition Agreement shall have been satisfied or the
fulfillment of any such conditions shall have been waived with the consent
of Administrative Agent and Requisite Lenders;
(ii) the Albertsons Acquisition shall have become effective in
accordance with the terms of the Albertsons Acquisition Agreement;
(iii) Administrative Agent shall have received evidence satisfactory
to it (including copies of all required consents) that either all landlords
under leases of property included
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in the Albertsons Property shall have given any necessary consents to the
sale of such property to Holdings and the transfer of such property by
Holdings to Borrower or that Albertsons has indemnified Borrower for any
losses or damages suffered by Borrower as a result of the failure to obtain
any such landlord consent;
(iv) Transaction Costs shall not exceed $18,000,000, and
Administrative Agent shall have received evidence to its satisfaction to
such effect; and
(v) Administrative Agent shall have received a certificate signed by
Responsible Officers of Holdings and Borrower to the effect set forth in
clauses (i)-(iv) above.
(j) Matters Relating to Existing Indebtedness of Borrower and its
Subsidiaries.
(i) Termination of Existing Credit Agreements and Related
-----------------------------------------------------
Liens; Existing Letters of Credit. On the Closing Date, Borrower and its
---------------------------------
Subsidiaries shall have (a) repaid in full all Indebtedness outstanding
under the Existing Credit Agreement, (b) terminated any commitments to lend
or make other extensions of credit thereunder, (c) delivered to
Administrative Agent all documents or instruments necessary to release all
Liens securing Indebtedness or other obligations of Borrower and its
Subsidiaries thereunder, and (d) made arrangements satisfactory to
Administrative Agent with respect to the cancellation of any letters of
credit outstanding thereunder or the issuance of Letters of Credit to
support the obligations of Borrower and its Subsidiaries with respect
thereto.
(ii) Existing Indebtedness to Remain Outstanding. Administrative
-------------------------------------------
Agent shall have received a certificate signed by a Responsible Officer of
Borrower stating that, after giving effect to the transactions described in
this Section 4.01(j), the Indebtedness of the Borrower Parties (other than
---------------
Indebtedness under the Loan Documents, the Holdings Senior Notes, the
Existing Holdings Notes, and the note referred to in Section 7.01(f)) shall
---------------
consist of (a) approximately $0 in aggregate principal amount of
outstanding Indebtedness described in Part I of Schedule 7.01 annexed
-------------
hereto and (b) Indebtedness in an aggregate amount not to exceed
$19,000,000 in respect of capital leases described in Part II of Schedule
--------
7.01 annexed hereto. The terms and conditions of all such Indebtedness
----
shall be in form and in substance satisfactory to Administrative Agent and
Requisite Lenders.
(k) Necessary Governmental Authorizations and Consents; Expiration of
Waiting Periods, Etc. Borrower shall have obtained all consents from all
Governmental Authorities and all consents of other Persons, in each case that
are necessary or advisable in connection with the Albertsons Acquisition, the
other transactions contemplated by the Loan Documents and the Related
Agreements, and the continued operation of Albertsons Properties in
substantially the same manner as conducted prior to the consummation of the
Acquisition, and each of the foregoing shall be in full force and effect, in
each case other than those the failure to obtain or maintain which, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. All applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose adverse conditions on the Albertsons
Acquisition or the financing
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thereof. No action, request for stay, petition for review or rehearing,
reconsideration, or appeal with respect to any of the foregoing shall be
pending, and the time for any applicable agency to take action to set aside its
consent on its own motion shall have expired.
(l) [intentionally omitted]
(m) Financial Statements; Pro Forma Balance Sheet and Projections. On or
before the Closing Date, Administrative Agent shall have received from Borrower
the following:
(i) any revisions to the projected consolidated financial statements
of Borrower and its Subsidiaries for the three-year period after the
Closing Date, reflecting the Albertsons Acquisition;
(ii) pro forma financial statements for the Albertsons Properties on
a stand-alone basis, consisting of a balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows for
the three fiscal years ended January 1999;
(iii) unaudited financial statements of Borrower and its Subsidiaries
as at June 27, 1999, consisting of a balance sheet and the related
consolidated and consolidating statements of income, stockholders' equity
and cash flows for the nine-month period ending on such date, all in
reasonable detail and certified by the chief financial officer of Borrower
that they fairly present the financial condition of Borrower and its
Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments;
(iv) a statement setting forth the sources and uses of funds in
connection with the Albertsons Acquisition;
each of which revised projections, pro forma financial statements, unaudited
financial statements, and other statements shall be in form and substance
satisfactory to Administrative Agent and the Requisite Lenders.
(n) Lien Searches and UCC Termination Statements. Administrative Agent
shall have received (a) the results of a recent search, by a Person satisfactory
to Administrative Agent, of all effective UCC financing statements and fixture
filings and all judgment and tax lien filings which may have been made with
respect to any personal or mixed property of Borrower and Development, together
with copies of all such filings disclosed by such search, and (b) UCC
termination statements duly executed by all applicable Persons for filing in all
applicable jurisdictions as may be necessary to terminate any effective UCC
financing statements or fixture filings disclosed in such search (other than any
such financing statements or fixture filings in respect of Liens permitted to
remain outstanding pursuant to the terms of this Agreement).
(o) Opinions. Administrative Agent and Lenders shall have received an
opinion of Varner, Saleson and Dobler, LLP general counsel to Holdings,
Borrower, and Development, substantially in the form of Exhibit E-1 hereto, and
-----------
opinions of Gibson, Dunn & Crutcher LLP,
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special counsel to Holdings and Borrower, substantially in the forms of Exhibits
--------
E-2 and E-3 hereto.
- --- ---
(p) Other Reports. Administrative Agent shall have received copies of, and
shall be satisfied with the form and substance of all contracts and agreements
evidencing any contingent obligations of the Borrower and its Subsidiaries.
Borrower shall have completed and returned to Administrative Agent the
Administrative Agent's assessment review regarding the Borrower's programs for
dealing with year 2000 computer issues, and Administrative Agent and the
Requisite Lenders shall have been satisfied as to Borrower's responses therein.
(q) Texas Eastern Corporation. Administrative Agent shall have received a
letter from Bruce Varner summarizing statements made to him by Texas Eastern
Corporation regarding its knowledge of Borrower's intention to enter into this
Agreement, and stating its intentions regarding the exercise of the rights, if
any, under the preferred stock issued to them by Borrower, which letter shall be
in form and substance satisfactory to Administrative Agent.
(r) Payment of Attorney Costs. Unless waived by Administrative Agent,
Borrower shall have paid all Attorney Costs of Administrative Agent to the
extent invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute its reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude final settling of accounts between
Borrower and Administrative Agent).
4.02 Conditions to all Extensions of Credit.
In addition to any applicable conditions precedent set forth elsewhere in
this Section 4 or in Section 2, the obligation of each Lender to make any
--------- ---------
Extension of Credit is subject to the following conditions precedent:
(a) the representations and warranties of Borrower contained in Section 5,
---------
or which are contained in any certificate, document or financial or other
statement furnished at any time under or in connection herewith or therewith,
shall be correct on and as of the date of such Extension of Credit, except to
the extent that such representations and warranties specifically refer to any
earlier date.
(b) no Default or Event of Default exists, or would result from such
proposed Extension of Credit.
(c) Administrative Agent shall have timely received a Request for Extension
of Credit by Requisite Notice by the Requisite Time therefor.
(d) in the case of any Extension of Credit consisting of Committed Loans
the proceeds of which will be used for the purposes described in Section
-------
2.01(c)(4), Borrower shall have provided evidence satisfactory to Administrative
- ----------
Agent (which evidence may, at the discretion of Administrative Agent, consist of
a legal opinion in form and substance satisfactory to Administrative Agent) that
the proposed use of proceeds of such Loans is not subject to the restrictions in
Article IV, Section 6(N) of Borrower's Restated Articles of Incorporation.
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(e) Administrative Agent shall have received, in form and substance
satisfactory to it, such other assurances, certificates, documents or consents
related to the foregoing as Administrative Agent or Requisite Lenders reasonably
may require.
Each request for an Extension of Credit by Borrower shall be deemed to be a
representation and warranty that the conditions specified in Sections 4.02(a)
----------------
and 4.02(b) have been satisfied and on and as of the date of such Extension of
-------
Credit.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and Lenders that:
5.01 Existence and Qualification; Power; Compliance with Laws. Each
Borrower Party is a corporation duly organized or formed, validly existing and
in good standing under the Laws of the state of its incorporation or
organization, has the power and authority and the legal right to own and operate
its properties, to lease the properties it operates and to conduct its business,
is duly qualified and in good standing under the Laws of each jurisdiction where
its ownership, lease or operation of properties or the conduct of its business
requires such qualification, and is in compliance with all Laws except to the
extent that noncompliance does not have a Material Adverse Effect.
5.02 Power; Authorization; Enforceable Obligations. Each Borrower Party has
the power and authority and the legal right to make, deliver and perform each
Loan Document and Related Agreements to which it is a party and Borrower has
power and authority to borrow hereunder and has taken all necessary action to
authorize the borrowings on the terms and conditions of this Agreement and to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents and Related Agreements to which it is a party. No consent
or authorization of, filing with, or other act by or in respect of any
Governmental Authority, is required in connection with the borrowings hereunder
or with the execution, delivery, performance, validity or enforceability of this
Agreement or any of the other Loan Documents or the Related Agreements. The Loan
Documents and Related Agreements have been duly executed and delivered by each
Borrower Party, and constitute a legal, valid and binding obligation of each
Borrower Party, enforceable against each Borrower Party in accordance with their
respective terms.
5.03 No Legal Bar.
The execution, delivery, and performance by each Borrower Party of the
Loan Documents and Related Agreements to which it is a party and compliance with
the provisions thereof have been duly authorized by all requisite action on the
part of such Borrower Party and do not and will not (a) violate or conflict
with, or result in a breach of, or require any consent under (i) any
Organization Documents of such Borrower Party or any of its Subsidiaries, (ii)
any applicable Laws, rules, or regulations or any order, writ, injunction, or
decree of any Governmental Authority or arbitrator, or (iii) any Contractual
Obligation of such Borrower Party or any of its
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Subsidiaries or by which any of them or any of their property is bound or
subject, (b) constitute a default under any such agreement or instrument, or (c)
result in, or require, the creation or imposition of any Lien on any of the
properties of such Borrower Party or any of its Subsidiaries. The Holdings
Senior Notes, when issued and sold, will either (a) have been registered or
qualified under applicable federal and state securities laws or (b) be exempt
therefrom.
5.04 Financial Statements; No Material Adverse Effect.
(a) The Audited Financial Statements (i) were prepared in accordance with
GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; (ii) fairly present the financial condition
of Borrower and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein; and (iii) show all material indebtedness and other liabilities,
direct or contingent, of Borrower and its Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments and Indebtedness in
accordance with GAAP consistently applied throughout the period covered thereby.
(b) Since March 28, 1999, there has been no event or circumstance which
has a Material Adverse Effect.
5.05 Litigation. No litigation, investigation or proceeding of or before
an arbitrator or Governmental Authority is pending or, to the knowledge of
Borrower after due and diligent investigation, threatened by or against any
Borrower Party or any of its Subsidiaries or against any of their properties or
revenues which, if determined adversely, could have a Material Adverse Effect.
5.06 No Default. Neither any Borrower Party nor any of their respective
Subsidiaries are in default under or with respect to any Contractual Obligation
which could have a Material Adverse Effect, and no Default or Event of Default
has occurred and is continuing or will result from the consummation of this
Agreement or any of the other Loan Documents, or the making of the Extensions of
Credit hereunder.
5.07 Ownership of Property; Liens. Each Borrower Party and its Subsidiaries
have valid fee or leasehold interests in all real property which they use in
their respective businesses, and each Borrower Party and their respective
Subsidiaries have good and marketable title to all their other property, and
none of such property is subject to any Lien, except as permitted in Section
7.02.
5.08 Taxes. Each Borrower Party and its Subsidiaries have filed all tax
returns which are required to be filed, and have paid, or made provision for the
payment of, all taxes with respect to the periods, property or transactions
covered by said returns, or pursuant to any assessment received by such Borrower
Party or its respective Subsidiaries, except (a) such taxes, if any, as are
------
being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established and maintained, and (b) immaterial
taxes; provided, however, that
-------- -------
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in each case no material item or portion of property of any Borrower Party
or any of its Subsidiaries is in jeopardy of being seized, levied upon or
forfeited.
5.09 Margin Regulations; Investment Company Act; Public Utility Holding
Company Act.
(a) No Borrower Party is engaged or will engage, principally or as one of
its important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" "margin stock" within the respective meanings of each
of the quoted terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. No part of the
proceeds of any Extensions of Credit hereunder will be used for "purchasing" or
"carrying" "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of Regulations U or X of such
Board of Governors.
(b) No Borrower Party or any of its Subsidiaries (i) is a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is
required to be registered as an "investment company" under the Investment
Company Act of 1940.
5.10 ERISA Compliance.
(a) Borrower, each of its Subsidiaries, and each of their respective
ERISA Affiliates are in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state Laws, and have
performed all their obligations under each Plan. Each Plan that is intended to
qualify under Section 401(a) of the Code has received a favorable determination
letter from the IRS or an application for such a letter is currently being
processed by the IRS with respect thereto and, to the best knowledge of
Borrower, nothing has occurred which would prevent, or cause the loss of, such
qualification. Borrower and each ERISA Affiliate have made all required
contributions to each Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Borrower, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan that has a Material Adverse Effect. There has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan that has a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur;
(ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither Borrower
nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Sections 4201 or
4243 of ERISA with respect to a
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Multiemployer Plan; and (v) neither Borrower nor any ERISA Affiliate has engaged
in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.
5.11 Intangible Assets. Each Borrower Party and its Subsidiaries own, or
possess the right to use, all trademarks, trade names, copyrights, patents,
patent rights, franchises, licenses and other intangible assets that are used in
the conduct of their respective businesses as now operated, and none of such
items, to the best knowledge of Borrower, conflicts with the valid trademark,
trade name, copyright, patent, patent right or intangible asset of any other
Person to the extent that such conflict has a Material Adverse Effect.
5.12 Compliance With Laws. Each Borrower Party and its Subsidiaries are in
compliance in all material respects with all Laws that are applicable to it.
5.13 Environmental Compliance. Each Borrower Party and its Subsidiaries
conduct in the ordinary course of business a review of the effect of existing
Environmental Laws and claims alleging potential liability or responsibility for
violation of any Environmental Law on their respective businesses, operations
and properties, and as a result thereof Borrower has reasonably concluded that
such Environmental Laws and claims do not, individually or in the aggregate,
have a Material Adverse Effect.
5.14 Insurance. The properties of each Borrower Party and its Subsidiaries
are insured with financially sound and reputable insurance companies not
Affiliates of Borrower, in such amounts, with such deductibles and covering such
risks as are customarily carried by companies engaged in similar businesses and
owning similar properties in localities where Borrower or such Subsidiary
operates.
5.15 Year 2000. Borrower has (a) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations
(including those affected by customers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications and devices containing imbedded computer chips used by any Borrower
Party or any of its Subsidiaries (or their respective customers and vendors) may
be unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (b) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and
(c) to date, implemented that plan in accordance with that timetable. Based on
the foregoing, Borrower believes that all computer applications and devices
containing imbedded computer chips (including those of its and its Subsidiaries'
customers and vendors) that are material to its or any of its Subsidiaries'
business and operations are reasonably expected on a timely basis to be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
to do so could not reasonably be expected to have a Material Adverse Effect.
5.16 Related Agreements.
(a) Delivery of Related Agreements. Borrower has delivered to Lenders
------------------------------
complete and correct copies of each Related Agreement and of all exhibits and
schedules thereto.
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(b) Seller's Warranties. Except to the extent otherwise set forth herein
-------------------
the schedules hereto, each of the representations and warranties given by
Albertsons to Borrower and/or Holdings in the Albertsons Acquisition Agreement
is true and correct in all material respects as of the date hereof (or as of any
earlier date to which such representation and warranty specifically relates) and
will be true and correct in all material respects as of the Closing Date (or as
of such earlier date, as the case may be), in each case subject to the
qualifications set forth in the schedules to the Albertsons Acquisition
Agreement.
(c) Warranties of Borrower and Holdings. Subject to the qualifications
-----------------------------------
set forth therein, each of the representations and warranties given by Borrower
and Holdings to Albertsons in the Albertsons Acquisition Agreement is true and
correct in all material respects as of the date hereof and will be true and
correct in all material respects as of the Closing Date.
(d) Survival. Notwithstanding anything in the Albertsons Acquisition
--------
Agreement to the contrary, the representations and warranties of Borrower set
forth in Sections 5.16(b) and 5.16(c) shall, solely for purposes of this
---------------- -------
Agreement, survive the Closing Date for the benefit of Lenders.
5.17 Management Agreements and Stockholders Agreements. As of the Closing
Date, there are no management employment contracts between Borrower or Holdings
and any members of their senior management, and there are no stockholder
agreements with respect to stock of Holdings or Borrower to which Holdings,
Borrower or any members of their senior management are parties.
5.18 Disclosure. No statement, information, report, representation, or
warranty made by any Borrower Party in any Loan Document or Related Agreement or
furnished to Administrative Agent or any Lender in connection with any Loan
Document contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein not misleading.
SECTION 6.
AFFIRMATIVE COVENANTS
So long as any Extension of Credit remains unpaid, or any other
Obligation remains unpaid or unperformed, or any portion of the Commitments
remains outstanding, Borrower shall, and shall (except in the case of Borrower's
reporting covenants), cause each of its Subsidiaries, to:
6.01 Financial Statements. Deliver to Administrative Agent in form and
detail satisfactory to Administrative Agent and the Requisite Lenders, with
sufficient copies for each Lender:
(a) (i) as soon as available, but in any event within 120 days after the
end of each fiscal year of Holdings, a consolidated balance sheet of Holdings
and its Subsidiaries as at the end of such fiscal year, and the related
consolidated statements of income and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year
and the
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figures from the projections delivered to Lenders on or prior to the
Closing Date or from the Financial Plan, as applicable, for the fiscal year
covered by such financial statements, all in reasonable detail, which
consolidated balance sheet and financial statements (excluding the comparisons
to the projections) shall be audited and accompanied by a report and opinion of
a "Big 5" public accounting firm, which report and opinion shall be prepared in
accordance with GAAP and shall not be subject to any qualifications or
exceptions as to the scope of the audit nor to any qualifications and exceptions
(including possible errors generated by financial reporting and related systems
due to the Year 2000 problem) not reasonably acceptable to the Requisite
Lenders; and (ii) as soon as available, but in any event within 120 days after
the end of each fiscal year of Borrower, a consolidated balance sheet of
Borrower and its Subsidiaries as at the end of such fiscal year, and the related
consolidated statements of income and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year
and the figures from the projections delivered to Lenders on or prior to the
Closing Date or from the Financial Plan, as applicable, for the fiscal year
covered by such financial statements, all in reasonable detail, which
consolidated balance sheet and financial statements (excluding the comparisons
to the projections) shall be audited and accompanied by a report and opinion of
a "Big 5" public accounting firm, which report and opinion shall be prepared in
accordance with GAAP and shall not be subject to any qualifications or
exceptions as to the scope of the audit nor to any qualifications and exceptions
(including possible errors generated by financial reporting and related systems
due to the Year 2000 problem) not reasonably acceptable to the Requisite
Lenders;
(b) (i) as soon as available, but in any event within 60 days after the
end of each of the first three fiscal quarters of each fiscal year of Holdings,
a consolidated balance sheet of Holdings and its Subsidiaries as at the end of
such fiscal quarter, and the related consolidated statements of income and cash
flows for such fiscal quarter and for the portion of Holding's fiscal year then
ended, setting forth in each case in comparative form the figures for the
corresponding fiscal quarter of the previous fiscal year and the corresponding
portion of the previous fiscal year and the figures from the projections
delivered to Lenders on or prior to the Closing Date or from the Financial Plan,
as applicable, for the fiscal quarter and portion of Holdings' fiscal year then
ended covered by such financial statements, all in reasonable detail and
certified by a Responsible Officer of Holdings as fairly presenting the
financial condition, results of operations and cash flows of Holdings and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes; and (ii) as soon as available, but in
any event within 60 days after the end of each of the first three fiscal
quarters of each fiscal year of Borrower, a consolidated balance sheet of
Borrower and its Subsidiaries as at the end of such fiscal quarter, and the
related consolidated statements of income and cash flows for such fiscal quarter
and for the portion of Borrower's fiscal year then ended, setting forth in each
case in comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal year
and the figures from the projections delivered to Lenders on or prior to the
Closing Date or from the Financial Plan, as applicable, for the fiscal quarter
and portion of Borrower's fiscal year then ended covered by such financial
statements, all in reasonable detail and certified by a Responsible Officer of
Borrower as fairly presenting the financial condition, results of operations and
cash flows of Borrower and its Subsidiaries in
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<PAGE>
accordance with GAAP, subject only to normal year-end audit adjustments and the
absence of footnotes;
(c) as soon as available, but in any event within 60 days after the end of
each fiscal month of Borrower, a consolidated balance sheet of Borrower and its
Subsidiaries as at the end of such fiscal month, and the related consolidated
statements of income and cash flows for such fiscal month and for the portion of
Borrower's fiscal year then ended, setting forth in each case in comparative
form the figures for the corresponding fiscal month of the previous fiscal year
and the corresponding portion of the previous fiscal year, all in reasonable
detail and certified by a Responsible Officer of Borrower as fairly presenting
the financial condition, results of operations and cash flows of Borrower and
its Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes; and
(d) as soon as practicable and in any event no later than 60 days after the
end of each fiscal year, a consolidated and consolidating plan and financial
forecast for such Fiscal Year and the next two succeeding fiscal years (the
"Financial Plan" for such Fiscal Years), including without limitation (i)
forecasted consolidated and consolidating balance sheets and forecasted
consolidated and consolidating statements of income and cash flows of Borrower
and its Subsidiaries for each quarter of the first such fiscal year and for each
of the next two fiscal years, and projected capital expenditures for such fiscal
year, together with pro forma Compliance Certificates for each such fiscal year
--- -----
and an explanation of the assumptions on which such forecasts are based, and
(ii) such other information and projections as any Lender may reasonably
request.
6.02 Certificates, Notices and Other Information. Deliver to Administrative
Agent in form and detail satisfactory to the Administrative Agent and the
Requisite Lenders, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial statements referred to
in Section 6.01(a)(ii), a certificate of its independent certified public
-------------------
accountants certifying such financial statement and stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default hereunder or, if any such Default or Event of Default shall exist,
stating the nature and status of such event;
(b) concurrently with the delivery of the financial statements referred to
in Sections 6.01(a)(ii) and (b)(ii), a duly completed Compliance Certificate
-------------------- -------
signed by a Responsible Officer of Borrower and a reconciliation of intercompany
transactions between Holdings and Borrower and Borrower's Subsidiaries;
(c) not more than 30 days after the end of each fiscal month of Borrower, a
duly completed Compliance Certificate, covering Part IV of Schedule 2 thereto
only, signed by a Responsible Officer of Borrower;
(d) promptly after request by Administrative Agent or any Lender, copies of
any detailed audit reports, management letters or recommendations submitted to
the board of directors (or the audit committee of the board of directors) of
Borrower by independent
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accountants in connection with the accounts or books of Borrower or any of its
Subsidiaries, or any audit of any of them;
(e) promptly after the same are available and, in any event, not more than
30 days after the filing thereof, copies of all annual, regular, periodic and
special reports and registration statements which Holdings may file or be
required to file with the Securities and Exchange Commission under Sections 13
or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to
be delivered to Administrative Agent pursuant hereto;
(f) promptly after the occurrence thereof, notice of any Default or Event
of Default;
(g) notice of any material change in accounting policies or financial
reporting practices by Borrower or any of its Subsidiaries;
(h) promptly after the commencement thereof, notice of any litigation,
investigation or proceeding affecting any Borrower Party where the amount
involved exceeds $1,000,000, or in which injunctive relief or similar relief is
sought, which relief, if granted, has a Material Adverse Effect;
(i) promptly after the occurrence thereof, notice of any Reportable Event
with respect to any Plan or the intent to terminate any Plan, or the institution
of proceedings or the taking or expected taking of any other action to terminate
any Plan or withdraw from any Plan;
(j) promptly after the occurrence thereof, notice of any Material Adverse
Effect;
(k) promptly of any discovery or determination that any computer
application (including those of its suppliers and vendors) that is material to
any Borrower Parties' or any of their Subsidiaries' business and operations will
not be Year 2000 compliant on a timely basis, except to the extent that such
failure could not reasonably be expected to have a Material Adverse Effect;
(l) promptly after the execution thereof, copies of all amendments, waivers
and supplemental indentures made with respect to the Holdings Senior Note
Indenture, the Holdings Senior Notes, the Existing Holdings Indenture or the
Existing Holdings Notes;
(m) promptly after the receipt by Borrower or any of its Subsidiaries
thereof, notice of claim or notice to the effect that Borrower of any of its
Subsidiaries is in default under any of its leases of real property; and
(n) promptly, such other data and information as from time to time may be
reasonably requested by Administrative Agent, or, through Administrative Agent
or any Lender.
Each notice pursuant to this Section 6.02 shall be accompanied by a
------------
statement of a Responsible Officer of Borrower setting forth details of the
occurrence referred to therein and stating what action Borrower has taken and
proposes to take with respect thereto.
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<PAGE>
6.03 Payment of Taxes. Pay and discharge when due all taxes, assessments,
and governmental charges, Ordinary Course Liens or levies imposed on any
Borrower Party or its Subsidiaries or on its income or profits or any of its
property, except for any such tax, assessment, charge, or levy which is an
Ordinary Course Lien under subsection (b) of the definition of such term.
6.04 Preservation of Existence. Preserve and maintain its existence,
licenses, permits, rights, franchises and privileges necessary or desirable in
the normal conduct of its business, except where failure to do so does not have
a Material Adverse Effect.
6.05 Maintenance of Properties. Maintain, preserve and protect all of its
material properties and equipment necessary in the operation of its business in
good order and condition, subject to wear and tear in the ordinary course of
business, and not permit any waste of its properties.
6.06 Maintenance of Insurance. Maintain liability and casualty insurance
with responsible insurance companies satisfactory to Lender in such amounts and
against such risks as is customary for similarly situated businesses.
6.07 Compliance With Laws.
(a) Comply with the requirements of all applicable Laws and orders of any
Governmental Authority, noncompliance with which has a Material Adverse Effect.
(b) Conduct its operations and keep and maintain its property in material
compliance with all Environmental Laws.
6.08 Inspection Rights. At any time during regular business hours and as
often as reasonably requested, permit Administrative Agent or any Lender, or any
employee, agent or representative thereof, to examine, audit and make copies and
abstracts from the Borrower Parties' records and books of account and to visit
and inspect their properties and to discuss their affairs, finances and accounts
with any of their officers and key employees, and, upon request, furnish
promptly to Administrative Agent or any Lender true copies of all financial
information and internal management reports made available to their senior
management.
6.09 Keeping of Records and Books of Account. Keep adequate records and
books of account reflecting all financial transactions in conformity with GAAP,
consistently applied, and in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
Borrower or any of its Subsidiaries.
6.10 Compliance with ERISA. Cause, and cause each of its ERISA Affiliates
to: (a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law; (b)
cause each Plan which is qualified under Section 401(a) of the Code to maintain
such qualification; and (c) make all required contributions to any Plan subject
to Section 412 of the Code.
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<PAGE>
6.11 Compliance With Agreements. Promptly and fully comply with all
Contractual Obligations under all material agreements, indentures, leases and/or
instruments to which any one or more of them is a party, except for any such
------
Contractual Obligations (a) the performance of which would cause a Default, (b)
then being contested by any of them in good faith by appropriate proceedings, or
(c) if the failure to comply therewith does not have a Material Adverse Effect.
6.12 Use of Proceeds. Use the proceeds of Extensions of Credit for lawful
working capital and general corporate purposes not otherwise in contravention of
this Agreement.
6.13 Further Assurances. Execute and file all such further instruments, and
perform such other acts, as Administrative Agent or Requisite Lenders may
determine are reasonably necessary to effectuate the intent of the Loan
Documents.
6.14 Execution of Subsidiary Guaranty by Future Subsidiaries
(a) Execution of Subsidiary Guaranty. In the event that any Person
becomes a Domestic Subsidiary of Borrower after the date hereof, Borrower will
promptly notify Administrative Agent of that fact and cause such Subsidiary to
execute and deliver to Administrative Agent a Subsidiary Guaranty (or a
counterpart thereof if the Subsidiary Guaranty has been previously executed and
delivered).
(b) Subsidiary Charter Documents, Legal Opinions, Etc. Borrower shall
deliver to Administrative Agent, together with such Subsidiary Guaranty, (i)
certified copies of such Subsidiary's Certificate or Articles of Incorporation,
together with a good standing certificate from the Secretary of State of the
jurisdiction of its incorporation and each other state in which such Person is
qualified as a foreign corporation to do business and, to the extent generally
available, a certificate or other evidence of good standing as to payment of any
applicable franchise or similar taxes from the appropriate taxing authority of
each of such jurisdictions, each to be dated a recent date prior to their
delivery to Administrative Agent, (ii) a copy of such Subsidiary's Bylaws,
certified by its corporate secretary or an assistant secretary as of a recent
date prior to their delivery to Administrative Agent, (iii) a certificate
executed by the secretary or an assistant secretary of such Subsidiary as to (a)
the fact that the attached resolutions of the Board of Directors of such
Subsidiary approving and authorizing the execution, delivery and performance of
such Subsidiary Guaranty are in full force and effect and have not been modified
or amended and (b) the incumbency and signatures of the officers of such
Subsidiary executing such Subsidiary Guaranty, and (iv) a favorable opinion of
counsel to such Subsidiary, in form and substance satisfactory to Administrative
Agent and its counsel, as to (a) the due organization and good standing of such
Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary
of such Subsidiary Guaranty, (c) the enforceability of such Subsidiary Guaranty
against such Subsidiary, (d) such other matters as Administrative Agent may
reasonably request, all of the foregoing to be satisfactory in form and
substance to Administrative Agent and its counsel.
6.15 Landlord Waivers.
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Borrower shall use its best efforts to deliver to Administrative Agent not
more than 90 days after the Closing Date, with respect to each store leased by
Borrower or any of its Subsidiaries, a letter, certificate or other instrument
in writing from the lessor under the related lease, satisfactory in form and
substance to Administrative Agent, pursuant to which such lessor agrees, for the
benefit of Administrative Agent, (i) that such lessor shall not terminate such
lease as a result of a default by such Borrower Party thereunder without first
giving Administrative Agent notice of such default and at least 60 days (or, if
such default cannot reasonably be cured by Administrative Agent within such
period, such longer period as may reasonably be required) to cure such default,
(ii) that such lessor subordinates any liens or similar rights it has against
inventory or other property of such Borrower Party located in such leasehold
property in favor of any liens placed on such inventory or other property to
secure Obligations of such Borrower Party, (iii) that such lessor will not
prevent Administrative Agent or its agents from entering the leasehold property
and removing any property that any Borrower Party has pledged or granted a lien
on to secure its Obligations, and (iv) to such other matters relating to such
leasehold property as Administrative Agent may reasonably request.
SECTION 7.
NEGATIVE COVENANTS
So long as any Extension of Credit remains unpaid, or any other Obligations
remain unpaid or unperformed, or any portion of the Commitments remains
outstanding, Borrower shall not, nor shall it permit any of its Subsidiaries to,
directly or indirectly:
7.01 Indebtedness.
Create, incur, assume or suffer to exist any Indebtedness, except:
------
(a) Ordinary Course Indebtedness;
(b) Indebtedness outstanding on the date hereof and listed on Schedule
--------
7.01; and any refinancings, refundings, renewals or extensions thereof, provided
- ----- --------
that the amount of such Indebtedness is not increased at the time of such
refinancing, refunding, renewal or extension except by an amount equal to the
premium or other amount paid, and fees and expenses incurred, in connection with
such refinancing and by an amount equal to any utilized commitments thereunder;
(c) Indebtedness owed under capital leases acquired in the Albertsons
Acquisition in an aggregate principal amount not to exceed $15,000,000 and any
refinancings, refundings, renewals or extensions thereof, provided that the
--------
amount of such Indebtedness is not increased at the time of such refinancing,
refunding, renewal or extension except by an amount equal to the premium or
other amount paid, and fees and expenses incurred, in connection with such
refinancing and by an amount equal to any utilized commitments thereunder;
(d) Indebtedness owed by Borrower or any of its Subsidiaries under or in
respect of (i) other capital leases or (ii) Indebtedness incurred for the
acquisition, construction or refinance of real property constructed or acquired
within the 12 month period preceding the incurrence of such Indebtedness, and
(iii) any refinancings, refundings, renewals or extensions of any Indebtedness
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permitted under this clause (d), provided that the amount of any such
--------
Indebtedness is not increased at the time of such refinancing, refunding,
renewal or extension except by an amount equal to the premium or other amount
paid, and fees and expenses incurred, in connection with such refinancing and by
an amount equal to any utilized commitments thereunder; and provided further
----------------
that the aggregate principal amount of all Indebtedness permitted under this
clause (d) shall not at any time exceed $10,000,000;
(e) unsecured Indebtedness owed under Swap Agreements entered into for the
purpose of hedging against fluctuations in interest rates payable in respect of
the Obligations owed hereunder;
(f) an unsecured demand promissory note payable by Borrower to Holdings,
to be issued as a dividend on or about August 6, 1999, in the original principal
amount of $50,000,000;
(g) Indebtedness consisting of the obligation to pay dividends following
the declaration thereof, to the extent payment of such dividends is permitted
hereunder; provided that such dividends are paid within 60 days of the
--------
declaration thereof;
(h) Indebtedness consisting of the obligation to pay any final judgment
against Borrower or any of its Subsidiaries, except to the extent that non-
payment of such judgment would result in a Default or Event of Default under
Section 9.01(h); and
- ---------------
(g) other Unsecured Indebtedness not exceeding $5,000,000 in the aggregate
at any time.
7.02 Liens and Negative Pledges.
Incur, assume or suffer to exist, any Lien or Negative Pledge upon any of
its property, assets or revenues, whether now owned or hereafter acquired,
except:
- ------
(a) Liens and Negative Pledges existing on the date hereof and listed on
Schedule 7.01 and any renewals or extensions thereof; provided that the
- ------------- --------
obligations secured or benefited thereby or the property covered thereby are not
increased, except as permitted by Section 7.01(b);
---------------
(b) Ordinary Course Liens;
(c) Liens securing the Indebtedness permitted under Section 7.01(c);
---------------
provided that such Liens shall only extend to the property acquired with such
- --------
Indebtedness or leased under any capital lease permitted under Section 7.01(c);
---------------
(d) Liens securing the Indebtedness permitted under Section 7.01(d);
---------------
provided that (i) any Liens securing Indebtedness permitted under clause (i) of
- --------
Section 7.01(d) shall only extend to the property subject to the capital lease
- ---------------
under which such Indebtedness is owed, (ii) any Liens securing Indebtedness
permitted under clause (ii) of Section 7.01(d) shall only extend to the real
---------------
property constructed, acquired or refinanced during the 12 month period
preceding the incurrence of such Indebtedness; and (iii) any Liens securing
Indebtedness permitted under clause (iii) of
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Section 7.01(d) shall only extend to the property securing the Indebtedness
- ---------------
being refinanced, refunded, renewed or extended; and
(e) other Liens securing Indebtedness in an aggregate principal amount not
to exceed $250,000 at any time.
7.03 Fundamental Changes. Merge or consolidate with or into any Person or
liquidate, wind-up or dissolve itself, or permit or suffer any liquidation or
dissolution, except, that so long as no Default or Event of Default exists or
would result therefrom:
(a) any Subsidiary of Borrower may merge with (i) Borrower provided that
Borrower shall be the continuing or surviving corporation, (ii) with any one or
more Subsidiaries of Borrower, and (iii) with any joint ventures, partnerships
and other Persons other than Santee Dairies LLC or Santee Dairies Inc., so long
as such joint ventures, partnerships and other Persons will, as a result of
making such merger and all other contemporaneous related transactions, become a
Subsidiary of Borrower; provided that when any Wholly-Owned Subsidiary of
--------
Borrower is merging into another Subsidiary of Borrower, the Wholly-Owned
Subsidiary of Borrower shall be the continuing or surviving Person; and
(b) any Subsidiary of Borrower may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise), to Borrower or any of its
Subsidiaries; provided that when any Wholly-Owned Subsidiary of Borrower is
--------
selling all or substantially all of its assets to another Subsidiary of
Borrower, the Subsidiary acquiring such assets shall be a Wholly-Owned
Subsidiary of Borrower.
7.04 Dispositions. Make any Dispositions, except:
------
(a) Ordinary Course Dispositions;
(b) Dispositions permitted by Section 7.03;
------------
(c) Borrower and its Subsidiaries may Dispose of their interest in Santee
Dairies LLC; and
(d) Borrower and its Subsidiaries may make Dispositions in the ordinary
course of business (including, without limitation, Dispositions in the ordinary
course of business of stores, the inventory located therein and other property
used in connection therewith) after the Closing Date of assets having an
aggregate fair market value of not more than $25,000,000 in each four
consecutive fiscal quarter period.
7.05 Investments. Make any Investments, except:
------
(a) Investments existing on the date hereof;
(b) Ordinary Course Investments;
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(c) Investments consisting of advances to officers, directors and employees
of Borrower and its Subsidiaries for travel, entertainment, relocation and
analogous ordinary business purposes not exceeding $500,000 in the aggregate;
(d) Investments permitted by Section 7.03; and
------------
(e) Investments not exceeding $5,000,000 in the aggregate.
7.06 Lease Obligations. Create or suffer to exist any obligations for the
payment of rent for any under lease or agreement to lease, except:
------
(a) leases in existence on the date hereof and any renewal, extension or
refinancing thereof to the extent such renewal, extension or refinancing is not
prohibited by Section 7.01;
------------
(b) leases (other than capital leases) entered into or assumed by Borrower
or any of its Subsidiaries after the date hereof in the ordinary course of
business; and
(c) capital leases to the extent the Indebtedness thereunder is not
prohibited by Section 7.01.
------------
7.07 Restricted Payments. Make any Restricted Payments, except:
------
(a) Borrower may declare and pay dividends in respect of the shares of its
preferred stock, no par value, outstanding on the Closing Date, at the rate of
$11 per share per annum; and
(b) Borrower may redeem for the liquidation preference thereof the shares
of its preferred stock, no par value, outstanding on the Closing Date.
7.08 ERISA. At any time engage in a transaction which could be subject to
Sections 4069 or 4212(c) of ERISA, or permit any Pension Plan to (a) engage in
any non-exempt "prohibited transaction" (as defined in Section 4975 of the
Code); (b) fail to comply with ERISA or any other applicable Laws; or (c) incur
any material "accumulated funding deficiency" (as defined in Section 302 of
ERISA), which, with respect to each event listed above, has a Material Adverse
Effect.
7.09 Change in Nature of Business. Make any change in the nature of the
business of any Borrower Party as conducted and as proposed to be conducted as
of the date hereof.
7.10 Transactions with Affiliates. Enter into any transaction of any kind
with any Affiliate of Borrower other than arm's-length transactions with
Affiliates that are not otherwise prohibited hereunder; provided that the
--------
foregoing restriction shall not apply to transactions between Borrower and any
of its Wholly-Owned Subsidiaries or between any of Borrower's Wholly-Owned
Subsidiaries.
7.11 Hostile Acquisitions. Use the proceeds of any Extension of Credit in
connection with the acquisition of a voting interest of five percent or more in
any Person if such acquisition is opposed by the board of directors or
management of such Person unless (a) Borrower has given
------
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Administrative Agent (who shall promptly notify each Lender) five Business Days'
prior notice thereof and (b) no Lender shall have, within that period, notified
Administrative Agent (who shall promptly notify Borrower) not consented to the
use of the proceeds of such Extension of Credit for that purpose.
7.12 [intentionally omitted]
7.13 Limitations on Upstreaming. Agree to any restriction or limitation on
the making of Restricted Payments, the payment of dividends or distributions,
the repurchasing of capital stock, or the transferring of assets from any
Subsidiary of Borrower to Borrower, except for the restriction in Section 4.07
------
of the Holdings Senior Note Indenture, as in effect on the Closing Date.
7.14 Financial Covenants.
(a) Adjusted Consolidated Net Worth. Permit, at any date of determination,
the sum of (i) Consolidated Net Worth on the last day of the fiscal quarter
most recently ended on or prior to such date of determination plus (ii) the
----
aggregate unpaid principal amount of any Indebtedness owed by Borrower to
Holdings that is permitted under Section 7.01 that remains outstanding on such
------------
date of determination, to be less than the sum of (v) Starting Consolidated Net
Worth, minus (w) $115,000,000, plus (x) an amount equal to 90% of the Holdings
----- ----
Consolidated Net Income for each fiscal quarter ending during the period from
the Closing Date to such date of determination (with no deduction for a net loss
in any such fiscal quarter) plus (y) an amount equal to 100% of the aggregate
----
increases in Shareholders' Equity of Borrower and its Subsidiaries during the
period from the Closing Date to such date of determination by reason of the
issuance and sale of capital stock of Borrower (including upon any conversion of
debt securities of Borrower into such capital stock) plus (z) contributions made
----
during the period from the Closing Date to such date of determination by
Holdings to the capital of Borrower as equity (excluding those made pursuant to
Sections 8.09 and 8.10).
- -------- ---- ----
(b) Consolidated EBITDA.
Permit Consolidated EBITDA for any period set forth below to be less than
the correlative amount indicated; provided that Consolidated EBITDA for the
--------
fiscal quarters ending on or before September 24, 2000 shall be measured on an
Annualized basis:
-54-
<PAGE>
<TABLE>
<CAPTION>
Period Ending Minimum Consolidated EBITDA
- --------------------------------------------------------------------------
<S> <C>
Fiscal Quarter Ending March 26, 2000 $75,000,000
Two Fiscal Quarters Ending June 25, 2000 $75,000,000
Three Fiscal Quarters Ending on or about
September 24, 2000 $75,000,000
Each Four Fiscal Quarter Period Ending
after September 24, 2000 $75,000,000
</TABLE>
7.15 Change in Auditors. Change the certified public accountants auditing
the books of Borrower without the consent of Requisite Lenders, other than any
change to a "Big 5" accounting firm.
7.16 Amendments or Waivers of Related Agreements. Agree to any material
amendment to, or waive any of its material rights under, any Related Agreement
after the Closing Date without in each case obtaining the prior written consent
of Requisite Lenders, to such amendment or waiver.
7.17 Use of Capital Contributions. Use any cash contributions to Borrower's
capital made by Holdings for any purpose other than general corporate purposes,
including working capital and short term financing of capital expenditures.
SECTION 8.
HOLDINGS COVENANTS
So long as any Extension of Credit remains unpaid, or any other Obligation
remains unpaid or unperformed, or any portion of the Commitments remains
outstanding, Holdings shall, and shall cause each of its Subsidiaries, to
perform, all covenants in this Section 8.
---------
8.01 Indebtedness. Holdings shall not create, incur, assume or suffer to
exist any Indebtedness, except:
------
(a) Indebtedness owed under the Holdings Senior Notes in an aggregate
principal amount not to exceed the amount thereof issued on the Closing Date,
which shall not exceed $450,000,000;
(b) Indebtedness owed to Borrower or any Subsidiary of Borrower, to the
extent permitted under Section 7, and Indebtedness owed to Development or any
---------
Subsidiary of Development; and
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<PAGE>
(c) Indebtedness in an aggregate principal amount not to exceed $6,000,0000
owed under the Existing Holdings Notes that remain outstanding on the
Closing Date.
8.02 Restricted Payments. Holdings shall not make or permit Borrower or
any of Borrower's Subsidiaries to make any Restricted Payments, except:
------
(a) Holdings may make Restricted Payments to purchase, prepay, redeem or
otherwise acquire for value Holdings Senior Notes, provided that the
--------
aggregate amount of such Restricted Payments does not exceed the sum of (i) the
aggregate amount of net cash proceeds received by Holdings or any of its
Subsidiaries after the Closing Date from Dispositions that are permitted
hereunder, excluding any such net cash proceeds that are reinvested by Holdings
or any of its Subsidiaries in their respective businesses within 12 months of
the receipt thereof and any such net cash proceeds that are used to repay
Obligations and reduce the Commitments,
plus (ii) the net cash proceeds received by Holdings from any Person (other
- ----
than Borrower or a Subsidiary of Borrower) from the issuance and sale after
the Closing Date of common stock of Holdings.
(b) Holdings may declare and pay dividends in respect of its common stock
on or after December 31, 2000, in an aggregate amount not to exceed 50% of the
cumulative amount of Holdings Consolidated Net Income earned from the fiscal
period commencing on or about September 30, 2000 and ending on the last day of
the most recent fiscal quarter ending on or prior to the date such dividend is
declared (treating such period as a single accounting period); provided that any
--------
such dividend is paid within 60 days of the declaration thereof.
(c) Holdings may redeem, prepay, or defease Existing Holdings Notes on the
Closing Date;
(d) Holdings may redeem, prepay, or defease Existing Holdings Notes after
the Closing Date with Existing Holdings Notes Sinking Funds (as defined in
Section 8.11);
- -------------
(e) Holdings may repurchase, redeem, acquire or retire for value any
capital stock of Holdings held by any key employee of Holdings or its
Subsidiaries (other than any key employee that is a partner of or otherwise
holds any equity interest in La Cadena Investments or any La Cadena Successor
(as such term is defined in the Holdings Senior Note Indenture)) upon any such
person's death, disability or termination of employment and pursuant to any
management equity subscription agreement, stock option agreement or other
incentive compensation plan or agreement entered into in the ordinary course of
business; provided that the aggregate price paid for all such redeemed,
--------
acquired or retired capital stock shall not exceed $500,000, which aggregate
amount shall increase by $500,000 on each anniversary of the Closing Date.
8.03 Change in Nature of Business; Ownership of Assets. Holdings shall not
(i) engage in any business other than entering into and performing its
obligations under and in accordance with the Loan Documents and Related
Agreements to which it is a party and other contracts or agreements to which it
is a party on the Closing Date or (ii) own any assets other than (a) the capital
stock of Borrower and Development, (b) cash and cash equivalents in an amount
not to exceed the amount needed for the purpose of paying general operating
expenses of Holdings, including paying interest on the Holdings Senior Notes,
(c) the Capital Expenditure
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<PAGE>
Funds (as defined in Section 8.10) and the capital expenditures paid
------------
for with Capital Expenditure Funds, (d) the Existing Holdings Notes Sinking
Funds (as defined in Section 8.11), and (e) promissory notes payable by Borrower
------------
to Holdings that are otherwise permitted to be issued by Borrower hereunder.
8.04 Transactions with Affiliates. Holdings shall not enter into any
transaction of any kind with any Affiliate of Holdings other than arm's-length
transactions with Affiliates that are not otherwise prohibited hereunder,
provided that Holdings may pay an advisory fee in an amount not to exceed
- --------
$5,000,000 to La Cadena Investments, a California general partnership, on the
Closing Date; and provided further that the foregoing restriction shall not
-------- -------
apply to transactions between Holdings and any of its Wholly-Owned Subsidiaries
or between any of Holdings' Wholly-Owned Subsidiaries.
8.05 Amendments or Waivers of Related Agreements and Existing Holdings
Indenture.
(a) Holdings shall not amend or otherwise change the terms of the
Holdings Senior Notes, the Holdings Senior Note Indenture, the Existing Holdings
Notes, or the Existing Holdings Indenture, or make or permit any of its
Subsidiaries to make any payment consistent with an amendment thereof or change
thereto, if the effect of such amendment or change is to increase the interest
rate on Holdings Senior Notes or Existing Holdings Notes, change (to earlier
dates) any dates upon which payments of principal or interest are due thereon,
change any event of default or condition to an event of default with respect
thereto (other than to eliminate any such event of default or increase any grace
period related thereto), change the redemption, prepayment or defeasance
provisions thereof, or change or permit any of its Subsidiaries to change any
collateral therefor (other than to release such collateral), or add any Negative
Pledge thereto or modify any Negative Pledge therein that would in either case
restrict the ability of any Borrower Party to grant liens to secure the
Obligations of such Borrower Party, or if the effect of such amendment or
change, together with all other amendments or changes made, is to increase
materially the obligations of the obligor thereunder or to confer any additional
rights on the holders of such Holdings Senior Notes (or a trustee or other
representative on their behalf) which would be adverse to Holdings or Lenders.
(b) Holdings shall not agree to any material amendment to, or waive any
of its material rights under, or otherwise change any material terms of, any of
the Albertsons Acquisition Agreement in each case as in effect on the Closing
Date, in a manner adverse to Holdings or any of its Subsidiaries or to Lenders
without the prior written consent of Administrative Agent and Requisite Lenders.
8.06 Maintenance of Availability. Holdings shall and shall cause its
Subsidiaries to at all times maintain the ability of Borrower to incur not less
than $15,000,000 of additional Indebtedness pursuant to clause (14) of Section
4.09(o) of the Holdings Senior Note Indenture, less an amount not to exceed
$5,000,000 of Letter of Credit Usage in respect of Letters of Credit that are
not Permitted Workers Compensation Letters of Credit.
-57-
<PAGE>
8.07 Execution of Development Guaranty by Future Subsidiaries
(a) Execution of Subsidiary Guaranty. In the event that any Person
becomes a Domestic Subsidiary of Development after the date hereof, Holdings
will promptly notify Administrative Agent of that fact and cause such Subsidiary
to execute and deliver to Administrative Agent a counterpart of the Development
Guaranty.
(b) Subsidiary Charter Documents, Legal Opinions, Etc. Holdings shall
deliver to Administrative Agent, together with such counterpart of the
Development Guaranty, (i) certified copies of such Subsidiary's Certificate or
Articles of Incorporation, together with a good standing certificate from the
Secretary of State of the jurisdiction of its incorporation and each other state
in which such Person is qualified as a foreign corporation to do business and,
to the extent generally available, a certificate or other evidence of good
standing as to payment of any applicable franchise or similar taxes from the
appropriate taxing authority of each of such jurisdictions, each to be dated a
recent date prior to their delivery to Administrative Agent, (ii) a copy of such
Subsidiary's Bylaws, certified by its corporate secretary or an assistant
secretary as of a recent date prior to their delivery to Administrative Agent,
(iii) a certificate executed by the secretary or an assistant secretary of such
Subsidiary as to (a) the fact that the attached resolutions of the Board of
Directors of such Subsidiary approving and authorizing the execution, delivery
and performance of such Development Guaranty are in full force and effect and
have not been modified or amended and (b) the incumbency and signatures of the
officers of such Subsidiary executing such Development Guaranty, and (iv) a
favorable opinion of counsel to such Subsidiary, in form and substance
satisfactory to Administrative Agent and its counsel, as to (a) the due
organization and good standing of such Subsidiary, (b) the due authorization,
execution and delivery by such Subsidiary of such Development Guaranty, (c) the
enforceability of such Development Guaranty against such Subsidiary, (d) such
other matters as Administrative Agent may reasonably request, all of the
foregoing to be satisfactory in form and substance to Administrative Agent and
its counsel.
8.08 Maintenance of Separate Corporate Identity.
Holdings shall, and shall cause Borrower to (i) maintain books and
records separate from any other person or entity; (ii) maintain its bank
accounts separate from any other Person; (iii) hold all of its assets in its own
name and not commingle its assets with any other Person; (iv) conduct its
business in its own name; (v) maintain separate financial statements showing its
assets and liabilities separate and apart from those of any other Person; (vi)
pay its own liabilities and expenses only out of its own funds; (vii) observe
all corporate formalities including the holding of separate board meetings;
(vii) use separate stationery, invoices and checks bearing its own name; (ix)
not hold out its credit as being available to satisfy the obligations of any
other Person; (x) hold itself out as a separate entity; and (xi) correct any
known misunderstanding regarding its separate identity.
8.09 Albertsons Acquisition.
Not more than 45 days after the Closing Date, Holdings shall consummate
all purchases contemplated by the Albertsons Acquisition Agreement, receive good
title to the Albertsons
-58-
<PAGE>
Properties, and contribute to Borrower as an equity contribution the Albertsons
Properties and all net cash proceeds received by Holdings from the issuance of
the Holdings Senior Notes that have not been used by Holdings as of the 45th
date after the Closing Date to pay for Acquisition Financing Requirements, or to
redeem Existing Holdings Notes, excluding the Capital Expenditure Funds (as
defined in Section 8.10) and the Existing Holdings Notes Sinking Funds
------------
(as defined in Section 8.11). Promptly upon the transfer of any of the
------------
Albertsons Properties to Holdings, Holdings shall execute and deliver to
Borrower all bills of sale, warranty deeds, grant deeds, and assignment and
assumption agreements necessary or useful to transfer title of the Albertsons
Properties from Holdings to Borrower.
8.10 Capital Expenditure Funds.
Holdings may retain net cash proceeds from the issuance of the Holdings
Senior Notes (the "Capital Expenditure Funds") in an amount not to exceed
$25,000,000, to be applied as set forth in this Section. Holdings shall use the
Capital Expenditure Funds solely to pay for capital expenditures made in
connection with the Albertsons Properties. Promptly after the completion of
such capital expenditures, Holdings shall contribute the assets acquired with
the proceeds of such capital expenditures to Borrower as an equity contribution.
Not later than March 31, 2000, Holdings shall contribute to Borrower as an
equity contribution all Capital Expenditure Funds that have not been applied by
such date to pay for capital expenditures made in connection with the Albertsons
Properties.
8.11 Existing Holdings Notes Sinking Funds
On the Closing Date, Holdings will establish and thereafter maintain a
deposit or investment account with Administrative Agent and deposit therein cash
in an amount equal to the aggregate face amount of the Existing Holdings Notes
that will not be repurchased, repaid, redeemed or otherwise defeased on the
Closing Date (the funds in such account being the "Existing Holdings Notes
Sinking Funds"). Holdings will invest the Existing Holdings Note Sinking Funds
only in cash and cash equivalents. Until all Existing Holdings Notes have been
permanently retired, Holdings shall not use the Existing Holdings Notes Sinking
Funds for any purpose other than the repurchase, repayment, redemption, or other
retirement of the Existing Holdings Notes.
8.12 Use of Proceeds of Repayments of Indebtedness by Borrower to Holdings.
Holdings shall not advance to Borrower as a capital contribution or
otherwise any funds received by Holdings from Borrower consisting of payments on
Indebtedness owed by Borrower to Holdings.
SECTION 9.
EVENTS OF DEFAULT AND REMEDIES
9.01 Events of Default.
Any one or more of the following events shall constitute an Event of
Default:
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<PAGE>
(a) Borrower fails to pay any principal on any Extension of Credit as and
on the date when due; or
(b) Borrower fails to pay any interest on any Extension of Credit, or any
commitment fees due hereunder within three days after the date when due; or
fails to pay any other fees or amount payable to Administrative Agent or any
Lender under any Loan Document within five days after the date due; or
(c) Any default occurs in the observance or performance of any agreement
contained in Sections 6.01, 6.02, 6.08, 7 or 8; or
------------- ---- ----- - -
(d) The occurrence of an Event of Default (as such term is or may hereafter
be specifically defined in any other Loan Document) under any other Loan
Document; or any Borrower Party fails to perform or observe any other covenant
or agreement (not specified above) contained in any Loan Document on its part to
be performed or observed and such failure continues for 30 days; or
(e) Any representation or warranty in any Loan Document or in any
certificate, agreement, instrument or other document made or delivered by any
Borrower Party pursuant to or in connection with any Loan Document proves to
have been incorrect when made or deemed made; or
(f) Any Borrower Party (or Santee Dairies LLC or Santee Dairies Inc. if
either is then a Subsidiary of Borrower) (i) defaults in any payment when due of
principal of or interest on any Indebtedness (other than Indebtedness hereunder)
or (ii) defaults in the observance or performance of any other agreement or
condition relating to any Indebtedness (other than Indebtedness hereunder) or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur, the effect of which default or other
event is to cause, or to permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, Indebtedness
having an aggregate principal amount in excess of $2,500,000 to be demanded or
become due (automatically or otherwise) prior to its stated maturity, or any
Guaranty Obligation in such amount to become payable, or any Borrower Party (or
Santee Dairies LLC or Santee Dairies Inc. if either is then a Subsidiary of
Borrower) is unable or admits in writing its inability to pay its debts as they
mature; or
(g) Any Loan Document, at any time after its execution and delivery and for
any reason other than the agreement of all Lenders or satisfaction in full of
all the Obligations, ceases to be in full force and effect or is declared by a
court of competent jurisdiction to be null and void, invalid or unenforceable in
any respect; or any Borrower Party denies that it has any or further liability
or obligation under any Loan Document, or purports to revoke, terminate or
rescind any Loan Document; or
(h) A final judgment against any Borrower Party (or Santee Dairies LLC or
Santee Dairies Inc. if either is then a Subsidiary of Borrower) is entered for
the payment of money in excess of $2,500,000, or any non-monetary final judgment
is entered against any Borrower Party
-60-
<PAGE>
(or Santee Dairies LLC or Santee Dairies Inc. if either is then a Subsidiary of
Borrower) which has a Material Adverse Effect and, in each case if such judgment
remains unsatisfied without procurement of a stay of execution within 30
calendar days after the date of entry of judgment or, if earlier, five days
prior to the date of any proposed sale, or any writ or warrant of attachment or
execution or similar process is issued or levied against all or any material
part of the Property of any such Person and is not released, vacated or fully
bonded within 30 calendar days after its issue or levy; or
(i) Any Borrower Party or any of its Subsidiaries institutes or consents to
the institution of any proceeding under Debtor Relief Laws, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its
property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the application or consent
of that Person and the appointment continues undischarged or unstayed for 60
calendar days; or any proceeding under Debtor Relief Laws relating to any such
Person or to all or any part of its property is instituted without the consent
of that Person and continues undismissed or unstayed for 60 calendar days, or an
order for relief is entered in any such proceeding; or
(j) (i) An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan which has resulted or could reasonably be expected to result
in liability of Borrower under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $1,000,000;
(ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans
at any time exceeds $3,250,000; or (iii) Borrower or any ERISA Affiliate fails
to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$1,000,000;
(k) Any event occurs which has a Material Adverse Effect;
(l) Jack H. Brown shall cease for any reason (including death or
disability) to be the Chairman and CEO of Borrower;
(m) Holdings shall cease to own 100% of the outstanding capital stock of
Borrower (other than the shares of Borrower's preferred stock, no par value,
outstanding on the Closing Date); or any Change in Control, as such term is
defined in the Holdings Senior Note Indenture as in effect on the Closing Date,
shall occur; or
(n) the Albertsons Acquisition shall not be consummated in accordance with
this Agreement and the applicable Related Agreements concurrently with the
making of the initial Loans, or the Albertsons Acquisition shall be unwound,
reversed or otherwise rescinded in whole or in part for any reason:
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<PAGE>
9.02 Remedies Upon Event of Default. Without limiting any other rights or
remedies of Administrative Agent or Lenders provided for elsewhere in this
Agreement, or the other Loan Documents, or by applicable Law, or in equity, or
otherwise:
(a) the occurrence, and during the continuance, of any Event of Default
other than an Event of Default described in Section 9.01(i):
- ----- ---- ---------------
(i) the Requisite Lenders may request Administrative Agent to, and
Administrative Agent thereupon shall, terminate the Commitments and/or
declare all or any part of the unpaid principal of all Loans, all interest
accrued and unpaid thereon and all other amounts payable under the Loan
Documents to be immediately due and payable, whereupon the same shall
become and be immediately due and payable, without protest, presentment,
notice of dishonor, demand or further notice of any kind, all of which are
expressly waived by Borrower; and
(ii) Issuing Lender may, with the approval of Administrative Agent on
behalf of the Requisite Lenders, demand immediate payment by Borrower of an
amount equal to the aggregate amount of all outstanding Letters of Credit
Usage to be held in a Letter of Credit Cash Collateral Account.
(b) Upon the occurrence of any Event of Default described in Section
-------
9.01(i):
- -------
(i) the Commitments and all other obligations of Administrative Agent
or Lenders shall automatically terminate without notice to or demand upon
Borrower, which are expressly waived by Borrower;
(ii) the unpaid principal of all Loans, all interest accrued and
unpaid thereon and all other amounts payable under the Loan Documents shall
be immediately due and payable, without protest, presentment, notice of
dishonor, demand or further notice of any kind, all of which are expressly
waived by Borrower; and
(iii) an amount equal to the aggregate amount of all outstanding
Letters of Credit Usage shall be immediately due and payable to Issuing
Lender without notice to or demand upon Borrower, which are expressly
waived by Borrower, to be held in a Letter of Credit Cash Collateral
Account.
(c) Upon the occurrence of any Event of Default, Lenders and Administrative
Agent, or any of them, without notice to (except as expressly provided for in
any Loan Document) or demand upon Borrower, which are expressly waived by
Borrower (except as to notices expressly provided for in any Loan Document), may
proceed to (but only with the consent of the Requisite Lenders) protect,
exercise and enforce their rights and remedies under the Loan Documents against
any Borrower Party and such other rights and remedies as are provided by Law or
equity.
(d) Except as permitted by Section 11.05, no Lender may exercise any rights
-------------
or remedies with respect to the Obligations without the consent of the Requisite
Lenders in their sole discretion. The order and manner in which Administrative
Agent's and Lenders' rights and
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<PAGE>
remedies are to be exercised shall be determined by the Requisite Lenders in
their sole discretion. Regardless of how a Lender may treat payments for the
purpose of its own accounting, for the purpose of computing the Obligations
hereunder, payments shall be applied first, to costs and expenses (including
Attorney Costs) incurred by Administrative Agent and each Lender, second, to the
payment of accrued and unpaid interest on the Loans to and including the date of
such application, third, to the payment of the unpaid principal of the Loans,
and fourth, to the payment of all other amounts (including fees) then owing to
Administrative Agent and Lenders under the Loan Documents, in each case paid pro
rata to each Lender in the same proportions that the aggregate Obligations owed
to each Lender under the Loan Documents bear to the aggregate Obligations owed
under the Loan Documents to all Lenders, without priority or preference among
Lenders. No application of payments will cure any Event of Default, or prevent
acceleration, or continued acceleration, of amounts payable under the Loan
Documents, or prevent the exercise, or continued exercise, of rights or remedies
of Administrative Agent and Lenders hereunder or thereunder or at Law or in
equity.
SECTION 10.
ADMINISTRATIVE AGENT
10.01 Appointment and Authorization of Administrative Agent.
(a) Each Lender hereby irrevocably (subject to Section 10.09) appoints,
-------------
designates and authorizes Administrative Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, Administrative Agent shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall Administrative Agent have or
be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against Administrative Agent. Without limiting the generality of the foregoing
sentence, the use of the term "agent" in this Agreement with reference to
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) Issuing Lender shall act on behalf of Lenders with respect to any
Letters of Credit issued by it and the documents associated therewith until such
time and except for so long as Administrative Agent may agree at the request of
the Requisite Lenders to act for such Issuing Lender with respect thereto;
provided, however, that Issuing Lender shall have all of the benefits and
- -------- -------
immunities (i) provided to Administrative Agent in this Section 10 with respect
----------
to any acts taken or omissions suffered by Issuing Lender in connection with
Letters of Credit issued by it or proposed to be issued by it and the
application and agreements for letters of credit pertaining to the Letters of
Credit as fully as if the term "Administrative Agent" as used in this Section 10
----------
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<PAGE>
included Issuing Lender with respect to such acts or omissions, and (ii) as
additionally provided in this Agreement with respect to Issuing Lender.
10.02 Delegation of Duties. Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Administrative Agent shall not
be responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
10.03 Liability of Administrative Agent. None of Administrative Agent-
Related Persons shall (i) be liable for any action taken or omitted to be taken
by any of them under or in connection with this Agreement or any other Loan
Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of Lenders for any recital, statement, representation or warranty made by
Borrower or any Subsidiary or Affiliate of Borrower, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Administrative Agent under or in connection with, this Agreement
or any other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of Borrower or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Administrative Agent-Related Person
shall be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of Borrower or any of Borrower's Subsidiaries or Affiliates.
10.04 Reliance by Administrative Agent.
(a) Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower),
independent accountants and other experts selected by Administrative Agent.
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Requisite Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by Lenders against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action.
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Requisite Lenders or all Lenders, if
required hereunder, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of Lenders.
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<PAGE>
(b) For purposes of determining compliance with the conditions specified in
Section 4.01, each Lender that has executed this Agreement shall be deemed to
- ------------
have consented to, approved or accepted or to be satisfied with, each document
or other matter either sent by Administrative Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to such Lender.
10.05 Notice of Default. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to Administrative Agent for the account of Lenders, unless
Administrative Agent shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". Administrative
Agent will notify Lenders of its receipt of any such notice. Administrative
Agent shall take such action with respect to such Default or Event of Default as
may be requested by the Requisite Lenders in accordance with Section 9;
---------
provided, however, that unless and until Administrative Agent has received any
- -------- -------
such request, Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable or in the best interest of Lenders.
10.06 Credit Decision; Disclosure of Information by Administrative Agent.
Each Lender acknowledges that none of Administrative Agent-Related Persons has
made any representation or warranty to it, and that no act by Administrative
Agent hereinafter taken, including any consent to and acceptance of any
assignment or review of the affairs of Borrower and its Subsidiaries, shall be
deemed to constitute any representation or warranty by any Administrative Agent-
Related Person to any Lender as to any matter, including without limitation,
whether Administrative Agent-Related Persons have disclosed material information
in their possession. Each Lender, including any Lender by assignment, represents
to Administrative Agent that it has, independently and without reliance upon any
Administrative Agent-Related Person and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to Borrower
hereunder. Each Lender also represents that it will, independently and without
reliance upon any Administrative Agent-Related Person and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower. Except for notices, reports and other documents
expressly herein required to be furnished to Lenders by Administrative Agent
herein, Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of Borrower or any of its Subsidiaries which may come into the
possession of any of Administrative Agent-Related Persons.
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10.07 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, Lenders shall indemnify upon
demand each Administrative Agent-Related Person (to the extent not reimbursed by
or on behalf of Borrower and without limiting the obligation of Borrower to do
so), pro rata, and hold harmless each Administrative Agent-Related Person from
and against any and all Indemnified Liabilities incurred by it; provided,
--------
however, that no Lender shall be liable for the payment to any Administrative
- -------
Agent-Related Person of any portion of such Indemnified Liabilities resulting
from such Person's gross negligence or willful misconduct; provided, however,
-------- -------
that no action taken in accordance with the directions of the Requisite Lenders
shall be deemed to constitute gross negligence or willful misconduct for
purposes of this Section. Without limitation of the foregoing, each Lender shall
reimburse Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that Administrative Agent
is not reimbursed for such expenses by or on behalf of Borrower. The undertaking
in this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Administrative Agent.
10.08 Administrative Agent in Individual Capacity. Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Borrower
and its Subsidiaries and Affiliates as though Bank of America were not
Administrative Agent or Issuing Lender hereunder and without notice to or
consent of Lenders. Lenders acknowledge that, pursuant to such activities, Bank
of America or its Affiliates may receive information regarding Borrower or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of Borrower or such Affiliate) and acknowledge that
Administrative Agent shall be under no obligation to provide such information to
them. With respect to its Loans, Bank of America shall have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not Administrative Agent or Issuing Lender.
10.09 Successor Administrative Agent. Administrative Agent may, and at the
request of the Requisite Lenders shall, resign as Administrative Agent upon 30
days' notice to Lenders. If Administrative Agent resigns under this Agreement,
the Requisite Lenders shall appoint from among Lenders a successor
administrative agent for Lenders which successor administrative agent shall be
approved by Borrower. If no successor administrative agent is appointed prior to
the effective date of the resignation of Administrative Agent, Administrative
Agent may appoint, after consulting with Lenders and Borrower, a successor
administrative agent from among Lenders. Upon the acceptance of its appointment
as successor administrative agent hereunder, such successor administrative agent
shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the term "Administrative Agent" shall mean such
successor administrative agent and the retiring Administrative Agent's
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent's resignation
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hereunder as Administrative Agent, the provisions of this Section 10 and
--------------
Sections 11.03 and 11.11 shall inure to its benefit as to any actions
- ---------- -----
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor administrative agent has accepted appointment as
Administrative Agent by the date which is 30 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective and Lenders
shall perform all of the duties of Administrative Agent hereunder until such
time, if any, as the Requisite Lenders appoint a successor agent as provided for
above. Notwithstanding the foregoing, however, Bank of America may not be
removed as Administrative Agent at the request of the Requisite Lenders unless
Bank of America shall also simultaneously be replaced as "Issuing Lender"
hereunder pursuant to documentation in form and substance reasonably
satisfactory to Bank of America.
SECTION 11.
MISCELLANEOUS
11.01 Amendments; Consents. No amendment, modification, supplement,
extension, termination or waiver of any provision of this Agreement or any other
Loan Document, no approval or consent thereunder, and no consent to any
departure by any Borrower Party therefrom shall be effective unless in writing
signed by Administrative Agent and Requisite Lenders, and each such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Except as otherwise expressly provided herein, without
the approval in writing of Administrative Agent and all Lenders, no amendment,
modification, supplement, termination, waiver or consent may be effective:
(a) To reduce the amount of principal, principal prepayments or the rate of
interest payable on, any Loan, or the amount of any fee or other amount payable
to any Lender under the Loan Documents (unless such modification is consented to
by each Lender entitled to receive such fee ) or to waive an Event of Default
consisting of the failure of Borrower to pay when due principal, interest or any
commitment fee;
(b) To postpone any date fixed for any payment of principal of, prepayment
of principal of, or any installment of interest on, any Loan or any installment
of any commitment fee, to extend the term of, or increase the amount of, any
Lender's Commitments (it being understood that a waiver of an Event of Default
shall not constitute an extension or increase in any Commitment of any Lender)
or modify the Pro Rata Share of any Lender;
(c) To amend the provisions of the definition of "Requisite Lenders",
-----------------
Sections 4 or 9 or this Section 11.01;
- ---------- - -------------
(d) To release the any guarantor from its obligations under any Guaranty;
or
(e) To amend any provision of this Agreement that expressly requires the
consent or approval of all Lenders.
provided, however, that (i) no amendment, waiver or consent shall, unless in
- -------- -------
writing and signed by Issuing Lender in addition to the Requisite Lenders or all
Lenders, as the case may be, affect
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the rights or duties of Issuing Lender under any Loan Document relating to
Letters of Credit and (ii) any fee letters may be amended, or rights or
privileges thereunder waived, in a writing executed by the parties thereto. Any
amendment, modification, supplement, termination, waiver or consent pursuant to
this Section shall apply equally to, and shall be binding upon, all Lenders and
Administrative Agent.
11.02 Transmission and Effectiveness of Notices and Signatures.
(a) Modes of Delivery. Except as otherwise provided in any Loan Document,
notices, requests, demands, directions, agreements and documents delivered in
connection with the Loan Documents (collectively, "communications") shall be
--------------
transmitted by Requisite Notice to the number and address set forth on Schedule
--------
11.02, may be delivered by the following modes of delivery, and shall be
- -----
effective as follows:
<TABLE>
<CAPTION>
Mode of Delivery Effective on earlier of actual receipt and:
---------------------------------------------------------------------------
<S> <C>
Courier Scheduled delivery date
Facsimile When transmission in legible form complete
Mail Fourth Business Day after deposit in U.S.
mail first class postage pre-paid
Personal delivery When received
Telephone When conversation completed
</TABLE>
provided, however, that communications delivered to Administrative Agent
- -------- -------
pursuant to Section 2 shall not be effective until actually received by
---------
Administrative Agent.
(b) Reliance by Administrative Agent and Lenders. Administrative Agent and
Lenders shall be entitled to rely and act on any communications purportedly
given by or on behalf of any Borrower Party even if such communications (i) were
not made in a manner specified herein, (ii) were incomplete, (iii) were not
preceded or followed by any other notice specified herein, or (d) the terms
thereof, as understood by the recipient, varied from any subsequent related
communications provided for herein. Borrower shall indemnify Administrative
Agent and Lenders from any loss, cost, expense or liability as a result of
relying on any communications permitted herein.
(c) Effectiveness of Facsimile Signatures. Signatures on communications
may be transmitted by facsimile only with the consent of Administrative Agent in
its sole discretion in each instance. The effectiveness of any such signatures
accepted by Administrative Agent shall, subject to applicable Law, have the same
force and effect as manual signatures and shall be binding on all Borrower
Parties and Administrative Agent and Lenders. Administrative Agent may also
require that any such signature be confirmed by a manually-signed hardcopy
thereof.
11.03 Attorney Costs, Expenses and Taxes.
Borrower agrees (a) to pay or reimburse Administrative Agent for all costs
and expenses incurred in connection with the development, preparation,
negotiation and execution of the Loan Documents, and the development,
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preparation, negotiation and execution of any amendment, waiver, consent,
supplement or modification to, any Loan Documents, whether or not they become
effective, and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, all reasonable Attorney Costs, and
(b) to pay or reimburse Administrative Agent and each Lender for all costs and
expenses incurred in connection with any refinancing, restructuring,
reorganization (including a bankruptcy reorganization) and enforcement or
attempted enforcement, or preservation of any rights under any Loan Documents,
and any other documents prepared in connection herewith or therewith, or in
connection with any refinancing, or restructuring of any such documents in the
nature of a "workout" or of any insolvency or bankruptcy proceeding, including,
without limitation, Attorney Costs. The foregoing costs and expenses shall
include all search, filing, recording, title insurance and appraisal charges and
fees and taxes related thereto, and other out-of-pocket expenses incurred by
Administrative Agent and the cost of independent public accountants and other
outside experts retained by Administrative Agent or any Lender. Such costs and
expenses shall also include Administrative costs of Administrative Agent
reasonably attributable to the administration of the Loan Documents. Any amount
payable by Borrower under this Section shall bear interest from the second
Business Day following the date of demand for payment at the Default Rate,
unless waived by Administrative Agent. The agreements in this Section shall
survive repayment of all Obligations.
11.04 Binding Effect; Assignment.
(a) This Agreement and the other Loan Documents to which Borrower is a
party will be binding upon and inure to the benefit of Borrower, Administrative
Agent, Lenders and their respective successors and assigns, except that,
Borrower may not assign its rights hereunder or thereunder or any interest
herein or therein without the prior written consent of all Lenders and any such
attempted assignment shall be void. Any Lender may at any time pledge its Note
or any other instrument evidencing its rights as a Lender under this Agreement
to a Federal Reserve Lender, but no such pledge shall release that Lender from
its obligations hereunder or grant to such Federal Reserve Lender the rights of
a Lender hereunder absent foreclosure of such pledge.
(b) From time to time following the Closing Date, each Lender may assign to
one or more Eligible Assignees all or any portion of its Commitments and its Pro
Rata Share of the Extensions of Credit; provided that (i) such assignment, if
--------
not to a Lender or an Affiliate of the assigning Lender, shall be consented to
by Borrower at all times other than during the existence of a Default or Event
of Default and Administrative Agent and Issuing Lender (which approval of
Borrower shall not be unreasonably withheld or delayed), (ii) a copy of a duly
signed and completed Notice of Assignment and Acceptance shall be delivered to
Administrative Agent, (iii) except in the case of an assignment to an Affiliate
of the assigning Lender, to another Lender or of the entire remaining
Commitments of the assigning Lender, the assignment shall not assign a Pro Rata
Share equivalent to less than the Minimum Amount therefor, and (iv) the
effective date of any such assignment shall be as specified in the Notice of
Assignment and Acceptance, but not earlier than the date which is five Business
Days after the date Administrative Agent has received the Notice of Assignment
and Acceptance. Upon acceptance by Administrative Agent of such Notice
Assignment and Acceptance and consent thereto by Administrative Agent and
Issuing
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<PAGE>
Lender and payment of the requisite fee described below, the Eligible
Assignee named therein shall be a Lender for all purposes of this Agreement,
with the Pro Rata Share therein set forth and, to the extent of such Pro Rata
Share, the assigning Lender shall be released from its further obligations under
this Agreement. Borrower agrees that it shall execute and deliver upon request
(against delivery by the assigning Lender to Borrower of any Note) to such
assignee Lender, one or more Notes evidencing that assignee Lender's Pro Rata
Share, and to the assigning Lender if requested, one or more Notes evidencing
the remaining balance Pro Rata Share retained by the assigning Lender.
Administrative Agent's consent to and acceptance of any assignment shall not be
deemed to constitute any representation or warranty by any Administrative Agent-
Related Person as to any matter.
(c) After receipt of a completed Notice of Assignment and Acceptance, and
receipt of an assignment fee of $3,500 from such Eligible Assignee (including
Affiliates of assigning Lenders), Administrative Agent shall, promptly following
the effective date thereof, provide to Borrower and Lenders a revised Schedule
--------
11.02 giving effect thereto.
- -----
(d) Each Lender may from time to time grant participations to one or more
banks or other financial institutions (including another Lender) all or any
portion of its Commitments and its Pro Rata Share of the Extensions of Credit;
provided, however, that (i) such Lender's obligations under this Agreement shall
- -------- -------
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participating
banks or other financial institutions shall not be a Lender hereunder for any
purpose except, if the participation agreement so provides, for the purposes of
Section 3 (but only to the extent that the cost of such benefits to Borrower
- ---------
does not exceed the cost which Borrower would have incurred in respect of such
Lender absent the participation) and subject to Sections 10.05 and 10.06, (iv)
------------------------
Borrower, Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, (v) the participation shall not restrict an
increase in the Commitments or in granting Lender's Pro Rata Share, so long as
the amount of the participation interest is not affected thereby, and (vi) the
consent of the holder of such participation interest shall not be required for
amendments or waivers of provisions of the Loan Documents; provided, however,
-------- -------
that the assigning Lender may, in any agreement with a participant, give such
participant the right to consent to any matter which (A) extends the Maturity
Date as to such participant or any other date upon which any payment of money is
due to such participant, (B) reduces the rate of interest owing to such
participant, any fee or any other monetary amount owing to such participant, or
(C) reduces the amount of any installment of principal owing to such
participant.
11.05 Set-off. In addition to any rights and remedies of Administrative
Agent and Lenders or any assignee or participant of Lenders or any Affiliates
thereof (each, a "Proceeding Party") provided by law, upon the occurrence and
----------------
during the continuance of any Event of Default, each Proceeding Party is
authorized at any time and from time to time, without prior notice to Borrower,
any such notice being waived by Borrower to the fullest extent permitted by law,
to proceed directly, by right of set-off, banker's lien, or otherwise, against
any assets of the Borrower Parties which may be in the hands of such Proceeding
Party (including all general or special, time or demand, provisional or other
deposits and other indebtedness owing by such
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Proceeding Party to or for the credit or
the account of Borrower) and apply such assets against the Obligations,
irrespective of whether such Proceeding Party shall have made any demand
therefor and although such Obligations may be unmatured. Each Lender agrees
promptly to notify Borrower and Administrative Agent after any such set-off and
application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
11.06 Sharing of Payments. Each Lender severally agrees that if it, through
the exercise of any right of setoff, banker's lien or counterclaim against
Borrower, or otherwise, receives payment of the Obligations held by it that is
ratably more than any other Lender, through any means, receives in payment of
the Obligations held by that Lender, then, subject to applicable Laws: (a)
Lender exercising the right of setoff, banker's lien or counterclaim or
otherwise receiving such payment shall purchase, and shall be deemed to have
simultaneously purchased, from the other Lender a participation in the
Obligations held by the other Lender and shall pay to the other Lender a
purchase price in an amount so that the share of the Obligations held by each
Lender after the exercise of the right of setoff, banker's lien or counterclaim
or receipt of payment shall be in the same proportion that existed prior to the
exercise of the right of setoff, banker's lien or counterclaim or receipt of
payment; and (b) such other adjustments and purchases of participations shall be
made from time to time as shall be equitable to ensure that all of Lenders share
any payment obtained in respect of the Obligations ratably in accordance with
each Lender's share of the Obligations immediately prior to, and without taking
into account, the payment; provided that, if all or any portion of a
--------
disproportionate payment obtained as a result of the exercise of the right of
setoff, banker's lien, counterclaim or otherwise is thereafter recovered from
the purchasing Lender by Borrower or any Person claiming through or succeeding
to the rights of Borrower, the purchase of a participation shall be rescinded
and the purchase price thereof shall be restored to the extent of the recovery,
but without interest. Each Lender that purchases a participation in the
Obligations pursuant to this Section shall from and after the purchase have the
right to give all notices, requests, demands, directions and other
communications under this Agreement with respect to the portion of the
Obligations purchased to the same extent as though the purchasing Lender were
the original owner of the Obligations purchased. Borrower expressly consents to
the foregoing arrangements and agrees that any Lender holding a participation in
an Obligation so purchased may exercise any and all rights of setoff, banker's
lien or counterclaim with respect to the participation as fully as if Lender
were the original owner of the Obligation purchased.
11.07 No Waiver; Cumulative Remedies.
(a) No failure by any Lender or Administrative Agent to exercise, and no
delay by any Lender or Administrative Agent in exercising, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege under any
Loan Document preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege.
(b) The rights, remedies, powers and privileges herein or therein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by Law.
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Any decision by Administrative Agent or any Lender not to require payment of any
interest (including Default Interest), fee, cost or other amount payable under
any Loan Document or to calculate any amount payable by a particular method on
any occasion shall in no way limit or be deemed a waiver of Administrative
Agent's or such Lender's right to require full payment thereof, or to calculate
an amount payable by another method that is not inconsistent with this
Agreement, on any other or subsequent occasion.
(c) The terms and conditions of Section 10 are inserted for the sole
----------
benefit of Administrative Agent and Lenders; the same may be waived in whole or
in part, with or without terms or conditions, in respect of any Extension of
Credit without prejudicing Administrative Agent's or Lenders' rights to assert
them in whole or in part in respect of any other Loan.
11.08 Usury. Notwithstanding anything to the contrary contained in any Loan
Document, the interest and fees paid or agreed to be paid under the Loan
Documents shall not exceed the maximum rate of non-usurious interest permitted
by applicable Law (the "Maximum Rate"). If Administrative Agent or any Lender
shall receive interest or a fee in an amount that exceeds the Maximum Rate, the
excessive interest or fee shall be applied to the principal of the Outstanding
Obligations or, if it exceeds the unpaid principal, refunded to Borrower. In
determining whether the interest or a fee contracted for, charged, or received
by Administrative Agent or a Lender exceeds the Maximum Rate, such Person may,
to the extent permitted by applicable Law, (a) characterize any payment that is
not principal as an expense, fee, or premium rather than interest, (b) exclude
voluntary prepayments and the effects thereof, and (c) amortize, prorate,
allocate, and spread in equal or unequal parts the total amount of interest
throughout the contemplated term of the Obligations.
11.09 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Integration. This Agreement, together with the other Loan Documents
and any letter agreements referred to herein, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. In the
event of any conflict between the provisions of this Agreement and those of any
other Loan Document, the provisions of this Agreement shall control and govern;
provided that the inclusion of supplemental rights or remedies in favor of
- --------
Administrative Agent or Lenders in any other Loan Document shall not be deemed a
conflict with this Agreement. Each Loan Document was drafted with the joint
participation of the respective parties thereto and shall be construed neither
against nor in favor of any party, but rather in accordance with the fair
meaning thereof.
11.11 Nature of Lenders' Obligations. The obligations of Lenders hereunder
are several and not joint or joint and several. Nothing contained in this
Agreement or any other Loan Document and no action taken by Administrative Agent
or Lenders or any of them pursuant hereto or thereto may, or may be deemed to,
make Lenders a partnership, an association, a joint venture or other entity,
either among themselves or with Borrower or any Affiliate of Borrower.
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Each Lender's obligation to make any Loan pursuant hereto is several and not
joint or joint and several, and in the case of the initial Loan only is
conditioned upon the performance by all other Lenders of their obligations to
make initial Loans. A default by any Lender will not increase the Pro Rata Share
attributable to any other Lender.
11.12 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any Loan Document, certificate or statement
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery thereof but shall terminate the later
of (a) when the Commitments are terminated and (b) when no Obligations remain
outstanding under any Loan Document. Such representations and warranties have
been or will be relied upon by Administrative Agent and each Lender,
notwithstanding any investigation made by Administrative Agent or any Lender or
on their behalf.
11.13 Indemnity by Borrower. Borrower agrees to indemnify, save and hold
harmless each Administrative Agent-Related Person and each Lender and their
respective Affiliates, directors, officers, agents, attorneys and employees
(collectively the "Indemnitees") from and against: (a) any and all claims,
-----------
demands, actions or causes of action that are asserted against any Indemnitee by
any Person (other than the Administrative Agent or any Lender) relating directly
or indirectly to a claim, demand, action or cause of action that such Person
asserts or may assert against any Borrower Party, any of their Affiliates or any
of their officers or directors; (b) any and all claims, demands, actions or
causes of action arising out of or relating to, the Loan Documents, any
predecessor loan documents, the Commitments, the use or contemplated use of the
proceeds of any Loan, or the relationship of any Borrower Party, the
Administrative Agent and Lenders under this Agreement; (c) any administrative or
investigative proceeding by any Governmental Authority arising out of or related
to a claim, demand, action or cause of action described in subsection (a) or (b)
above; and (d) any and all liabilities, losses, costs or expenses (including
Attorney Costs) that any Indemnitee suffers or incurs as a result of the
assertion of any foregoing claim, demand, action, cause of action or proceeding,
or as a result of the preparation of any defense in connection with any
foregoing claim, demand, action, cause of action or proceeding, in all cases,
whether or not an Indemnitee is a party to such claim, demand, action, cause of
action or proceeding, including those liabilities caused by an Indemnitee's own
negligence (all the foregoing, collectively, the "Indemnified Liabilities");
-----------------------
provided that no Indemnitee shall be entitled to indemnification for any loss
- --------
caused by its own gross negligence or willful misconduct or for any loss
asserted against it by another Indemnitee.
11.14 Nonliability of Lenders.
Borrower acknowledges and agrees that:
(a) Any inspections of any property of Borrower made by or through
Administrative Agent or Lenders are for purposes of administration of the Loan
Documents only, and Borrower is not entitled to rely upon the same (whether or
not such inspections are at the expense of Borrower);
(b) By accepting or approving anything required to be observed, performed,
fulfilled or given to Administrative Agent or Lenders pursuant to the Loan
Documents, neither
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Administrative Agent nor Lenders shall be deemed to have warranted or
represented the sufficiency, legality, effectiveness or legal effect of the
same, or of any term, provision or condition thereof, and such acceptance or
approval thereof shall not constitute a warranty or representation to anyone
with respect thereto by Administrative Agent or Lenders;
(c) The relationship between Borrower and Administrative Agent and Lenders
is, and shall at all times remain, solely that of borrowers and lenders; neither
Administrative Agent nor Lenders shall under any circumstance be construed to be
partners or joint venturers of Borrower or their Affiliates; neither
Administrative Agent nor Lenders shall under any circumstance be deemed to be in
a relationship of confidence or trust or a fiduciary relationship with Borrower
or their Affiliates, or to owe any fiduciary duty to Borrower or their
Affiliates; neither Administrative Agent nor Lenders undertake or assume any
responsibility or duty to Borrower or their Affiliates to select, review,
inspect, supervise, pass judgment upon or inform Borrower or their Affiliates of
any matter in connection with their Property or the operations of Borrower or
their Affiliates; Borrower and their Affiliates shall rely entirely upon their
own judgment with respect to such matters; and any review, inspection,
supervision, exercise of judgment or supply of information undertaken or assumed
by Administrative Agent or Lenders in connection with such matters is solely for
the protection of Administrative Agent and Lenders and neither Borrower nor any
other Person is entitled to rely thereon; and
(d) Administrative Agent and Lenders shall not be responsible or liable to
any Person for any loss, damage, liability or claim of any kind relating to
injury or death to Persons or damage to Property caused by the actions, inaction
or negligence of Borrower and/or its Affiliates and Borrower hereby indemnifies
and holds Administrative Agent and Lenders harmless from any such loss, damage,
liability or claim.
11.15 No Third Parties Benefited. This Agreement is made for the purpose of
defining and setting forth certain obligations, rights and duties of Borrower,
Administrative Agent and Lenders in connection with the Loans, and is made for
the sole benefit of Borrower, Administrative Agent and Lenders, and
Administrative Agent's and Lenders' successors and assigns. Except as provided
in Sections 10.04 and 10.13, no other Person shall have any rights of any nature
-------------- -----
hereunder or by reason hereof.
11.16 Severability. Any provision of the Loan Documents that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.17 Confidentiality. Administrative Agent and each Lender shall use any
confidential non-public information concerning the Borrower Parties and their
Subsidiaries that is furnished to Administrative Agent or such Lender by or on
behalf of the Borrower Parties and their Subsidiaries in connection with the
Loan Documents (collectively, "Confidential Information") solely for the purpose
------------------------
of evaluating and providing products and services to them and administering and
enforcing the Loan Documents, and it will hold the Confidential Information in
-74-
<PAGE>
confidence. Notwithstanding the foregoing, Administrative Agent and each Lender
may disclose Confidential Information to (a) any governmental agency or
regulatory body having or claiming to have authority to regulate or oversee any
aspect of Administrative Agent's or such Lender's business or that of their
affiliates or any of their or their affiliates' directors, officers, employees,
advisors, or representatives (collectively, the "Representatives") in connection
---------------
with the exercise of such authority or claimed authority; (b) the extent
necessary or appropriate to effect or preserve Administrative Agent's or such
Lender's or any of their Affiliates' security (if any) for any Obligation or to
enforce any right or remedy or in connection with any claims asserted by or
against Administrative Agent or such Lender or any of their Representatives; (c)
Representatives whom it determines need to know such information for the
purposes set forth in this Section; and (d) any bank or financial institution or
other entity to which such Lender has assigned or desires to assign an interest
or participation in the Loan Documents or the Obligations, provided that any
--------
such recipient of such Confidential Information agrees to keep such Confidential
Information confidential as specified herein. For purposes hereof, the term
"Confidential Information" shall not include information that (x) is in
Administrative Agent's or a Lender's possession prior to its being provided by
or on behalf of the Borrower Parties, provided that such information is not
--------
known by Administrative Agent or such Lender to be subject to another
confidentiality agreement with, or other legal or contractual obligation of
confidentiality to, a Borrower Party, (y) is or becomes publicly available
(other than through a breach hereof by Administrative Agent or such Lender), or
(z) becomes available to Administrative Agent or such Lender on a
nonconfidential basis, provided that the source of such information was not
--------
known by Administrative Agent or such Lender to be bound by a confidentiality
agreement or other legal or contractual obligation of confidentiality with
respect to such information.
11.18 Further Assurances. Borrower and its Subsidiaries shall, at their
expense and without expense to Lenders or Administrative Agent, do, execute and
deliver such further acts and documents as any Lender or Administrative Agent
from time to time reasonably requires for the assuring and confirming unto
Lenders or Administrative Agent of the rights hereby created or intended now or
hereafter so to be, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document.
11.19 Headings. Section headings in this Agreement and the other Loan
Documents are included for convenience of reference only and are not part of
this Agreement or the other Loan Documents for any other purpose.
11.20 Time of the Essence. Time is of the essence of the Loan Documents.
11.21 Foreign Lenders and Participants. Each Lender, and each holder of a
participation interest herein, that is a "foreign corporation, partnership or
trust" within the meaning of the Code shall deliver to Administrative Agent,
within 20 days after the Closing Date (or after accepting an assignment or
receiving a participation interest herein) two duly signed completed copies of
either Form W-8BEN (relating to such Person and entitling it to a complete
exemption from withholding on all payments to be made to such Person by Borrower
pursuant to this Agreement) or Form W-8ECI (relating to all payments to be made
to such Person by Borrower pursuant to this Agreement) of the United States
Internal Revenue Service or such
-75-
<PAGE>
other evidence satisfactory to Borrower and Administrative Agent that no
withholding under the federal income tax laws is required with respect to such
Person. Thereafter and from time to time, each such Person shall (a) promptly
submit to Administrative Agent such additional duly completed and signed copies
of one of such forms (or such successor forms as shall be adopted from time to
time by the relevant United States taxing authorities) as may then be available
under then current United States laws and regulations to avoid, or such evidence
as is satisfactory to Borrower and Administrative Agent of any available
exemption from, United States withholding taxes in respect of all payments to be
made to such Person by Borrower pursuant to this Agreement and (b) take such
steps as shall not be materially disadvantageous to it, in the reasonable
judgment of such Lender, and as may be reasonably necessary (including the re-
designation of its Lending Office, if any) to avoid any requirement of
applicable Laws that Borrower make any deduction or withholding for taxes from
amounts payable to such Person. If such Persons fails to deliver the above forms
or other documentation, then Administrative Agent may withhold from any interest
payment to such Person an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Code, without reduction. If any
Governmental Authority asserts that Administrative Agent did not properly
withhold any tax or other amount from payments made in respect of such Person,
such Person shall indemnify Administrative Agent therefor, including all
penalties and interest and costs and expenses (including Attorney Costs) of
Administrative Agent. The obligation of Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement of
Administrative Agent.
11.22 [intentionally omitted]
11.23 Governing Law.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE GOVERNING STATE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE; PROVIDED THAT ADMINISTRATIVE AGENT AND EACH LENDER
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF THE GOVERNING
STATE OR OF THE UNITED STATES FOR THE CENTRAL DISTRICT OF THE GOVERNING STATE,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER PARTY,
ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH BORROWER
PARTY, ADMINISTRATIVE AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER
DOCUMENT RELATED HERETO. EACH BORROWER PARTY,
-76-
<PAGE>
ADMINISTRATIVE AGENT AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
THE LAW OF THE GOVERNING STATE.
11.24 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
11.25 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-77-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
STATER BROS. MARKETS
By: /s/ Dennis N. Beal
--------------------------
Name: Dennis N. Beal
-----------------------
Title: Senior Vice President and
-------------------------
Chief Financial Officer
-----------------------
STATER BROS. HOLDINGS, INC.
By: /s/ Bruce D. Varner
--------------------------
Name: Bruce D. Varner
------------------------
Title: Secretary
-----------------------
BANK OF AMERICA, N.A., as
Administrative Agent
By: /s/ Helen Wilson
--------------------------
Name: Helen Wilson
--------------------------
Title: Vice President
--------------------------
BANK OF AMERICA, N.A., as
Issuing Lender and a Lender
By: /s/ Helen Wilson
--------------------------
Name: Helen Wilson
--------------------------
Title: Vice President
--------------------------
-78-
<PAGE>
EXHIBIT A
FORM OF REQUEST FOR EXTENSION OF CREDIT
Date: ______,
To: BANK OF AMERICA, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of August 6,
1999 between STATER BROS. MARKETS, a California corporation ("Borrower"), STATER
--------
BROS. HOLDINGS INC., a Delaware corporation ("Holdings"), Lenders from time to
--------
time party thereto, and BANK OF AMERICA, N.A., as Administrative Agent and
Issuing Lender (as amended, restated, extended, supplemented or otherwise
modified in writing from time to time, the "Agreement;" the terms defined
---------
therein being used herein as therein defined).
The undersigned hereby requests (select one):
[_] A Borrowing of Loans [_] A Conversion or Continuation of Loans
1. On ______________________________________.
2. In the amount of $_______________________.
3. Comprised of ____________________________.
[type of Loan requested]
4. If applicable: with an Interest Period of ____________ months.
The undersigned hereby certifies that the proceeds of the Loans will be
used for purposes described in clause [_] of Section 2.01(c) of the Agreement.
---------------
If proceeds of the Loans will be used for purposes described in Section
-------
2.01(c)(4) of the Agreement, attached hereto is evidence satisfactory to
- ----------
Administrative Agent (which evidence may, at the discretion of Administrative
Agent, consist of a legal opinion in form and substance satisfactory to
Administrative Agent) that the proposed use of proceeds of such Loans is not
subject to the restrictions in Article IV, Section 6(N) of Borrower's Restated
Articles of Incorporation.
The foregoing request complies with the requirements of Section 2.01 of the
------------
Agreement. The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the above date, before and after
giving effect and to the application of the proceeds therefrom:
(a) The representations and warranties made by Borrower and Holdings
in the Agreement, or which are contained in any certificate, document or
financial or other statement furnished at any time under or in connection
therewith, are and will be correct
A-1
<PAGE>
on and as of the date of this Extension of Credit, except to the extent
that such representations and warranties specifically refer to any earlier
date; and
A-2
<PAGE>
(b) no Default or Event of Default has occurred and is continuing on
the date hereof or after giving effect to this Extension of Credit.
STATER BROS. MARKETS
By: __________________________________________
Name: ________________________________________
Title: _______________________________________
A-3
<PAGE>
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
Financial Statement Date: ________,
To: BANK OF AMERICA, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of August
6,1999 between STATER BROS. MARKETS, a California corporation ("Borrower"),
--------
STATER BROS. HOLDINGS INC., a Delaware corporation ("Holdings"), Lenders from
--------
time to time party thereto, and BANK OF AMERICA, N.A., as Administrative Agent
and Issuing Lender (as amended, restated, extended, supplemented or otherwise
modified in writing from time to time, the "Agreement;" the terms defined
---------
therein being used herein as therein defined).
The undersigned Responsible Officers hereby certify as of the date hereof
that they are the ______________________________ of Borrower and ___________ of
Holdings, respectively, and that, as such, they are authorized to execute and
deliver this Certificate to Administrative Agent on the behalf of Borrower and
Holdings, and that:
[Use following for fiscal year-end financial statements]
1. Attached hereto as Schedule 1 are the year-end audited financial
----------
statements required by Section 6.01(a) of the Agreement for the fiscal years of
---------------
Borrower and Holdings ended as of the above date, together with the reports and
opinions of an independent certified public accountant required by such section.
[Use following for fiscal quarter-end financial statements]
1. Attached hereto as Schedule 1 are the unaudited financial statements
----------
required by Section 6.01(b) of the Agreement for the fiscal quarters of Borrower
---------------
and Holdings ended as of the above date. Such financial statements fairly
present the financial condition, results of operations and changes in financial
position of Borrower and its Subsidiaries and of Holdings and its Subsidiaries,
respectively, in each case in accordance with GAAP as at such date and for such
periods, subject only to normal year-end audit adjustments and the absence of
footnotes.
2. The undersigned have reviewed and are familiar with the terms of the
Agreement and have made, or have caused to be made under their supervision, a
detailed review of the transactions and conditions (financial or otherwise) of
Borrower and Holdings during the accounting periods covered by the attached
financial statements.
3. A review of the activities of the Borrower Parties during such fiscal
period has been made under our supervision with a view to determining whether
during such fiscal period the
B-1
<PAGE>
Borrower Parties performed and observed all their respective Obligations under
the Loan Documents, and
[select one:]
[to the best knowledge of the undersigned during such fiscal period, each
Borrower Party performed and observed each covenant and condition of the Loan
Documents applicable to it.]
--or--
[the following covenants or conditions have not been performed or observed
and the following is a list of all such Defaults and its nature and status:]
4. The following financial covenant analyses and information set forth on
Schedule 2 attached hereto are true and accurate on and as of the date of this
- ----------
Certificate.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as
of _____________, ________.
STATER BROS. MARKETS
By: ___________________________________
Name: _________________________________
Title: ________________________________
STATER BROS. HOLDINGS INC.
By: ___________________________________
Name: _________________________________
Title: ________________________________
B-2
<PAGE>
For the Quarter/Year ended ________________("Statement Date")
--------------
SCHEDULE 2
to the Compliance Certificate
($ in 000's)
I. Section 7.14(a) - Adjusted Consolidated Net Worth.
A. Actual Shareholders' Equity at Statement Date: $_____________
B. Outstanding principal amount of Indebtedness owed
by Borrower to Holdings on Statement Date: $_____________
C. Adjusted Consolidated Net Worth
(Lines I.A + I.B): $_____________
D. Starting Consolidated Net Worth: $_____________
E. 90% of Holdings Consolidated Net Income for each
fiscal quarter ending after Closing Date (no
reduction for losses): $_____________
F. 100% of net proceeds from issuance of equity of
Borrower after date of Agreement (including
conversion of debt securities): $_____________
G. Contributions by Holdings to the capital of
Borrower (other than pursuant to Sections 8.09
and 8.10): $_____________
H. Minimum required Adjusted Consolidated Net Worth
(Lines I.D + I.E + I.F + I.G minus $115,000,000): $_____________
-----
I. Excess (deficient) for covenant compliance
(Lines I.C - I.H): $_____________
II. Section 7.14(b) - Consolidated EBITDA.
A. Consolidated EBITDA for [one][two][three][four]
consecutive fiscal quarters(s) ending on above date
("Subject Period"):
--------------
B-3
<PAGE>
1. Consolidated Net Income for Subject Period: $_____________
2. Consolidated Interest Charges, as deducted from
Consolidated Net Income for Subject Period: $_____________
3. Provision for income taxes for Subject Period: $_____________
4. Depreciation and Amortization expenses deducted
from Consolidated Net Income for Subject Period
(minus any extraordinary gains for Subject
-----
Period not previously excluded in Lines
II.A.1-II.A.3): $_____________
5. Consolidated EBITDA for subject period
(Lines II.A.1 + II.A.2 + II.A.3 + II.A.4): $_____________
B-4
<PAGE>
6. Consolidated EBITDA for subject period
calculated on an Annualized Basis (for Subject
Periods ending on March 26, 2000, June 25,
2000 and September 24, 2000 only) $_____________
B. Minimum required: $75,000,000.00
--------------
C. Excess (deficient) for covenant compliance
(Line II.A.5 or II.A.6 - II.B): $___________
III. Section 8.02(b) - Restricted Payments.
A. Holdings Consolidated Net Income from September 24,
2000 through Statement Date declared: $_____________
B. 50% of Line III.A: $_____________
C. Aggregate of dividends paid on Holdings common stock
on or after December 31, 2000: $_____________
D. Excess (deficient) for covenant compliance
(Line III.B-Line III.C): $_____________
IV. Section 2.01(d) and 2.04(a) - Inventory Coverage.
A. Aggregate principal amount of Loans and Letter of
Credit Usage on Statement Date: $_____________
B. Book value of Inventory of Borrower and its
Subsidiaries: $_____________
C. 45% of Line IV.B : $_____________
D. Excess (deficient) for covenant compliance
(Line IV.C -Line IV.A): $_____________
B-5
<PAGE>
EXHIBIT C
FORM OF COMMITTED LOAN NOTE
$_______________________ ____________________
FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to
--------
pay to the order of _____________________(the "Lender"), on the Maturity Date
------
(as defined in the Credit Agreement referred to below) the principal amount of
$_____________________, or such lesser principal amount of Committed Loans (as
defined in the Credit Agreement referred to below) payable by Borrower to Lender
on such Maturity Date under that certain Credit Agreement dated as of August 6,
1999 among Borrower, STATER BROS. HOLDINGS INC., a Delaware corporation
("Holdings"), Lenders from time to time party thereto, and BANK OF AMERICA,
---------
N.A., as Administrative Agent and Issuing Lender (as amended, restated,
extended, supplemented or otherwise modified in writing from time to time, the
"Agreement;" the terms defined therein being used herein as therein defined).
---------
Borrower promises to pay interest on the unpaid principal amount of each
Committed Loan from the date of such Committed Loan until such principal amount
is paid in full, at such interest rates, and payable at such times as are
specified in the Credit Agreement.
All payments of principal and interest shall be made to Administrative
Agent for the account of Lender in United States dollars in immediately
available funds at Administrative Agent's Payment office.
If any amount is not paid in full when due hereunder, such unpaid amount
shall bear interest, to be paid upon demand, from the due date thereof until the
date of actual payment (and before as well as after judgment) computed at the
per annum rate set forth in the Credit Agreement.
This Note is one of the "Committed Loan Notes" referred to in the Credit
--------------------
Agreement. Reference is hereby made to the Credit Agreement for rights and
obligations of payment and prepayment, events of default and the right of Lender
to accelerate the maturity hereof upon the occurrence of such events. Committed
Loans made by Lender shall be evidenced by one or more loan accounts or records
maintained by Lender in the ordinary course of business. Lender may also attach
schedules to this Note and endorse thereon the date, amount and maturity of its
Committed Loans and payments with respect thereto.
Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and non-
payment of this Note.
C-1
<PAGE>
Borrower agrees to pay all collection expenses, court costs and Attorney
Costs (whether or not litigation is commenced) which may be incurred by Lender
in connection with the collection or enforcement of this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA.
STATER BROS. MARKETS
By:________________________________
Name:______________________________
Title:_____________________________
C-2
<PAGE>
EXHIBIT D
FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE
_________, _____
To: BANK OF AMERICA, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of August
6,1999 between STATER BROS. MARKETS, a California corporation ("Borrower"),
--------
STATER BROS. HOLDINGS INC., a Delaware corporation ("Holdings"), Lenders from
--------
time to time party thereto, and BANK OF AMERICA, N.A., as Administrative Agent
and Issuing Lender (as amended, restated, extended, supplemented or otherwise
modified in writing from time to time, the "Agreement;" the terms defined
---------
therein being used herein as therein defined).
1. We hereby give you notice of, and request your consent to, the
assignment by ___________________ (the "Assignor") to _______________________
--------
(the "Assignee") of _______% of the right, title and interest of the Assignor
--------
in and to the Loan Documents, including without limitation the right, title
and interest of the Assignor in and to the Commitments of the Assignor, all
outstanding Loans made by the Assignor and outstanding Letter of Credit Usage.
Before giving effect to such assignment:
(a) the aggregate amount of the Assignor's Revolving Loan Commitment is
$_________;
(b) the aggregate amount of the Assignor's Letter of Credit Commitment is
$_________;
(c) the aggregate principal amount of its outstanding Loans is $_______;
and
(d) the aggregate amount of the Letter of Credit Usage is $________.
2. The Assignee hereby represents and warrants that it has complied with
the requirements of Section 11.04 of the Agreement in connection with this
-------------
assignment and acknowledges and agrees that: (a) other than the representation
and warranty that it is the legal and beneficial owner of the Pro Rata Share
being assigned thereby free and clear of any adverse claim, the Assignor has
made no representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with the
Agreement or the execution, legality, validity, enforceability, genuineness or
sufficiency of the Agreement or any other Loan Document; (b) the Assignor has
made no representation or warranty and assumes no responsibility with respect to
the financial condition of Borrower or the performance by Borrower of the
Obligations; (c) it has received a copy of the Agreement, together with copies
of the most recent financial statements delivered pursuant to Section 6.1
-----------
thereof and such other documents and information as it has deemed appropriate to
make its own
D-1
<PAGE>
credit analysis and decision to enter into this Assignment and Acceptance; (d)
it will, independently and without reliance upon Administrative Agent or any
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Agreement; (e) it appoints and authorizes Administrative Agent
to take such action and to exercise such powers under the Agreement and the
other Loan Documents as are delegated to Administrative Agent by the Agreement
and such other Loan Documents; and (f) it will perform in accordance with their
terms all of the obligations which by the terms of the Agreement are required to
be performed by it as a Lender.
3. The Assignee agrees that, upon receiving your consent to such
assignment and from and after _______________________, the Assignee will be
bound by the terms of the Loan Documents, with respect to the interest in the
Loan Documents assigned to it as specified above, as fully and to the same
extent as if the Assignee were Lender originally holding such interest in the
Loan Documents.
D-2
<PAGE>
4. The following administrative details apply to the Assignee:
(a) Offshore Lending Office:
Assignee name: __________________________
Address: ________________________________
_________________________________________
Attention: ______________________________
Telephone: (___) ________________________
Telecopier: (___) _______________________
(b) Domestic Lending Office:
Assignee name: __________________________
Address: ________________________________
_________________________________________
Attention: ______________________________
Telephone: (___) ________________________
Telecopier: (___) _______________________
(c) Notice Address:
Assignee name: __________________________
Address: ________________________________
_________________________________________
Attention: ______________________________
Telephone: (___) ________________________
Telecopier: (___) _______________________
(d) Payment Instructions: Account No.:
Account No.______________________________
Attention: ______________________________
Reference: ______________________________
D-3
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice
of Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[ASSIGNOR]
By: _____________________________________
Name: ___________________________________
Title: __________________________________
[ASSIGNEE]
By: _____________________________________
Name: ___________________________________
Title: __________________________________
We hereby consent to the
foregoing assignment.
STATER BROS. MARKETS
By: ____________________________
Name: __________________________
Title: _________________________
BANK OF AMERICA, N.A., as Administrative Agent
By: ____________________________
Name: __________________________
Title: _________________________
D-4
<PAGE>
EXHIBIT E-1
[LETTERHEAD OF VARNER, SALESON & DOBLER LLP]
August 6, 1999
Bank of America, N. A., as Administrative Agent
under the Credit Agreement defined below
1455 Market Street
San Francisco, California 94103
and
the Lenders Party to the Credit Agreement defined below
Re: Credit Agreement dated as of August 6, 1999, by and among Stater
Bros. Markets, Stater Bros. Holdings Inc., the financial
institutions as Lenders party thereto, and Bank of America, N.A., as
Administrative Agent ("Credit Agreement").
Ladies and Gentlemen:
We have acted as California counsel to Stater Bros. Markets, a California
corporation (the "Borrower") and Stater Bros. Holdings Inc., a Delaware
corporation ("Holdings") for the purpose of rendering this opinion. This
Opinion is rendered to you at the request of Holdings and the Borrower in
compliance with Section 4.01(o) of the Credit Agreement.
We have also acted as counsel to Stater Bros. Development, Inc., a
California corporation ("Development") and a subsidiary of Holdings, in
-----------
connection with the guaranty by Development of obligations of the Borrower under
the Credit Agreement (the "Development Guaranty"; Development, in such capacity
--------------------
being referred to herein as the "Guarantor"). The Borrower, Holdings and the
---------
Guarantor are collectively referred to herein as the "Borrower Parties."
----------------
While certain members of our firm are admitted to practice in other States,
we have not examined the laws of any state other than the State of California or
consulted with members of our firm admitted to practice in other jurisdictions
with respect to the laws of such other jurisdictions, except that we are
generally familiar with the Delaware General Corporation Law. Accordingly, we
are not rendering any opinion whatsoever based on the laws of any jurisdiction
other than Federal law, the laws of the State of California and Delaware General
Corporation Law. For purposes of rendering this opinion, we have considered
such questions of Federal law, California law and Delaware General Corporation
Law as we have deemed necessary.
<PAGE>
Bank of America, N.A.
August 6, 1999
Page 2
This opinion is provided as our opinion only and not as a guarantee,
warranty or policy of insurance with respect to the matters on which we opine.
Capitalized terms used in this opinion without definition have the meanings
given them in the Credit Agreement among Borrower, Holdings, certain financial
institutions as Lenders party thereto ("Lenders"), and Bank of America, N.A.
(the "Administrative Agent").
In addition to all other limitations and qualifications herein, this
opinion is also subject to and limited by the limitations and qualifications set
forth in paragraphs A. through O. below.
In our capacity as such counsel, we have examined originals, or copies
identified to our satisfaction as being true copies, of such records, documents
or other instruments as in our judgment are necessary or appropriate to enable
us to render the opinions expressed below. These records, documents and
instruments included the following:
(a) The Articles of Incorporation of each Borrower Party, as amended
to date;
(b) The Bylaws of each Borrower Party, as amended to date;
(c) All records of proceedings and actions of the Board of Directors
of each Borrower Party relating to the Credit Agreement, the other Loan
Documents, the Related Agreements, and the transactions contemplated
thereby;
(d) The Credit Agreement;
(e) The Committed Note delivered today (the "Note");
----
(f) The Development Guaranty;
(g) the Albertsons Acquisition Agreement;
(h) the Holdings Senior Note Indenture; and
(i) the Holdings Senior Notes.
The documents referred to in paragraphs (d), (e) and (f) above are
collectively referred to herein as the "Loan Documents." The Albertsons
--------------
Acquisition Agreement, the Holdings Senior Note Indenture and the Holdings
Senior Notes are collectively referred to herein as the "Related Agreements."
------------------
<PAGE>
Bank of America, N.A.
August 6, 1999
Page 3
We have been furnished with, and with Lenders' consent have relied upon,
certificates of officers of the Borrower Parties with respect to certain factual
matters, copies of which have been delivered to Lenders. In addition, we have
obtained and relied upon such certificates and assurances from public officials
as we have deemed necessary, copies of which have been delivered to Lenders. In
all such examinations, we have assumed the genuineness of all signatures on
original and certified documents, and the conformity to original or certified
documents of all documents submitted to us as conformed or photostatic copies.
Based on the foregoing, and in reliance thereon, and subject to the
limitations, qualifications and exceptions set forth below, we are of the
opinion that:
1. The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own and operate its properties and to
carry on its business as now conducted. The Borrower is duly qualified to do
business, and is in good standing, in the State of California.
2. Holdings is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own and operate its properties and to
carry on its business as now conducted. Holdings is duly qualified to do
business, and is in good standing, in the State of Delaware.
3. The Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own and operate its properties and to
carry on its business as now conducted. The Guarantor is duly qualified to do
business, and is in good standing, in the State of California.
4. The Borrower has all requisite corporate power and authority to
execute, deliver and perform the Loan Documents and the Related Agreements to
which the Borrower is a party, to execute and deliver the Notes, and to carry
out the transactions contemplated thereby.
5. Holdings has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Credit Agreement and the Related
Agreements, and to carry out the transactions contemplated thereby.
6. The Guarantor has all requisite corporate power and authority to
execute, deliver and perform the Development Guaranty and to carry out the
transactions contemplated thereby.
<PAGE>
Bank of America, N.A.
August 6, 1999
Page 4
7. The execution, delivery and performance of the Loan Documents and the
Related Agreements to which the Borrower is a party and the issuance and payment
of the Notes have been duly authorized by all necessary corporate action on the
part of Borrower. The Loan Documents and the Related Agreements to which the
Borrower is a party and the Notes have been duly executed and delivered by
Borrower and constitute the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms.
8. The execution, delivery and performance of its obligations under the
Credit Agreement and the Related Agreements have been duly authorized by all
necessary corporate action on the part of Holdings. The Credit Agreement and
the Related Agreements have been duly executed and delivered by Holdings and
constitute the legally valid and binding obligations of Holdings, enforceable
against Holdings in accordance with their respective terms.
9. The execution, delivery and performance of the Development Guaranty
has been duly authorized by all necessary corporate action on the part of
Guarantor. The Development Guaranty has been duly executed and delivered by
Guarantor and constitutes the legally valid and binding obligation of Guarantor
and is enforceable against Guarantor in accordance with its terms.
10. Neither the execution and delivery of the Loan Documents and Related
Agreements by the Borrower Parties party thereto nor the execution, delivery and
payment of the Notes by the Borrower, nor the consummation of the transactions
contemplated thereby nor the compliance with the terms and conditions thereof by
the Borrower Parties (A) conflicts with, results in a breach or violation of, or
constitutes a default under, any of the terms, conditions or provisions of (x)
the Certificate or Articles of Incorporation or Bylaws of any Borrower Party or
any of their respective Subsidiaries, (y) any term of any material agreement,
instrument, order, writ, judgment or decree known to us after due inquiry to
which any Borrower Party or any of their respective Subsidiaries is a party or
by which any of their respective properties or assets are bound, or (z) any
present statute, rule or regulation binding on any Borrower Party or any of
their respective Subsidiaries, or (B) results in the creation of any Lien upon
any of the properties or assets of any Borrower Party under any agreement or
order referred to in clause (y) above.
11. No consents or approvals of, authorizations by, or registrations,
declarations or filings are required by any Borrower Party in connection with
the execution and delivery by the Borrower Parties of the Loan Documents and
Related Agreements to which they are a party or
<PAGE>
Bank of America, N.A.
August 6, 1999
Page 5
the extensions of credit under the Credit Agreement or the payment by Borrower
of its Obligations thereunder or the execution, delivery and payment of the
Notes or the consummation of the transactions contemplated thereby.
12. To the best of our knowledge after due inquiry, (i) there are no
actions, suits or proceedings pending or threatened against any Borrower Party
or any of their respective Subsidiaries that have could reasonably be expected
to materially and adversely affecting either the ability of any Borrower Party
to perform its obligations under any Loan Document or Related Agreement or the
financial condition or operations of any Borrower Party individually or the
Borrower Parties taken as a whole, and (ii) there are no action, suits or
proceedings pending against any Loan Party that seek to enjoin the consummation
of transactions contemplated by the Related Agreements.
13. The making of the Loans and the application of the proceeds thereof
as provided in the Credit Agreement do not violate Regulation T, U or X of the
Board of Governors of the Federal Reserve System.
14. No Borrower Party is an "investment company" or a company
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended, or a "holding company," or a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
15. The aggregate principal amount of indebtedness owed under the Credit
Agreement can be increased above $50,000,000 at any time after the execution and
delivery of the Credit Agreement without breaching or conflicting with the
Holdings Senior Note Indenture by an amount equal to the aggregate principal
amount of indebtedness that Borrower can incur at such time under Section
4.09(o) of the Holdings Senior Note Indenture.
In addition to any other limitations and qualifications herein, this
opinion is also subject to and limited by the following limitations and
qualifications:
A. For purposes of rendering this opinion, the term "enforceable" does
not mean that specific performance or other equitable remedies are available as
a remedy.
<PAGE>
Bank of America, N.A.
August 6, 1999
Page 6
B. The validity, binding effect and enforceability of the Documents are
limited by laws pertaining to bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent conveyance or other such laws, and laws
pertaining to creditors' rights generally. We express no opinion with respect
to such laws and rights.
C. The validity, binding effect and enforceability of the Documents are
subject to the public policy of the State of California and the effect of
California statutory law and judicial decisions which have imposed restrictions,
duties and standards on conduct regarding, without limitation, obligations of
good faith and fair dealing and reasonableness. We express no opinion with
respect to the manner in which the public policy of the State of California or
such laws or decisions may be applied in a given case.
D. Whenever this opinion, with respect to the existence or absence of
facts, is qualified by the phrase "to the best of our knowledge" or any other
phrase indicating a limitation on the basis of knowledge, it is intended to
indicate that no information has come to the attention of the lawyers of our
firm who have worked on the transactions contemplated by the documents
referenced herein or other matters for the Company which would give us actual
knowledge of the existence or absence of such facts and no inference as to our
knowledge of the existence or absence of such facts shall be drawn.
E. The validity, binding effect and enforceability of the Documents are
subject to the effect of general principles of equity, including, without
limitation, the concepts of materiality, reasonableness and forfeiture,
regardless of whether enforcement in considered proceedings at law or in equity,
and we express no opinion with respect to the manner in which those principles
may be applied in a given case.
F. We express no opinion whatsoever with respect to the validity, binding
effect or enforceability of any provision of the Documents releasing or
indemnifying a party against liability for its own wrongful acts.
G. We express no opinion whatsoever with respect to the validity, binding
effect or enforceability of any provision of the documents waiving broadly or
vaguely stated rights or unknown future rights and of provisions that rights or
remedies are not exclusive, that every right or remedy is cumulative and may be
exercised in addition to or with some other right or remedy or that the election
of some particular remedy does not preclude recourse to other remedies.
<PAGE>
Bank of America, N.A.
August 6, 1999
Page 7
H. We express no opinion with respect to the laws of the state or
jurisdiction whatsoever other than the laws of the State of California, the
Federal laws and the Delaware General Corporation Law, nor do we express an
opinion with respect to any matters governed by the laws of any jurisdiction
other than the State of California and the Delaware General Corporation Law.
Furthermore, we express no opinion whatsoever with respect to any federal or
state securities laws or blue sky laws.
I. This opinion is based on the state of the facts and the law as of the
date first set forth above and is inapplicable to the extent that any of those
facts or law change. We express no opinion as to factual or legal developments
of any kind in areas covered by this opinion which occur after the date hereof.
J. This opinion is to be construed narrowly to cover only the matters
expressly addressed herein and we express no opinion, either expressly or
implicitly, with respect to any other matter.
This opinion is rendered on the date first set forth above for the
benefit of the Administrative Agent and Lenders in connection with the Credit
Agreement and it may not be utilized for any reason for any other purpose or by
any other person, firm, corporation or entity.
Very truly yours,
<PAGE>
EXHIBIT E-2
August 6, 1999
(213) 229-7159 C 87217-00009
Bank of America, N.A., as
Administrative Agent under the
Credit Agreement defined below
1455 Market Street
San Francisco, California 94103
and
The Lenders, party to the Credit Agreement
defined below
Re: $75,000,000 Senior Credit Facilities
Gentlemen:
This opinion is furnished in connection with the Credit Agreement
among Stater Bros. Markets, Stater Bros. Holdings Inc. and Bank of America, N.A.
as Administrative Agent and Letter of Credit Issuing Lender and the other
financial institutions thereto (the "Revolving Credit Agreement") proposed to be
entered into among you, Stater Bros. Markets, a California Corporation ("Stater
Bros. Markets") and Stater Bros. Holdings Inc. ("Stater Bros. Holdings"), dated
August 6, 1999 (the "Revolving Credit Agreement"). Stater Bros. Markets is a
subsidiary of Stater Bros. Holdings, which owns all of its outstanding common
stock.
The Revolving Credit Agreement will permit borrowings by Stater Bros.
Markets from time to time, subject to a requirement that proceeds of such
borrowings be used in compliance with the Restated Articles of Incorporation
("Articles") of Stater Bros. Markets. Paragraph N of Section 6 of the Articles
provides, in relevant part, that Stater Bros. Markets may not, without the
approval of holders of 66-2/3% of the outstanding shares of preferred stock,
<PAGE>
August 6, 1999
Page 2
[d]irectly or indirectly create, incur, assume, guarantee, or otherwise
become liable, . . . with respect to any indebtedness for borrowed money
unless the proceeds thereof are used to retire any then existing
indebtedness, with the exception of trade payables, or to acquire capital
assets.
The Revolving Credit Agreement is being entered into in connection
with a series of transactions related to the acquisition of 43 supermarkets and
one future store site by Stater Bros. Holdings from Albertson's, Inc., and the
contemporaneous capital contribution of such assets to Stater Bros. Markets.
Stater Bros. Holdings will incur $450 million of indebtedness in connection with
the acquisition and capital contribution, including amounts required to
refinance existing debt. It is anticipated that the source of funds for
servicing such new indebtedness will be dividends from Stater Bros. Markets.
You have asked for our opinion as to the kinds of liabilities which
may be repaid with the proceeds of indebtedness pursuant to the Revolving Credit
Agreement without the approval of the holders of 66-2/3% of the outstanding
shares of preferred stock.
We are aware of no controlling statute or reported court decision
governing the terms "indebtedness" or "trade payables" under California law.
The Articles do not purport to define such terms, and the context of
their usage provides only limited guidance as to the intended meaning. The
language of paragraph N indicates that the term "indebtedness" is intended to
encompass more than obligations to repay borrowed money, since: (i) the
restriction in paragraph N is expressly applicable to "indebtedness for borrowed
money", whereas the permitted use of proceeds is to retire "indebtedness",
without the limiting phrase "for borrowed money"; and (ii) the reference to
"trade payables" would be without meaning or purpose if the term "indebtedness"
was restricted to obligations for borrowed money.
In the absence of a controlling statute or reported court decision,
and with the limited contextual guidance referred to above, we believe the two
key terms are properly construed in accordance with their common meanings.
<PAGE>
August 6, 1999
Page 3
A review of standard dictionaries indicates that the term
"indebtedness" is consistently defined as including any legal obligation to pay
money./1/ The following, from Black's Law Dictionary, is typical of such
definitions:
The state of being in debt, without regard to the ability or inability
of the party to pay the same. The owing of a sum of money upon a
certain and express agreement. Obligations yet to become due
constitute indebtedness, as well as those already due. And in a broad
sense and in common understanding the word may mean anything that is
due and owing./2/
We believe it is also relevant in this connection that the closely
similar term "debt" is defined in the United States Bankruptcy Code as
"liability on a claim"./3/ The term "claim" is defined broadly to include "any
right to payment. . . ."/4/
We find less guidance as to the meaning of the term "trade payables".
Although the term is in common use among lawyers and businessmen, neither
Black's Law Dictionary nor standard dictionaries which we consulted provide a
definition of the phrase. Neither, to the best of our knowledge, is the term
commonly defined in loan agreements and indentures. We found one dictionary
which provides the following definition of the similar term, "trade credit":
open account arrangements with suppliers of goods and services, and a
firm's record of payment with the suppliers./5/
_________________
/1/ Oxford English Dictionary, Vol. V, 191 (1970); Bouvier's Law Dictionary,
Vol. I, 1531 (8th ed. 1914); Webster's New Universal Unabridged Dictionary 927
(2d ed. 1983); Webster's New International Dictionary 1261 (2d ed. 1961); The
American Heritage Dictionary 653 (3d ed. 1992); Shorter Oxford English
Dictionary, Vol. I, 986 (1934); Merriam Webster's Collegiate Dictionary 590
(10th ed. 1995); Funk & Wagnalls New Comprehensive International Dictionary of
the English Language, Encyclopedic Edition (1982).
/2/ Black's Law Dictionary 768 (6th ed. 1990).
/3/ United States Bankruptcy Code (S) 101(12).
/4/ United States Bankruptcy Code (S) 101(5).
/5/ Barron's Dictionary of Finance and Investment Terms (4th ed. 1995).
<PAGE>
August 6, 1999
Page 4
Based upon our knowledge and experience, we believe the term "trade payables" is
commonly used to refer to liabilities for payment to providers of goods and
services in the normal course.
Based upon the foregoing, the following are categories of indebtedness
that, in our opinion, would not be within the meaning of the term "trade
payables": indebtedness for borrowed money; a payment obligation arising from a
transaction other than for goods and services (e.g. an acquisition of real
estate); the obligation to make payment of dividends following their
declaration;/6/ rents for real property; taxes; obligations pursuant to workers
compensation insurance laws; clean-up obligations arising under environmental
laws; and personal injury, products liability and other liabilities arising
under the law of torts. The foregoing list is not intended to be exhaustive.
We understand that concurrently with the capital contribution referred
to above, Stater Bros. Markets will declare a dividend in the amount of
$50,000,000, to be evidenced by its promissory note payable to Stater Bros.
Holdings. We understand that the note is intended to provide a source of funds
to be used by Stater Bros. Holdings for the payment of interest and/or principal
on its indebtedness, or otherwise in its business, and it is not contemplated
that such proceeds will be reinvested in Stater Bros. Markets. Based upon and
for the reasons stated above, we believe that Stater Bros. Markets may in,
compliance with the Articles, borrow funds pursuant to the Revolving Credit
Agreement in order to make payment of principal and interest on such $50,000,000
promissory note.
Stater Bros. Markets is a California corporation, and this opinion is
limited to the effect of the current state of the laws of the State of
California, and the facts as they currently exist. We assume no obligation to
revise or supplement this opinion in the event of changes in such laws or the
interpretations thereof or in the event of changes in such facts. This opinion
has been delivered solely for your benefit in connection with the Revolving
Credit Agreement. Except as stated in the following paragraph, it may not be
relied upon by any other person or entity, or by you for any other purpose, and
may not be copied or quoted in whole or in part without our prior express
written permission. You may, however, deliver a copy of this opinion to your
accountants, attorneys and other professional advisors, to governmental
regulatory agencies having jurisdiction over you and to permitted assignees
under the Revolving Credit Agreement, and such assignees may rely on this
opinion as if it were addressed to them on the date hereof.
____________________
/6/ See, Stephenson v. Drever, 16 Cal. 4th 1167, 1177, 947 P.2d 1301, 1306, 69
--------------------
Cal. Rptr. 2d 764, 769-70 (1997).
<PAGE>
August 6, 1999
Page 5
A copy of this opinion letter will be provided to Banc of America
Securities LLC, who may rely upon it as if it were addressed to them in
connection with their purchase of $450,000,000 aggregate principal amount of the
10.75% Senior Notes due 2006 of Stater Bros. Holdings.
Sincerely yours,
GIBSON, DUNN & CRUTCHER LLP
AEB/LC
<PAGE>
EXHIBIT E-3
August 6, 1999
(213) 229-7000 C 87217-00009
Bank of America, N.A., as
Administrative Agent under the
Credit Agreement defined below
1455 Market Street
San Francisco, California 94103
and
The Lenders party to the Credit Agreement
defined below
Re: Credit Agreement among Stater Bros. Markets, Stater Bros. Holdings
Inc. and Bank of America, N.A. as Administrative Agent, Lender and
Letter of Credit Issuing Lender (the "Credit Agreement")
Ladies and Gentlemen:
We have acted as special counsel to Stater Bros. Holdings, Inc., a Delaware
corporation (the "Company"), in connection with the issuance and sale by the
Company to Banc of America Securities LLC of $450,000,000 aggregate principal
amount of the Company's 10 3/4% Senior Notes due 2006 (the "Notes"), pursuant to
the Indenture dated as of August 6, 1999 (the "Indenture") between the Company,
as issuer, and IBJ Whitehall Bank & Trust Company, as trustee (the "Trustee").
All defined terms used herein, unless otherwise defined, shall have the
respective meanings assigned such terms in the Indenture.
Contemporaneously with the sale of the Notes, the Company and the Company's
subsidiary Stater Bros. Markets, a California corporation ("Markets") are
entering into the Credit Agreement. The Credit Agreement provides for (i) a
$50.0 million three-year revolving loan
<PAGE>
August 6, 1999
Page 2
facility (the "Revolving Loan Facility") and (ii) a $25.0 million three-year
letter of credit facility (the "Letter of Credit Facility"). You have asked for
our opinion whether the aggregate principal amount of indebtedness owed by
Markets under the Revolving Loan Facility can be increased above $50,000,000 at
any time after the execution and delivery of the Credit Agreement by an amount
equal to the aggregate principal amount of Indebtedness that Markets can incur
at such time under Section 4.09(o) of the Indenture (the "Hypothetical Revolving
Loan Facility Increase"), without such Hypothetical Revolving Loan Facility
Increase breaching Section 4.09 of the Indenture.
For the purpose of the opinion set forth below, we have made such factual
and legal examination as we deemed necessary under the circumstances, and in
that connection, we have examined a copy of the Indenture. In rendering this
opinion, we have assumed that the signatures on all documents examined by us are
genuine and all individuals executing and delivering such documents were duly
authorized to do so; and the documents submitted to us as certified or
reproduction copies conform to the originals.
Based on the foregoing examination, and in reliance thereon, and subject to
the assumptions, qualifications, limitations and exceptions set forth herein, we
are of the opinion that the Hypothetical Revolving Loan Facility Increase would
not violate Section 4.09 of the Indenture.
We express no opinion herein as to matters involving the laws of any
jurisdiction other than the State of New York and the United States of America.
This opinion is limited to the effect of the current state of the laws of the
State of New York and the United States of America. Except as expressly set
forth herein, this opinion is limited to the facts as they currently exist. We
assume no obligation to revise or supplement this opinion in the event of
changes in such laws or the interpretations thereof or in the event of changes
in such facts.
The foregoing opinions are subject to the following assumptions,
exceptions, qualifications and limitations:
A. We note that pursuant to the Credit Agreement, the Hypothetical
Revolving Loan Facility Increase would require the consent and approval of the
parties to the Credit Agreement, and we express no opinion herein as to the
matters set forth above if the Hypothetical Revolving Loan Facility Increase is
not approved by all such parties.
B. We note that Section 8.06 of the Credit Agreement requires Holdings
and its Subsidiaries (as defined therein) to at all times maintain the ability
of Markets to incur not less than $15.0 million of additional Indebtedness
pursuant to Section 4.09(o) of the Indenture and thereby restricts the ability
of Markets to borrow pursuant to Section 4.09(o) of the Indenture, and we
express no opinion herein as to the matters set forth above to the extent of
such
<PAGE>
August 6, 1999
Page 3
restrictions as in effect at the time of any proposed Hypothetical Revolving
Loan Facility Increase.
C. We note that at the time of the Hypothetical Revolving Loan Facility
Increase, any Indebtedness of Holdings or any Restricted Subsidiary (including
without limitation any such Indebtedness incurred pursuant to the Letter of
Credit Facility) at such time outstanding pursuant to Section 4.09(a) of the
Indenture would be required to be subtracted from the amount of the Hypothetical
Revolving Loan Facility Increase for purposes of determining compliance by
Holdings with Section 4.09 of the Indenture.
This opinion has been delivered solely for your benefit in connection with
the Credit Agreement. Unless expressly provided otherwise, it may not be relied
upon by any other person or entity, or by you for any other purpose, and may not
be copied or quoted in whole or in part without our prior express written
permission. You may, however, deliver a copy of this opinion to your
accountants, attorneys and other professional advisors, to governmental
regulatory agencies having jurisdiction over you and to permitted assignees
under the Credit Agreement, and your assignees may rely on this opinion as if it
were addressed to them on the date hereof.
Very truly yours,
GIBSON, DUNN & CRUTCHER LLP
AEB/LLC
<PAGE>
EXHIBIT F-1
FORM OF DEVELOPMENT GUARANTY
This GUARANTY is entered into as of August 6, 1999 by the undersigned
("Guarantor", and together with any future Domestic Subsidiaries executing this
Guaranty, being collectively referred to herein as the "Guarantors"), in favor
of and for the benefit of BANK OF AMERICA, N.A., as agent for and representative
of (in such capacity herein called "Guarantied Party") the financial
institutions ("Lenders") party to the Credit Agreement referred to below and
Swap Counterparties (as hereinafter defined), and for the benefit of the other
Beneficiaries (as hereinafter defined).
RECITALS.
A. Stater Bros. Markets, a California corporation ("Borrower"), and
Stater Bros. Holdings Inc., a Delaware corporation ("Holdings"), have entered
into that certain Credit Agreement dated as of August 6, 1999 with Lenders and
Guarantied Party, as Administrative Agent for Lenders (said Credit Agreement, as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "Credit Agreement"; capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined).
B. Borrower may from time to time enter, or may from time to time
have entered, into one or more Swap Agreements (collectively, the "Lender Swap
Agreements") with one or more Persons that are Lenders or Affiliates of Lenders
at the time such Swap Agreements are entered into (in such capacity,
collectively, the "Swap Counterparties") in accordance with the terms of the
Credit Agreement, and it is desired that the obligations of Borrower under the
Lender Swap Agreements, including without limitation the obligation of Borrower
to make payments thereunder in the event of early termination thereof, together
with all obligations of Borrower under the Credit Agreement and the other Loan
Documents, be guarantied hereunder.
C. Guarantied Party, Lenders and each Swap Counterparty for which
Guarantied Party has received the notice required by Section 18 hereof are
sometimes referred to herein as "Beneficiaries".
D. It is a condition precedent to the making of the initial Loans
under the Credit Agreement that Borrower's obligations thereunder be guarantied
by Guarantor. In addition to the Guarantor as of the date hereof, the terms of
the Credit Agreement require that each Domestic Subsidiary of the Guarantor
existing or acquired after the date hereof, also guaranty the Guarantied
Obligations.
E. Guarantors are willing irrevocably and unconditionally to
guaranty such obligations of Borrower.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make Loans and other extensions of credit thereunder and to
induce the Swap Counterparties to enter into the Lender Swap Agreements,
Guarantors hereby agree as follows:
F-1-1
<PAGE>
1. Guaranty. (a) In order to induce Lenders to extend credit to Borrower
pursuant to the Credit Agreement and the entry by Swap Counterparties into the
Lender Swap Agreements, Guarantors jointly and severally irrevocably and
unconditionally guaranty, as primary obligors and not merely as sureties, the
due and punctual payment in full of all Guarantied Obligations (as hereinafter
defined) when the same shall become due, whether at stated maturity, by
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. (S) 362(a)). The term "Guarantied Obligations" is used herein
in its most comprehensive sense and includes any and all Obligations of Borrower
and all obligations of Borrower under Lender Swap Agreements, now or hereafter
made, incurred or created, whether absolute or contingent, liquidated or
unliquidated, whether due or not due, and however arising under or in connection
with the Credit Agreement, the Lender Swap Agreements, this Guaranty and the
other Loan Documents, including those arising under successive borrowing
transactions under the Credit Agreement which shall either continue such
obligations of Borrower or from time to time renew them after they have been
satisfied.
Each Guarantor acknowledges that a portion of the Guarantied Obligations
are being incurred for and will inure to its benefit.
Any interest on any portion of the Guarantied Obligations that accrues
after the commencement of any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Borrower (or, if interest on any portion of the Guarantied
Obligations ceases to accrue by operation of law by reason of the commencement
of said proceeding, such interest as would have accrued on such portion of the
Guarantied Obligations if said proceeding had not been commenced) shall be
included in the Guarantied Obligations because it is the intention of each
Guarantor and Guarantied Party that the Guarantied Obligations should be
determined without regard to any rule of law or order that may relieve Borrower
of any portion of such Guarantied Obligations.
In the event that all or any portion of the Guarantied Obligations is paid
by Borrower, the obligations of each Guarantor hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) is rescinded or recovered directly
or indirectly from Guarantied Party or any other Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments that are so rescinded or
recovered shall constitute Guarantied Obligations.
Subject to the other provisions of this Section 1, upon the failure of
Borrower to pay any of the Guarantied Obligations when and as the same shall
become due, each Guarantor will upon demand pay, or cause to be paid, in cash,
to Guarantied Party for the ratable benefit of Beneficiaries, an amount equal to
the aggregate of the unpaid Guarantied Obligations.
(b) Anything contained in this Guaranty to the contrary notwithstanding,
the obligations of each Guarantor under this Guaranty shall be limited to a
maximum aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (x) in respect of intercompany indebtedness to Borrower or other
affiliates of Borrower to the extent that such indebtedness would be discharged
in an amount equal to the
F-1-2
<PAGE>
amount paid by such Guarantor hereunder and (y) under any guaranty of
Subordinated Indebtedness which guaranty contains a limitation as to maximum
amount similar to that set forth in this Section 1(b), pursuant to which the
liability of such Guarantor hereunder is included in the liabilities taken into
account in determining such maximum amount) and after giving effect as assets to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, reimbursement, indemnification or
contribution of such Guarantor pursuant to applicable law or pursuant to the
terms of any agreement.
(c) Each Guarantor under this Guaranty, and each guarantor under other
guaranties, if any, relating to the Credit Agreement (the "Related Guaranties")
that contain a contribution provision similar to that set forth in this Section
1(c), together desire to allocate among themselves (collectively, the
"Contributing Guarantors"), in a fair and equitable manner, their obligations
arising under this Guaranty and the Related Guaranties. Accordingly, in the
event any payment or distribution is made on any date by a Guarantor under this
Guaranty or a guarantor under a Related Guaranty, each such Guarantor or such
other guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the maximum amount permitted by law so as to maximize
the aggregate amount of the Guarantied Obligations paid to Beneficiaries.
2. Guaranty Absolute; Continuing Guaranty. The obligations of each
Guarantor hereunder are irrevocable, absolute, independent and unconditional and
shall not be affected by any circumstance which constitutes a legal or equitable
discharge of a guarantor or surety other than payment in full of the Guarantied
Obligations. In furtherance of the foregoing and without limiting the
generality thereof, each Guarantor agrees that: (a) this Guaranty is a guaranty
of payment when due and not of collectibility; (b) Guarantied Party may enforce
this Guaranty upon the occurrence of an Event of Default under the Credit
Agreement or the occurrence of an early termination date or similar event under
any Lender Swap Agreements notwithstanding the existence of any dispute between
Borrower and any Beneficiary with respect to the existence of such event; (c)
the obligations of each Guarantor hereunder are independent of the obligations
of Borrower under the Loan Documents or the Lender Swap Agreements and the
obligations of any other Guarantor and a separate action or actions may be
brought and prosecuted against each Guarantor whether or not any action is
brought against Borrower or any of such other Guarantors and whether or not
Borrower is joined in any such action or actions; and (d) a payment of a
portion, but not all, of the Guarantied Obligations by one or more Guarantors
shall in no way limit, affect, modify or abridge the liability of such or any
other Guarantor for any portion of the Guarantied Obligations that has not been
paid. This Guaranty is a continuing guaranty and shall be binding upon each
Guarantor and its successors and assigns, and each Guarantor irrevocably waives
any right (including without limitation any such right arising under California
Civil Code Section 2815) to revoke this Guaranty as to future transactions
giving rise to any Guarantied Obligations.
3. Actions by Beneficiaries. Any Beneficiary may from time to time,
without notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any limitation, impairment or discharge of any
Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise
change the time, place, manner or terms of payment of the Guarantied
Obligations, (b) settle, compromise, release or discharge, or accept or refuse
any offer of performance with respect to, or substitutions for, the Guarantied
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations, (c) request and accept other
guaranties of the Guarantied Obligations and take and hold security for the
payment of this Guaranty or the Guarantied Obligations, (d) release, exchange,
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compromise, subordinate or modify, with or without consideration, any security
for payment of the Guarantied Obligations, any other guaranties of the
Guarantied Obligations, or any other obligation of any Person with respect to
the Guarantied Obligations, (e) enforce and apply any security now or hereafter
held by or for the benefit of any Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that Guarantied Party or the other
Beneficiaries, or any of them, may have against any such security, as Guarantied
Party in its discretion may determine consistent with the Credit Agreement, the
Lender Swap Agreements and any applicable security agreement, including
foreclosure on any such security pursuant to one or more judicial or nonjudicial
sales, whether or not every aspect of any such sale is commercially reasonable,
and (f) exercise any other rights available to Guarantied Party or the other
Beneficiaries, or any of them, under the Loan Documents or the Lender Swap
Agreements.
4. No Discharge. This Guaranty and the obligations of Guarantors
hereunder shall be valid and enforceable and shall not be subject to any
limitation, impairment or discharge for any reason (other than payment in full
of the Guarantied Obligations), including without limitation the occurrence of
any of the following, whether or not any Guarantor shall have had notice or
knowledge of any of them: (a) any failure to assert or enforce or agreement not
to assert or enforce, or the stay or enjoining, by order of court, by operation
of law or otherwise, of the exercise or enforcement of, any claim or demand or
any right, power or remedy with respect to the Guarantied Obligations or any
agreement relating thereto, or with respect to any other guaranty of or security
for the payment of the Guarantied Obligations, (b) any waiver or modification
of, or any consent to departure from, any of the terms or provisions of the
Credit Agreement, any of the other Loan Documents, the Lender Swap Agreements or
any agreement or instrument executed pursuant thereto, or of any other guaranty
or security for the Guarantied Obligations, (c) the Guarantied Obligations, or
any agreement relating thereto, at any time being found to be illegal, invalid
or unenforceable in any respect, (d) the application of payments received from
any source to the payment of indebtedness other than the Guarantied Obligations,
even though Guarantied Party or the other Beneficiaries, or any of them, might
have elected to apply such payment to any part or all of the Guarantied
Obligations, (e) any failure to perfect or continue perfection of a security
interest in any collateral which secures any of the Guarantied Obligations, (f)
any defenses, set-offs or counterclaims which Borrower may assert against
Guarantied Party or any Beneficiary in respect of the Guarantied Obligations,
including but not limited to failure of consideration, breach of warranty,
payment, statute of frauds, statute of limitations, accord and satisfaction and
usury, and (g) any other act or thing or omission, or delay to do any other act
or thing, which may or might in any manner or to any extent vary the risk of a
Guarantor as an obligor in respect of the Guarantied Obligations.
5. Waivers. Each Guarantor waives, for the benefit of Beneficiaries: (a)
any right to require Guarantied Party or the other Beneficiaries, as a condition
of payment or performance by such Guarantor, to (i) proceed against Borrower,
any other guarantor (including any other Guarantor) of the Guarantied
Obligations or any other Person, (ii) proceed against or exhaust any security
held from Borrower, any other guarantor of the Guarantied Obligations or any
other Person, (iii) proceed against or have resort to any balance of any deposit
account or credit on the books of any Beneficiary in favor of Borrower or any
other Person, or (iv) pursue any other remedy in the power of any Beneficiary;
(b) any defense arising by reason of the incapacity, lack of authority or any
disability or other defense of Borrower including, without limitation, any
defense based on or arising out of the lack of validity or the unenforceability
of the Guarantied Obligations
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or any agreement or instrument relating thereto or by reason of the cessation of
the liability of Borrower from any cause other than payment in full of the
Guarantied Obligations; (c) any defense based upon any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal; (d) any
defense based upon Guarantied Party's or any other Beneficiary's errors or
omissions in the administration of the Guarantied Obligations, except behavior
that amounts to bad faith; (e) (i) any principles or provisions of law,
statutory or otherwise, that are or might be in conflict with the terms of this
Guaranty and any legal or equitable discharge of such Guarantor's obligations
hereunder, (ii) the benefit of any statute of limitations affecting such
Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to
set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any
requirement that any Beneficiary protect, secure, perfect or insure any Lien or
any property subject thereto; (f) notices, demands, presentments, protests,
notices of protest, notices of dishonor and notices of any action or inaction,
including acceptance of this Guaranty, notices of default under the Credit
Agreement, notices of default or early termination under any Lender Swap
Agreement or any agreement or instrument related thereto, notices of any
renewal, extension or modification of the Guarantied Obligations or any
agreement related thereto, notices of any extension of credit to Borrower and
notices of any of the matters referred to in the preceding paragraph and any
right to consent to any thereof; and (g) to the fullest extent permitted by law,
any defenses or benefits that may be derived from or afforded by law which limit
the liability of or exonerate guarantors or sureties, or which may conflict with
the terms of this Guaranty.
As used in this paragraph, any reference to "the principal" includes
Borrower, and any reference to "the creditor" includes Guarantied Party and each
other Beneficiary. In accordance with Section 2856 of the California Civil Code
(a) each Guarantor waives any and all rights and defenses available to it by
reason of Sections 2787 to 2855, inclusive, 2899 and 3433 of the California
Civil Code, including without limitation any and all rights or defenses such
Guarantor may have by reason of protection afforded to the principal with
respect to any of the Guarantied Obligations, or to any other guarantor of any
of the Guarantied Obligations with respect to any of such guarantor's
obligations under its guaranty, in either case pursuant to the antideficiency or
other laws of the State of California limiting or discharging the principal's
indebtedness or such guarantor's obligations, including without limitation
Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure; and
(b) each Guarantor waives all rights and defenses arising out of an election of
remedies by the creditor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a Guarantied Obligation,
has destroyed such Guarantor's rights of subrogation and reimbursement against
the principal by the operation of Section 580d of the Code of Civil Procedure or
otherwise; and even though that election of remedies by the creditor, such as
nonjudicial foreclosure with respect to security for an obligation of any other
guarantor of any of the Guarantied Obligations, has destroyed such Guarantor's
rights of contribution against such other guarantor. No other provision of this
Guaranty shall be construed as limiting the generality of any of the covenants
and waivers set forth in this paragraph.
6. Guarantors' Rights of Subrogation, Contribution, Etc.; Subordination
of Other Obligations. Each Guarantor waives any claim, right or remedy, direct
or indirect, that such Guarantor now has or may hereafter have against Borrower
or any of its assets in connection with this Guaranty or the performance by such
Guarantor of its obligations hereunder, in each case whether such claim, right
or remedy arises in equity, under contract, by statute (including without
limitation under California Civil Code Section 2847, 2848 or 2849), under common
law or
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otherwise and including without limitation (a) any right of subrogation,
reimbursement or indemnification that such Guarantor now has or may hereafter
have against Borrower, (b) any right to enforce, or to participate in, any
claim, right or remedy that any Beneficiary now has or may hereafter have
against Borrower, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Guarantied Obligations shall have been paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled, each Guarantor shall withhold exercise of any right of
contribution such Guarantor may have against any other guarantor of any of the
Guarantied Obligations. Each Guarantor further agrees that, to the extent the
waiver or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification such Guarantor may have
against Borrower or against any collateral or security, and any rights of
contribution such Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights Guarantied Party or the other Beneficiaries
may have against Borrower, to all right, title and interest Guarantied Party or
the other Beneficiaries may have in any such collateral or security, and to any
right Guarantied Party or the other Beneficiaries may have against such other
guarantor.
Any indebtedness of Borrower now or hereafter held by any Guarantor is
subordinated in right of payment to the Guarantied Obligations, and any such
indebtedness of Borrower to a Guarantor collected or received by such Guarantor
after an Event of Default has occurred and is continuing, and any amount paid to
a Guarantor on account of any subrogation, reimbursement, indemnification or
contribution rights referred to in the preceding paragraph when all Guarantied
Obligations have not been paid in full, shall be held in trust for Guarantied
Party on behalf of Beneficiaries and shall forthwith be paid over to Guarantied
Party for the benefit of Beneficiaries to be credited and applied against the
Guarantied Obligations.
7. Expenses. Guarantors jointly and severally agree to pay, or cause to
be paid, on demand, and to save Guarantied Party and the other Beneficiaries
harmless against liability for, any and all costs and expenses (including fees
and disbursements of counsel and allocated costs of internal counsel) incurred
or expended by Guarantied Party or any other Beneficiary in connection with the
enforcement of or preservation of any rights under this Guaranty.
8. Financial Condition of Borrower. No Beneficiary shall have any
obligation, and each Guarantor waives any duty on the part of any Beneficiary,
to disclose or discuss with such Guarantor its assessment, or such Guarantor's
assessment, of the financial condition of Borrower or any matter or fact
relating to the business, operations or condition of Borrower. Each Guarantor
has adequate means to obtain information from Borrower on a continuing basis
concerning the financial condition of Borrower and its ability to perform its
obligations under the Loan Documents and the Lender Swap Agreements, and each
Guarantor assumes the responsibility for being and keeping informed of the
financial condition of Borrower and of all circumstances bearing upon the risk
of nonpayment of the Guarantied Obligations.
9. Representations and Warranties. Each Guarantor makes, for the benefit
of Beneficiaries, each of the representations and warranties made in the Credit
Agreement by Borrower as to such Guarantor, its assets, financial condition,
operations, organization, legal status, business and any Loan Documents to which
it is a party.
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<PAGE>
10. Covenants. Each Guarantor agrees that, so long as any part of the
Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be
outstanding, or any Lender shall have any Commitment or any Swap Counterparty
shall have any obligation under such Lender Swap Agreement, such Guarantor will,
unless Requisite Lenders shall otherwise consent in writing, perform or observe,
and cause its Subsidiaries to perform or observe, all of the terms, covenants
and agreements that the Loan Documents state that Borrower is to cause a
Guarantor and such Subsidiaries to perform or observe.
11. Set Off. In addition to any other rights any Beneficiary may have
under law or in equity, if any amount shall at any time be due and owing by a
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including but not limited to indebtedness evidence
by certificates of deposit, whether matured or unmatured) and any other
indebtedness of such Beneficiary owing to a Guarantor and any other property of
such Guarantor held by a Beneficiary to or for the credit or the account of such
Guarantor against and on account of the Guarantied Obligations and liabilities
of such Guarantor to any Beneficiary under this Guaranty.
12. Discharge of Guaranty Upon Sale of Guarantor. If all of the stock of
a Guarantor or any of its successors in interest under this Guaranty shall be
sold or otherwise disposed of (including by merger or consolidation) in a sale
not prohibited by the Credit Agreement or otherwise consented to by Requisite
Lenders, the obligations of such Guarantor or such successor in interest, as the
case may be, hereunder shall automatically be discharged and released without
any further action by any Beneficiary or any other Person effective as of the
time of such sale.
13. Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by any
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, Guarantors. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
14. Miscellaneous. It is not necessary for Beneficiaries to inquire into
the capacity or powers of any Guarantor or Borrower or the officers, directors
or any agents acting or purporting to act on behalf of any of them.
The rights, powers and remedies given to Beneficiaries by this Guaranty are
cumulative and shall be in addition to and independent of all rights, powers and
remedies given to Beneficiaries by virtue of any statute or rule of law or in
any of the Loan Documents or Lender Swap Agreements or any agreement between one
or more Guarantors and one or more Beneficiaries or between Borrower and one or
more Beneficiaries. Any forbearance or failure to exercise, and any delay by
any Beneficiary in exercising, any right, power or remedy hereunder shall not
impair any such right, power or remedy or be construed to be a waiver thereof,
nor shall it preclude the further exercise of any such right, power or remedy.
In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTORS, GUARANTIED
PARTY AND THE OTHER BENEFICIARIES HEREUNDER SHALL BE
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GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
This Guaranty shall inure to the benefit of Beneficiaries and their
respective successors and assigns.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR
RELATING TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY
OF THIS GUARANTY EACH GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
GUARANTY. Each Guarantor agrees that service of all process in any such
proceeding in any such court may be made by registered or certified mail, return
receipt requested, to such Guarantor at its address set forth below its
signature hereto, such service being acknowledged by such Guarantor to be
sufficient for personal jurisdiction in any action against such Guarantor in any
such court and to be otherwise effective and binding service in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of Guarantied Party or any Beneficiary
to bring proceedings against such Guarantor in the courts of any other
jurisdiction.
EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, GUARANTIED
PARTY EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty claims
and all other common law and statutory claims. Each Guarantor and, by its
acceptance of the benefits hereof, Guarantied Party each (i) acknowledges that
this waiver is a material inducement for such Guarantor and Guarantied Party to
enter into a business relationship, that such Guarantor and Guarantied Party
have already relied on this waiver in entering into this Guaranty or accepting
the benefits thereof, as the case may be, and that each will continue to rely on
this waiver in their related future dealings, and (ii) further warrants and
represents that each has reviewed this waiver with its legal counsel and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS
GUARANTY. In the event of litigation, this Guaranty may be filed as a written
consent to a trial by the court.
15. Additional Guarantors. The initial Guarantor hereunder shall be the
signatory hereto on the date hereof. From time to time subsequent to the date
hereof, Domestic Subsidiaries of the initial Guarantor may become parties
hereto, as additional Guarantors (each an "Additional Guarantor"), by executing
a counterpart of this Guaranty. Upon delivery of any such counterpart to the
Administrative Agent, notice of which is hereby waived by the Guarantor, each
such Additional Guarantor shall be a Guarantor and shall be as fully a party
hereto as if such Additional
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<PAGE>
Guarantor were an original signatory hereof. Each Guarantor expressly agrees
that its obligations arising hereunder shall not be affected or diminished by
the addition or release of any other Guarantor hereunder, nor by any election of
the Administrative Agent not to cause any Subsidiary of the initial Guarantor to
become an Additional Guarantor hereunder. This Guaranty shall be fully effective
as to any Guarantor that is or becomes a party hereto regardless of whether any
other Person becomes or fails to become or ceases to be a Guarantor hereunder.
16. Counterparts; Effectiveness. This Guaranty may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become
effective as to each Guarantor upon the execution of a counterpart hereof by
such Guarantor (whether or not a counterpart hereof shall have been executed by
any other Guarantor) and receipt by the Administrative Agent of written or
telephonic notification of such execution and authorization of delivery thereof.
17. Guarantied Party as Agent.
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders. Guarantied Party shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Credit Agreement.
(b) Guarantied Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 10.9 of the Credit Agreement
shall also constitute notice of resignation as Guarantied Party under this
Guaranty; removal of Administrative Agent pursuant to subsection 10.9 of the
Credit Agreement shall also constitute removal as Guarantied Party under this
Guaranty; and appointment of a successor Administrative Agent pursuant to
subsection 10.9 of the Credit Agreement shall also constitute appointment of a
successor Guarantied Party under this Guaranty. Upon the acceptance of any
appointment as Administrative Agent under subsection 10.9 of the Credit
Agreement by successor Administrative Agent, that successor Administrative Agent
shall thereupon succeed to become vested with all the rights, powers, privileges
and duties of the retiring or removed Guarantied party under this Guaranty, and
the retiring or removed Guarantied Party under this Guaranty shall promptly (i)
transfer to such successor Guarantied Party all sums held hereunder, together
with all records and other documents necessary or appropriate in connection with
the performance of the duties of the successor Guarantied Party under this
Guaranty, and (ii) take such other actions as may be necessary or appropriate in
connection with the assignment to such successor Guarantied Party of the rights
created hereunder, whereupon such retiring or removed Guarantied Party shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure to its benefits as
to any actions taken or omitted to be taken by it under this Guaranty while it
was Guarantied.
18. Notice of Lender Swap Agreements. Guarantied Party shall not be
deemed to have any duty whatsoever with respect to Swap Counterparties until it
shall have received written notice in form and substance satisfactory to
Guarantied Party from Borrower, a Guarantor or the Swap Counterparty to the
existence and terms of the applicable Lender Swap Agreement.
[The remainder of this page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first written above.
STATER BROS. DEVELOPMENT, INC.
By: __________________________
Name:______________________
Title:_______________________
Address:
____________________________
____________________________
____________________________
S-1
<PAGE>
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ______________, ____.
________________________________________
(Name of Additional Guarantor)
By _____________________________________
Title __________________________________
S-2
<PAGE>
EXHIBIT F-2
FORM OF SUBSIDIARY GUARANTY
This GUARANTY is entered into as of ____________, 199_ by the undersigned
([each] a "Guarantor", and together with any future Domestic Subsidiaries
executing this Guaranty, being collectively referred to herein as the
"Guarantors"), in favor of and for the benefit of BANK OF AMERICA, N.A., as
agent for and representative of (in such capacity herein called "Guarantied
Party") the financial institutions ("Lenders") party to the Credit Agreement
referred to below and Swap Counterparties (as hereinafter defined), and for the
benefit of the other Beneficiaries (as hereinafter defined).
RECITALS.
A. Stater Bros. Markets, a California corporation ("Borrower"), and
Stater Bros. Holdings Inc., a Delaware corporation ("Holdings"), have entered
into that certain Credit Agreement dated as of August 6, 1999 with Lenders and
Guarantied Party, as Administrative Agent for Lenders (said Credit Agreement, as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "Credit Agreement"; capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined).
B. Borrower may from time to time enter, or may from time to time
have entered, into one or more Swap Agreements (collectively, the "Lender Swap
Agreements") with one or more Persons that are Lenders or Affiliates of Lenders
at the time such Swap Agreements are entered into (in such capacity,
collectively, the "Swap Counterparties") in accordance with the terms of the
Credit Agreement, and it is desired that the obligations of Borrower under the
Lender Swap Agreements, including without limitation the obligation of Borrower
to make payments thereunder in the event of early termination thereof, together
with all obligations of Borrower under the Credit Agreement and the other Loan
Documents, be guarantied hereunder.
C. Guarantied Party, Lenders and each Swap Counterparty for which
Guarantied Party has received the notice required by Section 18 hereof are
sometimes referred to herein as "Beneficiaries".
D. The terms of the Credit Agreement require that each Domestic
Subsidiary of the Borrower guaranty the Guarantied Obligations. A portion of the
proceeds of the Loans may be advanced to Guarantors, and thus the Guarantied
Obligations (as hereinafter defined) are being incurred for and will inure to
the benefit of Guarantors (which benefits are hereby acknowledged).
E. Guarantors are willing irrevocably and unconditionally to
guaranty such obligations of Borrower.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make Loans and other extensions of credit thereunder and to
induce the Swap Counterparties to enter into the Lender Swap Agreements,
Guarantors hereby agree as follows:
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1. Guaranty. (a) In order to induce Lenders to extend credit to Borrower
pursuant to the Credit Agreement and the entry by Swap Counterparties into the
Lender Swap Agreements, Guarantors jointly and severally irrevocably and
unconditionally guaranty, as primary obligors and not merely as sureties, the
due and punctual payment in full of all Guarantied Obligations (as hereinafter
defined) when the same shall become due, whether at stated maturity, by
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. (S) 362(a)). The term "Guarantied Obligations" is used herein
in its most comprehensive sense and includes any and all Obligations of Borrower
and all obligations of Borrower under Lender Swap Agreements, now or hereafter
made, incurred or created, whether absolute or contingent, liquidated or
unliquidated, whether due or not due, and however arising under or in connection
with the Credit Agreement, the Lender Swap Agreements, this Guaranty and the
other Loan Documents, including those arising under successive borrowing
transactions under the Credit Agreement which shall either continue such
obligations of Borrower or from time to time renew them after they have been
satisfied.
Each Guarantor acknowledges that a portion of the Guarantied Obligations
are being incurred for and will inure to its benefit.
Any interest on any portion of the Guarantied Obligations that accrues
after the commencement of any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Borrower (or, if interest on any portion of the Guarantied
Obligations ceases to accrue by operation of law by reason of the commencement
of said proceeding, such interest as would have accrued on such portion of the
Guarantied Obligations if said proceeding had not been commenced) shall be
included in the Guarantied Obligations because it is the intention of each
Guarantor and Guarantied Party that the Guarantied Obligations should be
determined without regard to any rule of law or order that may relieve Borrower
of any portion of such Guarantied Obligations.
In the event that all or any portion of the Guarantied Obligations is paid
by Borrower, the obligations of each Guarantor hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) is rescinded or recovered directly
or indirectly from Guarantied Party or any other Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments that are so rescinded or
recovered shall constitute Guarantied Obligations.
Subject to the other provisions of this Section 1, upon the failure of
Borrower to pay any of the Guarantied Obligations when and as the same shall
become due, each Guarantor will upon demand pay, or cause to be paid, in cash,
to Guarantied Party for the ratable benefit of Beneficiaries, an amount equal to
the aggregate of the unpaid Guarantied Obligations.
(b) Anything contained in this Guaranty to the contrary notwithstanding,
the obligations of each Guarantor under this Guaranty shall be limited to a
maximum aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
such Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (x) in respect of intercompany indebtedness to Borrower or other
affiliates of Borrower to the extent that such indebtedness would be discharged
in an amount equal to the
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<PAGE>
amount paid by such Guarantor hereunder and (y) under any guaranty of
Subordinated Indebtedness which guaranty contains a limitation as to maximum
amount similar to that set forth in this Section 1(b), pursuant to which the
liability of such Guarantor hereunder is included in the liabilities taken into
account in determining such maximum amount) and after giving effect as assets to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, reimbursement, indemnification or
contribution of such Guarantor pursuant to applicable law or pursuant to the
terms of any agreement.
(c) Each Guarantor under this Guaranty, and each guarantor under other
guaranties, if any, relating to the Credit Agreement (the "Related Guaranties")
that contain a contribution provision similar to that set forth in this Section
1(c), together desire to allocate among themselves (collectively, the
"Contributing Guarantors"), in a fair and equitable manner, their obligations
arising under this Guaranty and the Related Guaranties. Accordingly, in the
event any payment or distribution is made on any date by a Guarantor under this
Guaranty or a guarantor under a Related Guaranty, each such Guarantor or such
other guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the maximum amount permitted by law so as to maximize
the aggregate amount of the Guarantied Obligations paid to Beneficiaries.
2. Guaranty Absolute; Continuing Guaranty. The obligations of each
Guarantor hereunder are irrevocable, absolute, independent and unconditional and
shall not be affected by any circumstance which constitutes a legal or equitable
discharge of a guarantor or surety other than payment in full of the Guarantied
Obligations. In furtherance of the foregoing and without limiting the
generality thereof, each Guarantor agrees that: (a) this Guaranty is a guaranty
of payment when due and not of collectibility; (b) Guarantied Party may enforce
this Guaranty upon the occurrence of an Event of Default under the Credit
Agreement or the occurrence of an early termination date or similar event under
any Lender Swap Agreements notwithstanding the existence of any dispute between
Borrower and any Beneficiary with respect to the existence of such event; (c)
the obligations of each Guarantor hereunder are independent of the obligations
of Borrower under the Loan Documents or the Lender Swap Agreements and the
obligations of any other Guarantor and a separate action or actions may be
brought and prosecuted against each Guarantor whether or not any action is
brought against Borrower or any of such other Guarantors and whether or not
Borrower is joined in any such action or actions; and (d) a payment of a
portion, but not all, of the Guarantied Obligations by one or more Guarantors
shall in no way limit, affect, modify or abridge the liability of such or any
other Guarantor for any portion of the Guarantied Obligations that has not been
paid. This Guaranty is a continuing guaranty and shall be binding upon each
Guarantor and its successors and assigns, and each Guarantor irrevocably waives
any right (including without limitation any such right arising under California
Civil Code Section 2815) to revoke this Guaranty as to future transactions
giving rise to any Guarantied Obligations.
3. Actions by Beneficiaries. Any Beneficiary may from time to time,
without notice or demand and without affecting the validity or enforceability of
this Guaranty or giving rise to any limitation, impairment or discharge of any
Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise
change the time, place, manner or terms of payment of the Guarantied
Obligations, (b) settle, compromise, release or discharge, or accept or refuse
any offer of performance with respect to, or substitutions for, the Guarantied
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations, (c) request and accept other
guaranties of the Guarantied Obligations and take and hold security for the
payment of this Guaranty or the Guarantied Obligations, (d) release, exchange,
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<PAGE>
compromise, subordinate or modify, with or without consideration, any security
for payment of the Guarantied Obligations, any other guaranties of the
Guarantied Obligations, or any other obligation of any Person with respect to
the Guarantied Obligations, (e) enforce and apply any security now or hereafter
held by or for the benefit of any Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that Guarantied Party or the other
Beneficiaries, or any of them, may have against any such security, as Guarantied
Party in its discretion may determine consistent with the Credit Agreement, the
Lender Swap Agreements and any applicable security agreement, including
foreclosure on any such security pursuant to one or more judicial or nonjudicial
sales, whether or not every aspect of any such sale is commercially reasonable,
and (f) exercise any other rights available to Guarantied Party or the other
Beneficiaries, or any of them, under the Loan Documents or the Lender Swap
Agreements.
4. No Discharge. This Guaranty and the obligations of Guarantors
hereunder shall be valid and enforceable and shall not be subject to any
limitation, impairment or discharge for any reason (other than payment in full
of the Guarantied Obligations), including without limitation the occurrence of
any of the following, whether or not any Guarantor shall have had notice or
knowledge of any of them: (a) any failure to assert or enforce or agreement not
to assert or enforce, or the stay or enjoining, by order of court, by operation
of law or otherwise, of the exercise or enforcement of, any claim or demand or
any right, power or remedy with respect to the Guarantied Obligations or any
agreement relating thereto, or with respect to any other guaranty of or security
for the payment of the Guarantied Obligations, (b) any waiver or modification
of, or any consent to departure from, any of the terms or provisions of the
Credit Agreement, any of the other Loan Documents, the Lender Swap Agreements or
any agreement or instrument executed pursuant thereto, or of any other guaranty
or security for the Guarantied Obligations, (c) the Guarantied Obligations, or
any agreement relating thereto, at any time being found to be illegal, invalid
or unenforceable in any respect, (d) the application of payments received from
any source to the payment of indebtedness other than the Guarantied Obligations,
even though Guarantied Party or the other Beneficiaries, or any of them, might
have elected to apply such payment to any part or all of the Guarantied
Obligations, (e) any failure to perfect or continue perfection of a security
interest in any collateral which secures any of the Guarantied Obligations, (f)
any defenses, set-offs or counterclaims which Borrower may assert against
Guarantied Party or any Beneficiary in respect of the Guarantied Obligations,
including but not limited to failure of consideration, breach of warranty,
payment, statute of frauds, statute of limitations, accord and satisfaction and
usury, and (g) any other act or thing or omission, or delay to do any other act
or thing, which may or might in any manner or to any extent vary the risk of a
Guarantor as an obligor in respect of the Guarantied Obligations.
5. Waivers. Each Guarantor waives, for the benefit of Beneficiaries: (a)
any right to require Guarantied Party or the other Beneficiaries, as a condition
of payment or performance by such Guarantor, to (i) proceed against Borrower,
any other guarantor (including any other Guarantor) of the Guarantied
Obligations or any other Person, (ii) proceed against or exhaust any security
held from Borrower, any other guarantor of the Guarantied Obligations or any
other Person, (iii) proceed against or have resort to any balance of any deposit
account or credit on the books of any Beneficiary in favor of Borrower or any
other Person, or (iv) pursue any other remedy in the power of any Beneficiary;
(b) any defense arising by reason of the incapacity, lack of authority or any
disability or other defense of Borrower including, without limitation, any
defense based on or arising out of the lack of validity or the unenforceability
of the Guarantied Obligations
F-2-4
<PAGE>
or any agreement or instrument relating thereto or by reason of the cessation of
the liability of Borrower from any cause other than payment in full of the
Guarantied Obligations; (c) any defense based upon any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal; (d) any
defense based upon Guarantied Party's or any other Beneficiary's errors or
omissions in the administration of the Guarantied Obligations, except behavior
that amounts to bad faith; (e) (i) any principles or provisions of law,
statutory or otherwise, that are or might be in conflict with the terms of this
Guaranty and any legal or equitable discharge of such Guarantor's obligations
hereunder, (ii) the benefit of any statute of limitations affecting such
Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to
set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any
requirement that any Beneficiary protect, secure, perfect or insure any Lien or
any property subject thereto; (f) notices, demands, presentments, protests,
notices of protest, notices of dishonor and notices of any action or inaction,
including acceptance of this Guaranty, notices of default under the Credit
Agreement, notices of default or early termination under any Lender Swap
Agreement or any agreement or instrument related thereto, notices of any
renewal, extension or modification of the Guarantied Obligations or any
agreement related thereto, notices of any extension of credit to Borrower and
notices of any of the matters referred to in the preceding paragraph and any
right to consent to any thereof; and (g) to the fullest extent permitted by law,
any defenses or benefits that may be derived from or afforded by law which limit
the liability of or exonerate guarantors or sureties, or which may conflict with
the terms of this Guaranty.
As used in this paragraph, any reference to "the principal" includes
Borrower, and any reference to "the creditor" includes Guarantied Party and each
other Beneficiary. In accordance with Section 2856 of the California Civil Code
(a) each Guarantor waives any and all rights and defenses available to it by
reason of Sections 2787 to 2855, inclusive, 2899 and 3433 of the California
Civil Code, including without limitation any and all rights or defenses such
Guarantor may have by reason of protection afforded to the principal with
respect to any of the Guarantied Obligations, or to any other guarantor of any
of the Guarantied Obligations with respect to any of such guarantor's
obligations under its guaranty, in either case pursuant to the antideficiency or
other laws of the State of California limiting or discharging the principal's
indebtedness or such guarantor's obligations, including without limitation
Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure; and
(b) each Guarantor waives all rights and defenses arising out of an election of
remedies by the creditor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a Guarantied Obligation,
has destroyed such Guarantor's rights of subrogation and reimbursement against
the principal by the operation of Section 580d of the Code of Civil Procedure or
otherwise; and even though that election of remedies by the creditor, such as
nonjudicial foreclosure with respect to security for an obligation of any other
guarantor of any of the Guarantied Obligations, has destroyed such Guarantor's
rights of contribution against such other guarantor. No other provision of this
Guaranty shall be construed as limiting the generality of any of the covenants
and waivers set forth in this paragraph.
6. Guarantors' Rights of Subrogation, Contribution, Etc.; Subordination
of Other Obligations. Each Guarantor waives any claim, right or remedy, direct
or indirect, that such Guarantor now has or may hereafter have against Borrower
or any of its assets in connection with this Guaranty or the performance by such
Guarantor of its obligations hereunder, in each case whether such claim, right
or remedy arises in equity, under contract, by statute (including without
limitation under California Civil Code Section 2847, 2848 or 2849), under common
law or
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<PAGE>
otherwise and including without limitation (a) any right of subrogation,
reimbursement or indemnification that such Guarantor now has or may hereafter
have against Borrower, (b) any right to enforce, or to participate in, any
claim, right or remedy that any Beneficiary now has or may hereafter have
against Borrower, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Guarantied Obligations shall have been paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled, each Guarantor shall withhold exercise of any right of
contribution such Guarantor may have against any other guarantor of any of the
Guarantied Obligations. Each Guarantor further agrees that, to the extent the
waiver or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification such Guarantor may have
against Borrower or against any collateral or security, and any rights of
contribution such Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights Guarantied Party or the other Beneficiaries
may have against Borrower, to all right, title and interest Guarantied Party or
the other Beneficiaries may have in any such collateral or security, and to any
right Guarantied Party or the other Beneficiaries may have against such other
guarantor.
Any indebtedness of Borrower now or hereafter held by any Guarantor is
subordinated in right of payment to the Guarantied Obligations, and any such
indebtedness of Borrower to a Guarantor collected or received by such Guarantor
after an Event of Default has occurred and is continuing, and any amount paid to
a Guarantor on account of any subrogation, reimbursement, indemnification or
contribution rights referred to in the preceding paragraph when all Guarantied
Obligations have not been paid in full, shall be held in trust for Guarantied
Party on behalf of Beneficiaries and shall forthwith be paid over to Guarantied
Party for the benefit of Beneficiaries to be credited and applied against the
Guarantied Obligations.
7. Expenses. Guarantors jointly and severally agree to pay, or cause to
be paid, on demand, and to save Guarantied Party and the other Beneficiaries
harmless against liability for, any and all costs and expenses (including fees
and disbursements of counsel and allocated costs of internal counsel) incurred
or expended by Guarantied Party or any other Beneficiary in connection with the
enforcement of or preservation of any rights under this Guaranty.
8. Financial Condition of Borrower. No Beneficiary shall have any
obligation, and each Guarantor waives any duty on the part of any Beneficiary,
to disclose or discuss with such Guarantor its assessment, or such Guarantor's
assessment, of the financial condition of Borrower or any matter or fact
relating to the business, operations or condition of Borrower. Each Guarantor
has adequate means to obtain information from Borrower on a continuing basis
concerning the financial condition of Borrower and its ability to perform its
obligations under the Loan Documents and the Lender Swap Agreements, and each
Guarantor assumes the responsibility for being and keeping informed of the
financial condition of Borrower and of all circumstances bearing upon the risk
of nonpayment of the Guarantied Obligations.
9. Representations and Warranties. Each Guarantor makes, for the benefit
of Beneficiaries, each of the representations and warranties made in the Credit
Agreement by Borrower as to such Guarantor, its assets, financial condition,
operations, organization, legal status, business and any Loan Documents to which
it is a party.
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<PAGE>
10. Covenants. Each Guarantor agrees that, so long as any part of the
Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be
outstanding, or any Lender shall have any Commitment or any Swap Counterparty
shall have any obligation under such Lender Swap Agreement, such Guarantor will,
unless Requisite Lenders shall otherwise consent in writing, perform or observe,
and cause its Subsidiaries to perform or observe, all of the terms, covenants
and agreements that the Loan Documents state that Borrower is to cause a
Guarantor and such Subsidiaries to perform or observe.
11. Set Off. In addition to any other rights any Beneficiary may have
under law or in equity, if any amount shall at any time be due and owing by a
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including but not limited to indebtedness evidence
by certificates of deposit, whether matured or unmatured) and any other
indebtedness of such Beneficiary owing to a Guarantor and any other property of
such Guarantor held by a Beneficiary to or for the credit or the account of such
Guarantor against and on account of the Guarantied Obligations and liabilities
of such Guarantor to any Beneficiary under this Guaranty.
12. Discharge of Guaranty Upon Sale of Guarantor. If all of the stock of
a Guarantor or any of its successors in interest under this Guaranty shall be
sold or otherwise disposed of (including by merger or consolidation) in a sale
not prohibited by the Credit Agreement or otherwise consented to by Requisite
Lenders, the obligations of such Guarantor or such successor in interest, as the
case may be, hereunder shall automatically be discharged and released without
any further action by any Beneficiary or any other Person effective as of the
time of such sale.
13. Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by any
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, Guarantors. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
14. Miscellaneous. It is not necessary for Beneficiaries to inquire into
the capacity or powers of any Guarantor or Borrower or the officers, directors
or any agents acting or purporting to act on behalf of any of them.
The rights, powers and remedies given to Beneficiaries by this Guaranty are
cumulative and shall be in addition to and independent of all rights, powers and
remedies given to Beneficiaries by virtue of any statute or rule of law or in
any of the Loan Documents or Lender Swap Agreements or any agreement between one
or more Guarantors and one or more Beneficiaries or between Borrower and one or
more Beneficiaries. Any forbearance or failure to exercise, and any delay by
any Beneficiary in exercising, any right, power or remedy hereunder shall not
impair any such right, power or remedy or be construed to be a waiver thereof,
nor shall it preclude the further exercise of any such right, power or remedy.
In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTORS, GUARANTIED
PARTY AND THE OTHER BENEFICIARIES HEREUNDER SHALL BE
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<PAGE>
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
This Guaranty shall inure to the benefit of Beneficiaries and their
respective successors and assigns.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR
RELATING TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA, AND BY EXECUTION AND DELIVERY
OF THIS GUARANTY EACH GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
GUARANTY. Each Guarantor agrees that service of all process in any such
proceeding in any such court may be made by registered or certified mail, return
receipt requested, to such Guarantor at its address set forth below its
signature hereto, such service being acknowledged by such Guarantor to be
sufficient for personal jurisdiction in any action against such Guarantor in any
such court and to be otherwise effective and binding service in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of Guarantied Party or any Beneficiary
to bring proceedings against such Guarantor in the courts of any other
jurisdiction.
EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, GUARANTIED
PARTY EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty claims
and all other common law and statutory claims. Each Guarantor and, by its
acceptance of the benefits hereof, Guarantied Party each (i) acknowledges that
this waiver is a material inducement for such Guarantor and Guarantied Party to
enter into a business relationship, that such Guarantor and Guarantied Party
have already relied on this waiver in entering into this Guaranty or accepting
the benefits thereof, as the case may be, and that each will continue to rely on
this waiver in their related future dealings, and (ii) further warrants and
represents that each has reviewed this waiver with its legal counsel and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS
GUARANTY. In the event of litigation, this Guaranty may be filed as a written
consent to a trial by the court.
15. Additional Guarantors. The initial Guarantor(s) hereunder shall be
such of the Domestic Subsidiaries of Borrower as are signatories hereto on the
date hereof. From time to time subsequent to the date hereof, Domestic
Subsidiaries of the Borrower may become parties hereto, as additional Guarantors
(each an "Additional Guarantor"), by executing a counterpart of this Guaranty.
Upon delivery of any such counterpart to the Administrative Agent, notice of
which is hereby waived by the Guarantor, each such Additional Guarantor shall be
a Guarantor and shall be
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<PAGE>
as fully a party hereto as if such Additional Guarantor were an original
signatory hereof. Each Guarantor expressly agrees that its obligations arising
hereunder shall not be affected or diminished by the addition or release of any
other Guarantor hereunder, nor by any election of the Administrative Agent not
to cause any Subsidiary of the Borrower to become an Additional Guarantor
hereunder. This Guaranty shall be fully effective as to any Guarantor that is or
becomes a party hereto regardless of whether any other Person becomes or fails
to become or ceases to be a Guarantor hereunder.
16. Counterparts; Effectiveness. This Guaranty may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become
effective as to each Guarantor upon the execution of a counterpart hereof by
such Guarantor (whether or not a counterpart hereof shall have been executed by
any other Guarantor) and receipt by the Administrative Agent of written or
telephonic notification of such execution and authorization of delivery thereof.
17. Guarantied Party as Agent.
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders. Guarantied Party shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Credit Agreement.
(b) Guarantied Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 10.9 of the Credit Agreement
shall also constitute notice of resignation as Guarantied Party under this
Guaranty; removal of Administrative Agent pursuant to subsection 10.9 of the
Credit Agreement shall also constitute removal as Guarantied Party under this
Guaranty; and appointment of a successor Administrative Agent pursuant to
subsection 10.9 of the Credit Agreement shall also constitute appointment of a
successor Guarantied Party under this Guaranty. Upon the acceptance of any
appointment as Administrative Agent under subsection 10.9 of the Credit
Agreement by successor Administrative Agent, that successor Administrative Agent
shall thereupon succeed to become vested with all the rights, powers, privileges
and duties of the retiring or removed Guarantied party under this Guaranty, and
the retiring or removed Guarantied Party under this Guaranty shall promptly (i)
transfer to such successor Guarantied Party all sums held hereunder, together
with all records and other documents necessary or appropriate in connection with
the performance of the duties of the successor Guarantied Party under this
Guaranty, and (ii) take such other actions as may be necessary or appropriate in
connection with the assignment to such successor Guarantied Party of the rights
created hereunder, whereupon such retiring or removed Guarantied Party shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure to its benefits as
to any actions taken or omitted to be taken by it under this Guaranty while it
was Guarantied Party hereunder.
18. Notice of Lender Swap Agreements. Guarantied Party shall not be
deemed to have any duty whatsoever with respect to Swap Counterparties until it
shall have received written notice in form and substance satisfactory to
Guarantied Party from Borrower, a Guarantor or the Swap Counterparty to the
existence and terms of the applicable Lender Swap Agreement.
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[The remainder of this page intentionally left blank.]
F-2-10
<PAGE>
IN WITNESS WHEREOF, [each] Guarantor has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first written above.
[SUBSIDIARY]
By: __________________________
Name:_________________________
Title:________________________
Address:
______________________________
______________________________
______________________________
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<PAGE>
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ______________, ____.
________________________________________
(Name of Additional Guarantor)
By _____________________________________
Title __________________________________
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<PAGE>
SCHEDULE 2.01
REVOLVING LOAN COMMITMENTS,
LETTER OF CREDIT COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Lender Revolving Loan Letter of Credit Pro Rata Share
Commitment Commitment
<S> <C> <C> <C>
BANK OF AMERICA, N.A.
Total $50,000,000.00 $25,000,000.00 100.000000000%
</TABLE>
-1-
<PAGE>
SCHEDULE 7.01
EXISTING INDEBTEDNESS, LIENS AND NEGATIVE PLEDGES
-1-
<PAGE>
SCHEDULE 11.02
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
STATER BROS. HOLDINGS INC.
21700 Barton Road
Colton, California 92324
Attn: Dennis N. Beal
Chief Financial Officer
Telephone: (___)
Facsimile: (____)
Email: ___________@___________.com
with copies to:
Varner, Saleson & Dobler LLP
3750 University Avenue, Suite 610
Riverside, California 92501
Attn: Bruce D. Varner, Esq.
ADMINISTRATIVE AGENT'S OFFICE:
Notices (other than Requests for Extensions of Credit):
- -----------------------------------------------------
BANK OF AMERICA, N.A.
3650 14th Street
Riverside, California 92501
Attn: Helen Wilson
Telephone: (909) 781-1527
Facsimile: (909) 781-1595
Email: [email protected]
Requests for Extensions of Credit:
- ---------------------------------
BANK OF AMERICA, N.A.
3650 14th Street
Riverside, California 92501
Attn: Irene Sotelo
Telephone: (909) 781-1520
Facsimile: (909) 781-1595
Email: [email protected]
Account No.:
Ref:
-1-
<PAGE>
Domestic and Offshore Lending Office:
- ------------------------------------
BANK OF AMERICA, N.A.
3650 14th Street
Riverside, California 92501
Attn: Irene Sotelo
Telephone: (909) 781-1520
Facsimile: (909) 781-1595
Email: [email protected]
BANK OF AMERICA, N.A., as Issuing Lender
3650 14th Street
Riverside, California 92501
Attn: Irene Sotelo
Telephone: (909) 781-1520
Facsimile: (909) 781-1595
Email: [email protected]
BANK OF AMERICA, N.A., as Lender
Domestic and Offshore Lending Office:
- ------------------------------------
3650 14th Street
Riverside, California 92501
Attn: Irene Sotelo
Telephone: (909) 781-1520
Facsimile: (909) 781-1595
Email: [email protected]
-2-
<PAGE>
Notices (other than Requests for Extensions of Credit):
- -----------------------------------------------------
BANK OF AMERICA, N.A.
3650 14th Street
Riverside, California 92501
Attn: Helen Wilson
Telephone: (909) 781-1527
Facsimile: (909) 781-1595
Email: [email protected]
-3-
<PAGE>
EXHIBIT 10.19
STATER BROS. HOLDINGS INC.
Dealer Manager Agreement
July 1, 1999
Banc of America Securities LLC
231 S. LaSalle Street, 18th Floor
Chicago, Illinois 60697
Ladies and Gentlemen:
STATER BROS. HOLDINGS INC., a Delaware corporation (the "Company"),
plans (i) to make tender offers to purchase all of its outstanding (A) 11%
Senior Notes due 2001 (the "Senior Notes") and (B) 9% Senior Subordinated Notes
due 2004 (the "Senior Subordinated Notes" and, together with the Senior Notes,
collectively, the "Notes") and (ii) to solicit consents (the "Consents") from
the holders of the Notes to certain proposed amendments (the "Proposed
Amendments") to each of (A) the indenture dated as of March 8, 1994 (as amended
by the First Supplemental Indenture dated as of July 22, 1997, the "Senior Note
Indenture") between the Company and IBJ Whitehall Bank & Trust Company (formerly
IBJ Schroder Bank & Trust Company), as trustee, pursuant to which the Senior
Notes were issued and (B) the indenture dated as of July 24, 1997 (the "Senior
Subordinated Note Indenture" and, together with the Senior Note Indenture,
collectively, the "Indentures") between the Company and First Trust of New York,
National Association, as trustee, pursuant to which the Senior Subordinated
Notes were issued, in each case on the terms and subject to the conditions set
forth in the Offer to Purchase and Consent Solicitation Statement (the
"Offer/Solicitation") and the Consent and Letter of Transmittal (the "Consent
and Letter of Transmittal") attached hereto as Exhibits A and B, respectively
(which together constitute the "Offer" and the "Consent Solicitation" in respect
of the Notes). The Offer and Consent Solicitation are being made in connection
with the proposed acquisition of certain supermarket assets (the "Acquisition")
and the issuance of new notes (together with the Acquisition, the "Transaction")
as more fully described in the Offer/Solicitation.
The following sets forth the agreement (the "Agreement") between the
Company and you as exclusive dealer manager (the "Dealer Manager") and exclusive
solicitation agent (the "Solicitation Agent"):
1. Engagement as Dealer Manager and Solicitation Agent. The Company
---------------------------------------------------
hereby engages you as exclusive Dealer Manager and exclusive Solicitation Agent,
authorizes you to act as such in connection with the Offer and the Consent
Solicitation and agrees that you shall act as an independent contractor with
duties solely to the Company. As Dealer Manager and Solicitation Agent, you
agree, in accordance with your customary practice, to perform those services in
connection with the Offer and the Consent Solicitation as are customarily
performed
<PAGE>
by investment banking concerns in connection with tender offers and consent
solicitations of like nature, including but not limited to, soliciting the Notes
sought to be purchased by the Company pursuant to the Offer and soliciting the
Consents sought by the Company pursuant to the Consent Solicitation.
2. Offer and Consent Solicitation Material; Withdrawal. The Company
---------------------------------------------------
agrees to furnish you with as many copies as you may reasonably request of the
Offer/Solicitation and Consent and Letter of Transmittal, any amendments or
supplements thereto, any documents incorporated by reference therein, and any
other documents or materials whatsoever relating to the Offer or Consent
Solicitation (collectively, as amended or supplemented from time to time, and
including any documents incorporated by reference therein, the "Offer and
Consent Solicitation Material") to be used by the Company in connection with the
Offer and the Consent Solicitation. The Company agrees that, within a
reasonable time prior to using any Offer and Consent Solicitation Material, it
will submit copies of such material to you and your counsel and will not use or
publish any such material to which you or your counsel object.
In the event that (i) the Company uses or permits the use of any Offer
and Consent Solicitation Material (a) which has not been submitted to you for
your comment and approval, which approval shall not be unreasonably withheld, or
(b) which has been so submitted and with respect to which you have made
comments, but which comments have not resulted in a response reasonably
satisfactory to you and your counsel to reflect your comments, (ii) the Company
shall have breached, in any material respect, any of its respective
representations, warranties, agreements or covenants herein or (iii) the Offer
and the Consent Solicitation are terminated or withdrawn for any reason or any
stop order, restraining order, injunction or denial of an application for
approval has been issued and not thereafter stayed or vacated with respect
thereto, then in any such case you shall be entitled to withdraw as Dealer
Manager and Solicitation Agent without any liability or penalty to you or any
other Indemnified Person (as defined in Section 8) and without loss of any right
to the payment of all fees and expenses payable hereunder which have accrued to
the date of such withdrawal. If you withdraw as Dealer Manager or Solicitation
Agent for any of the reasons set forth in clauses (i) through (iii) above, the
reimbursement for your expenses incurred pursuant to Section 4 through the date
of such withdrawal shall be paid to you promptly after such date. The Company
shall inform you promptly after it receives notice or becomes aware of the
happening of any event, or the discovery of any fact, that would require the
making of any change in any Offer and Consent Solicitation Material then being
used or would affect the truth or completeness of any representation or warranty
contained in this Agreement if such representation or warranty were being made
immediately after the happening of such event or the discovery of such fact.
3. Compensation. You will not receive a fee for your services as
------------
Dealer Manager and Solicitation Agent under this Agreement.
4. Expenses. The Company agrees to pay (i) all fees and expenses
--------
relating to the preparation, printing, mailing and publishing of the Offer and
Consent Solicitation Material and supplemental indentures with respect to each
of the Indentures to effect the Proposed Amendments (the "Supplemental
Indentures"), (ii) all advertising charges in connection with the Offer and
Consent Solicitation incurred and approved by the Company, (iii) all fees and
expenses of the Company's counsel and accountants and of the Depositary (as
defined in Section 5), (iv) all other fees and expenses in connection with the
Offer and the Consent Solicitation,
2
<PAGE>
including those of any depositary, information agent or other person rendering
services in connection therewith and (v) to brokers and dealers (including you),
commercial banks, trust companies and other nominees the amount of their
customary mailing and handling expenses incurred in forwarding the Offer and
Consent Solicitation Material to their customers. The Company shall also
reimburse you for all reasonable, documented out-of-pocket expenses incurred by
you directly related to your services as Dealer Manager and Solicitation Agent,
including the reasonable fees and expenses of your counsel, Milbank, Tweed,
Hadley & McCloy LLP. All payments to be made by the Company pursuant to this
Section 4 shall be made promptly after the earlier to occur of the expiration or
termination of the Offer and the Consent Solicitation, the consummation of the
Transaction or your withdrawal pursuant to Section 2. The Company shall perform
its obligations set forth in this Section 4 whether or not the Offer or the
Consent Solicitation is commenced or the Company acquires any Notes or Consents
pursuant to the Offer or the Consent Solicitation or otherwise.
5. The Depositary and Information Agent. The Company shall arrange
------------------------------------
for IBJ Whitehall Bank & Trust Company to serve as depositary (the "Depositary")
in connection with the Offer and Consent Solicitation and, as such, to advise
you at least daily as to such matters relating to the Offer and Consent
Solicitation as you may request. The Company shall provide you or cause the
trustees under each of the Indentures and The Depository Trust Company ("DTC")
to provide you with copies of the records or other lists showing the names and
addresses of, and principal amounts of Notes held by, the holders of Notes as of
a recent date and shall, from and after such date, use its best efforts to cause
you to be advised from day to day during the pendency of the Offer and the
Consent Solicitation of all transfers of Notes, such notification consisting of
the name and address of the transferor and transferee of any Notes and the date
of such transfer. The Company shall arrange for D.F. King & Co., Inc. to serve
as information agent in connection with the Offer and the Consent Solicitation
and, as such, to advise you as to such matters relating to the Offer and the
Consent Solicitation as you may reasonably request and to furnish you with any
written reports concerning any such information as you may reasonably request.
6. Representations, Warranties and Certain Agreements of the Company
-----------------------------------------------------------------
The Company represents and warrants to you, and agrees with you, that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all the necessary
corporate power and authority, and has taken all necessary corporate action, to
authorize the Offer and the Consent Solicitation, the purchase of Notes pursuant
to the Offer, the payment for the Consents pursuant to the Consent Solicitation
and all other actions by the Company contemplated in the Offer and Consent
Solicitation Material, including the consummation of the Transaction and the
execution and delivery of the Supplemental Indentures;
(b) this Agreement has been duly authorized, executed and delivered
by, and is a legal, valid and binding agreement of, the Company, enforceable
against the Company in accordance with its terms, except as the enforceability
of this Agreement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or law) and
3
<PAGE>
except as rights to indemnity under this Agreement may be limited by Federal or
state securities laws;
(c) a complete and correct copy of the Offer and Consent Solicitation
Material has been furnished to you or will be furnished to you no later than the
date the Offer and Consent Solicitation is commenced (the "Commencement Date").
The Offer and Consent Solicitation Material, as amended and supplemented from
time to time, complies and will comply in all material respects with the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the rules and
regulations thereunder, and the various state securities or "blue sky" laws.
The Offer and Consent Solicitation Material does not and will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading;
(d) the Offer and Consent Solicitation, the purchase of the Notes
pursuant to the Offer, the payment for the Consents pursuant to the Consent
Solicitation, the execution, delivery and performance of the Supplemental
Indentures, all other actions by the Company contemplated in the Offer and
Consent Solicitation Material, including the consummation of the Transaction,
and the execution and delivery of, and the consummation of the transactions
contemplated in, this Agreement will comply in all material respects with all
applicable requirements of law, including any applicable rule or regulation of
any governmental agency, authority or instrumentality, and no consent,
authorization, approval, order, exemption or other action of, or filing with,
any governmental agency, authority or instrumentality of the United States or
any jurisdiction therein or any other jurisdiction is required in connection
with the Offer and the Consent Solicitation or the consummation by the Company
of the transactions contemplated herein or in the Offer and Consent Solicitation
Material, including the consummation of the Transaction, except that a final
order from the Federal Trade Commission ("FTC") and the California Attorney
General granting consent to the Acquisition is required to be obtained;
(e) the Offer and the Consent Solicitation, the purchase of Notes
pursuant to the Offer, the payment for the Consents pursuant to the Consent
Solicitation, the execution, delivery and performance of the Supplemental
Indentures, all other actions by the Company contemplated in the Offer and
Consent Solicitation Material, including the consummation of the Transaction,
and the execution and delivery of, and the consummation of the transactions
contemplated in, this Agreement do not and will not (i) conflict with, result in
a breach of or constitute a default under, the certificate of incorporation or
by-laws of the Company or any of its subsidiaries or any loan or credit
agreement, indenture, mortgage, note or other material agreement or instrument
affecting the Company or any of its subsidiaries or to which the Company or any
of its subsidiaries is a party or by which any of them or any of their
respective properties or assets is or may be bound or (ii) conflict with or
violate any order, judgment or decree of any court or governmental agency,
authority or instrumentality of the United States or any jurisdiction therein or
any other jurisdiction applicable to the Company or any of its subsidiaries;
(f) any document incorporated by reference in the Offer and Consent
Solicitation Material or from which information is so incorporated by reference
when filed or becoming effective, as the case may be, complied and will comply
in all material respects with
4
<PAGE>
the requirements of the Securities Act and the Exchange Act, as applicable, and
the applicable rules and regulations thereunder;
(g) each of the Supplemental Indentures has been duly and validly
authorized by the Company and may be entered into upon the consent of holders of
a majority of the aggregate principal amount of the Notes outstanding under the
applicable Indenture (the "Requisite Consents"), pursuant to the provisions of
the applicable Indenture. Upon the receipt of the Requisite Consents, the
Company will execute and deliver the Supplemental Indentures. Upon such
execution and delivery thereof, each of the Supplemental Indentures will have
been duly and validly authorized, executed and delivered by, and will be a
legal, valid and binding agreement of, the Company, enforceable against the
Company in accordance with its terms, except as the enforceability of the
Supplemental Indentures may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and may be subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(h) the Proposed Amendments set forth in the Supplemental Indentures
when executed and delivered will conform in all material respects to the
description thereof in the Offer and Consent Solicitation Material;
(i) on or prior to the Commencement Date, the Company will have made
appropriate arrangements, to the extent applicable, with DTC or any other
"qualified" securities depositary to allow for the book-entry movement of the
tendered Notes between depositary participants and the Depositary;
(j) each of the representations and warranties of the Company set
forth in this Agreement will be true and correct on and as of the Commencement
Date and on and as of the date of payment for the Notes and the Consents (the
"Settlement Date");
(k) neither the Offer nor the Consent Solicitation requires
registration under the Securities Act; and
(l) the Company will comply, and will cooperate with you to ensure
compliance, with Regulation 14E promulgated under the Exchange Act in connection
with the Offer and Consent Solicitation, to the extent such Regulation is
applicable to the Offer and Consent Solicitation.
7. Covenants. The Company shall advise you promptly of (i) the
---------
occurrence of any event which could cause the Company to withdraw or terminate
the Offer or the Consent Solicitation or would permit the Company to exercise
any right not to purchase tendered Notes or make consent payments thereunder,
(ii) any proposal or requirement to make, amend or supplement any Offer and
Consent Solicitation Material, (iii) the issuance of any order or the taking of
any other action by any administrative or judicial tribunal or other
governmental agency or instrumentality concerning the Offer or the Consent
Solicitation (and, if in writing, shall furnish you a copy thereof) and (iv) any
other information relating to the Offer or the Consent Solicitation which you
may from time to time reasonably request. The Company agrees that if any event
occurs or condition exists as a result of which the Offer and Consent
Solicitation Material would include an untrue statement of a material fact, or
omit to state any material fact necessary to make the statements therein, in the
light of the circumstances when the Offer and
5
<PAGE>
Consent Solicitation Material is delivered to a holder of Notes, not misleading,
or if, in the opinion of the Company, after consultation with you, it is
necessary at any time to amend or supplement the Offer and Consent Solicitation
Material to comply with applicable law, the Company shall immediately notify
you, prepare an amendment or supplement to the Offer and Consent Solicitation
Material that shall correct such statement or omission or effect such
compliance, and supply such amended or supplemented Offer and Consent
Solicitation Material to you.
8. Indemnification and Contribution. The Company hereby agrees to
--------------------------------
hold you harmless and to indemnify you (including any of your affiliates and any
director, officer, manager, member, agent or employee of you or any such
affiliate) and any director, officer, manager, member, or other person
controlling (within the meaning of Section 20(a) of the Exchange Act) you
(including any of your affiliates) from and against any and all losses, claims,
damages, liabilities or expenses (whether in contract, tort or otherwise)
whatsoever (as incurred or suffered and including, but not limited to, any and
all expenses reasonably incurred in investigating, preparing or defending any
litigation or proceeding, commenced or threatened, or any claim whatsoever and
whether or not you or any other indemnified person shall be a party thereto) (a)
arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any Offer and Consent Solicitation
Material, or any omission or alleged omission to state in any Offer and Consent
Solicitation Material a material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading or (ii) any withdrawal or termination by the Company of, or failure
by the Company to make or consummate, the Offer or the Consent Solicitation or
to purchase any Notes pursuant to the Offer or to make any consent payments
pursuant to the Consent Solicitation or (iii) any breach by the Company of any
representation or warranty or failure to comply with any of the agreements
contained herein or (b) otherwise arising out of, relating to or in connection
with or alleged to arise out of, relate to or be in connection with the Offer or
the Consent Solicitation or your role in connection therewith; provided,
however, that (x) in the case of clause (a)(i) above, the Company shall not be
liable to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission made therein in reliance upon and in conformity with
written information furnished to the Company by you or on your behalf
specifically for inclusion therein and (y) in the case of clauses (a)(ii) or (b)
above, the Company shall not be liable for any such loss, claim, damage,
liability or expense which is finally judicially determined to be attributable
to your gross negligence or willful misconduct. The foregoing indemnity shall be
in addition to any liability which the Company might otherwise have to you and
such other indemnified persons. You shall have no liability (direct or indirect
and whether in tort, contract or otherwise) to the Company or any other person
for any losses, claims, damages, liabilities or expenses arising from your own
acts or omissions in performing your obligations hereunder or otherwise in
connection with the Offer or the Consent Solicitation except for any such
losses, claims, damages, liabilities or expenses finally judicially determined
to be attributable to your gross negligence or willful misconduct.
If a claim is made against any person in respect of which indemnity
may be sought pursuant to the first paragraph of this Section 8, such person
(the "Indemnified Person") shall notify the person against whom such indemnity
may be sought (the "Indemnifying Person") promptly after any written assertion
of such claim threatening to institute an action or proceeding with respect
thereto and shall notify the Indemnifying Person promptly of any action
6
<PAGE>
commenced against such Indemnified Person within a reasonable time after such
Indemnified Person shall have been served with a summons or other first legal
process giving information as to the nature and basis of the claim. Failure to
so notify such Indemnifying Person shall not, however, relieve the Indemnifying
Person from any liability which it may have on account of the indemnity under
this Section 8 if the Indemnifying Person has not been prejudiced in any
material respect by such failure. The Indemnifying Person shall be entitled to
participate at its own expense in the defense of any such litigation or
proceedings, but such defense shall be conducted by counsel to such Indemnified
Person. The Indemnifying Person shall, upon the request of such Indemnified
Person, assume the defense of any such litigation or proceeding, and in the case
of any such request such defense shall be conducted by counsel reasonably
satisfactory to the Indemnified Person. In any such litigation or proceeding
the defense of which the Indemnifying Person shall have so assumed, any
Indemnified Person shall have the right to participate in such litigation or
proceeding and to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the (x) Indemnifying Person and
(y) the Indemnified Person and representation of both parties by the same
counsel would be inappropriate due to actual or potential conflicting interests
between them. It is understood that the Indemnifying Person shall not, in
connection with any litigation or proceeding or related litigation or proceeding
in the same jurisdiction, be liable under this Agreement for (i) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
you and all such other persons, if any, referred to in the first paragraph of
this Section 8 (such firm to be designated by you) and (ii) the fees and
expenses of more than one separate firm (in addition to local counsel) for the
Company and all such other persons, if any, referred to in the second paragraph
of this Section 8 (such firm to be designated by the Company), and that all such
fees and expenses shall be reimbursed as they are incurred. The Indemnifying
Person shall not be liable for any settlement of any litigation or proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees, subject to the provisions of this
Section 8, to indemnify the Indemnified Person from and against any loss,
damage, liability or expenses by reason of such settlement or judgment. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding. The
Indemnifying Person agrees to notify the Indemnified Person promptly of the
assertion of any claim in connection with the Offer or Consent Solicitation
against it, any of its officers or directors or any person who controls it
within the meaning of Section 20(a) of the Exchange Act.
To the extent the indemnity provided for in the foregoing paragraphs
of this Section 8 is unavailable to an Indemnified Person in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then each
Indemnifying Person agrees to contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the Indemnifying Person or Persons, on the one hand, and
the Indemnified Person or Persons, on the other, from the Offer and Consent
Solicitation or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, in such proportion as is
7
<PAGE>
appropriate to reflect not only the relative benefits referred to in the
foregoing clause (i), but also the relative fault of the Indemnifying Person or
Persons, on the one hand, and the Indemnified Person or Persons, on the other,
in connection with the statements, actions or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and by you, on the other, shall be deemed to be in the same proportion
as (i) the maximum aggregate value of the consideration proposed to be paid by
the Company for the purchase of Notes pursuant to the Offer and the consent
payments pursuant to the Consent Solicitation bears to (ii) the maximum
aggregate fee proposed to be paid to you pursuant to Section 3. The relative
fault of the Company, on the one hand, and of you, on the other, (i) in the case
of an untrue or alleged untrue statement of a material fact or an omission or
alleged omission to state a material fact, shall be determined by reference to,
among other things, whether such statement or omission relates to information
supplied by the Company or by you and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission and (ii) in the case of any other action or omission, shall be
determined by reference to, among other things, whether such action or omission
was taken or omitted to be taken by the Company, on the one hand, or by you, on
the other, and the parties' relative intent, knowledge, access to information
and opportunity to prevent such action or omission.
The Company and you agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitation set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Person in connection with investigating or defending any such action or claim.
The remedies provided for in this Section 8 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any Indemnified
Person at law or in equity.
9. Survival of Indemnities, Representations and Warranties, etc.
------------------------------------------------------------
The indemnity and contribution agreements contained in Section 8, the provisions
of Sections 2, 3 and 4 and the representations and warranties of the Company set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any failure to commence, or the withdrawal, termination or
consummation of, the Offer or the Consent Solicitation or the termination or
assignment of this Agreement, (ii) any investigation made by or on behalf of the
Company, you or any other Indemnified Person and (iii) any withdrawal by you
pursuant to Section 2.
10. Opinions of Counsel to the Company.
----------------------------------
(a) The Company agrees that it shall furnish to you on, and dated as
of, the Commencement Date (i) an opinion of Varner, Saleson & Dobler LLP,
counsel to the Company, addressed to you, addressing the matters set forth in
Exhibit C attached to this Agreement and (ii) an opinion of Gibson, Dunn &
Crutcher LLP, counsel to the Company, addressed to you, addressing the matters
set forth in Exhibit D attached to this Agreement. Receipt by you of such
opinion is an express condition to performance of your obligations as Dealer
Manager and Solicitation Agent under this Agreement or otherwise in connection
with the Offer and the Consent Solicitation. If such opinion is not received by
you, your obligations as Dealer Manager
8
<PAGE>
and Solicitation Agent under this Agreement or otherwise in connection with the
Offer and the Consent Solicitation shall cease to exist.
(b) The Company shall, at the time of execution and delivery of the
Supplemental Indentures, deliver or cause to be delivered to you the opinions of
counsel to the Company which is delivered to the trustee under each of the
Indentures in connection therewith, together with a letter of such counsel,
addressed to you and dated the date of such opinion, to the effect that you may
rely on such opinions as though they were addressed to you.
11. Severability. In the event that any provision hereof shall be
------------
determined to be invalid or unenforceable in any respect, such determination
shall not affect such provision in any other respect or any other provision
hereof, which shall remain in full force and effect.
12. Counterparts. This Agreement may be executed in two or more
------------
separate counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13. Binding Effect. This Agreement, including any right to
--------------
indemnity or contribution hereunder, shall inure to the benefit of and be
binding upon the Company, you and the other Indemnified Persons (as defined in
Section 8) and their respective successors and assigns. Nothing in this
Agreement is intended, or shall be construed, to give to any other person or
entity any right hereunder or by virtue hereof.
14. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York. This Agreement
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof.
15. References to Banc of America Securities LLC. The Company
--------------------------------------------
agrees that any reference to you in the Offer and Consent Solicitation Material,
or in any other release or communication relating to the Offer or the Consent
Solicitation, is subject to your prior written approval, which approval shall
not be unreasonably withheld.
16. Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally to the parties hereto as
follows:
(a) If to you:
Banc of America Securities LLC
100 North Tryon Street, 7th Floor
Charlotte, NC 28255
Attention: Andrew C. Karp
Fax: (704) 388-0830
Confirm: (704) 388-4813
9
<PAGE>
Banc of America Securities LLC
231 S. LaSalle Street, 18th Floor
Chicago, Illinois 60697
Attention: Bruce R. Thompson
Fax: (312) 828-5539
Confirm: (312) 828-7406
with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
601 South Figueroa Street, 30th Floor
Los Angeles, California 90017-5735
Attention: Eric H. Schunk, Esq.
Fax: (213) 629-5063
Confirm: (213) 892-4000
(b) If to the Company:
Stater Bros. Holdings Inc.
21700 Barton Road
Colton, California 92324
Attention: Jack H. Brown
Fax: (909) 783-5098
Confirm: (909) 783-5100
with a copy to:
Varner, Saleson & Dobler LLP
3750 University Avenue, Suite 610
Riverside, California 92501
Attention: Bruce D. Varner, Esq.
Fax: (909) 274-7770
Confirm: (909) 274-7777
10
<PAGE>
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Andrew H. Bogen, Esq.
Fax: (213) 617-3693
Confirm: (213) 229-7000
17. Waiver of Right to Jury Trial; Submission to Jurisdiction. You
---------------------------------------------------------
and the Company each waive any right to trial by jury in any action, claim, suit
or proceeding with respect to your engagement hereunder. The Company hereby (a)
submits to the jurisdiction of any New York State or federal court sitting in
New York City with respect to any actions and proceedings arising out of or
relating to this Agreement, (b) agrees that all claims with respect to such
actions or proceedings may be heard and determined in such New York State or
federal court, (c) waives the defense of any inconvenient forum and (d) agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
18. Subheadings. The descriptive headings contained in this
-----------
Agreement are incorporated for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
11
<PAGE>
Please indicate your willingness to act as Dealer Manager and
Solicitation Agent on the terms set forth herein and your acceptance of the
foregoing provisions by signing in the space provided below for that purpose and
returning to us a copy of this letter, whereupon this letter shall constitute a
binding agreement between us.
Very truly yours,
STATER BROS. HOLDINGS INC.
By: /s/ Dennis N. Beal
----------------------
Name: Dennis N. Beal
Title: Vice President, Finance and
Chief Financial Officer
By: /s/ Bruce D. Varner
----------------------
Name: Bruce D. Varner
Title: Secretary
Accepted as of the date
first above written:
BANC OF AMERICA SECURITIES LLC
By: /s/ Andrew C. Karp
---------------------------
Name: Andrew C. Karp
Title: Managing Director
12
<PAGE>
EXHIBIT A
Offer to Purchase and Consent Solicitation Statement
A-1
<PAGE>
EXHIBIT B
Consent and Letter of Transmittal
B-1
<PAGE>
EXHIBIT C
Form of Opinion of Varner, Saleson & Dobler LLP
(i) the Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary corporate power and authority to execute and deliver the Dealer
Manager Agreement and perform its obligations thereunder, to execute and deliver
the Supplemental Indentures and perform its obligations thereunder and to
consummate the transactions contemplated in the Offer and Consent Solicitation,
including consummation of the Transaction;
(ii) the Offer and Consent Solicitation, the execution, delivery and
performance of each of the Dealer Manager Agreement and the Supplemental
Indentures and the consummation of all other actions by the Company contemplated
in the Offer and Consent Solicitation Material, including the consummation of
the Transaction, have been duly and validly authorized by all necessary
corporate action by the Company, and no other corporate action by the Company is
necessary to authorize any such actions;
(iii) each of the Dealer Manager Agreement and the Supplemental
Indentures is a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as the validity,
binding effect and enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent conveyances or
other similar laws now or hereafter in effect relating to creditors' rights
generally and may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or law) and
except as rights to indemnity under the Dealer Manager Agreement may be limited
by Federal or state securities laws; and
(iv) the Offer and Consent Solicitation, the purchase of the Notes
pursuant to the Offer, the payment for the Consents pursuant to the Consent
Solicitation, the execution, delivery and performance of the Supplemental
Indenture, all other actions by the Company contemplated in the Offer and
Consent Solicitation Material, including the consummation of the Transaction,
and the execution and delivery of, and the consummation of the transactions
contemplated in, the Dealer Manager Agreement do not and will not (A) conflict
with or violate the certificate of incorporation or by-laws of the Company or
any of its subsidiaries, (B) to the knowledge of such counsel, conflict with or
violate any order, judgment or decree of any court or governmental agency,
authority or instrumentality applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any subsidiary
is bound, or (C) to the knowledge of such counsel, result in a breach of or
constitute a default (or an event which with notice or lapse of time or both
would become default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any material property or asset of the Company or any of
its subsidiaries pursuant to, any loan or credit agreement, mortgage, note or
other material agreement or instrument to which the Company or any of its
subsidiaries is a party or by which any of them or any of their respective
properties or assets is bound.
C-1
<PAGE>
EXHIBIT D
Form of Opinion of Gibson, Dunn & Crutcher LLP
(i) the Offer and Consent Solicitation Material and any document of
the Company filed with the Securities and Exchange Commission and incorporated
by reference (together with the Offer and Consent Solicitation Material, the
"Documents") in the Offer and Consent Solicitation Material or from which
information is so incorporated by reference, when it was filed or became
effective, as the case may be, complied as to form in all material respects with
the requirements of the Securities Act and the Exchange Act, as applicable, and
the rules and regulations promulgated thereunder; and
(ii) during the preparation of the Offer and Consent Solicitation
Material, we reviewed the Documents and participated in limited telephonic
conferences with an officer of the Company concerning such Documents. On the
basis of such limited involvement, this is to advise you that we have no reason
to believe that the Documents (other than the numerical, financial or
statistical data (including reserve data), financial statements and notes
thereto and related schedules therein, as to which we express no belief)
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
D-1
<PAGE>
STATER BROS. HOLDINGS INC. Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended Pro Forma
---------------------------------------------------------------------------------------------
Sept. 25, Sept. 24, Sept. 29, (1) Sept. 28, (2) Sept. 27, (2) Sept. 27, (2)
1994 1995 1996 1997 1998 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes........... $14,645 $10,945 $27,131 $22,510 $ 2,496 $(6,197)
Share of undistributed (income)
loss of less than 50%-owned
affiliates.......................... 592 980 1,624 - - -
Amortization of capitalized
interest............................ 180 192 190 139 321 321
Interest............................. 15,217 18,946 19,171 21,384 30,578 53,767
Less interest capitalized
during the period................... (437) (50) (116) (1,263) (1,135) (1,135)
Net amortization of debt
discount and premium
and issuance expense................ 721 1,180 1,203 1,460 2,797 2,343
Interest portion of rental
expense............................. 13,985 13,588 13,918 15,305 15,683 18,609
------- ------- ------- ------- ------- -------
Earnings as adjusted................ $44,903 $45,781 $63,121 $59,535 $50,740 $67,708
======= ======= ======= ======= ======= =======
Fixed Charges:
Interest............................. $15,217 $18,946 $19,171 $21,384 $30,578 $53,767
Net amortization of debt
discount and premium
and issuance expense................ 721 1,180 1,203 1,460 2,797 2,343
Interest portion of rental
expense............................. 13,985 13,588 13,918 15,305 15,683 18,609
Preferred stock dividends............ 545 - 6,967 10,451 - -
------- ------- ------- ------- ------- -------
Fixed Charges....................... $30,468 $33,714 $41,259 $48,600 $49,058 $74,719
======= ======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges................... 1.47 1.36 1.53 1.23 1.03 .91
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
39 Weeks Ended
--------------
Pro Forma
------------------------------------------
June 28, June 27, (2) June 27, (2)
1999 1999 1999
-------- -------- --------
<S> <C> <C> <C>
Earnings:
Income before income taxes........... $ (231) $16,021 $15,420
Share of undistributed (income)
loss of less than 50%-owned
affiliates.......................... - - -
Amortization of capitalized
interest............................ 237 237 237
Interest............................. 22,749 23,995 41,379
Less interest capitalized
during the period................... (1,109) (64) (64)
Net amortization of debt
discount and premium
and issuance expense................ 2,088 2,114 1,762
Interest portion of rental
expense............................. 12,463 12,246 14,210
------- ------- -------
Earnings as adjusted................ $36,197 $54,549 $72,944
======= ======= =======
Fixed Charges:
Interest............................. $22,749 $23,995 $41,379
Net amortization of debt
discount and premium
and issuance expense................ 2,088 2,114 1,762
Interest portion of rental
expense............................. 12,463 12,246 14,210
Preferred stock dividends............ - - -
------- ------- -------
Fixed Charges....................... $37,300 $38,355 $57,351
======= ======= =======
Ratio of Earnings to
Fixed Charges................... .97 1.42 1.27
======= ======= =======
</TABLE>
(1) 53-Week Fiscal Year
(2) Includes the Company's 50% share of the fixed charges and earnings of an
unconsolidated affiliate.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated May 17, 1999, with respect to the statements of
net assets and store level earnings of Lucky Stores included in the
Registration Statement (Form S-4) and related Prospectus of Stater Bros.
Holdings Inc., for the registration of $450,000,000 of 10 3/4% senior notes
due 2006.
/s/ Ernst & Young LLP
Salt Lake City, Utah
August 18, 1999
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Stater Bros.
Holdings, Inc. on Form S-4 of our report dated May 7, 1999 appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Boise, Idaho
August 19, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 1, 1998, in the Registration Statement
(Form S-4) and related Prospectus of Stater Bros. Holdings Inc. for the
registration of $450,000,000 Senior Notes due 2006.
/s/ Ernst & Young LLP
Riverside, California
August 17, 1999
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
__________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305-(b) (2)
_________
IBJ WHITEHALL BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Terence Rawlins, Assistant Vice President
IBJ Whitehall Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
STATER BROS. HOLDINGS, INC.
(Exact name of each registrant as specified in its charter)
Delaware 33-0350671
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21700 Barton Road
Colton, CA 92324
(Address of principal executive office) (Zip code)
10-3/4% Senior Notes due 2006
(Title of Indenture Securities)
1
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department,
Two Rector Street, New York, New
York
Federal Deposit Insurance Corporation,
Washington, D.C.
Federal Reserve Bank of New York
Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate
trust powers.
Yes
Item 2. Affiliations with the Obligors.
If the obligors are an affiliate of the trustee, describe each
such affiliation.
The obligors are not an affiliate of the trustee.
2
<PAGE>
Item 13. Defaults by the Obligors.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or
participation in any other securities, of the obligors are
outstanding, or is trustee for more than one outstanding series
of securities under the indenture, state whether there has been a
default under any such indenture or series, identify the
indenture or series affected, and explain the nature of any such
default.
None
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Whitehall Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460 & 333-46849).
*2. A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
3
<PAGE>
*4. A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 333-46849).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
NOTE
----
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligors and its directors
or officers, the trustee has relied upon information furnished to it by the
obligors.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as indicated
in Item 13, the obligors are not in default under any indenture under which
the applicant is trustee.
4
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Whitehall Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 16th day
of August, 1999.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-------------------------------------------
Terence Rawlins
Assistant Vice President
5
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Whitehall Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 16th day
of August, 1999.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-------------------------------------------
Terence Rawlins
Assistant Vice President
6
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issue by Stater Bros. Holdings,
Inc., of it's 10 3/4% Senior Notes due 2006, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-------------------------------------------
Terence Rawlins
Assistant Vice President
Dated: August 16, 1999
7
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issue by Stater Bros. Holdings,
Inc., of it's 10 3/4% Senior Notes due 2006, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-------------------------------------------
Terence Rawlins
Assistant Vice President
Dated: August 16, 1999
8
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ WHITEHALL BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of March 31, 1999
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
--------------
<S> <C> <C>
ASSETS
------
1. Cash and balance due from depository institutions:
a. Non-interest-bearing balances and currency and coin.................................... $ 21,794
b. Interest-bearing balances.............................................................. $ 24,039
2. Securities:
a. Held-to-maturity securities............................................................ $ -0-
b. Available-for-sale securities.......................................................... $ 192,664
3. Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs
Federal Funds sold and Securities purchased under agreements to resell...................... $ 90,207
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income........................... $2,045,440
b. LESS: Allowance for loan and lease losses.......................... $ 64,777
c. LESS: Allocated transfer risk reserve.............................. $ -0-
d. Loans and leases, net of unearned income, allowance, and reserve....................... $1,980,663
5. Trading assets held in trading accounts..................................................... $ 783
6. Premises and fixed assets (including capitalized leases).................................... $ 6,188
7. Other real estate owned..................................................................... $ -0-
8. Investments in unconsolidated subsidiaries and associated companies......................... $ -0-
9. Customers' liability to this bank on acceptances outstanding................................ $ 615
10. Intangible assets........................................................................... $ 12,786
11. Other assets................................................................................ $ 61,758
12. TOTAL ASSETS........................................................................... $2,391,497
</TABLE>
9
<PAGE>
LIABILITIES
-----------
<TABLE>
<S> <C> <C>
13. Deposits:
a. In domestic offices.................................................................... $ 722,967
(1) Noninterest-bearing................................................ $ 155,445
(2) Interest-bearing................................................... $ 567,522
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs.......................... $1,111,757
(1) Noninterest-bearing................................................ $ 14,819
(2) Interest-bearing................................................... $1,096,938
14. Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase.................. $ 105,000
15. a. Demand notes issued to the U.S. Treasury............................................... $ 3,000
b. Trading Liabilities.................................................................... $ 468
16. Other borrowed money:
a. With a remaining maturity of one year or less.......................................... $ 25,002
b. With a remaining maturity of more than one year........................................ $ 1,375
c. With a remaining maturity of more than three years..................................... $ 3,550
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding.................................... $ 615
19. Subordinated notes and debentures........................................................... $ 100,000
20. Other liabilities........................................................................... $ 68,528
21. TOTAL LIABILITIES........................................................................... $2,142,262
22. Limited-life preferred stock and related surplus............................................ $ N/A
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus............................................... $ -0-
24. Common stock................................................................................ $ 28,958
25. Surplus (exclude all surplus related to preferred stock).................................... $ 210,319
26. a. Undivided profits and capital reserves................................................. $ 9,707
b. Net unrealized gains (losses) on available-for-sale securities......................... $ 251
c. Accumulated net gains (losses) on cash flow hedges..................................... $ -0-
27. Cumulative foreign currency translation adjustments......................................... $ -0-
28. TOTAL EQUITY CAPITAL........................................................................ $ 249,235
29. TOTAL LIABILITIES AND EQUITY CAPITAL........................................................ $2,391,497
</TABLE>
10
<PAGE>
Exhibit 99.1
------------
FORM OF
LETTER OF TRANSMITTAL
Stater Bros. Holdings Inc.
Offer to
Exchange
All of its Outstanding
10 3/4% Senior Notes Due 2006
for
10 3/4% Senior Notes Due 2006
Which Have Been Registered Under the Securities Act of 1933
Pursuant to the Prospectus dated ________ __, 1999
________________________________________________________________________________
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _______, ______ __, 1999, UNLESS THE EXCHANGE OFFER IS EXTENDED.
________________________________________________________________________________
To: Exchange Agent
IBJ WHITEHALL BANK & TRUST COMPANY
By Mail/Hand Delivery/Overnight Express:
1 State Street
New York, New York 10004
Attn: Customer Service
Facsimile Transmission:
(212) 858-2611
To confirm receipt:
Tel. (212) 858-2103
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via a facsimile number other than the one listed
above, will not constitute a valid delivery. The instructions contained herein
should be read carefully before this Letter of Transmittal is completed.
The undersigned acknowledges receipt of the Prospectus dated ________ ___,
1999 ("Exchange Offer"), of Stater Bros. Holdings Inc., a Delaware corporation
(the "Company"), relating to the offer by the Company, upon the terms and
subject to the conditions set forth in the Exchange Offer and in this Letter of
Transmittal and the instructions hereto (which together with the Exchange Offer
and the instructions hereto constitute the "Offer"), to exchange 10 3/4% Senior
Notes due 2069 which have been registered under the Securities Act of 1933
("Exchange Notes") for any and all of its outstanding 10 3/4% Senior Notes due
2009 issued on August 6, 1999 ("Outstanding Notes"), at the rate of $1,000
principal amount of the Exchange Notes for each $1,000 principal amount of the
Outstanding Notes. Capitalized terms used but not defined herein have the
meanings given to them in the Exchange Offer.
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Offer.
This Letter of Transmittal is to be used if the Outstanding Notes are to be
physically delivered herewith, or if guaranteed delivery procedures are being
used, pursuant to the procedures set forth under "The Exchange Offer" in the
Exchange Offer. If delivery of Outstanding Notes is made by book-entry transfer
to the account maintained by the Exchange Agent at The Depository Trust Company
("DTC"), this Letter of Transmittal need not be manually executed, provided,
however, that tenders of Outstanding Notes must be effected in accordance with
the procedures mandated by DTC and the procedures set forth in the Exchange
Offer under the caption "The Exchange OfferProcedures for Tendering Outstanding
Notes." If a "Registered Holder" (which term, for the purposes of this
document, shall include the person in whose name the Outstanding Notes are
registered on the Company's books and any participant tendering by book-entry
transfer) desires to tender Outstanding Notes and such Outstanding Notes are not
immediately available or time will not permit all documents required by the
Offer to reach the Exchange Agent (or such Registered Holder is unable to
complete the procedure for book-entry transfer on a timely basis) prior to the
Expiration Date, a tender may be effected in accordance with the guaranteed
delivery procedures set forth in the Exchange Offer under the caption "The
Exchange OfferGuaranteed Delivery Procedures." See Instruction 1.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Offer, the undersigned
hereby tenders to the Company the principal amount of the Outstanding Notes
indicated below. Subject to, and effective upon, the acceptance for exchange of
the Outstanding Notes tendered hereby, the undersigned hereby irrevocably sells,
assigns and transfers to or upon the order of the Company all right, title and
interest in and to such Outstanding Notes, and hereby irrevocably constitutes
and appoints the Exchange Agent the true and lawful agent and attorney-in-fact
of the undersigned (with full knowledge that said Exchange Agent also acts as
the agent of the Company) with respect to such Outstanding Notes, with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to take such further action as may be required
in connection with the delivery, tender and exchange of the Outstanding Notes.
The undersigned acknowledges that this Offer is being made in reliance on
an interpretation by the staff of the Securities and Exchange Commission (the
"SEC") that the Exchange Notes issued pursuant to the Exchange Offer in exchange
for the Outstanding Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) a broker-dealer who purchased
Outstanding Notes directly from the Company for resale pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) a
person that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and, except
for broker-dealers that have acquired the Outstanding Notes as a result of
market making or other trading activities, prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such Exchange Notes. See Morgan
Stanley & Co. Incorporated, SEC No-Action Letter (available June 5, 1991) and
"The Exchange OfferResale of the Exchange Notes" in the Exchange Offer
The undersigned understands and agrees that the Company reserves the right
not to accept tendered Outstanding Notes from any tendering holder if the
Company determines, in its sole and absolute discretion, that such acceptance
could result in a violation of applicable securities laws.
The undersigned, if the undersigned is a beneficial holder, represents, or,
if the undersigned is a broker, dealer, commercial bank, trust company or other
nominee, represents that it has received representations from the beneficial
owners of the Outstanding Notes stating (as defined in the Exchange Offer) that
(i) the Exchange Notes to be acquired in connection with the Exchange Offer by
the holder (as such term is defined in the Exchange Offer under the caption "The
Exchange OfferProcedures for Tendering Outstanding Notes") and each beneficial
owner of the Outstanding Notes are being acquired by the holder and each
beneficial owner in the ordinary course of business of the holder and each
beneficial owner, (ii) the holder and each beneficial owner are not
participating, do not intend to participate, and have no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, (iii) the holder and each beneficial owner acknowledge and agree
that any person participating in the Exchange Offer for the purpose of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the Exchange Notes acquired by such person and cannot rely
on the position of the staff of the Commission set forth in no-action letters
that are discussed in the Exchange Offer under the caption "The Exchange Offer--
Resale of the Exchange Notes," (iv) that if the holder is a broker-dealer that
acquired Outstanding Notes as a result of market making or other trading
activities, it will deliver a prospectus in connection with any resale of
Exchange Notes acquired in the Exchange Offer, (v) the holder and each
beneficial owner understand that a secondary resale transaction described in
clause (iii) above should be covered by an effective registration statement
containing the selling security holder information required by Item 507 of
Regulations S-K of the Securities Act and (vi) neither the holder nor any
beneficial owner is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company except as otherwise disclosed to the Company in writing.
In addition, if the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Outstanding Notes, it
represents that the Outstanding Notes to be exchanged for Exchange Notes were
acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands and acknowledges that the Company reserves the
right in its sole discretion to purchase or make offers for any Outstanding
Notes that remain outstanding subsequent to the Expiration Date or, as set forth
in the Exchange Offer under the caption "The Exchange OfferConditions to the
Offer," to terminate the Exchange Offer and, to the extent permitted by
applicable law, purchase Outstanding Notes in the open market, in privately
negotiated transactions or otherwise. The term of any such purchases or offers
could differ from the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Offer, has full power and authority to tender,
exchange, assign and transfer the Outstanding Notes tendered hereby, and that
when the same are accepted for exchange by the Company, the Company will acquire
good and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim or right. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or the Company to be reasonably necessary or
desirable to complete the sale, assignment and transfer of the Outstanding Notes
tendered hereby.
2
<PAGE>
The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned.
The undersigned understands that tenders of the Outstanding Notes pursuant
to any one of the procedures described under "The Exchange OfferProcedures for
Tendering Outstanding Notes" in the Exchange Offer and in the instructions
hereto will constitute a binding agreement between the undersigned and the
Company in accordance with the terms and subject to the conditions of the Offer.
The undersigned understands that by tendering Outstanding Notes pursuant to
one of the procedures described in the Exchange Offer and the instructions
thereto, the tendering holder will be deemed to have waived the right to receive
any payment in respect of interest on the Outstanding Notes accrued up to the
date of issuance of the Exchange Notes.
The undersigned recognizes that, under certain circumstances set forth in
the Exchange Offer, the Company may not be required to accept for exchange any
of the Outstanding Notes tendered. Outstanding Notes not accepted for exchange
or withdrawn will be returned to the undersigned at the address set forth below
unless otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated under the box entitled "Special Exchange
Instructions" below, please deliver Exchange Notes in the name of the
undersigned. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send Exchange Notes to the
undersigned at the address shown below the signature of the undersigned. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Exchange Instructions" to transfer any Outstanding Notes from the name
of the Registered Holder thereof if the Company does not accept for exchange any
of the principal amount of such Outstanding Notes so tendered.
3
<PAGE>
THE UNDERSIGNED BY COMPLETING THE BOX "DESCRIPTION OF OUTSTANDING NOTES"
BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OUTSTANDING
NOTES AND MADE CERTAIN REPRESENTATIONS DESCRIBED HEREIN AND IN THE EXCHANGE
OFFER.
===============================================================================
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(See Instructions 1 and 3 and the following paragraph)
(Important: Also Complete Substitute Form W-9 Herein)
...............................................................................
...............................................................................
Signature(s) of Owner(s)
Dated:................................................................... ,1999
If the holder(s) is/are tendering any Outstanding Notes, this Letter of
Transmittal must be signed by the Registered Holder(s) as the name(s) appear(s)
on the Outstanding Notes or on a security position listing or by person(s)
authorized to become Registered Holder(s) by endorsements and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, officer or other person acting in a fiduciary or representative
capacity, please set forth full title. See Instruction 3.
Name(s):.......................................................................
...............................................................................
(Please Type or Print)
Capacity:.......................................................................
Address:........................................................................
................................................................................
(Include Zip Code)
Area Code and Telephone Number:.................................................
Tax Identification or
Social Security No(s).:.........................................................
(See Instruction 12 and complete Substitute Form W-9 herein)
Signature Guarantee
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution:
Authorized Signature:...........................................................
Printed Name:...................................................................
Title:..........................................................................
Name of Firm:...................................................................
Address:........................................................................
................................................................................
(Include Zip Code)
Area Code and Telephone Number:.................................................
Dated:................................................................... ,1999
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE OUTSTANDING
NOTES OR A NOTICE OF GUARANTEED DELIVERY AND ALL OTHER REQUIRED DOCUMENTS) MUST
BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
================================================================================
4
<PAGE>
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate numbers and
principal amounts should be listed on a separate signed schedule affixed
thereto. See Instruction 7. The minimum permitted tender is $1,000 principal
amount of Outstanding Notes; all other tenders must be in integral multiples of
$1,000.
<TABLE>
DESCRIPTION OF OUTSTANDING NOTES
=================================================================================================================================
<S> <C> <C> <C>
(i) (ii) (iii) (iv)
Aggregate
Name(s) and Address(es) of Holder(s) Certificate Principal Principal
(Please fill in, if blank) Number(s) Amount Amount
Represented Tendered
- ----------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total:..........................................................................
- -----------------------------------------------------------------------------------------------------------------------------------
* Unless otherwise indicated in the column labeled "Principal Amount Tendered" and subject to the terms and conditions of the
Offer, the undersigned will be deemed to have tendered the entire aggregate principal amount represented by the Outstanding
Notes indicated in the column labeled "Aggregate Principal Amount Represented." See Instruction 8.
================================================================================
</TABLE>
CHECK HERE IF TENDERED OUTSTANDING NOTES ARE ENCLOSED HEREWITH.
CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING (See Instructions 1 and 3):
Name(s) of Registered Holder(s):................................................
Date of Execution of Notice of Guaranteed Delivery:.............................
Name of Eligible Institution that Guaranteed Delivery:..........................
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES
OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:...........................................................................
Address:........................................................................
If delivery of Outstanding Notes is to be made by book-entry transfer to
the account maintained by the Exchange Agent at DTC, then tenders of Outstanding
Notes must be effected in accordance with the procedures mandated by DTC and the
procedures set forth in the Exchange Offer under the caption "The Exchange Offer
Procedures for Tendering Outstanding Old Notes."
5
<PAGE>
<TABLE>
========================================================= =========================================================
SPECIAL EXCHANGE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4 and 5) (See Instructions 4 and 5)
<S> <C>
To be completed ONLY if Outstanding Notes in a principal To be completed ONLY if Outstanding Notes in a principal
amount not exchanged and/or Exchange Notes are to be amount not exchanged and/or Exchange Notes are to be sent
registered in the name of or issued to someone other than to someone other than the person or persons whose
the person or persons whose signature(s) appear(s) on this signature(s) appear(s) on this Letter of Transmittal above
Letter of Transmittal above. or to such person or persons at an address other than that
shown in the box entitled "Descriptions of Outstanding
Notes" on this Letter of Transmittal above.
Issue and mail: (check appropriate box(es)):
Exchange Notes to: Outstanding Notes to: Mail or deliver: (check appropriate box(es)):
Name(s)..................................................... Exchange Notes to: Outstanding Notes to:
(Please Type or Print)
Name(s)................................................
........................................................ (Please Type or Print)
(Please Type or Print)
........................................................
Address..................................................... (Please Type or Print)
........................................................ Address................................................
Zip Code
.......................................................
........................................................ Zip Code
Employer Identification or Social Security Number .......................................................
(Complete the Substitute Form W-9) Employer Identification or Social Security Number
======================================================== ========================================================
</TABLE>
6
<PAGE>
TO BE COMPLETED BY ALL EXCHANGING HOLDERS
(See Instruction 5)
PAYEE'S NAME: ________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C>
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT Social Security Number
Form W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. OR_______________________________
Department of the Treasury Employer Identification Number
Internal Revenue Service
Payer's Request for Taxpayer
Identification Number (TIN)
==================================================================================================================================
Part 2--Certification--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding because: (a)
I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
Certification Instructions--You must cross out Item (2) above if you have been notified by the IRS that you are currently subject to
backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS
that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup
withholding, do not cross out such Item (2).
- -----------------------------------------------------------------------------------------------------------------------------------
Part 3 --
SIGNATURE___________________________________________________ DATE_______________________________1999 Awaiting TIN
==================================================================================================================================
</TABLE>
NOTE:FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
- --------------------------------------------------------------------------------
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understanding
that if I do not provide a Taxpayer Identification Number within sixty days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a Taxpayer Identification Number.
SIGNATURE:____________________________ DATE:___________________1999
- --------------------------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
Forming part of the Terms and Conditions of the Offer
1. Delivery of this Letter of Transmittal and Outstanding Notes:
Guaranteed Delivery Procedures. To be effectively tendered pursuant to the
Offer, the Outstanding Notes, together with a properly completed Letter of
Transmittal (or manually signed facsimile hereof) duly executed by the
Registered Holder thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at the address set forth on
the front page of this Letter of Transmittal and tendered Outstanding Notes must
be received by the Exchange Agent at such address at or prior to 5:00 p.m., New
York City time, on the Expiration Date; provided, however, that book-entry
transfers of Outstanding Notes may be affected in accordance with the procedures
set forth in the Exchange Offer under the caption "The Exchange Offer--
Procedures For Tendering Outstanding Notes." If the beneficial owner of any
Outstanding Notes is not the Registered Holder, then such person may validly
tender such person's Outstanding Notes only by obtaining and submitting to the
Exchange Agent a properly completed Letter of Transmittal from the Registered
Holder. Letters of Transmittal of Outstanding Notes should be delivered only by
hand or by courier, or transmitted by mail, and only to the Exchange Agent and
not to the Company or to any other person.
The method of delivery of Outstanding Notes and all other required
documents to the Exchange Agent is at the election and risk of the holder, and
if such delivery is by mail, it is suggested that the holder use properly
insured, registered mail with return receipt requested. If Outstanding Notes
are sent by mail, it is suggested that the mailing be made sufficiently in
advance of the Expiration Date to permit delivery to the Exchange Agent prior to
5:00 p.m., New York City time, on the Expiration Date.
If a holder desires to tender Outstanding Notes and such holder's
Outstanding Notes are not immediately available or time will not permit such
holder to complete the procedures for book-entry transfer on a timely basis or
time will not permit such holder's Letter of Transmittal and other required
documents to reach the Exchange Agent on or before the Expiration Date, such
holder's tender may be effected if:
(a) such tender is made by or through an Eligible Institution;
(b) on or prior to the Expiration Date, the Exchange Agent has
received a facsimile transmission or letter from such Eligible Institution
setting forth the name and address of the holder of such Outstanding Notes,
the certificate number(s) of such Outstanding Notes (except in the case of
book-entry tenders) and the principal amount of Outstanding Notes tendered
and stating that the tender is being made thereby and guaranteeing that,
within three business days after the Expiration Date, a duly executed
Letter of Transmittal, or facsimile thereof, together with the certificate
representing the Outstanding Notes, unless the book-entry transfer
procedures are to be used, and any other documents required by this Letter
of Transmittal and Instructions, will be deposited by such Eligible
Institution with the Exchange Agent; and
(c) this Letter of Transmittal, or a manually signed facsimile hereof,
and Outstanding Notes, in proper form for transfer (or a book-entry
confirmation with respect to such Outstanding Notes), and all other
required documents are received by the Exchange Agent within three business
days after the Expiration Date.
2. Withdrawal of Tenders. Tendered Outstanding Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must (i) be timely received by the Exchange Agent at its address set
forth on the first page of this Letter of Transmittal before the Exchange Agent
receives notice of acceptance from the Company, (ii) specify the name of the
person who tendered the Outstanding Notes, (iii) contain the description of the
Outstanding Notes to be withdrawn, the certificate number(s) of such Outstanding
Notes (except in the case of book-entry tenders) and the aggregate principal
amount represented by such Outstanding Notes or a Book-Entry Confirmation with
respect to such Outstanding Notes, and (iv) be signed by the holder of such
Outstanding Notes in the same manner as the original signature appears on this
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of the Outstanding Notes.
The signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution unless such Outstanding Notes have been tendered (i) by a Registered
Holder of Outstanding Notes who has not completed either the box entitled
"Special Exchange Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) for the account of an
Eligible Institution. If the Outstanding Notes have been tendered pursuant to
the procedure for book-entry tender set forth under the caption "The Exchange
Offer--Procedures for Tendering Outstanding Notes," a notice of withdrawal is
effective immediately upon receipt by the Exchange Agent of a written,
telegraphic or facsimile transmission notice of withdrawal even if physical
release is not yet effected. In addition, such notice must specify, in the case
of Outstanding Notes tendered by delivery of such Outstanding Notes, the name of
the Registered Holder (if different from that of the tendering holder) to be
credited with the withdrawn Outstanding Notes. Withdrawals may not be
rescinded, and any Outstanding Notes withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, properly withdrawn
Outstanding Notes may be retendered by following one of the procedures described
under "The Exchange Offer--Procedures for Tendering Outstanding Notes" in the
Exchange Offer at any time on or prior to the applicable Expiration Date.
8
<PAGE>
3. Signatures on this Letter of Transmittal, Bond Powers and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed
by the Registered Holder of the Outstanding Notes tendered hereby, the signature
must correspond exactly with the name as written on the face of the Outstanding
Notes without any change whatsoever.
If any Outstanding Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any Outstanding Notes tendered hereby are registered in different names,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Outstanding
Notes.
When this Letter of Transmittal is signed by the Registered Holder(s)
specified herein and tendered hereby, no endorsements of such Outstanding Notes
or separate bond powers are required. If, however, Exchange Notes are to be
issued, or any untendered principal amount of Outstanding Notes are to be
reissued to a person other than the Registered Holder, then endorsements of any
Outstanding Notes transmitted hereby or separate bond powers are required.
If this Letter of Transmittal is signed by a person other than the
Registered Holder(s), such Outstanding Notes must be endorsed or accompanied by
appropriate bond powers, in either case signed exactly as the name or names of
the Registered Holder or holders appear(s) on the Outstanding Notes.
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
Outstanding Notes or bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Except as described in this paragraph, signatures on this Letter of
Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by
an Eligible Institution which is a firm which is a member of a registered
national securities exchange or the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States, a participant in a recognized medallion signature guarantee
program or which is otherwise an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act. Signatures on this Letter of
Transmittal or a notice of withdrawal, as the case may be, need not be
guaranteed if the Outstanding Notes tendered pursuant hereto are tendered (i) by
a Registered Holder of Outstanding Notes who has not completed either the box
entitled "Special Exchange Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) for the account of an
Eligible Institution.
Endorsement on Outstanding Notes or signatures on bond forms required by
this Instruction 3 must be guaranteed by an Eligible Institution.
4. Special Issuance and Delivery Instructions. Tendering holders should
indicate in the applicable box the name and address to which Exchange Notes
and/or substitute Outstanding Notes for the principal amounts not exchanged are
to be issued or sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the employer identification or social security number of the person named must
also be indicated. If no such instructions are given, such Outstanding Notes not
exchanged will be returned to the name and address of the person signing this
Letter of Transmittal.
5. Tax Identification Number and Backup Withholding. Federal income tax
law of the United States requires that a holder of Outstanding Notes whose
Outstanding Notes are accepted for exchange provide the Company with such
holder's correct taxpayer identification number, which, in the case of a holder
who is an individual, is the holder's social security number, or otherwise
establish an exemption from backup withholding. If the Company is not provided
with the holder's correct taxpayer identification number, the exchanging holder
of Outstanding Notes may be subject to a penalty imposed by the Internal Revenue
Service. In addition, interest on the Exchange Notes acquired pursuant to the
Offer may be subject to backup withholding in an amount equal to 31 percent of
any interest payment. If withholding occurs and results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service upon filing of
a return.
To prevent backup withholding, each exchanging holder of Outstanding Notes
subject to backup withholding must provide his correct taxpayer identification
number by completing the Substitute Form W-9 provided in this Letter of
Transmittal, certifying that the taxpayer identification number provided is
correct (or that the exchanging holder of Outstanding Notes is awaiting a
taxpayer identification number) and that either (a) the exchanging holder has
not been notified by the Internal Revenue Service that he is subject to backup
withholding as a result of failure to report all interest or dividends or (b)
the Internal Revenue Service has notified the exchanging holder that he is no
longer subject to backup withholding.
Certain exchanging holders of Outstanding Notes (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding requirements. A foreign individual and other exempt holders
(e.g., corporations) should certify, in accordance with the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9, to
such exempt status on the Substitute Form W-9 provided in this Letter of
Transmittal.
6. Transfer Taxes. Holders tendering pursuant to the Offer will not be
obligated to pay brokerage fees or commissions or to pay transfer taxes with
respect to their exchange under the Offer unless the box entitled "Special
Exchange Instructions" in this Letter of Transmittal has been completed. The
Company will pay all other charges or expenses in connection with the Offer. If
holders tender Outstanding Notes for exchange and the Offer is not consummated,
such Outstanding Notes will be returned to the holders at the Company's expense.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes specified in this
Letter of Transmittal.
9
<PAGE>
7. Inadequate Space. If the space provided herein is inadequate, the
aggregate principal amount of the Outstanding Notes being tendered and the
security numbers (if available) should be listed on a separate schedule attached
hereto and separately signed by all parties required to sign this Letter of
Transmittal.
8. Partial Tenders. Tenders of Outstanding Notes will be accepted only
in integral multiples of $1,000. If tenders are to be made with respect to less
than the entire principal amount of any Outstanding Notes, fill in the principal
amount of Outstanding Notes which are tendered in column (iv) of the
"Description of Outstanding Notes." In the case of partial tenders, the
Outstanding Notes in fully registered form for the remainder of the principal
amount of the Outstanding Notes will be sent to the person(s) signing this
Letter of Transmittal, unless otherwise indicated in the appropriate place on
this Letter of Transmittal, as promptly as practicable after the expiration or
termination of the Offer.
Unless otherwise indicated in column (iv) in the box labeled "Description
of Outstanding Notes," and subject to the terms and conditions of the Offer,
tenders made pursuant to this Letter of Transmittal will be deemed to have been
made with respect to the entire aggregate principal amount represented by the
Outstanding Notes indicated in column (iii) of such box.
9. Mutilated, Lost, Stolen or Destroyed Outstanding Notes. Any holder
whose Outstanding Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
10. Validity and Acceptance of Tenders. All questions as to the
validity, form, eligibility (including time of receipt), acceptance and
withdrawal of Outstanding Notes tendered for exchange will be determined by the
Company in its sole discretion, which determination shall be final and binding.
The Company reserves the absolute right to reject any and all Outstanding Notes
not properly tendered and to reject any Outstanding Notes the Company's
acceptance of which might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Outstanding
Notes either before or after the Expiration Date (including the right to waive
the ineligibility of any holder who seeks to tender Outstanding Notes in the
Exchange Offer). The interpretation of the terms and Conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Outstanding Notes for exchange must
be cured within such period of time as the Company shall determine. The Company
will use reasonable efforts to give notification of defects or irregularities
with respect to tenders of Outstanding Notes for exchange but shall not incur
any liability for failure to give such notification. Tenders of the Outstanding
Notes will not be deemed to have been made until such irregularities have been
cured or waived.
11. Requests for Assistance or Additional Copies. IBJ Whitehall Bank &
Trust Company is the Exchange Agent. All tendered Outstanding Notes, executed
Letters of Transmittal and other related documents should be directed to the
Exchange Agent at the address or facsimile number set forth on the first page of
this Letter of Transmittal. Questions and requests for assistance and requests
for additional copies of the Prospectus, the Letter of Transmittal and other
related documents should be addressed to the Exchange Agent as follows:
IBJ Whitehall Bank & Trust Company
1 State Street
New York, New York 10004
Attn: Customer Service
Facsimile Transmission:
(212) 858-2611
To confirm receipt:
Tel. (212) 858-2103
10
<PAGE>
EXHIBIT 99.2
FORM OF NOTICE OF GUARANTEED DELIVERY
Stater Bros. Holdings Inc.
Offer to Exchange
All of its Outstanding
10 3/4% Senior Notes Due 2006
for
10 3/4% Senior Notes Due 2006
Which Have Been Registered Under the Securities Act of 1933
As set forth in the Prospectus described below, this Notice of Guaranteed
Delivery, or one substantially equivalent hereto, must be used to tender for
exchange any and all outstanding 10 3/4% Senior Notes due 2006 ("Outstanding
Notes") of Stater Bros. Holdings Inc., a Delaware corporation (the "Company"),
pursuant to the Exchange Offer (as defined below) if certificates for
Outstanding Notes are not immediately available or if such certificates for
Outstanding Notes and all other required documents cannot be delivered to the
Exchange Agent on or prior to the Expiration Date (as defined in the
Prospectus), or if the procedures for delivery by book-entry transfer cannot be
completed on a timely basis. This instrument may be delivered by hand or
transmitted by facsimile transmission or mail to the Exchange Agent.
The Exchange Agent for the Exchange Offer is:
IBJ WHITEHALL BANK & TRUST COMPANY
By Mail/Hand Delivery/Overnight Express:
1 State Street
New York, New York 10004
Attn: Customer Service
Facsimile Transmission:
(212) 858-2611
To confirm receipt:
Tel. (212) 858-2103
Delivery of this instrument to an address other than as set forth above or
transmissions of instructions via a facsimile number other than as set forth
above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the Instructions to the Letter of
Transmittal, such signature guarantee must appear in the applicable space
provided in the signature box in the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON _______, _______ __, 1999
UNLESS THE EXCHANGE OFFER IS EXTENDED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus dated August __, 1999
("Prospectus") and in the related Letter of Transmittal (which, together with
any amendments or supplements thereto, collectively constitute the "Exchange
Offer"), receipt of each of which is hereby acknowledged, the principal amount
of Outstanding Notes indicated below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer--
Guaranteed Delivery Procedures."
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<S> <C>
Signature(s):________________________________________ Address(es):_________________________________________
_____________________________________________________
Name(s) of Holder(s) of Outstanding Notes: Zip Code
_____________________________________________________ Area Code and Tel. No.(s):___________________________
_____________________________________________________
Please Type or Print
(Check box if Shares will be tendered by book-entry
Principal Amount of Outstanding Notes Tendered for transfer)
Exchange: $__________________________________________ [_] The Depository Trust Company
Outstanding Note Certificate No(s). (If available): Account Number:______________________________________
_____________________________________________________
_____________________________________________________
Dated: ______________________________, 1999
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GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution (as defined in the Prospectus), having
an office or correspondent in the United States, hereby (a) represents that the
above named person(s) "own(s)" the Outstanding Notes tendered hereby within the
meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended ("Rule 14e-4"), (b) represents that such tender of Outstanding Notes
complies with Rule 14e-4 and (c) guarantees either to deliver to the Exchange
Agent the certificates representing all the Outstanding Notes tendered hereby,
in proper form for transfer and together with a properly completed and duly
executed Letter of Transmittal, or a facsimile thereof, or to deliver such
Outstanding Notes pursuant to the procedure for book-entry transfer into the
Exchange Agent's account at The Depository Trust Company ("DTC"), together with
a confirmation of a book-entry transfer of the tendered Outstanding Notes into
the Exchange Agent's account at DTC, and, in either case, to deliver any other
required documents, all within three business days after the date hereof.
_____________________________________ _______________________________________
Name of Firm Authorized Signature
_____________________________________ Name __________________________________
Address Please Type or Print
_____________________________________ Title _________________________________
Zip Code
Area Code and Tel. No. ______________ Dated ___________________________, 1999
NOTE: DO NOT SEND CERTIFICATES FOR OUTSTANDING NOTES WITH THIS NOTICE.
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
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