__________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
November 21, 1995
THE SOUTHLAND CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 0-16626 and 0-676 75-1085131
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
2711 North Haskell Avenue
Dallas, Texas 75204
(Address of principal executive offices, zip code)
Registrant's Telephone Number, Including Area Code: 214/828-7011
__________________________________________________________________________
<PAGE>
Item 5. Other Events
On November 22, 1995, the Company issued $300 million aggregate
principal amount of 4.5% Convertible Quarterly Income Debt Securities
due 2010 ("Convertible Debt Securities") to Ito-Yokado Co., Ltd. and
Seven-Eleven Japan Co., Ltd., the joint owners of IYG Holding Company
which is the majority shareholder of the Company. The Convertible Debt
Securities are subordinated to all existing debt and pay interest quarterly;
however, the Company has the right to defer interest payments thereon for
up to 20 consecutive quarters. The Convertible Debt Securities are
convertible into shares of the Company's common stock at a price of
$4.1602 per share, subject to adjustment in certain cases.
In addition, on November 21, 1995, the Company successfully
concluded its "Dutch Auction" tender offer for 40 percent of both its 5%
First Priority Senior Subordinated Debentures due December 15, 2003
("5% Debentures") and 4.5% Second Priority Senior Subordinated
Debentures (Series A) due June 15, 2004 ("4.5% Debentures," together
with the 5% Debentures, the "Debentures"). Under terms of the tender
offer, 40 percent of each issue was purchased at the final clearing price of
$840.00 for the 5% Debentures and $786.00 for the 4.5% Debentures, in
each case per $1,000 principal amount. All Debentures tendered below
the final clearing price were purchased at the final clearing price.
Debentures tendered at the final clearing price were prorated, and those
tendered at prices above the final clearing price are being returned. The
5% Debentures acquired by the Company through the tender offer have been
used to satisfy the Company's sinking fund obligations for several years
under the terms of the Indenture governing the 5% Debentures.
The net proceeds from the issuance of the Convertible Debt Securities
is approximately $295 million, of which approximately $217 million
has been used to purchase the tendered Debentures. Additional open market
purchases of the Debentures may be made in the future. The remaining
proceeds will be used for general corporate purposes including, initially,
the repayment of currently outstanding commercial paper and revolving debt,
if any.
A copy of the Company's News Release, dated November 22, 1995,
reporting these events, is attached as Exhibit 99 to this Form 8-K.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
The following exhibits are submitted herewith:
4.(v)-1* Form of 4.5% Convertible Quarterly Income Debt Securities
due 2010, issued on November 22, 1995 to Ito-Yokado Co.,
Ltd. ($153,000,000) and Seven-Eleven Japan Co., Ltd.
($147,000,000).
10.(i)-1* Second Amendment to Third Amended and Restated Credit
Agreement dated as of November 28, 1995, to Credit
Agreement dated as of July 31, 1987, and subsequently
amended and restated among The Southland Corporation,
the financial institutions party therto as Senior
Lenders, the financial institutions party thereto as
Issuing Banks, Citicorp North America, Inc., as
Administrative Agent, and The Sakura Bank, Limited,
New York Branch, as Co-Agent.
1
<PAGE>
99.-1* News Release dated November 22, 1995 announcing the
completion of the Company's tender offer for 40% of both
its 4.5% Second Priority Senior Subordinated Debentures
(Series A) Due June 15, 2004 and 5% First Priority
Senior Subordinated Debentures Due December 15, 2003 and
the issuance of $300 million 4.5% Convertible Quarterly
Income Debt Securities.
______________________
*Filed or furnished herewith
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SOUTHLAND CORPORATION
(Registrant)
Dated: December 5, 1995 Bryan F. Smith, Jr.
_________________________
(Bryan F. Smith, Jr.)
Senior Vice President
and General Counsel
2
<PAGE>
INDEX TO EXHIBITS
4.(v)-1* Form of 4.5% Convertible Quarterly Income Debt Securities
due 2010, issued on November 22, 1995 to Ito-Yokado Co.,
Ltd. ($153,000,000) and Seven-Eleven Japan Co., Ltd.
($147,000,000).
10.(i)-1* Second Amendment to Third Amended and Restated Credit
Agreement dated as of November 28, 1995, to Credit
Agreement dated as of July 31, 1987, and subsequently
amended and restated among The Southland Corporation,
the financial institutions party thereto as Senior
Lenders, the financial institutions party thereto as
Issuing Banks, Citicorp North America, Inc., as
Administrative Agent, and The Sakura Bank, Limited,
New York Branch, as Co-Agent.
99.-1* News Release dated November 22, 1995 announcing the
completion of the Company's tender offer for 40% of both
its 4.5% Second Priority Senior Subordinated Debentures
(Series A) Due June 15, 2004 and 5% First Priority
Senior Subordinated Debentures Due December 15, 2003 and
the issuance of $300 million 4.5% Convertible Quarterly
Income Debt Securities.
______________________
*Filed or furnished herewith
3
CONFORMED COPY
THE SOUTHLAND CORPORATION
Quarterly Income Debt Security Due 2010
$___________
No. __
THE SOUTHLAND CORPORATION, a corporation
duly organized and existing under the laws of Texas (herein called the
"Company"), for value received, hereby promises to pay to _______________,
or registered assigns, the principal sum of $___________
on November 21, 2010, and to pay interest thereon from November
27, 1995 or from the most recent interest payment date to which
interest has been paid or duly provided for, quarterly on March 15,
June 15, September 15 and December 15 in each year, commencing
December 15, 1995, (each an "Interest Payment Date") at the rate of
4.5% per annum, net of applicable withholding taxes, if any, until the
principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest
Payment Date will be paid to the person in whose name this Security
(or one or more predecessor Securities) is registered at the close of
business on the regular record date for such interest, which shall be the
business day next preceding such Interest Payment Date (a "Regular
Record Date"). Any such interest not so punctually paid or duly
provided for (including a failure to pay or duly provide for such
interest pursuant to an Extension Period, as defined below) will
forthwith cease to be payable to the holder on such Regular Record
Date and may either be paid to the Person in whose name this Security
(or one or more predecessor Securities) is registered at the close of
business on a special record date for the payment of such defaulted
Interest to be fixed by the Company, notice whereof shall be given to
holder of this Security not less than 10 days prior to such special
record date, or be paid at any time in any other lawful manner.
Payment of the principal of (and premium, if any) and
interest on this Security will be made at the office or agency of the
Company maintained for that purpose in Dallas, Texas, 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; such payments
shall be made by wire transfer to the holder of this Security, to the
account specified by such holder to the Company in writing.
The Company shall have the right at any time during the
term of this Security to extend the interest payment period of (and
thereby postpone the payment of interest otherwise payable on) this
Security from time to time to a period not exceeding 20 consecutive
quarters (the "Extension Period"), at the end of which Extension
Period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified herein to the extent
permitted by applicable law); provided, that, during any such
Extension Period, the Company shall not declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments
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2
with respect to the foregoing. Prior to the termination of any such
Extension Period, the Company may further extend the interest
payment period and thereby defer the payment of interest, provided
that such Extension Period, together with all such previous and further
extensions thereof, may not exceed 20 consecutive quarters or extend
beyond the maturity of the Securities. Subject to the requirements that
each Extension Period may not be in effect for more than 20
consecutive quarters and may not extend beyond November 21, 2010,
and that the Company pay interest at the conclusion of each Extension
Period, the Company may declare any number of Extension Periods.
The Company shall give the holder of this Security at least 30 days'
prior notice of the initiation or extension of any Extension Period.
Upon the termination of any Extension Period and the payment of all
amounts then due, the Company may select a new Extension Period.
This Security is subject to restrictions on transfer set
forth on the reverse hereof.
Reference is hereby made to the further provisions of
this Security set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused
this instrument to be duly executed.
Dated: November 22, 1995
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3
THE SOUTHLAND CORPORATION
By: /s/
---------------------------
Name:
Title:
Attest: /s/
------------------------
Name:
Title:
<PAGE>
[Reverse of Security]
1. GENERAL. This Security is one of a duly
authorized issue of securities of the Company (herein called the
"Securities") designated on the face hereof, limited in aggregate
principal amount to $300,000,000.
This Security is convertible into Common Stock as
provided below in Section 4, and is subject to redemption at the
election of the Company as provided below in Section 5.
In the event of redemption of this Security in part
only, a new Security or Securities of like tenor for the unredeemed
portion hereof will be issued in the name of the holder hereof upon
the cancellation hereof; provided that Securities will only be issued
in denominations of $15,000,000 or greater except in the event that
all or a portion of this Security is transferred to a Person that holds it
pursuant to an Indenture (as defined in Section 6.2) under which
securities having an aggregate principal amount of at least
$60,000,000 are outstanding.
When this Security is presented to the Company with a
request to register the transfer or to exchange it for an equal principal
amount at maturity of Securities of other authorized denominations,
the Company shall register the transfer or make the exchange as
requested. To permit registrations of transfers and exchanges in
accordance herewith, the Company shall execute a new Security or
Securities; provided that Securities will only be issued in
denominations of $15,000,000 or greater except in the event that all
or a portion of this Security is transferred to a Person that holds it
pursuant to an Indenture (as defined in Section 6.2) under which
securities having an aggregate principal amount of at least
$60,000,000 are outstanding. No service charge shall be made to the
Holder for any registration of transfer or exchange or redemption of
this Security, but the Company may require payment by the Holder
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith.
The indebtedness evidenced by this Security is, to the
extent provided below, subordinated and subject in right of payment
to the prior payment in full of all Senior Indebtedness. Each holder
of this Security, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Company on
his behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination so provided and (c)
appoints the Company his attorney-in-fact for any and all such
purposes. Each holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions
contained herein by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such
holder upon said provisions.
2. EVENTS OF DEFAULT. (a) Event of
Default, wherever used herein with respect to this Security, means
any one of the following events (whatever the reason for such Event
of Default and whether it shall be occasioned by the provisions of
Section 3 or be voluntary or involuntary or be effected by operation
<PAGE>
2
of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any interest upon this
Security when it becomes due and payable (as determined
after giving effect to any Extension Period), and continuance
of such default for a period of 30 days whether or not such
payment is prohibited by the provisions of Section 3 below;
or
(2) default in the payment of the principal of or
any premium on this Security at its final maturity; whether or
not such payment is prohibited by the provisions of Section 3
below; or
(3) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order
adjudging the Company bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of
the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of
any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any
such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 60 consecutive
days; or
(4) the commencement by the Company of a
voluntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar
law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of
a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the
consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such
action.
(b) Subject to Section 3, if an Event of Default
occurs with respect to this Security and is continuing, then the holder
of this Security may after giving 10 days prior written notice to the
Agent under the Credit Agreement as provided in Section 3.3(d)
<PAGE>
3
declare the principal amount of this Security to be due and payable
immediately, by a notice in writing to the Company, and upon any
such declaration the principal amount (of this Security) shall become
immediately due and payable.
(c) After any such acceleration, but before a
judgment or decree based on acceleration, the Holder of this Security
may rescind and annul such acceleration if all Events of Default,
other than the non-payment of accelerated principal (or other
specified amount), have been cured.
Section 3. SECURITY SUBORDINATE TO SENIOR
INDEBTEDNESS.
Section 3.1 GENERAL. The provisions of this Section 3
apply notwithstanding anything to the contrary contained in this
Security. The Company covenants and agrees, and each holder of
this Security, by such holder's acceptance hereof, likewise covenants
and agrees, that, to the extent and in the manner hereinafter set forth
in this Section 3, the indebtedness represented by this Security and
the payment of the principal of and the interest on all of this Security
are hereby expressly made subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness. This
Section 3 constitutes a continuing offer to all persons who become
holders of, or continue to hold, Senior Indebtedness, each of whom
is an obligee hereunder and is entitled to enforce such holder's rights
hereunder, subject to the provisions hereof, without any act or notice
of acceptance hereof or reliance hereon.
3.2. PAYMENT OVER OF PROCEEDS UPON
DISSOLUTION, ETC.
(a) In the event of any Insolvency or Liquidation
Proceeding, (1) all Senior Indebtedness under or with respect to the
Credit Agreement and (2) all amounts payable in respect of any other
Senior Indebtedness shall first be paid in full before the holder of this
Security is entitled to receive any direct or indirect payment or
distribution of any cash, property or securities (excluding
Reorganization Securities) on account of principal of or interest on
this Security.
(b) The holders of Senior Indebtedness or their
respective Representatives shall be entitled to receive directly, for
application to the payment thereof (to the extent necessary to pay all
such Senior Indebtedness in full after giving effect to any
substantially concurrent payment or distribution to the holders of
such Senior Indebtedness), in the following order of priority, any
payment or distribution of any kind or character, whether in cash,
property or securities (excluding Reorganization Securities but
including any payment or distribution, except Reorganization
Securities, which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being
subordinated to the payment of the Securities) which may be payable
or deliverable in respect of the Securities in any such Insolvency or
Liquidation Proceeding: first, so long as any Senior Indebtedness
under or with respect to the Credit Agreement is outstanding, to the
holders of such Senior Indebtedness (pro rata on the basis of the
respective amounts of such Senior Indebtedness held by them) or their
<PAGE>
4
Representatives; and, second, if and only if all Senior
Indebtedness under or with respect to the Credit Agreement is paid in
full, to the holders of any other Senior Indebtedness (pro rata on the
basis of the respective amounts of such other Senior Indebtedness
held by them) or their respective Representatives.
(c) In the event that, notwithstanding the foregoing
provisions of this Section 3.2, the holder of any Security shall have
received any payment from or distribution of assets of the Company
or the estate created by the commencement of any such Insolvency or
Liquidation Proceeding, of any kind or character in respect of this
Security, whether in cash, property or securities (excluding
Reorganization Securities but including any payment or distribution,
except Reorganization Securities, which may be payable or deliverable
by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Securities) before all Senior
Indebtedness is paid in full, then and in such event such payment or
distribution shall be received and held in trust for and shall be paid
over, in the following order of priority, to the holders of the Senior
Indebtedness remaining unpaid or their respective Representatives, to
the extent necessary to pay all such Senior Indebtedness in full after
giving effect to any substantially concurrent payment or distribution to
the holders of such Senior Indebtedness, for application to the payment
in full of such Senior Indebtedness: first, so long as any Senior
Indebtedness under or with respect to the Credit Agreement is
outstanding, to the holders of such Senior Indebtedness (pro rata on the
basis of the respective amounts of such Senior Indebtedness held by
them) (or their respective Representatives) and, second, if and only if
all Senior Indebtedness under or with respect to the Credit Agreement
is paid in full, to the holders of any other Senior Indebtedness (pro rata
on the basis of the respective amounts of such other Senior
Indebtedness held by them) or their respective Representatives.
Section 3.3. DEFAULT ON SENIOR INDEBTEDNESS.
(a) If there exists a default in the payment when due
(whether at maturity or upon acceleration or mandatory prepayment, or
on any principal installment payment date or interest payment date, or
otherwise) of any Senior Indebtedness and such default shall not have
been cured, or such default, or the benefits of this sentence, shall not
have been waived in writing by or on behalf of the holders of such
Senior Indebtedness (or their Representative, if any), then any payment
on account of principal of, or interest on this Security which the holder
of this Security would then be entitled to receive, but for the provisions
of this subsection 3.3(a), shall instead be paid over, in the following
order of priority, to the holders of such Senior Indebtedness (or their
Representative, if any) until all amounts of Senior Indebtedness then
due and payable have been paid in full, prior to any direct or indirect
payment by the Company or such holders of any principal of or interest
on the Security: first, so long as any Senior Indebtedness then due and
payable under or with respect to the Credit Agreement is outstanding,
to the holders of such Senior Indebtedness (pro rata on the basis of the
respective amounts of such Senior Indebtedness held by them) (or their
respective Representatives) and, second, if and only if all Senior
Indebtedness then due and payable under or with respect to the Credit
Agreement is paid in full, to the holders of any other Senior
Indebtedness then due and payable (pro rata on the basis of the
<PAGE>
5
respective amounts of such other Senior Indebtedness held by them) or
their respective Representatives.
(b) The Company may not, directly or indirectly,
make any payment on account of the principal of or interest on this
Security during the period (a "Deferral Period") from the date the
Company receives (1) from the Agent under the Credit Agreement, (2)
from a Representative or (3) from a holder of Senior Indebtedness that
has no Representative, an effective notice (a "Deferral Notice") of:
(i) the existence of a default in the payment when
due (whether at maturity or upon acceleration or mandatory
prepayment or on any principal installment payment date or
interest payment date, or otherwise) of any Senior Indebtedness
(a "Payment Default"); or
(ii) the existence of any event of default (other than
a Payment Default) of the general type referred to in, or
resulting from the Company's failure to perform obligations of
the general type referred to in Sections 6.01(iii), 6.01(iv)(B),
7.01 (except the last sentence thereof), 7.02, 7.06, 7.09, 8.01
through 8.05, 8.07 through 8.12, 8.14, 8.15, 8.16, 9.01 through
9.06, 11.01(e), 11.01(f) through 11.01(n), and 11.01(p) of the
Credit Agreement as originally executed, whether such event of
default arises under the Credit Agreement or under any other
agreement or instrument pursuant to which any other Senior
Indebtedness is issued, in each instance as now in effect or as
hereafter from time to time modified or amended, without
necessity of consent by or notice or the holder of this Security
(a "Specified Covenant Default"),
until the earlier of (i) the date such Payment Default or Specified
Covenant Default is cured (if capable of being cured), waived in writing
or otherwise ceases to exist, (ii) the date application of this subsection
3.3(b) has been waived in writing by the Agent under the Credit
Agreement in accordance with the terms of the Credit Agreement (or if
all Senior Indebtedness under or with respect to the Credit Agreement
has been paid in full, the holders of not less than 50% in aggregate
principal amount of all other Senior Indebtedness or their respective
Representatives waive in writing the application of this subsection
3.3(b)), and (iii) the 180th day after receipt by the Company of such
Deferral Notice; PROVIDED, HOWEVER, that (x) only one Deferral
Notice relating to the same Payment Default or Specified Covenant
Default may be given, (y) no subsequent Deferral Notice may be given
with respect to any Payment Default or Specified Covenant Default
existing at the time an effective Deferral Notice is given and (z) if any
such Deferral Notice has been given, no subsequent Deferral Notice
with respect to any number of different Payment Defaults or Specified
Covenant Defaults shall be effective until the later of (X) the date such
subsequent Deferral Notice is received by the Company or (Y) the
365th day after receipt of the then most recent prior effective Deferral
Notice. So long as any Senior Indebtedness is outstanding under the
Credit Agreement, only the Agent under the Credit Agreement may
deliver an effective Deferral Notice under this subsection 3.3(b).
<PAGE>
6
(c) Upon termination of any Deferral Period the
Company shall resume payments on account of principal of and interest
on this Security subject to the obligation of the Company and the
holder of this Security (or his Representatives) to pay over to the
holders of Senior Indebtedness amounts otherwise payable on account
of the principal of or interest on this Security pursuant to the provisions
of, and in the circumstances specified in, this Section 3.
(d) So long as any Senior Indebtedness is
outstanding under or with respect to the Credit Agreement, the holder
of this Security shall give the Agent under the Credit Agreement ten
days' prior notice of any proposed acceleration with respect to the
Securities.
(e) In the event that, notwithstanding the foregoing
provisions of subsection 3.3(a), any payment shall be made by or on
behalf of the Company from assets of the Company and received by the
holder of this Security at a time when such payment was prohibited by
the provisions of subsection 3.3(a), then such payment shall be held in
trust for the benefit of and shall be immediately paid over, in the
following order of priority, to the holders of Senior Indebtedness then
due and payable or their respective Representatives, for application to
the payment in full of all Senior Indebtedness then due and payable in
accordance with its terms (after giving effect to any prior or
substantially concurrent payment to the holders of such Senior
Indebtedness): first, so long as any Senior Indebtedness then due and
payable under or with respect to the Credit Agreement is outstanding,
to the holders of such Senior Indebtedness (pro rata, on the basis of the
respective amount of any such Senior Indebtedness held by them) or
their respective Representatives; and, second, if and only if all Senior
Indebtedness then due and payable under or with respect to the Credit
Agreement is paid in full, to the holders of any other Senior
Indebtedness then due and payable (pro rata, on the basis of the
respective amount of such other Senior Indebtedness held by them) or
their respective Representatives.
In the event that, notwithstanding the foregoing
provisions of subsection 3.3(b), any payment shall be made by or on
behalf of the Company from assets of the Company and received by the
holder of this Security at a time when such payment was prohibited by
the provisions of subsection 3.3(b) then such payment shall be held in
trust for the benefit of and shall be immediately paid over, in the
following order of priority, to the holders of Senior Indebtedness
remaining unpaid or their respective Representatives, for application to
the payment of all Senior Indebtedness in full in accordance with its
terms (after giving effect to any prior or substantially concurrent
payment to the holders of such Senior Indebtedness): first, so long as
any Senior Indebtedness under or with respect to the Credit Agreement
is outstanding, to the holders of such Senior Indebtedness (pro rata, on
the basis of the respective amount of such Senior Indebtedness held by
them) or their respective Representatives; and second, if and only if all
Senior Indebtedness under or with respect to the Credit Agreement is
paid in full, to the holders of any other Senior Indebtedness (pro rata,
on the basis of the respective amount of such other Senior Indebtedness
held by them) or their respective Representatives.
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7
(f) The provisions of this Section 3.3 shall not
modify or limit in any way the application of Section 3.2. The
provisions of Sections 3.3(b) and (c) shall not modify or limit in any
way the application of Section 3.3(a).
3.4. SUBROGATION TO RIGHTS OF HOLDERS
OF SENIOR INDEBTEDNESS.
After all amounts payable under or in respect of Senior
Indebtedness are paid in full, the holder of this Security shall be
subrogated to the extent of the payments or distributions made to the
holders of, or otherwise applied to payment of, such Senior
Indebtedness pursuant to the provisions of this Section 3 (equally and
ratably with the holders of all indebtedness of the Company (i) which
by its express terms is subordinate and subject in right of payment to
Senior Indebtedness to substantially the same extent as this Security is
so subordinate and subject in right of payment and (ii) which is entitled
to like rights and subrogation), to the rights of the holders of such
Senior Indebtedness or their respective Representatives to receive
payments and distributions of cash, property and securities applicable
to the Senior Indebtedness until the principal of and interest on this
Security shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness or
their respective Representatives of any cash, property or securities to
which the holder of this Security would be entitled except for the
provisions of this Section 3, and no payments over pursuant to the
provisions of this Section 3 to the holders of Senior Indebtedness or
their respective Representatives by the Company or the holder of this
Security, shall, as among the Company and its creditors (other than
holders of Senior Indebtedness and the holder of this Security), be
deemed to be a payment or distribution by the Company to or on
account of the Senior Indebtedness, it being understood that the
provisions of this Section 3 are solely for the purpose of defining the
relative rights of the holders of Senior Indebtedness on the one hand
and the holders of this Security on the other hand.
If any payment or distribution to which the holder of this
Security would otherwise have been entitled but for the provisions of
this Section 3 shall have been applied, pursuant to the provisions of this
Section 3, to the payment of all amounts payable under the Senior
Indebtedness, then and in such case, the holder of this Security shall be
entitled to receive (equally and ratably with the holders of all
indebtedness of the Company (i) which by its express terms is
subordinate and subject in right of payment to Senior Indebtedness to
substantially the same extent as this Security is subordinate and subject
in right of payment and (ii) which is entitled to like rights) from the
holders of such Senior Indebtedness or their respective Representatives
any substantially contemporaneous or distributions received by such
holders of Senior Indebtedness or their respective Representatives in
excess of the amount sufficient to pay in full all obligations payable
under or in respect of such Senior Indebtedness.
3.5. RIGHTS OF HOLDERS NOT TO BE
IMPAIRED.
Nothing contained in this Section 3 or elsewhere in this
Security is intended to or shall:
<PAGE>
8
(a) impair, as among the Company, its creditors
other than holders of Senior Indebtedness, and the holder of this
Security, the obligation of the Company, which is absolute and
unconditional, to pay to the holder of this Security the principal
of and interest on this Security as and when the same shall
become due and payable in accordance with its terms; or
(b) affect the relative rights against the Company of
the holder of this Security and creditors of the Company other
than the holders of Senior Indebtedness; or
(c) prevent the holder of this Security from
exercising all remedies otherwise permitted by applicable law
upon default under this Security, subject to the rights, if any,
under this Section 3 of the holders of Senior Indebtedness to
receive payments or distributions otherwise payable or
deliverable to, or received by, the holder upon the exercise of
any such remedy and subject to the restriction on acceleration
set forth in Section 3.3(d) hereof.
3.6. NO WAIVER OF SUBORDINATION
PROVISIONS.
No right of any present or future Agent under the Credit
Agreement, holder of any Senior Indebtedness, or Representative
thereof, to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act by any such Agent
under the Credit Agreement, holder or Representative thereof, or by
any noncompliance by the Company with the terms, provisions and
covenants of this Security regardless of any knowledge thereof which
any such Agent under the Credit Agreement, holder or Representative
thereof may have or be otherwise charged with.
Without in any way limiting the generality of the
foregoing paragraph, the Agent under the Credit Agreement and the
holders of Senior Indebtedness or their Representatives, if applicable,
may, at any time and from time to time without the consent of or notice
to the holder of this Security, without incurring responsibility to any
holders of this Security and without impairing or releasing the
subordination and other benefits provided in this Section 3 or the
obligations hereunder of the holder of this Security to the holders of
Senior Indebtedness, do any one or more of the following, all without
notice to the holder of this Security and even if any right of
reimbursement or subrogation or other right or remedy of the holder of
this Security is affected, impaired or extinguished thereby:
(1) change the manner, place or terms of payment or
change or extend the time of payment of, or renew, exchange,
amend or alter, the terms of any Senior Indebtedness, any
security therefor or guaranty thereof or any liability of the
Company or any guarantor to such holder, or any liability
incurred directly or indirectly in respect thereof, or otherwise
amend, renew, exchange, modify or supplement in any manner Senior
<PAGE>
9
Indebtedness or any instrument evidencing or guaranteeing or
or securing the same or any agreement under which Senior
Indebtedness is outstanding;
(2) sell, exchange, release, surrender, realize upon,
enforce or otherwise deal with in any manner and any order any
property pledged, mortgaged or otherwise securing Senior
Indebtedness or any liability of the Company or any guarantor
to such holder, or any liability incurred directly or indirectly
in respect thereof;
(3) settle or compromise any Senior Indebtedness or
any other liability of the Company or any guarantor of the
Senior Indebtedness to such holder or any security therefor or
any liability incurred directly or indirectly in respect thereof
and apply any sums by whomsoever paid and however realized to
any liability (including, without limitation, Senior Indebtedness)
in any manner or order; and
(4) fail to take or to record or otherwise perfect, for
any reason or for no reason, any lien or security interest
securing Senior Indebtedness by whomsoever granted, exercise
or delay in or refrain from exercising any right or remedy
against the Company or any security or any guarantor or any
other person, elect any remedy and otherwise deal freely with
the Company and any security and any guarantor of the Senior
Indebtedness or any liability of the Company or any guarantor
to such holder or any liability incurred directly or indirectly
in respect thereof.
3.7. RELIANCE ON COURT ORDERS;
EVIDENCE OF STATUS.
Upon any payment or distribution of assets of the
Company referred to in Section 3.2, the holder of this Security shall be
entitled to rely upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution delivered to the holder of this Security for the purpose of
ascertaining the persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness
of the Company, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto
or to this Section 3.
3.8. PAYMENT.
A payment with respect to this Security or with respect
to principal of or interest on this Security shall include, without
limitation, payment of principal of and interest on this Security, any
payment on account of optional redemption provisions and any
payment or recovery on any claim (whether for rescission or damages
and whether based on contract or tort) relating to or arising out of the
offer, sale or purchase of this Security, provided that any such payment,
depositing, other payment or recovery not prohibited pursuant to this
Section 3 at the time actually made shall not be subject to any recovery
by any holder of Senior Indebtedness or Representative therefor or
other person pursuant to this Section 3 at any time thereafter.
<PAGE>
10
The failure to make a payment on account of principal
of or interest on this Security by reason of any provision of this Section
3 shall not be construed as preventing the occurrence of an Event of
Default. Except as expressly provided in Section 3.3(d), nothing in this
Section 3 shall affect the rights of the holders to accelerate the maturity
of this Security in accordance with their terms.
3.9 CERTAIN OTHER MATTERS.
(a) Notwithstanding any provision in this Security to the contrary,
only the Company, the Agent under the Credit Agreement or other
Representative, or a holder of Senior Indebtedness that has no
Representative, may give notice to the Company that a payment on
account of principal of or interest on this Security would violate the
provisions of Sections 3.1 through 3.11 hereof. Nothing in this
Section 3.9 is intended to or shall relieve any Holder of this Security
from the obligations imposed under Sections 3.2 and 3.3 with respect
to moneys or other distributions received in violation of the provisions
hereof.
(b) If the holder hereof does not file a proper claim
or proof of debt in the form required in any Insolvency or Liquidation
Proceeding prior to 30 days before the expiration of the time to file
such claims or proofs, then, so long as any Senior Indebtedness under
or with respect to the Credit Agreement is outstanding, the Agent
under the Credit Agreement is hereby authorized, and upon payment in
full of all Senior Indebtedness outstanding under the Credit Agreement,
the holders of the other Senior Indebtedness, or their Representatives,
are hereby authorized, and shall have the right (without any duty), to
file an appropriate claim for and on behalf of the holder of this Security.
3.10 CERTAIN DEFINITIONS.
As used in this Section 3, the following terms have the
following meanings:
"AGENT UNDER THE CREDIT AGREEMENT" means the then acting
Administrative Agent (as defined therein) under the Credit Agreement or
any successor thereto exercising substantially the same rights and powers
and, if there is then no acting Agent under the Credit Agreement, or there
is then no such successor, holders of indebtedness under or with respect
to the Credit Agreement holding a majority of the principal amount of
indebtedness outstanding thereunder.
"CREDIT AGREEMENT" means (i) the Credit Agreement dated as
of July 31, 1987 among JT Acquisition Corporation, the banks and other
financial institutions party thereto and Bankers Trust Company, Canadian
Imperial Bank of Commerce, Citicorp Industrial Credit, Inc. ("Citicorp"),
Manufacturers Hanover Trust Company and Security Pacific National Bank,
each as Agent, and Citicorp, as Administrative Agent, and the Loan
Documents (as defined therein), as the same may from time to time be
amended, renewed, supplemented or otherwise modified, and any other
agreement pursuant to which any of the indebtedness, commitments,
obligations, costs, expenses, fees, reimbursements and other indemnities
payable or owing thereunder may be refinanced, restructured, renewed or
refunded, as any such other agreement may from time to time be amended,
supplemented, renewed or otherwise modified; and (ii) after the Agent under
<PAGE>
11
the Credit Agreement referred to in clause (i) hereof has
acknowledged in writing that such Credit Agreement has been
terminated and all outstanding indebtedness and obligations thereunder
or with respect thereto have been repaid in full in cash and discharged,
any successor to or replacement of such Credit Agreement (as
designated by the Board of Directors of the Company, in its sole
judgment, and evidenced by a resolution), as such successor or
replacement may from time to time be amended, renewed,
supplemented or otherwise modified.
"CURRENCY AGREEMENT" of any person means any foreign
exchange contract, currency swap agreement, option or futures contract
or other similar agreement or arrangement entered into to hedge payments
owed to or by such person or any of its Subsidiaries against fluctuations
in currency values.
"DEBT" means, with respect to any person, (i) any
indebtedness, contingent or otherwise, in respect of borrowed money
including, without limitation, all interest, fees and expenses owed with
respect thereto (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), or
evidenced by bonds, notes, debentures or similar instruments, or
representing the deferred and unpaid balance of the purchase price of
any property or interest therein, except any such balance that
constitutes a trade payable if and to the extent such indebtedness would
appear as a liability upon a balance sheet of such person prepared on a
consolidated basis in accordance with generally accepted accounting
principles, (ii) all obligations and other liabilities (contingent or
otherwise) of such person in respect of letters of credit or other similar
instruments (and reimbursement obligations with respect thereto) and
(iii) all capitalized lease obligations of such person.
"INSOLVENCY OR LIQUIDATION PROCEEDING" means (i) any
insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding, relative
to the Company or to its creditors, as such, or to its assets, or (ii) any
liquidation, dissolution, reorganization or winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency
or bankruptcy, or (iii) any assignment for the benefit of creditors or any
other marshaling of assets and liabilities of the Company.
"INTEREST HEDGING OBLIGATION" means any obligation of any
person pursuant to any arrangement with any other person whereby, directly
or indirectly, such person is entitled to receive from time to time
periodic payments calculated by applying either a fixed or floating rate
of interest on a stated notional amount in exchange for periodic payments
made by such person calculated by applying a fixed or floating rate of
interest on the same notional amount; PROVIDED that the term "Interest
Hedging Obligation" shall also include interest rate exchange, collar,
cap, swap, options or similar agreements providing interest rate protection.
"REORGANIZATION SECURITIES" means shares of stock of the
Company, or its successor, as reorganized, or other securities of the of the
Company or any other person provided for by a plan of reorganization, the
payment of which is subordinated, at least to the same extent as this
Security, to the payment of all Senior Indebtedness which may at the time be
<PAGE>
12
outstanding and the principal of which is due no earlier than the principal
of this Security, provided that the rights of the holders of the Senior
Indebtedness are not impaired thereby or such holders as a class shall have
approved such plan of reorganization.
"REPRESENTATIVE" means the trustee, agent or other
representative for holders of all or any of the Senior Indebtedness, if
any, designated in the indenture, agreement or other document creating,
evidencing or governing such Senior Indebtedness or pursuant to which it
was issued, or otherwise duly designated by the holders of such Senior
Indebtedness and with respect to the holders of Senior Indebtedness under
the Credit Agreement shall include the Agent under the Credit Agreement.
"SENIOR INDEBTEDNESS" means all Debt and
other obligations specified below payable directly or indirectly by the
Company, whether outstanding on the date of this Security or
thereafter created, incurred or assumed by the Company: (1) the
principal of and interest on all loans, letters of credit and other
extensions of credit under the Credit Agreement, and all expenses, fees,
reimbursements, indemnities and other amounts owing by the Company
pursuant to the Credit Agreement; (2) other Debt of the Company that
is not expressly subordinated to this Security (except to the extent
excluded below) and (3) amounts payable in respect of Currency
Agreements and Interest Hedging Obligations, in each case, of the
Company. Senior Indebtedness does not include (a) any amounts or
other obligations under or relating to any operating lease; (b) any
accounts payable or other obligations owing to trade creditors created
or assumed by the Company in connection with the obtaining of
materials or services; (c) any tort liability and any liability for Federal,
state, local or other taxes, or other governmental charges or claims of
whatever nature (including, but not limited to, environmental charges
or claims), owed or owing by the Company; (d) any Debt to a
Subsidiary or any affiliate of the Company; (e) any Debt or other
obligations (A) owing, directly or indirectly, to any person under or in
respect of any employee benefit plan, whether pursuant to the ERISA
or otherwise; or (B) owing, directly or indirectly, to employees; and (f)
any Debt with respect to which recourse to the Company or its assets is
limited in any manner but only to the extent that such Debt is limited in
recourse and, to the extent such Debt which otherwise would constitute
Senior Indebtedness is not limited in recourse, such Debt shall be
Senior Indebtedness, if not otherwise expressly subordinated.
Exclusions from this definition of Senior Indebtedness, do not include
any Debt or other obligations permitted under clauses (1) or (3) above.
All interest accrued on any Senior Indebtedness, in
accordance with and at the contract rate specified in the agreement or
instrument creating, evidencing or governing such Senior Indebtedness,
shall constitute Senior Indebtedness both for periods before and for
periods after the commencement of any Insolvency or Liquidation
Proceeding, even if the claim for such interest is not allowed pursuant
to applicable law; PROVIDED that no increase in the rate of interest
applicable by reason of a default or event of default under or in respect
of Senior Indebtedness shall constitute Senior Indebtedness after the
commencement of such Insolvency or Liquidation Proceeding if and to
the extent the increase exceeds 2% per annum and the claim for such
excess increased interest is not allowed.
<PAGE>
13
To the extent any payment of Senior Indebtedness
(whether by or on behalf of the Company, as proceeds of security or
enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to a trustee,
receiver or other similar party under any bankruptcy, insolvency,
receivership or similar law, then, if such payment is recovered by, or
paid over to, such trustee, receiver or other similar party, the Senior
Indebtedness or part thereof originally intended to be satisfied shall be
deemed to be reinstated and outstanding as if such payment had not
occurred. All Senior Indebtedness shall be and remain Senior
Indebtedness for all purposes of this Security (including, without
limitation, Section 3 hereof) if allowed as a claim, whether or not
subordinated, in a bankruptcy, receivership, insolvency or similar
proceeding, except that interest shall constitute Senior Indebtedness
(subject to the exception in the preceding paragraph) whether or not so
allowed as a claim.
3.11. LIMITATIONS ON AMENDMENTS. Notwithstanding any
other provisions in this Security to the contrary, so long as any Senior
Indebtedness under or with respect to the Credit Agreement is outstanding,
no amendment, supplement or modification of any provision of this Security
relating to any provision of Sections 3.1 through 3.11 hereof, shortening
the tenor, advancing the time or schedule for payments (by increasing the
payment amount or otherwise) in respect of redemptions, principal, interest
or other payments, or adding sinking fund payments, mandatory redemption
obligations, covenants, breaches, defaults, or events of default or cure
periods or loosening the requirements for acceleration or which would
result in the benefits to the Company or the holders of Senior
Indebtedness provided by this Security being limited or in any way
restricted or diminished, shall be effective unless expressly agreed to in
writing by the specified percentage of holders of Senior Indebtedness
under or with respect to the Credit Agreement required to consent
thereto pursuant to the terms of the Credit Agreement.
Section 4. CONVERSION.
4.1. RIGHT TO CONVERT. Subject to the
provisions of Section 1 hereof, the holder of this Security shall have the
right, at the option of such holder, at any time or from time to time to
convert this Security or any portion thereof, in denominations of
$1,000 principal amount or integral multiples thereof, into that number
of fully paid and nonassessable whole shares (the "Conversion Shares")
of Common Stock of the Company ("Common Stock") obtained by
dividing (i) the aggregate principal amount of this Security being
converted on such date by (ii) $4.1602, subject to adjustment as
provided in this Section 4 (such ratio being the "Conversion Ratio").
Except as provided herein, no payment or adjustment
shall be made upon conversion of this Security for interest accrued
hereon or for dividends paid on Common Stock of the Company prior
to the close of business on the record date for the determination of
stockholders entitled to such dividends. Upon the conversion of any
portion of this Security (the "Converted Security"), the Company shall
pay to the holder of this Security accrued and unpaid interest, if any, on
the Converted Security, to the Interest Payment Date next preceding such
<PAGE>
14
conversion; PROVIDED, HOWEVER, that, with respect to any
conversion of any Converted Security during any Extension Period, the
holder of this Security shall not be entitled to receive accrued and
unpaid interest on the Converted Security which is payable on any
Interest Payment Date preceding such conversion if such Interest
Payment Date occurred during such Extension Period (a "Special
Interest Payment Date"), but shall be entitled to receive, in lieu thereof,
at the election of the Company, either: (A) such number of shares of
Common Stock as shall be equal to (x) the amount of such accrued and
unpaid interest, DIVIDED BY (y) the Closing Price per share of the
Common Stock on the Trading Day (as defined below) on which the
holder of this Security gives notice to the Company that it is effecting a
conversion or, if such notice is not given on a Trading Day, on the next
succeeding Trading Day (PROVIDED, that no fractional shares of
Common Stock or scrip representing any such fractional shares shall be
issued and that the holder shall receive no consideration for the value of
such fractional shares); or (B) a newly issued debt security of the
Company (a "PIK Note") having an aggregate principal amount equal
to the amount of such accrued and unpaid interest and having
provisions substantially similar to those of this Security and a like tenor,
except that interest shall be paid on such newly issued debt security at a
rate per annum of 6.5% and such newly issued debt security shall be
non-convertible; and PROVIDED, FURTHER, that the holder of this
Security shall be entitled to receive accrued and unpaid interest payable
on the Converted Security on a Special Interest Payment Date if the
Company has given the holder notice of its election to redeem the
Converted Security pursuant to Section 5. Any provision of this
Security notwithstanding, PIK Notes will not be issued, and may not be
transferred, to any Person that, after giving effect to such issuance or
transfer, does not hold PIK Notes having a principal amount of at least
$15 million.
The Conversion Shares, upon conversion of this
Security, when the same shall be issued in accordance with the terms
hereof, shall be fully paid and nonassessable shares of Common Stock
of the Company in the hands of the holders thereof.
4.2. MECHANICS OF CONVERSION. In order to
effect the conversion of this Security into Conversion Shares, the
holder of this Security shall surrender to the Company the Security to
be converted, together with a statement that such holder elects to
convert all or a specified portion of this Security in accordance with the
provisions hereof and a statement of the name or names in which such
holder wishes the Conversion Shares to be issued.
In case such notice shall specify a name or names other
than that of such holder, such notice shall be accompanied by payment
of all transfer taxes payable upon the issuance of Conversion Shares in
such name or names. Other than such taxes, the Company will pay any
and all issue and other taxes (other than taxes based on income) that
may be payable in respect of any issue or delivery of Conversion Shares
upon conversion of this Security.
As promptly as practicable and in any event within ten
business days after surrender of this Security and the receipt of such
notice of conversion relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the Company
that any such taxes have been paid), the Company will deliver promptly
<PAGE>
15
to, or upon the written order of, the holder of this Security
(i) certificates representing the number of validly issued, fully paid and
nonassessable whole Conversion Shares or other consideration to
which the holder of this Security shall be entitled and (ii) if less than the
entire principal amount of this Security is being converted, a new
Security or Securities, of like tenor, evidencing a principal amount
equal to the principal amount of this Security surrendered for
conversion less the principal amount of this Security being converted.
Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of this Security
and the making of any such required payment. Upon such conversion,
the rights of the holder hereof as to this Security being converted shall
cease except for the right to receive Conversion Shares (or such other
consideration as provided herein) in accordance herewith, and the
person entitled to receive the Conversion Shares shall be treated for all
purposes as having become the record holder of such Conversion
Shares at such time.
The Company shall not be required to convert this
Security, and no surrender of this Security shall be effective for that
purpose, while the stock transfer books of the Company for the
Common Stock are closed for any purposes (but not for any period in
excess of 15 days), but the surrender of this Security for conversion
during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books,
as if the conversion had been made on the date such Security was
surrendered, and with the application of the Conversion Ratio in effect
at the date of such surrender.
The holder of the Security is not entitled, as such, to
receive dividends or other distributions, receive notice of any meeting
of the stockholders, consent to any action of the stockholders, receive
notice of any other stockholder proceedings, or to any other rights as
stockholders of the Company.
4.3. ADJUSTMENT TO CONVERSION RATIO. The denominator of
the Conversion Ratio shall be adjusted from time to time as follows:
(a) In case the Company shall hereafter pay a
dividend or make a distribution in Common Stock of the
Company to all holders of the outstanding Common Stock of
the Company, the denominator of the Conversion Ratio in
effect at the opening of business on the date following the date
fixed for the determination of stockholders entitled to receive
such dividend or other distribution shall be reduced by
multiplying such denominator of the Conversion Ratio by a
fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date
fixed for such determination and the denominator shall be the
sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business
on the day following the date fixed for such determination. The
Company will not pay any dividend or make any distribution on
Common Stock held in the treasury of the Company.
<PAGE>
16
(b) In case the Company shall hereafter issue rights
or warrants to all holders of its outstanding Common Stock
entitling them (for a period expiring within 45 days after the
date fixed for determination of stockholders entitled to receive
such rights or warrants) to subscribe for or purchase Common
Stock at a price per share less than the Current Market Price (as
defined below) on the date fixed for determination of
stockholders entitled to receive such rights or warrants, the
denominator of the Conversion Ratio shall be adjusted so that
the same shall equal the number determined by multiplying the
denominator of the Conversion Ratio in effect immediately prior
to the date fixed for determination of stockholders entitled to
receive such rights or warrants by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for
determination of stockholders entitled to receive such rights or
warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at
such Current Market Price, and of which the denominator shall
be the number of shares of Common Stock outstanding on the
date fixed for determination of stockholders entitled to receive
such rights or warrants plus the total number of additional
Common Stock offered for subscription or purchase. Such
adjustment shall become effective immediately after the opening
of business on the day following the date fixed for
determination of stockholders entitled to receive such rights or
warrants. To the extent that Common Stock is not delivered
after the expiration of such rights or warrants, the denominator
shall be readjusted to the denominator which would then be in
effect had the adjustments made upon the issuance of such
rights or warrants been made on the basis of delivery of only the
number of shares of Common Stock actually delivered. In the
event that such rights or warrants are not so issued, the
denominator shall again be adjusted to be the denominator
which would then be in effect if such date fixed for the deter-
mination of stockholders entitled to receive such rights or
warrants had not been fixed.
(c) In case outstanding Common Stock shall be
subdivided into a greater number of shares of Common Stock,
the denominator of the Conversion Ratio in effect at the
opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately
reduced, and conversely, in case outstanding Common Stock
shall be combined into a smaller number of shares of Common
Stock, the denominator of the Conversion Ratio in effect at the
opening of business on the day following the day upon which
such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on
the day following the day upon which such subdivision or
combination becomes effective.
(d) In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock shares
of any class of capital stock (other than a dividend or
distribution to which subparagraph (a) of this Section 4.3
applies) or evidences of its indebtedness or assets (including
securities, but excluding any rights or warrants referred to in
subparagraph (b) of this Section 4.3, and excluding any
dividend or distribution (x) in connection with the liquidation,
<PAGE>
17
dissolution or winding up of the Company, whether voluntary
or involuntary, (y) paid exclusively in cash or (z) referred to in
subparagraph (a) of this Section 4.3) (any of the foregoing
being hereinafter in this subparagraph (d) referred to as the
"DISTRIBUTION SECURITIES"), then, in each such case,
unless the Company elects to reserve such Distribution
Securities for distribution to the holder of this Security upon the
conversion of this Security so that the holder, when converting
the Security will receive upon such conversion, in addition to
the Conversion Shares to which the holder is entitled, the
amount and kind of such Distribution Securities which the
holder would have received if the holder had, immediately prior
to the Record Date for such distribution of the Distribution
Securities, converted its Security into Conversion Shares, the
denominator of the Conversion Ratio shall be reduced so that
the same shall equal the number determined by multiplying the
denominator of the Conversion Ratio in effect on the Record
Date by a fraction of which the numerator shall be the Current
Market Price per share of Common Stock on the Record Date
less the fair market value (as determined by the Board of
Directors or, to the extent permitted by applicable law, a duly
authorized committee thereof, whose determination shall be
conclusive, and described in a resolution of the Board of
Directors or such duly authorized committee thereof, as the
case may be), on the Record Date, of the portion of the
Distribution Securities so distributed applicable to one share of
Common Stock and the denominator shall be such Current
Market Price per share of the Common Stock, such reduction
to become effective immediately prior to the opening of busi-
ness on the day following the Record Date; PROVIDED,
HOWEVER, that in the event the then fair market value (as so
determined) of the portion of the Distribution Securities so
distributed applicable to one share of Common Stock is equal to
or greater than the Current Market Price of the Common Stock
on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that the holder of the
Security shall have the right to receive upon conversion the
amount and kind of Distribution Securities the holder would
have received had the holder converted this Security on the
Record Date. In the event that such dividend or distribution is
not so paid or made, the denominator of the Conversion Ratio
shall again be adjusted to be the denominator of the Conversion
Ratio which would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors
(or, to the extent permitted by applicable law, a duly authorized
committee thereof) determines the fair market value of any
distribution for purposes of this subparagraph (d) by reference
to the actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider the
prices in such market over the same period used in computing
the Current Market Price of the Common Stock.
For purposes of this subparagraph (d) and
subparagraphs (a) and (b) of this Section 4.3, any dividend or
distribution that includes Common Stock, or rights or warrants
to subscribe for or purchase Common Stock, shall be deemed
instead to be (i) a dividend or distribution of the evidences of
indebtedness, assets or shares of capital stock other than such
Common Stock or rights or warrants (and any reduction in the
denominator of the Conversion Ratio required by this
subparagraph (d) with respect to such dividend or distribution
<PAGE>
18
shall then be made) immediately followed by (ii) a dividend or
distribution of such Common Stock or such rights or warrants
(and any further reduction in the denominator of the Conversion
Ratio required by subparagraph (a) or (b) of this Section 4.3
with respect to such dividend or distribution shall then be made,
except (A) the Record Date of such dividend or distribution as
defined in this subparagraph (d) shall be substituted as "the date
fixed for the determination of stockholders entitled to receive
such dividend or other distribution" and "the date fixed for such
determination" within the meaning of subparagraphs (a) and (b)
of this Section 4.3 and (B) any Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the
close of business on the date fixed for such determination"
within the meaning of subparagraph (a) of this Section 4.3.
<PAGE>
19
(e) In case the Company shall, by dividend or
otherwise, at any time distribute to all holders of its Common
Stock cash (excluding (x) any quarterly cash dividend on the
Common Stock to the extent the aggregate cash dividend per
share of Common Stock in any fiscal quarter does not exceed
the greater of (i) the amount per share of Common Stock of the
next preceding quarterly cash dividend on the Common Stock
to the extent not requiring any adjustment of the denominator
of the Conversion Ratio pursuant to this subparagraph (e) (as
adjusted to reflect subdivisions or combinations of the Common
Stock), and (ii) 3.75% of the Current Market Price of the
Common Stock on the Trading Day next preceding the date of
declaration of such dividend and (y) any dividend or distribution
in connection with the liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary), then, in such
case, unless the Company elects to reserve such cash for
distribution to the holder of this Security upon the conversion
of this Security so that the holder converting the Security will
receive upon such conversion, in addition to the Conversion
Shares to which the holder is entitled, the amount of cash which
the holder would have received if the holder had, immediately
prior to the Record Date for such distribution of cash,
converted its Security into Conversion Shares, the denominator
of the Conversion Ratio shall be reduced so that the same shall
equal the number determined by multiplying the denominator of
the Conversion Ratio in effect immediately prior to the Record
Date by a fraction of which the numerator shall be the Current
Market Price of the Common Stock on the Record Date less the
amount of cash so distributed (and not excluded as provided
above) applicable to one share of Common Stock and the
denominator shall be such Current Market Price of the
Common Stock, such reduction to become effective
immediately prior to the opening of business on the day
following the Record Date; PROVIDED, HOWEVER, that in
the event the portion of the cash so distributed applicable to one
share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the Record Date, in lieu
of the foregoing adjustment, adequate provision shall be made
so that the holder of the Security shall thereafter have the right
to receive upon conversion the amount of cash such holder
would have received had he converted each Security on the
Record Date. In the event that such dividend or distribution is
not so paid or made, the denominator of the Conversion Ratio
shall again be adjusted to be the denominator of the Conversion
Ratio which would then be in effect if such dividend or
distribution had not been declared.
(f) In case a tender or exchange offer made by
the Company or any subsidiary of the Company for all or any
portion of the Common Stock shall expire and such tender or
exchange offer shall involve the payment by the Company or
such subsidiary of consideration per share of Common Stock
having a fair market value (as determined by the Board of
Directors or, to the extent permitted by applicable law, a duly
authorized committee thereof, whose determination shall be
conclusive, and described in a resolution of the Board of
Directors or such duly authorized committee thereof, as the
case may be) at the last time (the "Expiration Time") tenders or
exchanges may be made by holders of Common Stock pursuant
to such offer (as it shall have been amended) that exceeds the
Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time, the denominator of
<PAGE>
20
the Conversion Ratio shall be reduced so that such denominator
shall equal the number determined by multiplying the
denominator of the Conversion Ratio in effect immediately prior
to the Expiration Time by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Expiration
Time multiplied by the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time
and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender or exchange offer)
of all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to
any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Shares) on the
Expiration Time and the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time,
such reduction to become effective immediately prior to the
In the event that the Company is obligated to purchase shares
pursuant to any such tender or exchange offer, but the
Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are
rescinded, the denominator of the Conversion Ratio shall again
be adjusted to be the denominator of the Conversion Ratio
which would then be in effect if such tender or exchange offer
had not been made.
(g) The Company may make such reductions in the
denominator of the Conversion Ratio, in addition to those
required by subparagraphs (a), (b), (c), (d), (e) and (f) of this
Section 4.3, as the Board of Directors considers to be advisable
to avoid or diminish any income tax to holders of Common
Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or
from any event treated as such for income tax purposes. To the
extent permitted by applicable law, the Company from time to
time may reduce the denominator of the Conversion Ratio by
any amount for any period of time if the period is at least 20
days, the reduction is irrevocable during such period, and the
Board of Directors (or, to the extent permitted by applicable
law, a duly authorized committee thereof) shall have made a
determination that such reduction would be in the best interests
of the Company, which determination shall be conclusive.
Whenever the denominator of the Conversion Ratio is reduced
pursuant to the preceding sentence, the Company shall mail to
the holder of record of this Security a notice of the reduction at
least 15 days prior to the date the reduced denominator of the
Conversion Ratio takes effect, and such notice shall state the
reduced denominator of the Conversion Ratio and the period it
will be in effect.
(h) No adjustment in the denominator of the
Conversion Ratio shall be required unless such adjustment would
require an increase or decrease of at least 1% in the denominator
of the Conversion Ratio then in effect; PROVIDED, HOWEVER, that any
adjustments which by reason of this subparagraph (h) are not required
to be made shall be carried forward and taken into account in
determining whether any subsequent adjustment shall be required.
<PAGE>
21
Except as provided in this Section 4.3, the denominator of the
Conversion Ratio will not be adjusted for the issuance of Common
Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the
foregoing.
(i) Notwithstanding any other provision of
this Section 4.3, no adjustment to the denominator of the
Conversion Ratio shall reduce the denominator of the
Conversion Ratio below the then par value per share of the
Common Stock, and any such purported adjustment shall
instead reduce the denominator of the Conversion Ratio to such
par value. The Company hereby covenants not to take any
action (i) to increase the par value per share of the Common
Stock or (ii) that would or does result in any adjustment in the
denominator of the Conversion Ratio that, if made without
giving effect to the previous sentence, would cause the
denominator of the Conversion Ratio to be less than the then
par value per share of the Common Stock, PROVIDED,
HOWEVER, that the covenant in this sentence shall be
suspended if within ten days of determining in good faith that
such action would result in such adjustment (but not later than
the business day next following the effectiveness of such
adjustment), the Company gives notice of redemption of all
outstanding shares of this Security, and effects the redemption
referred to in such notice on the redemption date referred to
therein, but the covenant in this sentence shall be retroactively
reinstated if such notice is not given or such redemption does
not occur.
(j) Whenever the denominator of the Conversion
Ratio is adjusted as herein provided:
(i) the Company shall compute the adjusted
denominator of the Conversion Ratio and shall prepare a
certificate signed by the Treasurer of the Company
setting forth such adjusted denominator and showing in
reasonable detail the facts upon which such adjustment
is based; and
(ii) a notice stating that the denominator of
the Conversion Ratio has been adjusted and setting forth
such adjusted denominator shall as soon as practicable
be mailed by the Company to the record holder of this
Security at his last addresses as it shall appear upon the
security register.
(k) Whenever the denominator of the Conversion
Ratio is adjusted as herein provided, the Company shall
promptly file with the holder hereof an officers' certificate
setting forth the denominator after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
Promptly after delivery of such certificate, the Company shall
prepare a notice of such adjustment of the denominator of the
Conversion Ratio setting forth such adjusted denominator and
the date on which each adjustment becomes effective and shall
mail such notice of such adjustment of the denominator of the
Conversion Ratio to the holder of this Security at his last
address appearing on the security register, within 20 days, after
<PAGE>
22
execution thereof. Failure to deliver such notice shall not effect
the legality or validity of any such supplement indenture.
(l) In any case in which this Section 4.3 provides
that an adjustment shall become effective immediately after a
record date for an event, the Company may defer, until the
occurrence of such event, issuing to the holder of this Security
converted after such record date and before the occurrence of
such event the additional Conversion Shares issuable upon such
conversion by reason of the adjustment required by such event
over and above the Conversion Shares issuable upon such
conversion before giving effect to such adjustment.
(m) For purposes of this Section 4.3, the following
terms shall have the meaning indicated:
(i) "Closing Price" with respect to any
securities on any day means the closing sale price
regular way on such day or, in case no such sale takes
place on such day, the average of the reported closing
bid and asked prices, regular way, in each case on the
Nasdaq National Market, or, if such security is not listed
or admitted to trading on such exchange, on the
principal national security exchange or quotation system
on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading
on any national securities exchange or quotation system,
the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting
service, or if not so available, in such manner as
furnished by any Nasdaq National Market member firm
selected from time to time by the Board of Directors for
that purpose, or a price determined in good faith by the
Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof,
whose determination shall be conclusive.
(ii) "Current Market Price" means the
average of the daily Closing Prices per share of
Common Stock for the ten consecutive Trading Days
immediately prior to the date in question; PROVIDED,
HOWEVER, that (A) if the "ex" date (as defined below)
for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment
to the denomination of the Conversion Ratio pursuant to
paragraph (a), (b), (c), (d), (e) or (f) of this Section 4.3
occurs during such ten consecutive Trading Days, the
Closing Price for each Trading Day prior to the "ex"
date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by
which the denominator of the Conversion Ratio is so
required to be adjusted as a result of such other event,
(B) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that
requires an adjustment to the denominator of the
Conversion Ratio pursuant to paragraph (a), (b), (c),
(d), (e) or (f) of this Section 4.3 occurs on or after the
<PAGE>
23
"ex" date for the issuance or distribution requiring such
computation and prior to the day in question, the
Closing Price for each Trading Day on and after the
"ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the
fraction by which the denominator of the Conversion
Ratio is so required to be adjusted as a result of such
other event, and (C) if the "ex" date for the issuance or
distribution requiring such computation is prior to the
day in question, after taking into account any adjustment
required pursuant to clause (A) or (B) of this proviso,
the Closing Price for each Trading Day on or after such
"ex" date shall be adjusted by adding thereto the amount
of any cash and the fair market value (as determined by
the Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof in a
manner consistent with any determination of such value
for purposes of paragraph (d) or (f) of Section 4.3,
whose determination shall be conclusive and described
in a resolution of the Board of Directors or such duly
authorized committee thereof, as the case may be) of the
evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of
Common Stock as of the close of business on the day
before such "ex" date. For purposes of any computation
under Section 4.3(f), the Current Market Price of the
Common Stock on any date shall be deemed to be the
average of the daily Closing Prices per share of
Common Stock for such day and the next two
succeeding Trading Days; PROVIDED, HOWEVER,
that if the "ex" date for any event (other than the tender
or exchange offer requiring such computation) that
requires as adjustment to the denominator of the
Conversion Ratio pursuant to paragraphs (a), (b), (c),
(d), (e) or (f) of this Section 4.3 occurs on or after the
Expiration Time for the tender or exchange offer
requiring such computation and prior to the day in
question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted
by multiplying such Closing Price by the reciprocal of
the fraction by which the denominator of the Conversion
Ratio is so required to be adjusted as a result of such
other event. For purposes of this paragraph, the term
"ex" date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common
Stock trades regular way on the relevant exchange or in
the relevant market from which the Closing Price was
obtained without the right to receive such issuance or
distribution, (2) when used with respect to any
subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades
regular way on such exchange or in such market after
the time at which such subdivision or combination
becomes effective, and (3) when used with respect to
any tender or exchange offer means the first date on
which the Common Stock trades regular way on such
exchange or in such market after the Expiration Time of
such offer.
(iii) "fair market value" for purposes of this
Section 4 shall mean the amount which a willing buyer
under no compulsion to buy would pay a willing seller
under no compulsion to sell in an arm's length
transaction.
<PAGE>
24
(iv) "Record Date" shall mean, with respect
to any dividend, distribution or other transaction or
event in which the holders of Common Stock have the
right to receive any cash, securities or other property or
in which the Common Stock (or other applicable
security) is exchanged for or converted into any
combination of cash, securities or other property, the
date fixed for determination of shareholders entitled to
receive such cash, securities or other property (whether
such date is fixed by the Board of Directors or by
statute, contract or otherwise).
4.4. NO FRACTIONAL SHARES. No fractional
Conversion Shares or scrip representing fractional Conversion Shares
shall be issued upon conversion of this Security or in payment of
accrued interest pursuant to Section 4.1. Any right to fractional shares
that may otherwise exist by application of the provisions of this
Security shall be null and void and of no force and effect.
4.5. RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE OF ASSETS. In the case of (a) any
reclassification or change of the Common Stock of the Company, (b) a
consolidation, merger or combination involving the Company or (c) a
sale or conveyance to another corporation of the property and assets of
the Company as an entirety or substantially as an entirety, in each case
as a result of which holders of Common Stock shall be entitled to
receive stock, other securities, other property or assets (including cash)
with respect to or in exchange for such Common Stock, the holder of
this Security will be entitled thereafter to convert such Securities into
the kind and amount of shares of stock, other securities or other
property or assets which they would have owned or been entitled to
receive upon such reclassification, change, consolidation, merger,
combination, sale or conveyance had the Security been converted into
Conversion Shares immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance assuming that
the holder of Securities would not have exercised any rights of election
as to the stock, other securities or other property or assets receivable in
connection therewith.
SECTION 5. RIGHT TO REDEEM.
The Company shall have the right to redeem this Security upon not less than
30 days' written notice to the holder hereof, as a whole or in part, on or
after November 22, 1998 at a redemption price equal to 100% of the
aggregate principal amount hereof, together with accrued interest to
the date of redemption (but interest installments whose Interest
Payment Date is on or prior to such date of redemption will be payable
to the holder of this Security of record at the close of business on the
relevant Regular Record Dates referred to on the face hereof);
PROVIDED, HOWEVER, that the Company may only exercise the
foregoing right to redeem if the Closing Price of the Common Stock
exceeds $5.20 for 20 Trading Days in any consecutive 30 day Trading
Day period, commencing with the first such period beginning after the
third anniversary of the original issuance of this Security.
<PAGE>
25
"TRADING DAY" means, with respect to any Security,
if the Common Stock of the Company is listed or admitted to trading
on the NYSE, a day on which the NYSE is open for the transaction of
business, or, if the Common Stock of the Company is not listed or
admitted to trading on the NYSE, a day on which the principal national
securities exchange on which the Common Stock of the Company is
listed or admitted to trading is open for the transaction of business, or,
if the Common Stock of the Company is not so listed or admitted to
trading on any national securities exchange, a day on which the Nasdaq
National Market System (or any successor thereto) or such other
system then in use is open for the transaction of business, of, if the
Common Stock of the Company is not quoted by any such
organization, any day other than a Saturday, Sunday or a day on which
banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"NYSE" means the New York Stock Exchange and any
successor thereto.
Nothing contained in this Section 5 shall affect the
holder's right to convert this Security into Common Stock pursuant to
Section 4 prior to the date of redemption.
SECTION 6. EXECUTION OF INDENTURE.
6.1 GENERAL. The Company agrees to execute
the Indenture with respect to the Registrable Securities that are
Securities, substantially in the form attached hereto as Exhibit A, with
such changes as the Company may reasonably determine are desirable
to sell such Registrable Securities. Such Indenture shall be executed by
the Company and the Trustee prior to, or contemporaneously with, the
first sale of such Registrable Securities pursuant to a Registration
Statement. Such Indenture will cover all Securities sold by the
Holders, but no Securities held or beneficially owned by the Holders.
6.2 CERTAIN DEFINITIONS. As used in this
Section 6, capitalized terms not otherwise defined in this Note have
the meanings ascribed thereto in the Registration Rights Agreement
between the Company, Ito-Yokado Co., and Seven-Eleven Japan Co.,
Ltd., dated as of November 22, 1995.
SECTION 7. MISCELLANEOUS.
Interest on the Security shall be computed on the basis of a 360-day year
of twelve 30-day months.
Prior to due presentment of this Security for
registration of transfer, the Company, and any agent of the Company
may treat the person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company nor any such agent shall be affected
by notice to the contrary.
This Security, and all issues relating to this Security,
including the validity, enforceability, interpretation or construction of
this Security or any provision of this Security, shall be governed by
and construed in accordance with the laws of the State of New York
<PAGE>
26
excluding (to the greatest extent permissible by law) any rule of law
that would cause the application of the laws of any jurisdiction other
than the State of New York.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT)
(AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT OR (D) AFTER
REGISTRATION UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
[EXECUTION COPY]
SECOND AMENDMENT
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED
CREDIT AGREEMENT (the "Second Amendment") dated as of November
28, 1995 relates to that certain Credit Agreement dated as of
July 31, 1987, as amended and restated as of November 5, 1987, as
further amended and restated as of February 17, 1993 and as
further amended and restated as of December 16, 1994 (as so
amended and restated, and as further amended by the First
Amendment to Third Amended and Restated Credit Agreement dated as
of March 31, 1995, the "Credit Agreement") among The Southland
Corporation, a Texas corporation ("Southland"), the financial
institutions party thereto as "Senior Lenders" and "Issuing
Banks", Citicorp North America, Inc., a Delaware corporation, as
administrative agent for the Senior Lenders and the Issuing Banks
(in such capacity, together with any successor administrative
agent appointed pursuant to Section 12.07 thereof, the
"Administrative Agent") and The Sakura Bank, Limited, New York
Branch, as Co-Agent.
1 . DEFINITIONS. Capitalized terms defined in the
Credit Agreement and not otherwise defined or redefined herein are used
herein with the meanings so defined.
2 . AMENDMENTS TO THE CREDIT AGREEMENT. Upon the
"Second Amendment Effective Date" (as defined in Section 4 below), the
Credit Agreement is hereby amended as follows:
1 AMENDMENTS TO SECTION 1.01. Section 1.01 of
the Credit Agreement is hereby amended as follows:
(a) The definition of "CAPITAL EXPENDITURES" is
hereby deleted in its entirety and the following is inserted
in lieu thereof:
"CAPITAL EXPENDITURES" shall mean, for any period,
(i) the aggregate of all expenditures (whether paid in
cash or accrued as liabilities during that period but
excluding that portion deemed as Capital Leases) by
Southland and its Subsidiaries during such period that,
in conformity with GAAP, are required to be included in
or reflected by the property, plant or equipment or
similar fixed asset accounts reflected in the
consolidated balance sheet of Southland and its
<PAGE>
Subsidiaries, MINUS (ii) the amount of expenditures
included in CLAUSE (i) which are accrued during the
then current fiscal quarter and the three (3)
immediately preceding fiscal quarters of Southland and
its Subsidiaries with respect to which the properties
relating to such expenditures are subject to sale and
leaseback transactions permitted by SECTION 8.01(v)(B)
and consummated during such current fiscal quarter.
(b) The definition of "CONSOLIDATED FIXED
CHARGES" is hereby amended by restating the second
parenthetical phrase in clause (ii) therein in its entirety
to read as follows:
(including the principal component of Capital Lease
obligations and excluding (A) prepayments of scheduled
principal payments (including principal due at
maturity) on the Senior Subordinated Debentures in
connection with the Senior Subordinated Debenture
Repurchase and (B) prepayments of Other Indebtedness of
Southland in an aggregate amount not to exceed (X)
$300,000,000, MINUS (Y) the aggregate amount paid by or
on behalf of Southland in connection with all
prepayments made pursuant to the immediately preceding
clause (A))
(c) The following definition of "SECOND
AMENDMENT" is hereby added immediately following the
definition of "SECOND AMENDED AND RESTATED CREDIT
AGREEMENT":
"SECOND AMENDMENT" shall mean the Second Amendment
to Third Amended and Restated Credit Agreement dated as
of November 28, 1995.
(d) The following definition of "SENIOR
SUBORDINATED DEBENTURE REPURCHASE" is hereby added
immediately following the definition of "SENIOR SUBORDINATED
DEBENTURE INDENTURES":
"SENIOR SUBORDINATED DEBENTURE REPURCHASE" shall
mean (i) the issuance by Southland of Subordinated
Indebtedness in an aggregate principal amount of not
less than $300,000,000 to the Purchaser pursuant to a
subordinated promissory note in substantially the form
attached as Annex A to the Second Amendment and (ii)
the repurchase for cancellation with the proceeds of
- 2 -
<PAGE>
such Subordinated Indebtedness of certain of (A)
Southland's outstanding 5% First Priority Senior
Subordinated Debentures due December 15, 2003 and (B)
Southland's 4.5% Second Priority Senior Subordinated
Debentures (Series A) due June 15, 2004.
1 AMENDMENTS TO SECTION 8.01.
(a) Section 8.01(iii) of the Credit Agreement is
hereby amended by deleting provisions thereof in their
entirety and inserting in lieu thereof the following:
(iii) Subordinated Indebtedness and extensions,
renewals, replacements and refinancings thereof which
satisfy the criteria set forth in the definition of
"Subordinated Indebtedness", the aggregate principal
amount of which shall not exceed the aggregate
principal amount of Subordinated Indebtedness
outstanding as of the Second Amendment Effective Date
under (and as defined in) the Second Amendment (which
aggregate principal amount shall not exceed
$750,000,000), as certified by Southland in a written
notice delivered to the Administrative Agent within ten
(10) Business Days after such Second Amendment
Effective Date (together with, in the case of a
refinancing, interest accrued thereon and reasonable
costs incurred in connection with the refinancing);
(b) Section 8.01(v) of the Credit Agreement is
hereby amended by deleting the provisions of subclauses (A)
and (B) thereof in their entirety and inserting in lieu
thereof the following:
(A) Capital Lease obligations (other than such
obligations included in Permitted Existing
Indebtedness) and Indebtedness incurred in
connection with Capital Expenditures (and within a
reasonable period of time thereafter), if (1) such
Capital Lease obligations and Indebtedness are
incurred in connection with the acquisition of
assets at fair value after the Effective Date and
(2) such Capital Lease Obligations and
Indebtedness are either unsecured or secured by
the assets subject to such Capital Lease or
constituting such Capital Expenditure and other
assets securing Capital Lease obligations and
Indebtedness incurred in connection with Capital
- 3 -
<PAGE>
Expenditures in each case which are part of the
same transaction, (B) sale and leaseback
transactions, if (1) the obligations and
Indebtedness incurred in connection with such
transaction are either unsecured or secured only
by the assets subject to such transactions and (2)
the aggregate principal amount of such obligations
and Indebtedness (other than such obligations or
Indebtedness included in Permitted Existing
Indebtedness) does not exceed $50,000,000 at any
time outstanding;
1 AMENDMENTS TO SECTION 8.02(a). Section 8.02(a)
of the Credit Agreement is hereby amended as follows:
(a) by deleting in its entirety the reference to
"CLAUSES (i), (iii) or (iv)" therein and inserting in lieu
thereof a reference to "CLAUSES (i), (iii), (iv) or (v)";
(b) by deleting the word "or" immediately
preceding clause (iv) thereof and inserting in lieu thereof
a comma; and
(c) by deleting the period at the end of clause
(iv) thereof and inserting in lieu thereof the following:
"or (v) dispositions of assets in sale and leaseback
transactions permitted by SECTION 8.11."
1 AMENDMENTS TO SECTION 8.04. Section 8.04 of
the Credit Agreement is hereby amended as follows:
(a) by deleting the word "and" immediately
preceding clause (xv) thereof; and
(b) by deleting the period at the end of clause
(xv) thereof and inserting in lieu thereof the following:
"; and (xvi) other Accommodation Obligations in an aggregate
amount not to exceed $5,000,000 at any time outstanding."
.1 AMENDMENT TO SECTION 8.05(iii). Section
8.05(iii) of the Credit Agreement is hereby amended by
deleting in its entirety the phrase "all repurchases or
redemptions in excess of the amount required to satisfy
sinking fund payments which shall become due with respect to
such debentures prior to the Revolving Credit Termination
Date" therein and inserting in lieu thereof the following:
"to the extent that the aggregate amount of payments made by
- 4 -
<PAGE>
or on behalf of Southland with respect to all such
repurchases and redemptions exceeds $300,000,000, such
repurchases and redemptions"
.2 AMENDMENT TO SECTION 8.12(b). Section 8.12(b)
of the Credit Agreement is hereby amended by deleting the
provisions thereof in their entirety and inserting in lieu
thereof the following:
(b) NOTICES. Southland shall deliver to the
Administrative Agent (i) a copy of each notice or
other communication delivered by or on behalf of
Southland to any trustee under any Subordinated
Indebtedness indenture or to any holder (in its
capacity as such) of any Subordinated Indebtedness
not issued pursuant to an indenture, such delivery
to be made at the same time and by the same means
as such notice or other communication is delivered
to such trustee or such holder, and (ii) a copy of
each notice or other communication received by
Southland from any trustee under any Subordinated
Indebtedness indenture or from any holder (in its
capacity as such) of any Subordinated Indebtedness
not issued pursuant to an indenture, such delivery
to be made promptly after such notice or other
communication is received by Southland.
1 . REPRESENTATIONS AND WARRANTIES. Southland hereby
represents and warrants to each Senior Lender, each Issuing Bank,
the Administrative Agent and the Co-Agent that (a) each of the
statements set forth in Section 5.01 (other than the statements
set forth in Section 5.01(iii)(A)) of the Credit Agreement are
true, correct and complete on and as of the Second Amendment
Effective Date as though made to each Senior Lender, each Issuing
Bank, the Administrative Agent and the Co-Agent on and as of such
date and (b) as of the Second Amendment Effective Date, no Event
of Default or Potential Event of Default under Section 11.01(a)
of the Credit Agreement or (by reason of a breach of one or more
covenants set forth in Article IX of the Credit Agreement)
Section 11.01(b) of the Credit Agreement has occurred and is
continuing or will result from the Senior Subordinated Debenture
Repurchase.
2 . SECOND AMENDMENT EFFECTIVE DATE. This Second
Amendment shall become effective as of the date first above
written (the "Second Amendment Effective Date") upon the
satisfaction of the following conditions:
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<PAGE>
(a) the Administrative Agent's receipt of counterparts
hereof executed by Southland, the Administrative Agent and
the Requisite Senior Lenders;
(b) an opinion of Bryan F. Smith, general counsel to
the Borrower, dated the Second Amendment Effective Date and
addressed to the Administrative Agent, the Senior Lenders
and the Issuing Banks with respect to the Senior
Subordinated Debenture Repurchase, in form and substance
satisfactory to the Administrative Agent and the Requisite
Senior Lenders;
(c) an opinion of Shearman & Sterling, special counsel
to the Borrower, dated the Second Amendment Effective Date
and addressed to the Administrative Agent, the Senior
Lenders and the Issuing Banks with respect to the Senior
Subordinated Debenture Repurchase, in form and substance
satisfactory to the Administrative Agent and the Requisite
Senior Lenders;
(d) the tender for repurchase and cancellation by the
holders thereof of Senior Subordinated Debentures in a face
amount sufficient to cause the aggregate outstanding
principal amount of Subordinated Indebtedness of Southland
as of the Second Amendment Effective Date, together with all
other Indebtedness of Southland as of the Second Amendment
Effective Date, not to violate Section 8.01 of the Credit
Agreement (after giving effect to this Second Amendment);
and
(e) the receipt by Southland or its agent of not less
than $300,000,000 in gross proceeds of Subordinated
Indebtedness issued pursuant to a subordinated promissory
note in substantially the form attached hereto as ANNEX A
and made a part hereof.
1 . MISCELLANEOUS. This Second Amendment is a Loan
Document. The headings herein are for convenience of reference
only and shall not alter or otherwise affect the meaning hereof.
Except to the extent specifically amended or modified hereby,
the provisions of the Credit Agreement shall not be amended,
modified, impaired or otherwise affected hereby and the Credit
Agreement and all of the Obligations are hereby confirmed in full
force and effect. The execution, delivery and effectiveness of
this Second Amendment shall not, except as expressly provided
herein, operate as a waiver of any right, power or remedy of any
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<PAGE>
Senior Lender or Issuing Bank under any of the Loan Documents,
nor constitute a waiver of any provision of any of the Loan
Documents.
2 . COUNTERPARTS. This Second Amendment may be
executed in any number of counterparts which together shall
constitute one instrument.
3 . GOVERNING LAW. THIS SECOND AMENDMENT, AND ALL
ISSUES RELATING TO THIS AMENDMENT, INCLUDING THE VALIDITY,
ENFORCEABILITY, INTERPRETATION OR CONSTRUCTION OF THIS AMENDMENT
OR ANY PROVISION HEREOF, SHALL BE GOVERNED BY, AND SHALL BE
DETERMINED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
IN WITNESS WHEREOF, the Administrative Agent, the
Requisite Senior Lenders and Southland have caused this Second
Amendment to be executed by their respective officers thereunto
duly authorized as of the date first above written.
BORROWER: THE SOUTHLAND CORPORATION
By: /S/
________________________________
Title:
ADMINISTRATIVE
AGENT: CITICORP NORTH AMERICA, INC.,
as Administrative Agent
By: /S/
________________________________
Title:
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<PAGE>
SENIOR LENDERS: THE ASAHI BANK, LTD., NEW YORK
BRANCH
By: /S/
________________________________
Title:
THE BANK OF TOKYO TRUST COMPANY
By: /S/
________________________________
Title:
BANKERS TRUST COMPANY
By: /S/
________________________________
Title:
CHEMICAL BANK
By: /S/
________________________________
Title:
CIBC, INC.
By: /S/
________________________________
Title:
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<PAGE>
CITICORP USA, INC.
By: /S/
________________________________
Title:
THE FUJI BANK, LIMITED, HOUSTON
AGENCY
By: /S/
_______________________________
Title:
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY
By: /S/
________________________________
Title:
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED, NEW YORK BRANCH
By: /S/
________________________________
Title:
NATIONSBANK OF TEXAS, N.A.
By: /S/
________________________________
Title:
- 9 -
<PAGE>
THE SAKURA BANK, LIMITED, NEW YORK BRANCH
By: /S/
________________________________
Title:
- 10 -
<PAGE>
ANNEX A
TO
SECOND AMENDMENT
FORM OF SUBORDINATED INDEBTEDNESS PROMISSORY NOTE
Attached.
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NEWS RELEASE
THE SOUTHLAND CORPORATION
2711 North Haskell Avenue / Dallas, Tx 75204
Mailing Address: Box 711 / Dallas, Tx 75221-0711
Telephone 214-828-7587
Rick Updyke
Manager, Investor Relations
(214) 828-7328
Recorded Update
(214) 828-7587
SOUTHLAND ANNOUNCES SUCCESSFUL TENDER OFFER
DALLAS, Texas, November 22, 1995 -- The Southland Corporation
(NASDAQ: SLCM) today announced the successful completion of its "Dutch
auction" tender offer for 40 percent of both its 5% First Priority Senior
Subordinated Debentures due December 15, 2003 ("5% Debentures") and 4 1/2%
Second Priority Senior Subordinated Debentures (Series A) due June 15, 2004
("4 1/2% Debentures"). The company said it was pleased that the tender
offer was significantly oversubscribed.
Under terms of the tender offer, 40 percent of each issue will be
purchased at the final clearing price of $840.00 for the 5% Debentures and
$786.00 for the 4 1/2% Debentures, in each case per $1,000 principal amount.
All debentures tendered below the final clearing price will be purchased at
the final clearing price. Debentures tendered at the final clearing price
will be prorated and those tendered above will be returned.
In addition, the company will finance the purchase of the debentures
through the issuance of $300 million of Convertible Quarterly Income Debt
Securities ("Convertible QUIDS") to its majority owners, Ito-Yokado Co., Ltd.,
and Seven-Eleven Japan Co., Ltd. The Convertible QUIDS will be subordinated
to all existing debt, have a 15 year term, an interest rate of 4 1/2% and be
convertible into shares of the company's common stock at a price of
<PAGE>
$4.1602 per share. The company expects the depositary for the tender offer,
Wilmington Trust Company, to begin the process of delivering payments for the
debentures on the settlement date, which is scheduled for November 28, 1995.
The dealer managers of the tender offer are Goldman Sachs & Co.
With more than 15,000 convenience stores worldwide, 7-Eleven is the
premier name and largest chain in the convenience retailing industry. Over
5,500 7-Eleven and other convenience stores are operated or franchised in
the United States and Canada by The Southland Corporation. IYG Holding
Company, a wholly owned subsidiary of Ito-Yokado Co., Ltd., and Seven-Eleven
Japan Co., Ltd., has owned a majority interest in Southland since 1991.
Seven-Eleven Japan operates approximately 6,100 7-Eleven stores under an
area license agreement with Southland. Additionally, about 3,400 7-Eleven
stores are operated by area licensees and affiliates of Southland in the
U.S., its territories and 18 other countries.
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