-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LoU7PQqPMhlCz8RTjczE1qQ9DI3OsGvHzDwzqerUIaYhWikrVRNA4e9RR90dMVfR L6UKLJWKVQ/KT5veFMe28w== 0000912057-95-005098.txt : 20030406 0000912057-95-005098.hdr.sgml : 20030406 19950630150944 ACCESSION NUMBER: 0000912057-95-005098 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 21 CONFORMED PERIOD OF REPORT: 19950401 FILED AS OF DATE: 19950630 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAND UNION CO /DE/ CENTRAL INDEX KEY: 0000316236 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 251518276 STATE OF INCORPORATION: DE FISCAL YEAR END: 0325 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-48282-01 FILM NUMBER: 95551570 BUSINESS ADDRESS: STREET 1: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470-0966 BUSINESS PHONE: 2018906000 MAIL ADDRESS: STREET 1: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470 FORMER COMPANY: FORMER CONFORMED NAME: SUCCESSOR TO GRAND UNION CO/VA/ DATE OF NAME CHANGE: 19600201 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 1, 1995 ------------- Commission File Number 33-48282-01 ----------- THE GRAND UNION COMPANY (Exact name of registrant as specified in its charter) Delaware 22-1518276 - - --------------------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 201 Willowbrook Boulevard, Wayne, New Jersey 07470 - - --------------------------------------------- --------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 201-890-6000 --------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------- Not Applicable Not Applicable - - --------------------------------------------- --------------------- Securities registered pursuant to Section 12(g) of the Act: Not Applicable - - -------------------------------------------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ----- ----- As of June 30, 1995, the number of shares outstanding of the Registrant's common stock, par value $1.00 per share, was 10,000,000 shares. As of June 30, 1995, the common stock of the Registrant is not listed on any national securities exchange. Documents incorporated by reference: None ---- THE GRAND UNION COMPANY PART I ITEM 1. BUSINESS GENERAL The Grand Union Company, a Delaware corporation ("Grand Union" or the "Company"), currently operates 231 retail food stores under the "Grand Union" name in six northeastern states. CHAPTER 11 REORGANIZATION On November 29, 1994, Grand Union announced that it was not likely to be able to fund cash interest payments due in early calendar 1995, and that it intended to develop a capital restructuring plan. Beginning on January 16, 1995, Grand Union did not make interest payments required under its outstanding debt obligations. On January 24, 1995, Grand Union announced that it had reached an agreement in principle with Grand Union's bank lenders and with members of informal committees of certain holders of Grand Union's 11.375% Senior Notes due 1999 (the "11.375% Senior Notes") and 11.25% Senior Notes due 2000 (the "11.25% Senior Notes" and collectively with the 11.375% Senior Notes, the "Senior Notes") and certain holders of Grand Union's 12.25% Senior Subordinated Notes due 2002 (the "12.25% Subordinated Notes") and 12.25% Senior Subordinated Notes due 2002, Series A (the "Series A 12.25% Subordinated Notes", together with the 13% Senior Subordinated Notes due 1998 (the "13% Subordinated Notes") and the 12.25% Subordinated Notes, the "Subordinated Notes") on the terms of a restructuring of Grand Union's capital structure. On January 25, 1995 (the "Filing Date"), as part of the implementation of such agreement, Grand Union filed a voluntary petition for relief under chapter 11 ("Chapter 11") of Title 11 of the United States Code (the "Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). From the Filing Date through June 15, 1995 (the "Effective Date", as defined below), Grand Union operated as a debtor-in-possession under Chapter 11 of the Code and was subject to the supervision of the Bankruptcy Court in accordance with the Code. During this period, Grand Union's business was operated under a series of "first day orders", which, among other things, permitted it to retain certain financial and legal advisors and which authorized payment of certain pre-petition employee costs, including worker's compensation benefits, and pre-petition trade claims, subject to the satisfaction of various requirements. On January 30, 1995, Grand Union (as debtor and as debtor-in-possession) entered into a credit agreement (the "DIP Facility") with the banks party thereto providing for borrowings of up to $150 million on a revolving credit basis. On February 16, 1995, final approval of the DIP Facility was granted and the Bankruptcy Court also issued a Final Cash Collateral Order which allowed Grand Union to use cash collateral to pay operating expenses in the ordinary course of business. There were no borrowings made under the DIP Facility during the Chapter 11 proceedings and it was terminated on the Effective Date. On February 16, 1995, Grand Union Capital Corporation ("Capital"), which prior to the Effective Date owned all of the issued and outstanding common stock of Grand Union (the "Old Common Stock"), consented to the entry of an order for relief in respect of an involuntary Chapter 11 petition filed in the Bankruptcy Court on February 6, 1995 by entities purporting to be holders of Capital's 15% Senior Zero Coupon Notes due 2004 (the "Capital Senior Zero Notes") and 16.5% Senior Subordinated Zero Coupon Notes due 2007 (the "Capital Subordinated Zero Notes" and collectively with the Capital Senior Zero Notes, the "Capital Notes"). On February 16, 1995, Grand Union Holdings Corporation ("Holdings"), of which Capital is a wholly owned subsidiary, filed a voluntary Chapter 11 petition in the Bankruptcy Court. Capital and Holdings are currently operating as debtors-in-possession under the protection of Chapter 11, each in bankruptcy proceedings separate from Grand Union, and are each subject to the jurisdiction and supervision of the Bankruptcy Court. Prior to the Effective Date, the principal asset of Capital and, indirectly, of Holdings was the common stock of Grand Union. The Bankruptcy Court confirmed the Second Amended Chapter 11 Plan of The Grand Union Company, dated as of April 19, 1995 (as confirmed, the "Plan"), on May 31, 1995 (the "Confirmation Date"), and the Company emerged from Chapter 11 on June 15, 1995 (the "Effective Date"). Two proceedings challenging the order confirming the Plan are pending. The Company does not believe that either proceeding will result in any modification or revocation of the 1 order. On the Effective Date, Grand Union adopted a restated certificate of incorporation (the "New Certificate"), the principal effects of which are: (i) to authorize 30,000,000 shares of new common stock (the "New Common Stock") (of which 10,000,000 shares were issued under the Plan) and 10,000,000 shares of preferred stock (none of which will be issued under the Plan) and (ii) to prohibit the issuance of non-voting equity securities. The Plan provides for full payment of all allowed administrative expenses and all allowed general unsecured and priority claims. On the Effective Date, obligations relating to the Company's existing bank credit agreement (the "Bank Credit Agreement") were paid in full and the Company entered into an Amended and Restated Credit Agreement (the "New Bank Facility") with its bank lending group which provides for a five-year revolving credit facility of $100,000,000 (the "New Revolving Credit Facility") and a seven-year term loan facility of $104,144,371 (the "New Term Loan"). The New Bank Facility is secured by a lien on substantially all of the assets of Grand Union and its subsidiaries. As of the Effective Date, the Senior Notes were deemed cancelled and each holder of Senior Notes became entitled to receive its pro rata share of Grand Union's new 12% Senior Notes due 2004 (the "New Senior Notes") having an aggregate principal amount of $595,475,922 issued pursuant to the Plan. As of the Effective Date, the Subordinated Notes and the Old Common Stock were deemed cancelled and each holder of Subordinated Notes became entitled to receive its pro rata share of an aggregate of 10,000,000 shares of Grand Union's New Common Stock issued pursuant to the Plan. The Plan also provided for the issuance of warrants to purchase an aggregate of 900,000 shares of New Common Stock to holders of the Capital Notes pursuant to the terms of a settlement reached among the Company, Capital, Holdings, the Official Committee of Unsecured Creditors of Capital and certain holders of the Capital Notes. In accordance with the terms of the settlement, on the Effective Date, and solely for the purpose of effectuating the settlement, any claims against the Company arising from the Capital Notes were discharged and (i) each holder of Capital Senior Zero Notes became entitled to receive its pro rata share of 240,000 Series 1 Warrants to purchase shares of New Common Stock at a purchase price of $30 per share ("Series 1 Warrants") and of 480,000 Series 2 Warrants to purchase shares of New Common Stock at a purchase price of $42 per share ("Series 2 Warrants") and (ii) each holder of Capital Subordinated Zero Notes became entitled to receive its pro rata share of 60,000 Series 1 Warrants and 120,000 Series 2 Warrants, provided that holders of $200,000 or more principal amount of either the Capital Senior Zero Notes or Capital Subordinated Zero Notes are required to execute a release of all claims relating to such Capital Notes as a condition to receiving the distribution. The Plan made no provision for the holders of the 12% Junior Subordinated Notes due 1999 (the "Holdings Junior Notes") or Redeemable Preferred Stock issued by Holdings or the common shares or warrants to purchase common shares of Holdings. STORE FORMATS Grand Union's store sizes and formats vary depending upon the demographics and competitive conditions in each location, as well as the availability of real estate. Grand Union supermarkets offer a wide selection of national brand and private label products as well as high-quality produce, meat and general merchandise. The majority of the Company's sales are generated from stores which also contain a number of high margin specialty and service areas for such goods as imported and domestic produce, salads, hot and cold prepared foods, seafood and fresh-baked goods. Select stores feature in-store kitchens and pharmacies. Liquor and wine departments are included where permitted by local law. Grand Union's supermarkets range in size from 14,000 to 64,000 square feet and newly constructed stores are typically in excess of 40,000 square feet. MERCHANDISING STRATEGY Grand Union's current merchandising strategy is premised upon the following: VALUE. The Company's strategy is to provide value to the customer by offering competitive prices and a wide variety of advertised and unadvertised specials, sponsoring special promotions and offering a wide selection of private label products. MERCHANDISE ASSORTMENT. Management believes that many consumers prefer food stores that not only offer the wide variety of food and non-food items carried by conventional supermarkets, but also sell an expanded assortment of high-quality food items and produce. Accordingly, Grand Union continues to upgrade existing departments with new selections and, where appropriate, has added specialty departments, including full service butcher and seafood shops, 2 floral departments, delicatessens and bakeries. This merchandising strategy provides consumers with a broader product offering and a more convenient shopping experience, while shifting the Company's sales mix toward higher margin products. EFFICIENCIES OF DISTRIBUTION. Grand Union's distribution system has contributed to its ability to efficiently pursue its strategy of offering the consumer a wide assortment of quality products at competitive prices. Strategically located distribution centers make it possible for Grand Union to minimize in-store stockroom space, thereby increasing store selling space. SELECTED DATA The table below sets forth certain statistical information with respect to Grand Union retail stores, excluding the stores formerly operated in the Southern Region (see "Recent History - Sale of the Southern Region" below), for the periods indicated.
52 Weeks Ended 52 Weeks Ended 53 Weeks Ended April 1, 1995 April 2, 1994 April 3, 1993 -------------- --------------- -------------- Number of stores (at end of period) 231 254 250 Total selling square feet (in thousands) 4,276 4,532 4,276 Average gross square feet per store 25,871 24,966 23,922 Average sales per selling square foot per week $10.29 $10.76 $11.23
SUMMARY OF OPERATIONS NORTHERN REGION Grand Union currently operates 127 stores in its Northern Region including 40 stores in Vermont, 84 stores in upstate New York and 3 stores in New Hampshire. The Northern Region had sales of approximately $989 million for the 52 weeks ended April 1, 1995 ("Fiscal 1995"). The Company has operated in most of the markets it currently serves in the Northern Region for more than 25 years, and in many communities for over 50 years. In Vermont, Grand Union operates 40 stores throughout the state in virtually every significant community. Grand Union has the preeminent market share in the state, having more sales than all other chain-store operators combined. The Company's strong position in Vermont allows it to achieve significant economies in purchasing, distribution, advertising and field supervision. The competitive environment in Vermont evolves very slowly due to zoning and environmental regulations in the state which restrict commercial development (including supermarkets). Grand Union's long-standing presence in Vermont was enhanced through the acquisition in 1990 of certain stores operated by P&C Foods, then a subsidiary and currently a division of The Penn Traffic Company ("Penn Traffic"), a company indirectly controlled by Miller Tabak Hirsch + Co. ("MTH"), which prior to the Effective Date indirectly controlled approximately 39% of the common stock of Holdings on a fully diluted basis. Grand Union has focused its capital expenditures in Vermont on improving existing locations and replacing stores where possible. The largest competitors to Grand Union in Vermont are Golub Corporation ("Price Chopper"), Hannaford Brothers, Inc. ("Hannaford") and The Great Atlantic & Pacific Tea Company, Inc. ("A&P"). In upstate New York, Grand Union generally operates in small cities and rural communities, where the Company estimates it typically has the leading market share. Although generally not as restrictive as Vermont, commercial development in the upstate New York market place has been and continues to be constrained by zoning and environmental restrictions, particularly in areas regulated by the Adirondack Park Commission. Victory Markets, Inc. ("Great American") competes against the Company in a number of communities in the Hudson and Mohawk River Valleys. In the more urban Albany, New York metropolitan area (the "Capital District"), the Company operates 28 stores and estimates that it has the second largest market share. Grand Union's competitors, including Price Chopper, which has the highest market share, and Hannaford have opened several stores in the last two years. Such newly opened stores are generally larger and more modern than the Company's stores in the relevant markets. These openings have had an adverse effect on the Company's sales and profitability. In the Mid-Hudson Valley area of New York (14 stores), the Company estimates that it has the leading market share. Principal competitors are Big V Supermarkets Inc. (operating under the ShopRite name), Price Chopper, Hannaford and A&P. Weak economic conditions in the Mid-Hudson Valley area have been accompanied by a number 3 of competitive openings in recent years. A number of stores in the Northern Region (particularly in the Adirondack area and Vermont) are in resort areas and generally experience significant increases in sales in the summer months and in some cases during the winter ski season. NEW YORK REGION Grand Union currently operates 104 stores in its New York Region. The New York Region generated approximately $1.4 billion of sales for Fiscal 1995. Grand Union's primary New York Region marketing area comprises the more affluent suburban communities of central and northern New Jersey (44 stores), Westchester, Orange, Rockland, Dutchess and Putnam Counties in New York (27 stores), Long Island (14 stores) and Fairfield County, Connecticut (14 stores). The Company also has a limited presence in New York City (3 stores) and Pennsylvania (2 stores). Within its primary New York Region marketing areas, the Company generally operates stores in mature, densely populated markets. These stores serve communities with demographics particularly well-suited for store formats emphasizing specialty departments. Accordingly, the sales mix in this region includes a larger percentage of higher margin perishable department items than in the Northern Region. In addition, the high population density as well as the geographic concentration of stores in the region provide substantial opportunities to achieve additional economies of scale, particularly in advertising and distribution. Because the New York Region is a fragmented market with no single food retailer having a dominant market share, competition is market specific. In New Jersey, the Company competes primarily against Pathmark Stores, Inc. ("Pathmark"), A&P and various supermarkets supplied by the Wakefern ("ShopRite") and Twin County ("Foodtown") cooperatives. In Westchester, Orange, Rockland, Dutchess and Putnam Counties in New York, the Company generally competes with A&P, Edwards Supermarkets, Inc. and ShopRite. On Long Island, the Company's principal competitors are A&P/Waldbaums, Pathmark, King Kullen Grocery Co., Inc. and Foodtown. Grand Union's main competitors in Fairfield County, Connecticut are the Stop & Shop Company and A&P. CAPITAL INVESTMENT The Company's capital spending is primarily directed toward renovating and upgrading the existing Grand Union store base and opening new and replacement stores in existing marketing areas. Capital expenditures, including capitalized leases, other than real estate leases, for Fiscal 1995 and the 52 weeks ended April 2, 1994 ("Fiscal 1994") were approximately $71 million and $86 million, respectively. DISTRIBUTION, SUPPLY AND MANAGEMENT INFORMATION SYSTEMS DISTRIBUTION. Management believes that Grand Union's distribution system enhances its ability to offer consistently fresh and high quality dairy products, meats, baked goods, produce and frozen foods. Moreover, this system enables Grand Union to take advantage of cost saving, volume purchase opportunities. Grand Union currently operates five distribution centers, including the Waterford distribution center described below, aggregating approximately 2.1 million square feet. In addition, Grand Union utilizes a frozen food distribution facility operated by a third party. Grand Union also leases space in three additional storage facilities and, from time to time, utilizes limited space in several other facilities. The strategic location of the distribution centers makes it possible for Grand Union to make frequent shipments to stores, which reduces the amount of in-store stockroom space, thereby limiting nonproductive store inventories. In connection with the Chapter 11 proceedings, Grand Union elected to close its Waterford distribution center which distributes grocery and perishable products to its Northern Region stores. The warehouse will cease to operate on or about July 31, 1995. The Company has entered into a six-year agreement with an independent wholesaler to supply its Northern Region stores with the products formerly distributed through the Waterford warehouse. The Company believes that the new distribution arrangement will result in significant savings to the Company over the contract term. In September 1993, Grand Union entered into a program to consolidate the purchasing, storage and distribution of health and beauty care and general merchandise product with Penn Traffic. Under this program, the inventory of health and beauty care and general merchandise product is owned by Penn Traffic and is stored in Grand Union's 4 warehouse in Montgomery, New York. The products are distributed from the warehouse to Grand Union stores and certain Penn Traffic stores and wholesale customers. Grand Union reimburses Penn Traffic for shipments to Grand Union stores based on terms defined in the agreement. Grand Union purchases the health and beauty care products for both Grand Union and those Penn Traffic stores and wholesale customers serviced by the warehouse and is reimbursed by Penn Traffic for such purchases based on terms defined in the agreement. Penn Traffic purchases the general merchandise product for both Grand Union and Penn Traffic. Under the arrangement, Grand Union and Penn Traffic share the cost of operating the warehouse based on their proportionate usage of the product. Under the agreement governing such arrangement, either Penn Traffic or Grand Union may terminate the program from and after July 1, 1995, upon six (6) months prior written notice. This agreement is being reevaluated in connection with the Chapter 11 proceedings. Grand Union believes this arrangement will be terminated within the next several months. MANAGEMENT INFORMATION SYSTEMS. Financial, distribution, purchasing and operating system requirements are supported through a central computer system located in Wayne, New Jersey. Grand Union currently utilizes scanning systems in 160 stores (representing approximately 86% of total sales) and intends to continue to invest in scanning and other store systems in the future. SUPPLIERS. Products sold, including private label products, are purchased through a large group of unaffiliated suppliers. Grand Union is not dependent upon any single supplier, and its grocery purchases are of a sufficient volume to qualify for minimum price brackets for most products sold. COMMISSARY. Grand Union operates a 20,000 square foot commissary located in Newburgh, New York, in which high quality cooked meat products, salads and soups are prepared for sale in the Company's delicatessen departments. EMPLOYEES As of April 1, 1995, Grand Union had approximately 16,000 employees, of whom approximately 60% were employed on a part-time basis. Approximately 50% of Grand Union's employees are covered by collective bargaining agreements negotiated with 17 local unions. As of April 1, 1995, approximately 88% of the employees covered by these collective bargaining agreements were employed in store locations and approximately 12% were employed in distribution facilities. Approximately 188 employees represented by the Independent Warehouse Employees Association and 148 employees represented by the Independent Transportation Workers Association will be terminated in connection with the closing of the Waterford warehouse on or around July 31, 1995. The Company reached a settlement with the unions which provides for additional severance payments for members in consideration of the resolution of various legal claims asserted by both collective bargaining units. The Company entered into a new labor agreement on June 7, 1995, with United Food and Commercial Workers, Local 1262. The agreement, which expires March 13, 1999, covers approximately 1,900 clerks working in 33 Grand Union stores located in New York City, Long Island and Westchester, Putnam and Dutchess Counties in New York. The Company's other labor agreements have expiration dates ranging from October 1995 through December 1998. On May 29, 1993, Grand Union settled a labor dispute with United Food and Commercial Workers, Local 1262 ("Local 1262"), which represents clerks working in 61 Grand Union stores located in northern New Jersey and in Orange and Rockland Counties, New York. The expiration of Grand Union's contract on April 24, 1993, after an extension from the contract's original expiration date on April 10, 1993, resulted in work stoppages at some, and eventually all, of the 61 Grand Union stores involved during the period from May 7, 1993 through May 29, 1993, as well as work stoppages at 251 Foodtown, Pathmark and ShopRite stores whose employees are covered by identical collective bargaining agreements. On June 17, 1993, a new four year agreement with Local 1262 was ratified by the approximately 3,600 members of Local 1262 employed by Grand Union and by the approximately 23,000 members of Local 1262 employed by Foodtown, Pathmark and ShopRite. TRADE NAMES, SERVICE MARKS AND TRADEMARKS Grand Union uses a variety of trade names, service marks and trademarks. Except for Grand Union-Registered Trademark-, Grand Union does not believe any of such trade names, service marks or trademarks is material to its business. 5 COMPETITION The food retailing business is highly competitive. Grand Union competes with numerous national, regional and local chains, convenience stores, stores owned and operated and otherwise affiliated with large food wholesalers, unaffiliated independent food stores, warehouse clubs, discount drugstore chains and discount general merchandise chains. Some of Grand Union's competitors have greater financial resources than the Company and could use those resources to take steps which could adversely affect the Company's competitive position. RECENT HISTORY CHAPTER 11 REORGANIZATION As described above, Grand Union emerged from Chapter 11 on June 15, 1995. See "Item 1. Business - Chapter 11 Reorganization". OCTOBER 1993 ACQUISITION On October 18, 1993, the Company acquired five supermarket locations on Long Island. The total gross square footage of these five stores is approximately 160,000 square feet. The cost of the acquisition included cash consideration of approximately $16,100,000 (of which approximately $6,000,000 was allocated to property, equipment and leasehold improvements and approximately $10,100,000 was allocated to goodwill) and approximately $2,200,000 for store inventory. The goodwill is being amortized over 40 years. The acquisition was financed through the application of a portion of the proceeds of the sale to institutional investors of $50,000,000 principal amount of Series A 12.25% Subordinated Notes. During Fiscal 1995, one of the stores was closed and the remaining amount of goodwill allocable to the store was written off. SALE OF THE SOUTHERN REGION On March 29, 1993, Grand Union sold 48 of its 51 Southern Region stores to A&P. The three Southern Region stores not sold to A&P were closed, and have been subleased. Grand Union received net cash proceeds of approximately $25,000,000 and was relieved of approximately $4,500,000 of capital lease obligations. THE 1992 RECAPITALIZATION On July 22, 1992, Holdings, Capital and Grand Union completed a recapitalization (the "1992 Recapitalization"). In connection with the 1992 Recapitalization, Holdings, through Capital and Grand Union, entered into the Bank Credit Agreement providing for a $210,000,000 term loan facility (the "Term Loan") and a $100,000,000 revolving credit facility (the "Revolving Credit Facility"), issued $350,000,000 principal amount of Grand Union 11.25% Senior Notes and $500,000,000 principal amount of Grand Union 12.25% Subordinated Notes, and sold $343,000,000 principal amount of Capital Senior Zero Notes and $745,000,000 principal amount of Capital Subordinated Zero Notes, together with warrants to purchase at a nominal price approximately 19.9% of the common stock of Holdings on a fully diluted basis, for aggregate gross proceeds of approximately $200,000,000. The 1992 Recapitalization also included the sale to institutional investors of approximately 28.4% of the common stock of Holdings on a fully diluted basis for approximately $25,000,000. The proceeds were used to retire substantially all of the debt of Holdings, GU Acquisition Corporation ("GUAC"), a wholly owned subsidiary of Holdings, and Grand Union as well as to repurchase the shares and option to purchase shares owned by Salomon Brothers Holding Company Inc, certain warrants held by the parties to the term loan and revolving credit facility existing prior to the 1992 Recapitalization and approximately 3.4% of the common stock of Holdings held by Grand Union management. At the time of the 1992 Recapitalization, GUAC and its wholly owned subsidiary, Cavenham Holdings Inc., the former parent of Grand Union, were merged into Grand Union and Grand Union became a wholly owned subsidiary of Capital. On January 28, 1993, Grand Union sold $175,000,000 principal amount of 11.375% Senior Notes in a private placement. Net proceeds of the sale of the 11.375% Senior Notes were used to repay $142,000,000 of indebtedness under the Term Loan and the remainder was used to repay indebtedness under the Revolving Credit Facility. An additional $20,856,000 of the Term Loan was repaid from the proceeds of the sale of the Southern Region on March 29, 1993. All of such repaid indebtedness under the Term Loan and under the Revolving Credit Facility had been incurred in connection with the 1992 Recapitalization. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Grand Union has no significant foreign operations or export sales. 6 ITEM 2. PROPERTIES Grand Union conducts its operations primarily in leased stores, distribution centers and offices. The following table indicates the location and number of stores as of April 1, 1995. Number of Locations Stores --------- -------- Northern Region: Vermont 40 New York 84 New Hampshire 3 New York Region: New York 44 New Jersey 44 Connecticut 14 Pennsylvania 2 --- Total 231 --- --- As of April 1, 1995, Grand Union owns 15 and leases 216 of its store sites pursuant to commercial leases. Management believes that none of such leases is individually material to Grand Union. Most of these leases contain several renewal options. Fifteen store leases which do not contain renewal options will expire over the next five years and management anticipates that it will be able to renegotiate favorable lease terms for most of these locations, if so desired. Grand Union currently operates five distribution centers (including the Waterford distribution center which is being closed - See "Item 1. Business - Distribution, Supply and Management Information Systems") which are leased and a commissary, which is housed in a building owned by Grand Union on a ground-leased site in Newburgh, New York. Grand Union owns a 66,160 square foot site which is part of its Carlstadt, New Jersey Grocery Distribution Center and a 101,000 square foot facility in Waverly, New York. Grand Union's leased distribution centers each have approximately 30 years or more remaining on the respective leases including options. See Note 13 to the Consolidated Financial Statements, Property Leases, for information on leases and annual rents. ITEM 3. LEGAL PROCEEDINGS Reference is made to "Item 1. Business - Chapter 11 Reorganization" for information regarding Grand Union's Chapter 11 proceedings. As a result of the commencement of the Chapter 11 case on January 25, 1995, certain litigation pending against Grand Union on that date was automatically stayed pursuant to Section 362 of the Code. With certain exceptions, all legal claims against the Company pending as of January 25, 1995, will be resolved through the bankruptcy process. Grand Union believes that the resolution of these legal proceedings will not have a material effect upon its consolidated results of operations or its financial position. Soil and ground-water contamination has been detected at a shopping center owned by Grand Union which is located in Connecticut. The Company is investigating whether such contamination was caused by improper disposal of perchloroethylene wastes by a dry cleaner previously operating at this location or by an off-site source. Grand Union has undertaken, under approval by the Connecticut Department of Environmental Protection, a proposal for a remedial investigation designed to identify the sources of such soil and ground-water contamination and to determine the length, depth and breadth of the contamination on and off-site. Sampling analyses for the ground-water at the shopping center and for drinking water in private residences located in the immediately surrounding area confirm that the source of the on-site contamination, in part, is an off-site shopping center and a gasoline station located nearby. A Remedial Action and Investigation Report was submitted to the Connecticut Department of Environmental Protection on May 21, 1993. The Company is awaiting a response from the Connecticut Department of Environmental Protection. The Company's potential responsibility does not arise from any aspect of its operation of a supermarket at the shopping center but from the actions of a former tenant. Any contamination caused on-site by a source located off-site would be the responsibility of another party. The Company believes that the current intention of the Connecticut Department of Environmental Protection is to seek reimbursement of past costs and clean up costs from some or all 7 of these other parties. The Company is unable to determine the amount of its potential liability arising from the on-site contamination, but does not believe, based upon the results of investigations made to date, that the amount of potential liability is likely to be materially adverse to the Company's financial condition. Management presently estimates, based upon investigations made by the Company's environmental consultant to date, that such liability should not exceed $2 million. Investigations are continuing, and there can be no assurance that the amount of such liability will not exceed $2 million. In 1991, Grand Union's landlord brought an action against Grand Union, two other tenants at the Apple Valley Shopping Center in LaGrange, New York, and a supplier of hazardous substances to one of the tenants, seeking approximately $1,600,000 in response costs within the meaning of the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") and consequential damages (pursuant to the court's supplemental jurisdiction). The plaintiff claims that Grand Union and other tenants discharged hazardous substances from their premises which caused the plaintiff to incur response costs. The gravamen of the plaintiff's claim is that Grand Union placed household cleaning products containing volatile organic substances in a compactor situated at the rear of its premises and that such substances were released into the environment. Grand Union believes that the evidence will not support the allegation and is vigorously defending the matter. In connection with the Company's Chapter 11 proceedings, the plaintiff filed a proof of claim in the amount of $4,389,518. Region II U.S. Environmental Protection Agency carried out a removal action at this site and recently notified the Company that it was a potentially responsible party within the meaning of Section 107(a) of CERCLA. The Company is unable to determine the amount of its potential liability arising from this matter, but does not believe that the amount of potential liability is likely to be materially adverse to the Company's financial condition. At the time of the acquisition of Grand Union by Holdings in July 1989, Grand Union and P&C Foods, then a subsidiary and currently a division of Penn Traffic, operated stores in some of the same geographic areas in Vermont and upstate New York. In order to satisfy the concerns of federal antitrust authorities arising therefrom in connection with the acquisition of Grand Union by Holdings, prior to consummation thereof MTH Holdings, Inc. ("MTH Holdings"), an affiliate of Miller Tabak Hirsch + Co., a New York Limited Partnership, and GUAC entered into an Agreement Containing Consent Order (the "Order") with the Bureau of Competition of the Federal Trade Commission ("FTC") and an Agreement to Hold Separate with Salomon Inc and the FTC (collectively, the "FTC Agreements"). The FTC Agreements required the divestiture by MTH Holdings and/or Grand Union (including in each case their respective subsidiaries and affiliates) of sixteen stores located in Vermont and upstate New York. Such divestitures were completed on July 30, 1990. Thirteen of the sixteen stores divested were P&C Foods stores and three of the sixteen stores divested were Grand Union stores. In a related transaction, Grand Union and P&C Foods entered into an operating agreement (the "Operating Agreement"), pursuant to which Grand Union acquired the right to operate P&C Foods' thirteen remaining stores in New England under the Grand Union name until July 2000, for an average annual rent of approximately $10.7 million with an option to extend the term of such operation for an additional five years. Grand Union paid P&C Foods $7.5 million for an option to purchase the stores at an amount defined in the Operating Agreement. Pursuant to the terms of the Operating Agreement, the 1992 Recapitalization triggered a $15 million prepayment obligation to P&C Foods. The Operating Agreement was assumed during the Chapter 11 case and will continue on its current terms. The FTC Agreements also provide, among other things, that MTH Holdings and Grand Union (including in each case their respective subsidiaries and affiliates) shall not acquire, for a period of ten years, any retail grocery stores in Vermont and certain specified counties in New York without the prior approval of the FTC. As required by the FTC Agreements, following commencement of the Chapter 11 proceedings, Grand Union notified the FTC that a change of control of the Company would occur upon completion of the reorganization. The Agreement to Hold Separate was, by its terms, applicable only until certain stores identified therein could be divested. All required divestitures have occurred and, as of the Effective Date, there was no longer any control affiliation between Penn Traffic and Grand Union, which may in the future be direct competitors in certain market areas. The consummation of the Plan did not result in any change in the applicability of the FTC Agreements. The Company is also subject to certain other legal proceedings and claims arising in connection with its business. It is management's opinion that the ultimate resolution of such claims will not have a material adverse effect on the Company's consolidated results of operations or its financial position. 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of the year covered by this Report on Form 10-K. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS MARKET INFORMATION The Old Common Stock of Grand Union was not publicly traded. The Plan requires that Grand Union use its reasonable best efforts to cause the New Common Stock, the Series 1 Warrants and the Series 2 Warrants to be listed on one or more stock exchanges or quoted on the National Market System within one hundred twenty (120) days after the Effective Date. HOLDERS Prior to the Effective Date, Capital owned all of the issued and outstanding Old Common Stock of Grand Union. On the Effective Date, pursuant to the terms of the Plan (see "Part 1. Item 1. Business - Chapter 11 Reorganization" above), the holders of claims for the principal of and interest on the Subordinated Notes became entitled to receive an aggregate of 10,000,000 shares of New Common Stock, par value $1.00 per share, of Grand Union, and the shares of Old Common Stock and the Subordinated Notes were deemed cancelled as of the Effective Date. To effectuate the distribution of the New Common Stock, a global certificate for 10,000,000 shares of New Common Stock was delivered to IBJ Schroder Bank & Trust Company, as Exchange Agent (the "Exchange Agent"), and registered holders of such Subordinated Notes have been requested to tender certificates representing such indebtedness to the Exchange Agent in order to receive their shares of New Common Stock in a pro rata distribution. DIVIDENDS No cash dividends were declared or paid during each of the three fiscal years ended April 1, 1995. Payment of dividends to holders of New Common Stock is restricted by Grand Union's New Bank Facility and by the terms of the New Senior Notes. 9 ITEM 6. SELECTED FINANCIAL DATA The data as of April 1, 1995 and April 2, 1994 and for the 52 week periods then ended, as of April 3, 1993 and for the 53 weeks then ended, and as of March 28, 1992 and March 30, 1991, and for the 52 week periods then ended are derived from the consolidated financial statements of the Company. This information should be read in conjunction with the historical financial statements of the Company, including the notes thereto, included elsewhere herein. These financial statements reflect the accounts of Holdings pushed down to the accounts of Grand Union.
52 Weeks 52 Weeks 53 Weeks 52 Weeks 52 Weeks Ended Ended Ended Ended Ended April 1, April 2, April 3, March 28, March 30, 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (in millions except per share amounts) STATEMENT OF OPERATIONS: Sales $2,391.7 $2,477.3 $2,834.0 $2,968.5 $2,996.6 Gross profit 687.6 711.0 801.5 818.1 784.5 Operating and administrative expense 550.9 531.8 606.2 619.9 603.6 Depreciation and amortization 87.1 78.6 80.6 78.7 76.9 Provision for store closings, net 12.9 - - - - Reorganization items 10.8 - - - - Charges relating to pension settlement and early retirement programs 3.7 4.5 - - - Loss on disposal of the Southern Region - - 198.0 - - Recapitalization expense - - 3.5 - - Interest expense: Debt 157.7 164.0 151.9 141.7 145.6 Capital lease obligations 19.2 15.0 13.2 12.3 11.0 Amortization of deferred financing fees 5.1 4.8 9.4 18.0 7.4 Loss before income taxes, extraordinary charges and cumulative effect of accounting change 159.8 87.6 261.2 52.5 60.0 Extraordinary charges - - 47.7 - - Cumulative effect of accounting change - 30.3 - - - Net loss 159.8 118.0 313.4 65.1 71.0 Net loss per share applicable to common stock 2,383.68 1,780.06 4,359.45 1,038.79 1,100.49 Ratio of earnings to fixed charges (1) - - - - - Deficiency in earnings available to cover fixed charges 159.8 87.6 261.2 52.5 60.0 BALANCE SHEET DATA: Total assets $1,394.8 $1,394.2 $1,418.2 $1,536.8 $1,569.6 Total debt and capital lease obligations (2) 1,614.9 1,532.2 1,402.5 1,251.1 1,223.8 Redeemable stock (2) 174.2 154.7 139.8 128.9 117.0 Nonredeemable stock and stockholders' deficit 824.3 644.8 510.3 190.8 112.6 OPERATING AND OTHER DATA: EBITDA (3) $135.6 $180.1 $196.7 $196.3 $185.8 EBITDA as a percentage of sales 5.7% 7.3% 6.9% 6.6% 6.2% Capital expenditures(4) $70.8 $86.2 $66.2 $34.6 $34.3 LIFO provision (credit) (1.1) 0.9 1.4 (1.9) 4.9 Number of stores at the end of the year 231 254 250 304 307 (1) The ratio of earnings to fixed charges is computed by dividing (i) earnings before income taxes, extraordinary charges, the cumulative effect of accounting change and fixed charges by (ii) fixed charges. Fixed charges consist of total interest expense plus the estimated interest component of operating leases. No ratio is indicated where the ratio is less than one. (2) Amounts as of April 1, 1995 are classified in the Consolidated Balance Sheet as Liabilities Subject to Compromise. (3) Earnings before interest expense, depreciation, amortization, LIFO provision, provision for store closings, reorganization items, charges relating to pension settlement and early retirement programs, loss on disposal of the Southern Region, recapitalization expense, extraordinary charges, cumulative effect of accounting change and income taxes. (4) Includes capitalized leases other than real estate capitalized leases.
10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth certain statement of operations data.
Pro Forma 52 Weeks 52 Weeks 53 Weeks 53 Weeks Ended Ended Ended Ended April 1, April 2, April 3, April 3, 1995 1994 1993 (a) 1993 ---- ---- -------- ---- (dollars in millions) Sales $2,391.7 $2,477.3 $2,562.8 $2,834.0 Gross profit 687.6 711.0 730.1 801.5 Operating and administrative expense 550.9 531.8 542.1 606.2 Depreciation and amortization 87.1 78.6 71.7 80.6 Provision for store closings, net 12.9 - - - Reorganization items 10.8 - - - Charges relating to pension settlement and early retirement programs 3.7 4.5 - - Loss on disposal of the Southern Region - - - 198.0 Recapitalization expense - - 3.5 3.5 Interest expense 182.0 183.8 173.8 174.5 Income tax provision - - 4.5 4.5 Extraordinary charge - - 47.7 47.7 Cumulative effect of accounting change - 30.3 - - Net loss 159.8 118.0 113.1 313.4 EBITDA 135.6 180.1 189.5 196.7 LIFO provision (credit) (1.1) .9 1.4 1.4 Sales percentage increase (decrease) (b) (3.5) (3.3) N/A (4.5) Gross profit as a percentage of sales 28.8 28.7 28.5 28.3 Operating and administrative expense as a percentage of sales 23.0 21.5 21.2 21.4 EBITDA as a percentage of sales 5.7 7.3 7.4 6.9 (a) Pro Forma without the Southern Region. (b) Decrease for the 52 weeks ended April 2, 1994 excludes the Southern Region (12.6% decrease including the Southern Region).
Comparison of results of operations for the 52 weeks ended April 2, 1994 ("Fiscal 1994") and the 53 weeks ended April 3, 1993 ("Fiscal 1993") are affected by the extra week in Fiscal 1993 and the inclusion of the operations of the Company's Southern Region (sold on March 29, 1993) for 40 weeks in Fiscal 1993. The analysis and discussion of Fiscal 1994 as compared to Fiscal 1993 presented below compares Fiscal 1994 operations with the pro forma operations for Fiscal 1993, which have been prepared excluding the Southern Region. Sales for the 52 weeks ended April 1, 1995 ("Fiscal 1995") decreased $85.6 million or 3.5% as compared to Fiscal 1994. The sales decrease in Fiscal 1995 resulted from the sale or closure of 28 stores, 20 of which were sold or closed in the third and fourth quarters of the year in connection with the Company's restructuring, the effect of competitive openings in Fiscal 1995 and Fiscal 1994 and weak economic conditions, particularly in the Northern Region, an increased emphasis on value-oriented products in the Northern Region and the effect of publicity surrounding the Company's Chapter 11 proceedings (see "Liquidity and Capital Resources"), partially offset by the effect of stores opened, enlarged or renovated in Fiscal 1995 and Fiscal 1994. Sales comparisons are also affected by the exclusion from Fiscal 1995 (and inclusion in Fiscal 1994) of the holiday shopping period preceding Easter and the effect of a 22 day work stoppage during Fiscal 1994 discussed below. 11 Same store sales (sales of stores which were operated during the comparable periods of both fiscal years) decreased 4.8% in Fiscal 1995, principally due to the effect of competitive openings and the Chapter 11 proceedings (see "Liquidity and Capital Resources"). During Fiscal 1995, the Company opened one new store and four replacement stores, enlarged or renovated eight stores and closed or sold 28 stores (including replaced stores). Sales for Fiscal 1994 decreased $85.5 million or 3.3% as compared to Fiscal 1993 and decreased 1.6% after adjusting for the extra week in Fiscal 1993. The sales decrease for Fiscal 1994 was attributable to continued unfavorable economic conditions, particularly in the Northern Region, new competitive store openings in the mid-Hudson Valley and Capital District areas of the Northern Region and low food price inflation, partially offset by the favorable impact of the acquisition of five supermarkets on Long Island (see "Liquidity and Capital Resources") and the Company's expanded capital expenditure program which began after the recapitalization of Holdings in July 1992. Additionally, sales for Fiscal 1994 were impacted by a 22 day work stoppage, which ultimately affected sales in 61 Grand Union stores located in northern New Jersey and in Orange and Rockland Counties, New York. Same store sales, influenced by the same factors mentioned above, decreased 3.0% during Fiscal 1994 after adjusting for the 53rd week in Fiscal 1993. During Fiscal 1994, the Company opened nine new stores (including five acquired stores on Long Island) and five replacement stores, enlarged or renovated 23 stores and closed 10 stores (including replaced stores). The relatively flat level of gross profit, as a percentage of sales, in Fiscal 1995 as compared to Fiscal 1994 reflects higher grocery margins and promotional allowance income in the first half of the year and income resulting from a liquidation of LIFO inventories, offset by the effects of promotional pricing programs begun during the second quarter in the Northern Region and by the effects of significantly reduced income from promotional allowances and forward buy inventory purchases, both directly related to the Company's announcement on November 29, 1994 (see "Liquidity and Capital Resources") that it would seek to restructure its capital structure. The increase in gross profit, as a percentage of sales, for Fiscal 1994 as compared to Fiscal 1993 resulted from reduced grocery product procurement costs and a greater proportion of higher margin produce and general merchandise sales, partially offset by lower health and beauty care pricing for the entire year. The increase in operating and administrative expenses, as a percentage of sales, in Fiscal 1995 resulted primarily from increases, as a percentage of sales, in store labor and fringe costs and utilities expense, principally relating to the sales decline, and from increased insurance expense. The increase in operating and administrative expenses, as a percentage of sales, in Fiscal 1994 resulted primarily from increases, as a percentage of sales, in store labor and fringe benefits, occupancy expense and utilities expense principally resulting from the decline in sales. In addition, the reduced sales which resulted from the work stoppage which occurred in May 1993 had a negative impact on operating and administrative expense as a percentage of sales. The increase in operating and administrative expense for Fiscal 1994 was partially offset by a $3.8 million credit to operating and administrative expense resulting from a reduction of the Company's self insurance reserves. Depreciation and amortization was $87.1 million in Fiscal 1995 compared to $78.6 million in Fiscal 1994. The increase was attributable to the Company's higher level of capital expenditures in Fiscal 1995 and Fiscal 1994 as compared to prior years. During Fiscal 1995, the Company recorded store closure provisions which totaled $16.9 million offset by $4.0 million of proceeds from the termination of a warehouse sublease. Reorganization expenses of $10.8 million were incurred in Fiscal 1995 in connection with the Company's Chapter 11 proceedings, principally consisting of professional fees, debtor-in-possession financing fees and other restructuring related expenses. The Company anticipates that it will incur a significant amount of additional reorganization costs during the 52 weeks ended March 30, 1996 ("Fiscal 1996"). 12 During Fiscal 1995 and Fiscal 1994, the Company offered early retirement programs to certain employees. In Fiscal 1995, the early retirement charge along with a higher level of retirements resulting from certain legislation resulted in a pension settlement expense of $3.7 million. In Fiscal 1994, the charge relating to the early retirement program was $4.5 million. Interest expense decreased $1.8 million in Fiscal 1995 and increased $10.0 million in Fiscal 1994. As a result of the Chapter 11 proceedings, the Company did not accrue interest expense on its Subordinated Notes or on debt of Capital or Holdings subsequent to January 25, 1995. The decrease in interest resulting therefrom was partially offset by increased interest on capitalized lease obligations. The Fiscal 1994 increase in interest expense was primarily due to the increased level of debt outstanding, partially offset by the decrease in amortization of loan placement fees. There were no income taxes provided for in either Fiscal 1995 or Fiscal 1994. The income tax provision for Fiscal 1993 represents state income taxes. During Fiscal 1994, the Company recorded a $30.3 million charge as the cumulative effect of an accounting change relating to the adoption of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". This charge represents the portion of future retiree benefit costs related to service already rendered by both active and retired employees up to the date of adoption. During Fiscal 1993, the Company recognized a loss of $198 million relating to the disposal of the Southern Region. The loss is comprised of 1) write-off of goodwill and beneficial leases of $106.4 million, 2) difference between proceeds received and the book value of tangible assets of $37.3 million, 3) reserve for remaining Southern Region real estate of $26.9 million, 4) employee termination expenses of $9.8 million, 5) operating loss of the Southern Region subsequent to the date the decision was made to sell the region of $7.0 million and 6) other miscellaneous items of $10.6 million. During Fiscal 1993, Holdings recorded a $3.5 million charge relating to expenses incurred in connection with the 1992 Recapitalization and extraordinary charges totaling $47.7 million relating to the early retirement of debt. EBITDA was $135.6 million or 5.7% of sales in Fiscal 1995, compared to $180.1 million or 7.3% of sales for Fiscal 1994. EBITDA in Fiscal 1995 was significantly affected by the Company's restructuring, including reduced sales relating to publicity surrounding the Chapter 11 proceedings; lower levels of promotional allowances, subsequent to the Company's announcement on November 29, 1994 that it would seek to restructure the Company's capital structure, than were previously made available to the Company; low levels of forward buy inventories throughout most of Fiscal 1995; and by the marketing programs introduced during the year in the Northern Region. The Company estimates that the 22 day work stoppage in May 1993 had the effect of reducing Fiscal 1994 EBITDA by approximately $8.0 million as a result of lost sales, product losses and other costs associated with the work stoppage. Gross profit will continue to be adversely affected in Fiscal 1996 until the Company's investment in forward buy inventory can be fully restored. During the second quarter of Fiscal 1995, Grand Union began a new marketing program in certain of its Northern Region markets. The program includes both lower everyday prices and stronger feature programs. The Company believes it must continue and extend these investments in its store operations. Although the investments adversely affect gross profit in periods in which they are made, and there is no assurance that they will succeed in improving sales and profits over the long term, Grand Union believes that they are necessary in order to preserve and expand the Company's sales base. 13 LIQUIDITY AND CAPITAL RESOURCES Resources used to finance significant expenditures for the three fiscal years ended April 1, 1995 are reflected in the following table:
52 Weeks 52 Weeks 53 Weeks Ended Ended Ended April 1, April 2, April 3, 1995 1994 1993 -------- -------- -------- (in millions) Resources used: Capital expenditures $63.0 $81.0 $58.1 Debt repayment 11.3 8.7 1,358.4 Loan placement fees - 1.8 63.6 Purchase of redeemable Class A common stock of Holdings - .2 - Premiums on debt repayment - - 24.1 Prepayment under P&C Foods operating agreement - - 15.0 ----- ----- -------- $74.3 $91.7 $1,519.2 ----- ----- -------- ----- ----- -------- Financed by: Debt incurred $29.0 $77.7 $1,443.4 Operating activities, including cash and temporary cash investments 43.2 13.4 31.2 Property disposals 2.1 .6 1.4 Proceeds relating to the sale of the fixed assets of the Southern Region - - 25.0 Refunded insurance deposits - - 11.6 Capital contribution - - 6.6 ----- ----- -------- $74.3 $91.7 $1,519.2 ----- ----- -------- ----- ----- --------
During Fiscal 1995 and Fiscal 1994, the cash requirements listed above were principally obtained from borrowings and from cash provided by operating activities. Borrowings included $29 million in Fiscal 1995 and $25 million in Fiscal 1994 under the Revolving Credit Facility. Additionally, Fiscal 1994 borrowings included proceeds from the sale of $50 million principal amount of Series A 12.25% Subordinated Notes. Debt repayments for Fiscal 1995 and Fiscal 1994 consisted of scheduled repayments of capital leases and various mortgages. During Fiscal 1995, the Company opened one new and four replacement stores, completed the remodeling of eight stores and sold or closed 28 stores. Capital expenditures for Fiscal 1995, including capitalized leases other than real estate capitalized leases, were approximately $71 million. Capital expenditures, including capitalized leases other than real estate capitalized leases, for Fiscal 1996 are expected to be approximately $50 million. Capital expenditures will be principally for new stores, replacement stores, remodeled stores and expansions. The Company plans to finance capital expenditures and scheduled debt repayments primarily through cash provided by operations and, to a limited extent, through purchase money mortgages and equipment leases. On November 29, 1994, Grand Union announced that it was not likely to be able to fund cash interest payments due in early calendar 1995, and that it intended to develop a capital restructuring plan. On December 21, 1994, Grand Union entered into a Limited Waiver and Agreement with the banks party to the Bank Credit Agreement which waived any event of default which might exist under the Bank Credit Agreement should Grand Union fail to make payments of interest due on January 16, 1995 in respect of certain outstanding debt of Grand Union. The Limited Waiver and Agreement also waived compliance with certain covenants in the Bank Credit Agreement, thereby permitting Grand Union to continue to make borrowings in the ordinary course under its revolving line of credit through February 15, 1995. Beginning on January 16, 1995, Grand Union did not make interest payments required under its outstanding debt obligations. On January 24, 1995, Grand Union announced that it had reached an agreement in principle with Grand Union's bank lenders and with members of informal committees of certain holders of the Senior Notes and the 12.25% Subordinated 14 Notes and the Series A 12.25% Subordinated Notes on the terms of a restructuring of Grand Union's capital structure. On the Filing Date, as part of the implementation of such agreement, Grand Union filed a voluntary petition for relief under Chapter 11 of the Code with the Bankruptcy Court. From the Filing Date through the Effective Date, Grand Union operated as a debtor-in-possession under Chapter 11 of the Code and was subject to the supervision of the Bankruptcy Court in accordance with the Code. During this period, Grand Union's business was operated under a series of "first day orders", which, among other things, permitted it to retain certain financial and legal advisors and which authorized payment of certain pre-petition employee costs, including worker's compensation benefits, and pre-petition trade claims, subject to the satisfaction of various requirements. On January 30, 1995, Grand Union (as debtor and as debtor-in-possession) entered into the DIP Facility with the banks party thereto providing for borrowings of up to $150 million on a revolving credit basis. On February 16, 1995, final approval of the DIP Facility was granted and the Bankruptcy Court also issued a Final Cash Collateral Order which allowed Grand Union to use cash collateral to pay operating expenses in the ordinary course of business. The DIP Facility provided for a commitment fee equal to .5% of the average unused portion. There were no borrowings made under the DIP Facility during the Chapter 11 proceedings and it was terminated on the Effective Date. On February 16, 1995, Capital consented to the entry of an order for relief in respect of an involuntary Chapter 11 petition filed in the Bankruptcy Court on February 6, 1995 by entities purporting to be holders of the Capital Notes. On February 16, 1995, Holdings filed a voluntary Chapter 11 petition in the Bankruptcy Court. Capital and Holdings are currently operating as debtors-in- possession under the protection of Chapter 11, each in bankruptcy proceedings separate from Grand Union, and are each subject to the jurisdiction and supervision of the Bankruptcy Court. The Bankruptcy Court confirmed the Plan on May 31, 1995 and the Company emerged from Chapter 11 on June 15, 1995. Two proceedings challenging the order confirming the Plan are pending. The Company does not believe that either proceeding will result in any modification or revocation of the order. On the Effective Date, Grand Union adopted the New Certificate, the principal effects of which are: (i) to authorize 30,000,000 shares of the New Common Stock (of which 10,000,000 shares were issued under the Plan) and 10,000,000 shares of preferred stock (none of which will be issued under the Plan) and (ii) to prohibit the issuance of non-voting equity securities. The Plan provides for full payment of all allowed administrative expenses and all allowed general unsecured and priority claims. On the Effective Date, obligations relating to the Company's Bank Credit Agreement were paid in full and the Company entered into the New Bank Facility with its bank lending group which provides for the New Revolving Credit Facility of $100,000,000 and the New Term Loan of $104,144,371. The New Bank Facility is secured by a lien on substantially all of the assets of Grand Union and its subsidiaries. As of the Effective Date, the Senior Notes were deemed cancelled and each holder of Senior Notes became entitled to receive its pro rata share of New Senior Notes having an aggregate principal amount of $595,475,922 issued pursuant to the Plan. As of the Effective Date, the Subordinated Notes and the Old Common Stock were deemed cancelled and each holder of Subordinated Notes became entitled to receive its pro rata share of an aggregate of 10,000,000 shares of Grand Union's New Common Stock issued pursuant to the Plan. The Plan also provided for the issuance of warrants to purchase an aggregate of 900,000 shares of New Common Stock to holders of the Capital Notes pursuant to the terms of a settlement reached among the Company, Capital, Holdings, the Official Committee of Unsecured Creditors of Capital and certain holders of the Capital Notes. In accordance with the terms of the settlement, on the Effective Date, and solely for the purpose of effectuating the settlement, any claims against the Company arising from the Capital Notes were discharged and (i) each holder of Capital Senior Zero Notes became entitled to receive its pro rata share of 240,000 Series 1 Warrants to purchase shares of New Common Stock at a purchase price of $30 per share and of 480,000 Series 2 Warrants to purchase shares of New Common Stock at a purchase price of $42 per share and (ii) each holder of Capital Subordinated Zero Notes became entitled to receive its pro rata share of 60,000 Series 1 Warrants and 120,000 Series 2 Warrants, provided that holders of $200,000 or more principal amount of either the Capital Senior Zero Notes or Capital 15 Subordinated Zero Notes are required to execute a release of all claims relating to such Capital Notes as a condition to receiving the distribution. The Plan made no provision for the holders of the Holdings Junior Notes or Redeemable Preferred Stock issued by Holdings or the common shares or warrants to purchase common shares of Holdings. On October 18, 1993, Grand Union acquired five supermarket locations on Long Island from Foodarama for consideration of approximately $16.1 million (of which approximately $6 million was allocated to property, equipment and leasehold improvements and approximately $10.1 million was allocated to goodwill), plus the value of the inventory at the stores (approximately $2.2 million). The total gross square footage of these five stores is approximately 160,000 square feet. The acquisition was financed through the application of a portion of the proceeds of the sale to institutional investors of the Series A 12.25% Subordinated Notes. During Fiscal 1995 Grand Union renovated and enlarged three of the acquired store locations, closed one store and sold one store. During Fiscal 1995, the remaining amount of goodwill allocable to the store that was closed was written off. In May 1993, Grand Union experienced a work stoppage by United Food and Commercial Workers, Local 1262, which ultimately affected 61 Grand Union stores located in northern New Jersey and in Orange and Rockland Counties, New York. The Company estimates that its Fiscal 1994 EBITDA was reduced by approximately $8 million as a result of the work stoppage. On March 29, 1993, Grand Union sold 48 of its 51 Southern Region stores to A&P. The three Southern Region stores not sold to A&P were closed and subsequently subleased. Grand Union received net cash proceeds of approximately $25 million and was relieved of approximately $4.5 million of capital lease obligations. The Company recognized a loss of $198 million on the disposal of the Southern Region. The Company repaid $20.9 million of the remaining Term Loan from the proceeds of the sale of the Southern Region. On January 28, 1993, Grand Union sold $175 million principal amount of 11.375% Senior Notes in a private placement. Net proceeds of the sale of the 11.375% Senior Notes were used to repay $142 million of indebtedness under the Term Loan and the remainder was used to repay indebtedness under the Revolving Credit Facility. All of such repaid indebtedness under the Term Loan and under the Revolving Credit Facility had been incurred in connection with the July 1992 recapitalization described below. On July 22, 1992, Holdings, Capital and Grand Union completed a recapitalization (the "1992 Recapitalization"). In connection with the 1992 Recapitalization, Holdings, through Capital and Grand Union entered into a new Bank Credit Agreement providing for a $210 million Term Loan and a $100 million Revolving Credit Facility, issued $350 million principal amount of Grand Union 11.25% Senior Notes and $500 million principal amount of Grand Union 12.25% Subordinated Notes, and sold $343 million principal amount of Capital Senior Zero Notes and $745 million principal amount of Capital Subordinated Zero Notes together with warrants to purchase at a nominal price approximately 19.9% of the common stock of Holdings on a fully diluted basis, for aggregate gross proceeds of approximately $200 million. The 1992 Recapitalization also included the sale to institutional investors of approximately 28.4% of the common stock of Holdings on a fully diluted basis for approximately $25 million. The proceeds were used to retire substantially all of the debt of Holdings, GUAC and Grand Union as well as to repurchase the shares and option to purchase shares owned by Salomon Brothers Holding Company Inc, certain warrants held by the parties to the term loan and revolving credit facility existing prior to the 1992 Recapitalization, and approximately 3.4% of the common stock of Holdings held by Grand Union management. At the time of the 1992 Recapitalization, GUAC and its wholly owned subsidiary, Cavenham Holdings Inc., the former parent of Grand Union, were merged into Grand Union and Grand Union became a wholly owned subsidiary of Capital. 16 GOODWILL Based upon its estimation of the enterprise value of Grand Union on the Effective Date, management believes that the carrying value of goodwill continues to be appropriate. The remaining value of goodwill will be written off as of the Effective Date. IMPACT OF NEW ACCOUNTING STANDARDS In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("FAS No. 112"). This new statement is effective for fiscal years beginning after December 15, 1993 and requires an accrual for certain benefits paid to former or inactive employees after employment but before retirement. FAS No. 112, which was adopted in the first quarter of Fiscal 1995, did not have a material impact on the Company's results of operations or financial position. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS: Report of Independent Accountants F-1 Consolidated Statement of Operations for the 52 weeks ended April 1, 1995, the 52 weeks ended April 2, 1994 and the 53 weeks ended April 3, 1993 F-2 Consolidated Balance Sheet at April 1, 1995 and April 2, 1994 F-3 Consolidated Statement of Cash Flows for the 52 weeks ended April 1, 1995, the 52 weeks ended April 2, 1994 and the 53 weeks ended April 3, 1993 F-4 Notes to Consolidated Financial Statements F-5 All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS AND EXECUTIVE OFFICERS: The names, ages and present principal occupations of the directors and executive officers of Grand Union as of June 15, 1995 are as set forth below. NAME AGE POSITIONS ---- --- --------- Roger E. Stangeland 65 Director and Chairman Joseph J. McCaig 50 Director, President and Chief Executive Officer William A. Louttit 48 Director, Executive Vice President and Chief Operating Officer Darrell W. Stine 57 Executive Vice President - New York Region Kenneth R. Baum 47 Senior Vice President, Chief Financial Officer, and Secretary Daniel E. Josephs 63 Director William G. Kagler 63 Director Douglas T. McClure, Jr. 42 Director David Y. Ying 40 Director MR. STANGELAND has been Chairman and a Director of Grand Union since June 15, 1995. Mr. Stangeland is 17 a Director and Chairman Emeritus of The Vons Companies, Inc. ("Vons"), a large Southern California based grocery retailer. From 1985 until his retirement on May 3, 1995, he was Chairman of the Board of Vons. Mr. Stangeland is the immediate Past Chairman of the Board of the Food Marketing Institute, a national supermarket trade organization, and continues as a Director of that organization. He is also a Director of Quality Drug Corporation. MR. MCCAIG became President and Chief Executive Officer of Grand Union in July 1989. He served as President and Chief Operating Officer from 1981 until July 1989 and has been a Director of Grand Union since 1981. Mr. McCaig became a Director of Holdings in July 1989 and a Director of Capital in July 1992. He became President of Holdings and Capital in May 1993. Mr. McCaig served as a Director of Penn Traffic from September 1992 until May 1995. MR. LOUTTIT has been Executive Vice President and Chief Operating Officer of Grand Union since July 1989. He served as Executive Vice President in charge of Merchandising from 1984 until July 1989 and has been a Director of Grand Union since 1981. MR. STINE was appointed Executive Vice President of Grand Union in July 1994. He served as Senior Vice President with responsibility for the Company's New York Region from 1988 until July 1994. MR. BAUM was appointed Senior Vice President, Chief Financial Officer, and Secretary of Grand Union in July 1994. Mr. Baum served as Vice President and Controller from 1983 until July 1994 and as a Director of Grand Union from July 1994 until June 15, 1995. MR. JOSEPHS has been a Director since June 15, 1995. Mr. Josephs served as Director, President and Chief Operating Officer of Dominick's Finer Foods, a supermarket chain based in the Chicago area, from 1985 until March 1995. MR. KAGLER has been a Director since June 15, 1995. Mr. Kagler has served Skyline Chili, Inc. as Chairman of the Executive Committee of the Board since November 1994, Chairman of the Board and Chief Executive Officer from November 1993 until November 1994, and President and Chief Executive Officer from September 1989 until November 1993. Prior thereto, he served as President of The Kroger Co., a Cincinnati based food retailer. He holds Directorships of The Fifth Third Bank, Union Central Life Insurance Co., The Ryland Group Inc. and Future Now, Inc. MR. MCCLURE has been a Director since June 15, 1995. Mr. McClure had been a managing director of New Street Capital Corp., a merchant banking firm from April 1992 until February 1994. Prior to April 1992, he was a managing director with the investment firm of Drexel Burnham Lambert. Mr. McClure is a Director of AMPEX Corporation and of WestPoint Stevens Inc. MR. YING has been a Director since June 15, 1995. Mr. Ying has been a managing director at Donaldson, Lufkin & Jenrette Securities Corporation since January 1993, and is the head of the firm's Restructuring Group. From January 1990 to January 1993, Mr. Ying was a managing director with the investment firm of Smith Barney. The current directors of Grand Union were selected by certain members of the Official Committee of Unsecured Creditors which was appointed by the United States Trustee for the District of Delaware. Prior to the Effective Date, the Board of Directors of Grand Union consisted of Messrs. McCaig, Louttit, Baum, Gary D. Hirsch (Chairman) and Martin A. Fox. Executive officers of Grand Union are appointed and serve at the discretion of the Board of Directors. Each director of Grand Union is elected for a period of one year and will serve until his successor is duly elected and qualified. ITEM 11. EXECUTIVE COMPENSATION See "Certain Relationships and Related Transactions" for a description of the financial advisory agreement between MTH and Grand Union in effect until the Effective Date and of the settlement agreement between MTH and Grand Union pursuant to which such financial advisory agreement was terminated on the Effective Date. Mr. Hirsch 18 is a general partner of the managing partner of MTH and Mr. Fox is an executive officer of MTH. Mr. Hirsch and Mr. Fox resigned as directors of Grand Union on the Effective Date. The following table sets forth the compensation paid or accrued by Grand Union to the Chief Executive Officer of Grand Union and each of the four other most highly-compensated executive officers of the Company for services rendered to the Company in all capacities during the three fiscal years ended April 1, 1995. The Company made no grants of stock options or stock appreciation rights in Fiscal 1995 nor did the Company make any awards in Fiscal 1995 under any long-term incentive plan. SUMMARY COMPENSATION TABLE
Other Annual All Other Fiscal Salary Bonus Compensation Compensation Year ($) ($) ($) (1) ($) (2) ------ ------- ------- ------------ ------------ Joseph J. McCaig 1995 502,165 123,479 - 980,968 Chief Executive Officer, 1994 523,712 120,140 - 30,109 President and Director 1993 518,077 133,707 - 27,076 William A. Louttit 1995 335,669 66,392 - 437,355 Executive Vice President, Chief 1994 349,731 65,943 - 14,038 Operating Officer and Director 1993 345,385 85,932 - 7,479 Darrell W. Stine 1995 259,077 17,446 - 188,261 Executive Vice President - 1994 251,134 45,460 - 14,535 New York Region 1993 248,336 63,334 - 12,193 Kenneth R. Baum 1995 152,769 20,603 - 31,691 Senior Vice President, Chief 1994 143,715 26,775 - 4,739 Financial Officer and Secretary 1993 141,989 28,320 - 4,342 Robert Terrence Galvin (3) 1995 77,288 45,516 - 531,932 Senior Vice President, Chief Financial 1994 245,635 46,676 - 9,687 Officer, and Secretary 1993 242,789 59,578 - 8,551 (1) No information is provided in the "Other Annual Compensation" column since the aggregate amount of perquisites and other personal benefits in respect of each of Fiscal 1995, Fiscal 1994 and Fiscal 1993 is less than the lower of $50,000 and 10% of the total annual salary and bonus reported for each of the named officers and no other compensation of the type required to be described in the "Other Annual Compensation" column was paid in Fiscal 1995, Fiscal 1994 or Fiscal 1993. (2) "All Other Compensation" includes the following for Messrs. McCaig, Louttit, Stine, Baum and Galvin: (i) contributions to the Company's Savings Plan under Section 401(k) made by the Company in Fiscal 1995, Fiscal 1994 and Fiscal 1993, respectively, for each of the named executive officers as follows: Mr. McCaig $1,455, $2,964 and $1,928; Mr. Louttit $765, $2,331 and $0; Mr. Stine $1,547, $2,313 and $2,136; Mr. Baum $1,525, $1,650, and $1,786; and Mr. Galvin $932, $2,470 and $2,128 and (ii) premium payments for term life insurance made by the Company in Fiscal 1995, Fiscal 1994 and Fiscal 1993, respectively, for each of the named executive officers as follows: Mr. McCaig $31,090, $27,145 and $25,148; Mr. Louttit $10,013, $11,707 and $7,479; Mr. Stine $13,522, $12,222 and $10,057; Mr. Baum $3,302, $3,089 and $2,556; and Mr. Galvin $0, $7,217 and $6,423. The Fiscal 1995 amounts for Messrs. McCaig, Louttit, Stine and Baum also include the value of securities held in custodial accounts established pursuant to non-competition and confidentiality agreements entered into by Messrs. McCaig, Louttit, Stine and Baum in August 1993. Pursuant to such agreements, to the extent securities were distributed from such custodial accounts, the value of securities so distributed were to offset the Company's obligations to such executives under Grand Union's Supplemental Retirement Program for Key Executives (see "Supplemental Retirement Program for Key Executives" below). As a result of the filing of the Chapter 11 petition, the executives became entitled to and received distributions of the securities held in such custodial accounts in the following amounts: Mr. McCaig $948,423; Mr. Louttit $426,577; Mr. Stine $173,192 and Mr. Baum $26,864. The Fiscal 1995 amount for Mr. Galvin also includes a lump-sum payment of $531,000 made to Mr. Galvin in connection with his termination of employment with the Company in July 1994, 19 consisting of (a) $381,000 in part as severance and in part as accrued vacation pay and (b) $150,000 in lieu of any benefit under the Company's Supplemental Retirement Program for Key Executives. (3) Mr. Galvin held the positions of Senior Vice President, Chief Financial Officer, Secretary and Director until July 23, 1994.
THE GRAND UNION COMPANY EMPLOYEES' RETIREMENT PLAN Grand Union sponsors The Grand Union Company Employees' Retirement Plan (the "Retirement Plan"), a qualified, noncontributory retirement plan, for retirement benefits for its eligible salaried and hourly non-union employees, union employees not covered by other pension plans, and all its officers. Under the Retirement Plan, a participant's benefit is generally 1.5% of his "highest annual compensation" multiplied by years of service not in excess of 35 minus primary social security benefits. Benefits under the plan are paid under several alternatives, including monthly or lump sum payments at the employee's option. Benefits are normally payable at age 65, however, the plan provides for early retirement with reduced benefits commencing at age 55. The Company has not decided to adopt GATT legislation as it relates to its pension plan earlier than the required implementation date. The Internal Revenue Code places certain limits on pension benefits which may be paid under plans qualified under the Internal Revenue Code. The current limit of such pension benefit is $120,000 per annum. SUPPLEMENTAL RETIREMENT PROGRAM FOR KEY EXECUTIVES Grand Union maintains The Grand Union Company Supplemental Retirement Program for Key Executives (the "Supplemental Plan"), a non-qualified pension plan pursuant to which certain key employees of Grand Union and its affiliates ("Participants"), including Messrs. McCaig, Louttit, Stine and Baum, earn a pension in addition to the pension benefit to which they are entitled under the Retirement Plan. The pension benefit under the Supplemental Plan is calculated as an annual pension payable monthly (i) if the Participant is not married on his retirement date, for the Participant's life, or (ii) if the Participant is married on his retirement date, the same amount as described in clause (i) for the duration of the Participant's life and thereafter 50% of such amount for the duration of the life of the Participant's surviving spouse. The amount of the annual pension payable upon retirement at age 62 or later is determined as the "target benefit" minus the "plan offsets". The "target benefit" is an annual pension equal to (i) for a Participant having at least 15 years of credited service under the Supplemental Plan, 65% of the Participant's final year's base salary, or (ii) for a Participant having less than 15 years of credited service under the Supplemental Plan, the product of 4-1/3% of the Participant's final year's base salary multiplied by the Participant's number of years of credited service under the Supplemental Plan. "Plan offsets" for Participants retiring at age 62 or later are equal to the sum of the Participant's (i) primary Social Security benefits payable at the later of age 62 or the Participant's actual retirement age, (ii) benefits under the Retirement Plan payable at the later of age 62 or the Participant's actual retirement age in the form of a single life annuity, and (iii) benefits, if any, payable from the qualified retirement plan(s) of the Participant's previous employer(s). Participants may also retire early (i) at or after attaining age 50 but prior to attaining age 55, with the consent of Grand Union (the consent requirement is waived for a Participant who becomes disabled or is involuntarily terminated other than for cause), or (ii) at or after age 55, without any requirement for consent by Grand Union. For Participants who retire early, the "target benefit" is reduced by 5% per year for each year the Participant is under age 62. Supplemental Plan benefits are payable in an actuarially determined single sum no later than 30 days following the Participant's date of retirement or other termination of employment. In general, no Supplemental Plan benefits will be paid to a Participant whose employment with Grand Union terminates prior to the Participant's attaining age 50. In May 1995, the Bankruptcy Court approved a modification to the Supplemental Plan which provides that (x) in the case of Joseph J. McCaig, final year's base salary shall be deemed to be an amount not less than $500,000 and (y) notwithstanding the general requirement of the Supplemental Plan, that benefits will not be paid to persons who retire prior to age 50, persons who were Participants in the Supplemental Plan prior to April 1, 1995 will be eligible for early retirement without forfeiture of benefits under the Supplemental Plan from and after age 47. In August 1993, in consideration of non-competition and confidentiality agreements entered into by certain executives of Grand Union, including Messrs. McCaig, Louttit, Stine and Baum, Grand Union agreed to transfer to a 20 custodial account to be held by an independent custodian securities having a specified value intended to approximate the benefits payable to the specified executives under the Supplemental Plan (plus a reserve for claims and expenses of the custodian). Such securities were to have been transferred to the custodian over a four-year period. Pursuant to the terms of the agreements, the executives for whose benefit securities had been transferred to the custodian were entitled to receive a distribution of such securities upon Grand Union's filing of the Chapter 11 petition in January 1995. Accordingly, in February 1995, securities having an aggregate value of approximately $1,575,000 (representing securities on deposit with the custodian as of the Filing Date plus interest thereon) were distributed to the executives entitled thereto. The value of the securities so distributed to each executive reduced the future amounts payable to such executive pursuant to the Supplemental Plan. Upon distribution of the securities to the executives for whose benefit they were held, the custodial accounts were terminated. The table below shows, on a combined basis for the Supplemental Plan and the Retirement Plan, the estimated annual benefit payable upon retirement to specified compensation and years of service classifications up to the maximum of 15 years of service. The credited years of service under these Plans for Messrs. McCaig, Louttit, Stine and Baum are 21 years, 19 years, 27 years, and 11 years, respectively. The current compensation set forth in the Summary Compensation Table does not differ substantially from covered compensation under these Plans. The retirement benefits shown are based upon retirement at age 62 and the payment of a single-life annuity to the employee. The benefits shown do not reflect any offset as a result of primary Social Security benefits, and do not reflect adjustment for the value of securities received by those executives who received distributions from custodian accounts as described in the preceding paragraph.
Years of Service Final Average ----------------------------------------------- Compensation 5 10 15 or more ------------- ------- -------- ---------- $100,000 $21,667 $43,333 $65,000 150,000 32,500 65,000 97,500 200,000 43,333 86,667 130,000 250,000 54,167 108,333 162,500 300,000 65,000 130,000 195,000 350,000 75,833 151,667 227,500 400,000 86,667 173,333 260,000 450,000 97,500 195,000 292,500 500,000 108,333 216,667 325,000 550,000 119,167 238,333 357,500 600,000 130,000 260,000 390,000
SEVERANCE POLICY In May 1995, Grand Union adopted a severance policy, which was approved by the Bankruptcy Court, in respect of its salaried employees whereby a salaried employee who is involuntarily terminated without cause or who is constructively terminated (which is defined to mean an involuntary transfer that would require relocation outside the Company's current operating area or (x) with respect to persons holding the position of chief executive officer, chief operating officer or chief financial officer, either removal from such position, or a reduction in salary of 5% or more in any year and (y) with respect to any other salaried employee, either a reduction in salary of 10% or more in any year or a reduction in grade level of more than two grades in any year) is entitled to receive a lump-sum severance payment equal to (i) in the case of salaried employees holding the office of President, Executive Vice President or Senior Vice President, 18 months' base salary; (ii) in the case of salaried employees holding the office of Corporate Vice President, 12 months' base salary; (iii) in the case of salaried employees holding the office of appointed vice president or director, 6 months' base salary; and (iv) in the case of all other salaried employees, one week's base salary for each year of service to the Company up to a maximum of 26 weeks. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION On June 16, 1995, the Board of Directors created a personnel and compensation committee (the "Compensation Committee") consisting of three directors. The Compensation Committee is responsible for all of the Company's compensation decisions. The current members of the Compensation Committee are Messrs. Kagler, 21 Stangeland and Josephs. Mr. Kagler is Chairman of the Compensation Committee. The current Board of Directors has determined that each non-employee member shall receive an annual fee of $25,000 and a fee for each meeting attended of $1,500. It is anticipated by the Board that members who are Chairs of the Audit and Compensation Committees shall receive additional compensation in an amount to be determined. The Board may also consider, at some later date, further Board compensation based on the Company's performance. Prior to the Effective Date, there was no Compensation Committee and compensation decisions were considered by the entire Board of Directors, except that no member of the Board participated in deliberations regarding his own compensation as an executive officer of Grand Union. Mr. Gary D. Hirsch, who served as Chairman and a Director of Grand Union until the Effective Date, is Chairman and a Director of Penn Traffic. Martin A. Fox, a Director, Vice President and Assistant Secretary of Grand Union until the Effective Date, is Vice Chairman - Finance and Assistant Secretary of Penn Traffic. Messrs. Hirsch and Fox do not receive salaries from Penn Traffic and do not participate in cash bonus plans of Penn Traffic, and received no compensation in their capacities as executive officers or directors of Grand Union. Messrs. Hirsch and Fox receive compensation from MTH, of which Mr. Hirsch is a general partner of the managing partner, and Mr. Fox is Executive Vice President. As described below, until the Effective Date, MTH was engaged as financial advisor to Grand Union and, in accordance with the terms of the Plan, on the Effective Date the MTH financial advisory agreement was terminated and MTH and Grand Union entered into the MTH Settlement Agreement. MTH is engaged as a financial advisor to Penn Traffic. Until May 31, 1995 Mr. McCaig was a member of the Board of Directors of Penn Traffic, for which he received compensation of $10,000 per annum and $1,000 per Board of Directors meeting attended. Prior to the Effective Date, the directors of Grand Union were not compensated for their services as such. Directors received reimbursement of reasonable expenses incidental to attendance at meetings of the Board of Directors. Prior to the Effective Date, the Company was party to a financial advisory agreement with MTH (the "MTH Agreement"), pursuant to which MTH was to have provided certain financial consulting and business management services to the Company through July 1997. In accordance with the Plan, the MTH Agreement was terminated on the Effective Date and Grand Union executed a settlement agreement (the "MTH Settlement Agreement"). The MTH Settlement Agreement provides for the termination of the MTH Agreement, payment by Grand Union of accrued and unpaid fees under the MTH Agreement through the Effective Date and for the indemnification of MTH and certain entities related to MTH (the "MTH Entities") from certain claims and liabilities, subject to the terms and limitations set forth in the MTH Settlement Agreement (See "Item 13. - Certain Relationships and Related Transactions"). During Fiscal 1995, Fiscal 1994 and Fiscal 1993, the Company paid $750,000, $900,000 and $825,000, respectively, to MTH, pursuant to the MTH Agreement. LIMITATION OF DIRECTORS' LIABILITIES Section 102 of the Delaware General Corporation Law allows a corporation to eliminate the personal liability of directors of a corporation to the corporation or to any of its stockholders for monetary damages for a breach of fiduciary duty as a director, except in the case where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of the Delaware General Corporation Law or obtained an improper personal benefit. Under Grand Union's Restated Certificate of Incorporation, a director of Grand Union shall not be liable to Grand Union or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of June 15, 1995, IBJ Schroder Bank & Trust Co., as Exchange Agent, held 10,000,000 shares of the New Common Stock, par value $1.00 per share, of Grand Union, which shares constituted all the outstanding stock of Grand Union. In addition, the Exchange Agent held an aggregate of 900,000 Series 1 and Series 2 Warrants (collectively, the "Warrants") for the purchase of shares of New Common Stock at the rate of one share per Warrant. The Warrants are immediately exercisable. Such shares of New Common Stock and such Warrants are being held by the Exchange Agent pending the completion of the distribution 22 of such securities to the holders of claims in the classes entitled to receive such securities under the Plan. The information in the table below presents the beneficial ownership of each person known by Grand Union to be entitled to own beneficially more than five percent of the outstanding voting New Common Stock after the completion of the distribution of the New Common Stock and Warrants, based on information supplied to Grand Union by the persons or entities involved. Because such distribution has not been completed, however, Grand Union is not certain that it has identified all such beneficial holders. To Grand Union's knowledge, none of Grand Union's officers or directors own any New Common Stock or Warrants.
Percentage of Number of Shares of Common Outstanding Shares of New Common Name and Address of Beneficial Holder Stock Beneficially Owned (1) Stock (2) - - ------------------------------------- -------------------------- -------------------------------- Putnam Investment Management 3,258,633 (3),(4) 32.53% One Post Office Square Boston, MA 02109 Putnam High Yield Trust 1,688,769 (5) 16.89% c/o Putnam Investment Management One Post Office Square Boston, MA 02109 Putnam Diversified Income Fund 546,560 (6) 5.46% c/o Putnam Investment Management One Post Office Square Boston, MA 02109 - - ---------------- (1) Due to the treatment of fractional interests in New Common Stock and Warrants, these numbers are approximate until completion of the exchanges provided for under the Plan. (2) For purposes of the computation of percentages of New Common Stock ownership, a holder is deemed to own beneficially all shares which may be acquired by such holder upon exercise of Warrants held by such holder, and such shares are deemed outstanding, but no shares of New Common Stock which may be acquired by any other holder upon exercise of Warrants held by such other holder are deemed to be outstanding. (3) Includes 6,026 shares of New Common Stock issuable upon exercise of Series 1 Warrants, and 12,051 shares exercisable upon exercise of Series 2 Warrants. (4) Shares of New Common Stock beneficially held by Putnam Investment Management are as a result of the holdings of various investment funds and other institutional investors for which Putnam Investment Management or affiliated entities act as investment advisors. These shares of New Common Stock include the shares held by Putnam High Yield Trust and Putnam Diversified Income Fund, whose holdings are also separately reported in the table. See Notes (5) and (6). (5) These shares of New Common Stock are also beneficially owned by Putnam Investment Management. See Note (4) above. (6) Includes 2,352 shares of New Common Stock issuable upon exercise of Series 1 Warrants, and 4,704 shares of New Common Stock issuable upon exercise of Series 2 Warrants. All of the shares held by Putnam Diversified Income Fund are also beneficially owned by Putnam Investment Management. See Note (4) above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Prior to the Effective Date, the Company was party to the MTH Agreement, pursuant to which MTH was to have provided certain financial consulting and business management services to the Company through July 1997. 23 In accordance with the Plan, the MTH Agreement was terminated on the Effective Date and Grand Union executed the MTH Settlement Agreement. The MTH Settlement Agreement provides for the termination of the MTH Agreement, payment by Grand Union of accrued and unpaid fees under the MTH Agreement through the Effective Date and for the indemnification of MTH and the MTH Entities from certain claims and liabilities, subject to the terms and limitations set forth in the MTH Settlement Agreement. For additional information regarding the MTH Settlement Agreement see Note 18 to the Consolidated Financial Statements included elsewhere herein. During Fiscal 1995, Fiscal 1994 and Fiscal 1993, the Company paid $750,000, $900,000 and $825,000, respectively, to MTH, pursuant to the MTH Agreement. At the time of the acquisition of GUAC by Holdings in July 1989, Grand Union and P&C Foods, which is indirectly controlled by MTH, operated stores in some of the same geographic areas in Vermont and upstate New York. In connection with the acquisition, agreements were entered into with federal antitrust authorities which required the divestiture of 16 Grand Union stores or P&C Foods stores. The divestitures required by these agreements were completed on July 30, 1990. Thirteen of the sixteen stores divested were P&C Foods stores. In a related transaction, on July 30, 1990, P&C Foods and Grand Union entered into the Operating Agreement pursuant to which Grand Union acquired the right to operate P&C Foods' thirteen remaining stores in New England under the Grand Union name until July 2000, with an option to extend the term of such operation for an additional five years. P&C Foods also granted Grand Union an option to purchase such stores. In connection with these transactions, Grand Union agreed to pay P&C Foods a minimum annual fee which will average $10.7 million per year during the ten-year lease term plus, beginning with the year commencing July 31, 1992, additional contingent fees of up to $700,000 per year based upon sales performance of the stores operated by Grand Union. In addition, Grand Union paid P&C Foods $7.5 million for the option to purchase the stores. Pursuant to the terms of the Operating Agreement, a $15 million prepayment of the annual fee was made to P&C Foods in connection with the 1992 Recapitalization. The Operating Agreement was assumed during the Chapter 11 case and will continue on its current terms. Pursuant to the terms of the Operating Agreement, in April 1992, Grand Union purchased P&C Foods' White River Junction, Vermont warehouse for cash consideration of approximately $5 million. In September 1993, Grand Union entered into a program to consolidate the purchasing, storage and distribution of health and beauty care and general merchandise product with Penn Traffic. Under this program, the inventory of health and beauty care and general merchandise product is owned by Penn Traffic and is stored in Grand Union's warehouse in Montgomery, New York. The products are distributed from the warehouse to Grand Union stores and certain Penn Traffic stores and wholesale customers. Grand Union reimburses Penn Traffic for shipments to Grand Union stores based on terms defined in the agreement. Grand Union purchases the health and beauty care products for both Grand Union and those Penn Traffic stores and wholesale customers serviced by the warehouse and is reimbursed by Penn Traffic for such purchases based on terms defined in the agreement. Penn Traffic purchases the general merchandise product for both Grand Union and Penn Traffic. Under the arrangement, Grand Union and Penn Traffic share the cost of operating the warehouse based on their proportionate usage of the product. In connection with this agreement, Penn Traffic purchased all of the health and beauty care and general merchandise inventories previously owned by Grand Union for approximately $12,821,000. During Fiscal 1995 and Fiscal 1994, Grand Union purchased from vendors approximately $120,027,000 and $75,262,000, respectively, of health and beauty care products under the agreement. Additionally, Grand Union purchased approximately $87,208,000 and $48,163,000, respectively, from Penn Traffic's inventory of health and beauty care and general merchandise products at cost. At April 1, 1995 and April 2, 1994, respectively, Grand Union had recorded a net receivable of approximately $7,705,000 and $5,014,000 related to this agreement. Under the agreement governing such arrangement, either Penn Traffic or Grand Union may terminate the program from and after July 1, 1995, upon six (6) months prior written notice. This agreement is being reevaluated in connection with the Chapter 11 proceedings. Grand Union believes this arrangement will be terminated within the next several months. During Fiscal 1995, Donaldson Lufkin & Jenrette acted as financial advisor to the Informal Committee of certain holders of Subordinated Notes in connection with the restructuring of Grand Union and received compensation from the Company for such services. Mr. Ying, a director of the Company since June 15, 1995, has been a managing director of Donaldson Lufkin & Jenrette Securities Corporation since January 1993. 24 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT: See Item 8. REPORTS ON FORM 8-K (i) Report on Form 8-K dated January 24, 1995, as filed with the Commission on January 25, 1995. (ii) Report on Form 8-K dated January 25, 1995, as filed with the Commission on January 25, 1995. (iii) Report on Form 8-K dated May 31, 1995, as filed with the Commission on June 15, 1995. (iv) Report on Form 8-K dated June 29, 1995, as filed with the Commission on June 29, 1995. EXHIBITS (REGULATION S-K ITEM 601) Exhibit Number Description of Document ------ ----------------------- 2.1 Second Amended Chapter 11 Plan of Reorganization of The Grand Union Company ("Grand Union"), filed with the United States Bankruptcy Court, District of Delaware, on April 19, 1995, incorporated by reference to Exhibit T3E1 to Grand Union's Form T-3 dated May 8, 1995. 2.2 Findings of Fact, Conclusions of Law and Order Confirming the Second Amended Plan of Reorganization proposed by Grand Union, dated May 31, 1995. 2.3 Minute Order Clarifying Findings of Fact, Conclusions of Law and Order Confirming Second Amended Plan of Reorganization proposed by Grand Union, dated June 14, 1995. 3.1 Restated Certificate of Incorporation of Grand Union. 3.2 By-laws of Grand Union, as restated on June 15, 1995. 4.1 Form of New Common Stock Certificate of Grand Union. 4.2 Indenture dated as of June 15, 1995, between Grand Union, as Issuer and IBJ Schroder Bank & Trust Company, as Trustee for the 12% Senior Notes due September 1, 2004, including form of the 12% Senior Note due 2004. 4.3 Amended and Restated Borrower Pledge Agreement dated as of June 15, 1995, made by Grand Union to Bankers Trust Company ("Bankers Trust"), as Collateral Agent. 4.4 Amended and Restated Borrower Security Agreement dated as of June 15, 1995, between Grand Union and Bankers Trust, as Collateral Agent. 4.5 Warrant Agreement dated as of June 15, 1995, between Grand Union and American Stock Transfer & Trust Company, as Warrant Agent for 300,000 Series 1 Warrants and 600,000 Series 2 Warrants. 4.6 Registration Rights Agreement dated as of June 15, 1995, among Grand Union and Each of the Persons Named in Schedule A thereto for the New Common Stock. 4.7 Registration Rights Agreement dated as of June 15, 1995, by and among Grand Union and The Holders Named therein for the Registrable Notes. 25 Exhibit Number Description of Document ------ ----------------------- 10.1 Agreement to Hold Separate dated July 17, 1989, by and among MTH Holdings Inc. ("MTH Holdings"), GU Acquisition Corporation ("GUAC"), Salomon Inc and the Federal Trade Commission (the "FTC") entered into in the matter of MTH Holdings and GUAC before the FTC, incorporated by reference to Exhibit No. 10.5 to Grand Union's Registration Statement on Form S-1 (Registration No. 33-29707) (the "1989 Grand Union Registration Statement"). 10.2 Agreement containing Consent Order among MTH Holdings, GUAC and the FTC entered into in the matter of MTH Holdings and GUAC before the FTC, incorporated by reference to Exhibit No. 10.6 to the 1989 Grand Union Registration Statement. 10.3 Asset Purchase Agreement, dated as of January 25, 1990, by and between Grand Union and Price Chopper Operating Co. of Vermont, Inc., incorporated by reference to Exhibit No. 10.15 to Holdings Registration Statement on Form S-1 (Registration No. 33-32879). 10.4 Asset Purchase Agreement, dated as of February 9, 1990, by and between Grand Union and Price Chopper Operating Co., Inc., incorporated by reference to Exhibit No. 10.49 to GUAC's Registration Statement on Form S-1 (Registration No. 33-22398). 10.5 Agreement and Master Sublease dated as of July 30, 1990, by and between Grand Union and P&C Food Markets, Inc. ("P&C Foods"), incorporated by reference to Exhibit No. 10.18 to Holdings' Report on Form 10-Q dated July 21, 1990 (Commission File No. 33-29707). 10.6 Asset Purchase Agreement dated as of February 4, 1993, between The Great Atlantic & Pacific Tea Company, Inc. and Grand Union, incorporated by reference to Exhibit No. 2.1 to Grand Union's Report on Form 8-K dated February 4, 1993. 10.7 Asset Purchase Agreement dated as of September 20, 1993 among Foodarama Supermarkets, Inc., ShopRite of Malverne, Inc. and Grand Union, incorporated by reference to Exhibit No. 10.19 to Grand Union's Registration Statement on Form S-1 (Registration No. 33-70956). *10.8 Second Amendment and Restatement of The Grand Union Company Supplemental Retirement Program for Key Executives adopted as of April 1, 1993, incorporated by reference to Exhibit No. 10.20 to Holdings' Report on Form 10-K dated July 1, 1994. 10.9 Amended and Restated Credit Agreement dated as of June 15, 1995, among Grand Union, the lending institutions listed from time to time on Schedule 1 thereto, and Bankers Trust, as Agent, including Exhibits A-1, A-2 and A-3, and various Schedules thereto. 10.10 Amended and Restated Borrower Pledge Agreement dated as of June 15, 1995, made by Grand Union to Bankers Trust, as Collateral Agent (included in Exhibit 4.3). - - ---------------- * Compensatory plan or arrangement. 26 Exhibit Number Description of Document ------ ----------------------- 10.11 Amended and Restated Borrower Security Agreement dated as of June 15, 1995, between Grand Union and Bankers Trust, as Collateral Agent (included in Exhibit 4.4). 10.12 Subsidiary Security Agreement dated as of June 15, 1995, among the corporations listed on Schedule 1 thereto and Bankers Trust, as Collateral Agent. 10.13 Subsidiary Guaranty dated as of June 15, 1995, made by each of the corporations from time to time listed on Annex A attached thereto in favor of the Banks and the Agent from time to time party to the Credit Agreement. 10.14 Form of Indenture of Open-End Mortgage, Deed of Trust, Deed to Secure Debt, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, dated as of June 15, 1995, made by Grand Union to Bankers Trust, as Collateral Agent. 10.15 Letter dated June 15, 1995, containing MTH Settlement Agreement between Miller Tabak Hirsch + Co. ("MTH") and Grand Union in connection with (i) the termination of the Agreement, dated July 22, 1992, between MTH and Grand Union, and (ii) the Second Amended Plan of Reorganization, dated April 19, 1995, of Grand Union. 10.16 Agreement dated as of April 1995, among Grand Union, Grand Union Capital Corporation ("Capital"), Holdings, the Official Committee of Unsecured Creditors of Capital and certain holders of Zero Coupon Notes issued by Capital and guaranteed by Holdings named therein. 10.17 Waiver dated June 14, 1995, with respect to the Second Amended Chapter 11 Plan of Grand Union, among Grand Union, Bankers Trust, the Official Committee of Unsecured Creditors of Grand Union and the Informal Committee of Senior Noteholders. 21.1 Subsidiaries of Grand Union. 27.1 Financial Data Schedule. 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 GRAND UNION COMPANY (Registrant) /s/ Kenneth R. Baum -------------------------------------------------------------- Kenneth R. Baum Senior Vice President, Chief Financial Officer and Secretary (Principal Financial Officer and Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- Director and Chairman June 30, 1995 - - ------------------------- Roger E. Stangeland /s/ Joseph J. McCaig Director, President June 30, 1995 - - ------------------------- and Chief Executive Joseph J. McCaig Officer (Principal Executive Officer) /s/ William A. Louttit Director, Executive June 30, 1995 - - ------------------------- Vice President and William A. Louttit Chief Operating Officer Director June 30, 1995 - - ------------------------- Daniel E. Josephs /s/ William G. Kagler Director June 30, 1995 - - ------------------------- William G. Kagler /s/ Douglas T. McClure, Jr. Director June 30, 1995 - - ------------------------- Douglas T. McClure, Jr. /s/ David Y. Ying Director June 30, 1995 - - ------------------------- David Y. Ying 28 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and the Board of Directors of The Grand Union Company In our opinion, the accompanying consolidated financial statements listed in the index appearing under Item 8 on page 17 present fairly, in all material respects, the financial position of The Grand Union Company and its subsidiaries (the "Company") at April 1, 1995 and April 2, 1994 and the results of their operations and their cash flows for each of the three years in the period ended April 1, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, on January 25, 1995, the Company filed a voluntary petition with the United States Bankruptcy Court for the District of Delaware seeking to reorganize under chapter 11 ("Chapter 11") of Title 11 of the United States Code. Subsequent thereto, the Company filed its plan of reorganization, which plan, as amended, was confirmed on May 31, 1995, and became effective on June 15, 1995. As of June 15, 1995, the Company will implement the guidance as to the accounting by entities emerging from Chapter 11 in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("Fresh-Start Reporting"). The estimated unaudited pro forma impact of this Fresh-Start Reporting is presented in Note 1. The implementation of Fresh-Start Reporting as a result of the Company's emergence from Chapter 11 will materially change the amounts reported in the consolidated financial statements of the Company as of and for periods subsequent to June 15, 1995. As a result of the reorganization and the implementation of Fresh-Start Reporting, assets and liabilities will be recorded at fair values and outstanding obligations relating to the claims of creditors will be discharged primarily in exchange for cash, new indebtedness and equity. As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", effective April 4, 1993. PRICE WATERHOUSE LLP New York, New York June 16, 1995 F - 1 THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF OPERATIONS
52 Weeks 52 Weeks 53 Weeks Ended Ended Ended April 1, April 2, April 3, 1995 1994 1993 --------- ------------- ----------- (in thousands) Sales $ 2,391,696 $ 2,477,339 $ 2,833,987 Cost of sales (1,704,082) (1,766,303) (2,032,481) ----------- ----------- ----------- Gross profit 687,614 711,036 801,506 Operating and administrative expenses (550,913) (531,839) (606,178) Depreciation and amortization (87,098) (78,577) (80,551) Provision for store closings, net (12,900) - - Reorganization items (10,770) - - Charges relating to pension settlement and early retirement programs (3,747) (4,468) - Loss on disposal of the Southern Region - - (198,000) Recapitalization expense - - (3,516) Interest expense: Debt: Obligations requiring current cash interest (124,372) (128,661) (107,644) Obligations requiring no current cash interest (33,317) (35,354) (44,271) Capital lease obligations (19,226) (14,951) (13,191) Amortization of deferred financing fees (5,101) (4,831) (9,378) ----------- ----------- ----------- Loss before income taxes, extraordinary charges and cumulative effect of accounting change (159,830) (87,645) (261,223) Income tax provision - - (4,535) ----------- ----------- ----------- Loss before extraordinary charges and cumulative effect of accounting change (159,830) (87,645) (265,758) Extraordinary charges relating to early extinguishment of debt - - (47,663) Cumulative effect of accounting change - (30,308) - ----------- ----------- ----------- Net loss (159,830) (117,953) (313,421) Accrued preferred stock dividends of Holdings (19,480) (16,011) (14,623) ----------- ----------- ----------- Net loss applicable to common stock of Holdings $ (179,310) $ (133,964) $ (328,044) ----------- ----------- ----------- ----------- ----------- ----------- Weighted average number of Holdings common shares outstanding 75,224 75,258 75,249 Per Share Data of Holdings: ----------- ----------- ----------- ----------- ----------- ----------- Loss applicable to common stock before extraordinary charges and cumulative effect of accounting change (after accrued preferred stock dividends) $ (2,383.68) $ (1,377.34) $ (3,726.05) ----------- ----------- ----------- ----------- ----------- ----------- Extraordinary charges - - $ (633.40) ----------- ----------- ----------- ----------- ----------- ----------- Cumulative effect of accounting change - $ (402.72) - ----------- ----------- ----------- ----------- ----------- ----------- Net loss applicable to common stock $ (2,383.68) $ (1,780.06) $ (4,359.45) ----------- ----------- ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements. F-2 THE GRAND UNION COMPANY CONSOLIDATED BALANCE SHEET
April 1, 1995 April 2, 1994 ------------- ------------- (in thousands) ASSETS Current assets: Cash and temporary cash investments $ 89,423 $ 44,294 Receivables 18,592 37,072 Inventories 189,467 206,063 Other current assets 16,787 17,444 ---------- ---------- Total current assets 314,269 304,873 Property 426,962 400,554 Goodwill 545,451 563,276 Beneficial leases 27,218 33,074 Deferred financing fees 44,069 48,721 Other assets 36,787 43,726 ---------- ---------- $1,394,756 $1,394,224 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current maturities of long-term debt $ - $ 914 Current portion of obligations under capital leases - 7,099 Accounts payable and accrued liabilities 174,126 238,225 ---------- ---------- Total current liabilities 174,126 246,238 ---------- ---------- Long-term debt - 1,404,089 ---------- ---------- Obligations under capital leases - 120,140 ---------- ---------- Other noncurrent liabilities 53,072 113,810 ---------- ---------- Liabilities subject to compromise 1,817,698 - ---------- ---------- Commitments and contingencies Redeemable stock of Holdings subject to compromise: Class A common stock, $.01 par value 9,407 9,407 Preferred stock (liquidation preference $164,792,000 in aggregate) 164,792 145,312 ---------- ---------- Total redeemable stock 174,199 154,719 ---------- ---------- Nonredeemable common stock and stockholders' deficit of Holdings: Class A common stock, $.01 par value; authorized 473,281 shares; issued and outstanding 48,505 shares (net of treasury shares) less 11,932 shares shown as redeemable common stock 1 1 Class B common stock, $.01 par value; 26,719 authorized, issued and outstanding - - Treasury stock; 164 shares of Class A common stock at cost (156) (156) Accumulated deficit (824,184) (644,617) ---------- ---------- Total nonredeemable common stock and stockholders' deficit of Holdings (824,339) (644,772) ---------- ---------- $1,394,756 $1,394,224 ---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements. F - 3 THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS
52 Weeks 52 Weeks 53 Weeks Ended Ended Ended April 1, April 2, April 3, 1995 1994 1993 --------- ---------- ---------- (in thousands) OPERATING ACTIVITIES: Net loss $(159,830) $(117,953) $(313,421) Adjustments to reconcile net loss to net cash provided by (used for) operating activities before reorganization items: Extraordinary charges on early extinguishment of debt - - 47,663 Cumulative effect of accounting change - 30,308 - Write-off of goodwill and beneficial leases and loss on fixed assets related to the disposal of the Southern Region - - 137,017 Depreciation and amortization 87,098 78,577 80,551 Charges relating to pension settlement and early retirement programs 3,747 4,468 - Noncash interest 33,317 35,354 44,271 Amortization of deferred financing fees 5,101 4,831 9,378 Net changes in assets and liabilities: Receivables 18,480 (12,505) (878) Inventories 16,596 29,159 (14,467) Other current assets 657 (1,303) (3,485) Accounts payable and accrued liabilities 86,550 (44,807) 27,160 Other 7,330 (18,039) 13,393 --------- --------- --------- Net cash provided by (used for) operating activities before reorganization items 99,046 (11,910) 27,182 Reorganization items (10,770) - - --------- --------- --------- Net cash provided by (used for) operating activities 88,276 (11,910) 27,182 --------- --------- --------- INVESTMENT ACTIVITIES: Capital expenditures (62,973) (81,029) (58,089) Disposals of property 2,128 584 1,394 Proceeds relating to the sale of the fixed assets of the Southern Region - - 25,000 Refunded insurance deposits - - 11,636 Prepayment under P&C Food Markets, Inc. operating agreement - - (15,000) --------- --------- --------- Net cash used for investment activities (60,845) (80,445) (35,059) --------- --------- --------- FINANCING ACTIVITIES: Proceeds from the issuance of long-term debt 29,000 77,661 1,443,421 Obligations under capital leases discharged (10,339) (8,218) (9,644) Loan placement fees - (1,775) (63,643) Retirement of long-term debt (963) (514) (1,348,762) Purchase of redeemable Class A common stock - (156) - Capital contribution - - 6,560 Premiums on debt retirement - - (24,086) --------- --------- --------- Net cash provided by financing activities 17,698 66,998 3,846 --------- --------- --------- Increase (decrease) in cash and temporary cash investments 45,129 (25,357) (4,031) Cash and temporary cash investments at beginning of year 44,294 69,651 73,682 --------- --------- --------- Cash and temporary cash investments at end of year $ 89,423 $ 44,294 $ 69,651 --------- --------- --------- --------- --------- ---------
See accompanying notes to consolidated financial statements. F - 4 THE GRAND UNION COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BANKRUPTCY FILING AND PLAN OF REORGANIZATION The Grand Union Company, a Delaware corporation, ("Grand Union" or the "Company") was, through June 15, 1995, a wholly owned subsidiary of Grand Union Capital Corporation ("Capital"), a wholly owned subsidiary of Grand Union Holdings Corporation ("Holdings"). The principal asset of Capital and, indirectly, of Holdings was the capital stock of Grand Union (the "Old Common Stock"). On November 29, 1994, Grand Union announced that it was not likely to be able to fund cash interest payments due in early calendar 1995, and that it intended to develop a capital restructuring plan. Beginning on January 16, 1995, Grand Union did not make interest payments required under its outstanding debt obligations. On January 24, 1995, Grand Union announced that it had reached an agreement in principle with Grand Union's bank lenders and with members of informal committees of certain holders of Grand Union's 11.375% Senior Notes due 1999 (the "11.375% Senior Notes") and 11.25% Senior Notes due 2000 (the "11.25% Senior Notes" and collectively with the 11.375% Senior Notes, the "Senior Notes") and certain holders of Grand Union's 12.25% Senior Subordinated Notes due 2002 (the "12.25% Subordinated Notes") and 12.25% Senior Subordinated Notes due 2002, Series A (the "Series A 12.25% Subordinated Notes", together with the 13% Senior Subordinated Notes due 1998 (the "13% Subordinated Notes") and the 12.25% Subordinated Notes, the "Subordinated Notes") on the terms of a restructuring of Grand Union's capital structure. CHAPTER 11 BANKRUPTCY FILINGS - On January 25, 1995 (the "Filing Date"), as part of the implementation of such agreement, Grand Union filed a voluntary petition for relief under chapter 11 ("Chapter 11") of Title 11 of the United States Code (the "Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). From the Filing Date through June 15, 1995 (the "Effective Date", as defined below), Grand Union operated as a debtor-in-possession under Chapter 11 of the Code and was subject to the supervision of the Bankruptcy Court in accordance with the Code. During this period, Grand Union's business was operated under a series of "first day orders", which, among other things, permitted it to retain certain financial and legal advisors and which authorized payment of certain pre-petition employee costs, including worker's compensation benefits, and pre-petition trade claims, subject to the satisfaction of various requirements. On January 30, 1995, Grand Union (as debtor and as debtor-in-possession) entered into a credit agreement (the "DIP Facility") with the banks party thereto providing for borrowings of up to $150 million on a revolving credit basis. On February 16, 1995, final approval of the DIP Facility was granted and the Bankruptcy Court also issued a Final Cash Collateral Order which allowed Grand Union to use cash collateral to pay operating expenses in the ordinary course of business. The DIP Facility provided for a commitment fee equal to .5% of the average unused portion. There were no borrowings made under the DIP Facility during the Chapter 11 proceedings and it was terminated on the Effective Date. On February 16, 1995, Capital consented to the entry of an order for relief in respect of an involuntary Chapter 11 petition filed in the Bankruptcy Court on February 6, 1995 by entities purporting to be holders of Capital's 15% Senior Zero Coupon Notes due 2004 (the "Capital Senior Zero Notes") and 16.5% Senior Subordinated Zero Coupon Notes due 2007 (the "Capital Subordinated Zero Notes" and collectively with the Capital Senior Zero Notes, the "Capital Notes"). On February 16, 1995, Holdings, of which Capital is a wholly owned subsidiary, filed a voluntary Chapter 11 petition in the Bankruptcy Court. Capital and Holdings are currently operating as debtors-in-possession under the protection of Chapter 11, each in bankruptcy proceedings separate from Grand Union, and are each subject to the jurisdiction and supervision of the Bankruptcy Court. F - 5 NOTE 1 - BANKRUPTCY FILING AND PLAN OF REORGANIZATION (CONTINUED) PLAN OF REORGANIZATION - The Bankruptcy Court confirmed the Second Amended Chapter 11 Plan of The Grand Union Company, dated as of April 19, 1995, (as confirmed, the "Plan"), on May 31, 1995 (the "Confirmation Date"), and the Company emerged from Chapter 11 on June 15, 1995 (the "Effective Date"). Two proceedings challenging the order confirming the Plan are pending. The Company does not believe that either proceeding will result in any modification or revocation of the order. On the Effective Date, Grand Union adopted a restated certificate of incorporation (the "New Certificate"), the principal effects of which are: (i) to authorize 30,000,000 shares of new common stock (the "New Common Stock") (of which 10,000,000 shares were issued under the Plan) and 10,000,000 shares of preferred stock (none of which will be issued under the Plan) and (ii) to prohibit the issuance of non-voting equity securities. The Plan provides for full payment of all allowed administrative expenses and all allowed general unsecured and priority claims. On the Effective Date, obligations relating to the Company's existing bank credit agreement (the "Bank Credit Agreement") were paid in full and the Company entered into an Amended and Restated Credit Agreement (the "New Bank Facility") with its bank lending group which provides for a five-year revolving credit facility of $100,000,000 (the "New Revolving Credit Facility") and a seven-year term loan facility of $104,144,371 (the "New Term Loan"). The New Bank Facility is secured by a lien on substantially all of the assets of Grand Union and its subsidiaries. As of the Effective Date, the Senior Notes were deemed cancelled and each holder of Senior Notes became entitled to receive its pro rata share of Grand Union's new 12% Senior Notes due 2004 (the "New Senior Notes") having an aggregate principal amount of $595,475,922 issued pursuant to the Plan. As of the Effective Date, the Subordinated Notes and the Old Common Stock were deemed cancelled and each holder of Subordinated Notes became entitled to receive its pro rata share of an aggregate of 10,000,000 shares of Grand Union's New Common Stock issued pursuant to the Plan. The Plan also provided for the issuance of warrants to purchase an aggregate of 900,000 shares of New Common Stock to holders of the Capital Notes pursuant to the terms of a settlement reached among the Company, Capital, Holdings, the Official Committee of Unsecured Creditors of Capital and certain holders of the Capital Notes. In accordance with the terms of the settlement, on the Effective Date, and solely for the purpose of effectuating the settlement, any claims against the Company arising from the Capital Notes were discharged and (i) each holder of Capital Senior Zero Notes became entitled to receive its pro rata share of 240,000 Series 1 Warrants to purchase shares of New Common Stock at a purchase price of $30 per share ("Series 1 Warrants") and of 480,000 Series 2 Warrants to purchase shares of New Common Stock at a purchase price of $42 per share ("Series 2 Warrants") and (ii) each holder of Capital Subordinated Zero Notes became entitled to receive its pro rata share of 60,000 Series 1 Warrants and 120,000 Series 2 Warrants, provided that holders of $200,000 or more principal amount of either the Capital Senior Zero Notes or Capital Subordinated Zero Notes are required to execute a release of all claims relating to such Capital Notes as a condition to receiving the distribution. The Plan made no provision for the holders of the 12% Junior Subordinated Notes due 1999 (the "Holdings Junior Notes") or Redeemable Preferred Stock issued by Holdings or the common shares or warrants to purchase common shares of Holdings. FRESH-START REPORTING As of the Effective Date, Grand Union will adopt Fresh-Start Reporting in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities In Reorganization Under The Bankruptcy Code" ("SOP 90-7"). Fresh-Start Reporting will result in material changes to the Company's consolidated financial statements as of and subsequent to the Effective Date. The reorganization value (the approximate fair value) of the Company as of the Effective Date will be determined based on valuation techniques believed by management and its financial advisors to be representative of the Company's business and industry. The excess of the fair value of Grand Union's liabilities and stockholders' equity over the fair value of identifiable assets will be recorded as an intangible asset and amortized over an appropriate period. The following unaudited pro forma condensed balance sheet has been prepared under the assumption that Fresh- Start Reporting was effective as of April 1, 1995. The amounts and estimates reflected in the pro forma balance sheet are subject to change based on actual conditions and estimates on the Effective Date. F - 6 NOTE 1 - BANKRUPTCY FILING AND PLAN OF REORGANIZATION (CONTINUED)
April 1, 1995 April 1, As Restructuring Fresh-Start 1995 Reported Adjustments Adjustments Pro Forma -------- ------------- ----------- --------- (a) (b) (in thousands) ASSETS Current assets: Cash and temporary cash investments $ 89,423 ($52,100) $ - $ 37,323 Receivables 18,592 - - 18,592 Inventories 189,467 - 7,457 196,924 Other current assets 16,787 - - 16,787 ---------- -------- -------- ---------- Total current assets 314,269 (52,100) 7,457 269,626 Property 426,962 (11,810) - 415,152 Goodwill 545,451 - (545,451) - Reorganization value in excess of amounts allocable to identifiable assets - - 508,853 508,853 Beneficial leases 27,218 - - 27,218 Deferred financing fees 44,069 3,125 (44,069) 3,125 Other assets 36,787 - (19,045) 17,742 ---------- -------- -------- ---------- $1,394,756 ($60,785) ($92,255) $1,241,716 ---------- -------- -------- ---------- ---------- -------- -------- ---------- LIABILITIES AND EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt $ - $ 1,010 $ - $ 1,010 Current portion of obligations under capital leases - 6,895 - 6,895 Accounts payable and accrued liabilities 174,126 5,887 2,158 182,171 ---------- -------- -------- ---------- Total current liabilities 174,126 13,792 2,158 190,076 Long-term debt - 675,450 - 675,450 Obligations under capital leases - 108,216 - 108,216 Other noncurrent liabilities 53,072 39,925 4,977 97,974 Liabilities subject to compromise 1,817,698 (1,817,698) - - Redeemable stock subject to compromise 174,199 (174,199) - - Common stock 1 9,999 - 10,000 Capital in excess of par value - 160,000 - 160,000 Accumulated deficit (824,340) 923,730 (99,390) - ---------- -------- -------- ---------- $1,394,756 ($60,785) ($92,255) $1,241,716 ---------- -------- -------- ---------- ---------- -------- -------- ---------- April 1, 1995 April 1, As Restructuring Fresh-Start 1995 Reported Adjustments Adjustments Pro Forma -------- ------------- ----------- --------- (a) LIABILITIES SUBJECT TO COMPROMISE Accounts payable and accrued liabilities $ 150,649 ($150,649) $ - $ - Long-term debt 1,466,357 (1,466,357) - - Obligations under capital leases 148,586 (148,586) - - Other noncurrent liabilities 52,106 (52,106) - - ---------- -------- -------- ---------- Total liabilities subject to compromise $1,817,698 ($1,817,698) $ - $ - ---------- -------- -------- ---------- ---------- -------- -------- ----------
F - 7 NOTE 1 - BANKRUPTCY FILING AND PLAN OF REORGANIZATION (CONTINUED) (a) Restructuring Adjustments, which reflect the settlement of liabilities subject to compromise, as a result of consummation of the Plan: - Establish revised obligations under the New Bank Facility and the New Senior Notes . - Eliminate the Subordinated Notes, Capital Senior Zero Notes, Capital Subordinated Zero Notes, Holdings Junior Notes, Holdings Redeemable Common Stock, Holdings Redeemable Preferred Stock, Holdings Class A Common Stock, Holdings Class B Common Stock and Holdings Class A Treasury Stock. - Reflect the elimination of rejected capitalized leases from the related asset and obligation. - Record New Common Stock (10,000,000 shares, par value $1.00 per share) and capital in excess of par value. (b) Fresh-Start Adjustments, which reflect the new basis of accounting by the Company: - Eliminate existing goodwill and deferred financing fees. - Adjust inventories, pension assets and liabilities and postretirement benefit obligations to fair values. - Record the fair market value of interest rate protection agreements. - Record reorganization value in excess of amounts allocable to identifiable assets and liabilities. NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION. The Company's financial statements as of and for the 52 weeks ended April 1, 1995 have been presented in conformity with SOP 90-7 (See Note 1) which requires a segregation of liabilities subject to compromise by the Bankruptcy Court as of the Filing Date and identification of all transactions and events that are directly associated with the reorganization of the Company. Prior year comparative balances have not been reclassified to conform with current year balances stated under SOP 90-7. The most significant difference between the current year and prior year presentations is the reclassification of substantially all of the outstanding debt and other liabilities to "Liabilities Subject to Compromise." See Note 3 for a detailed description of liabilities subject to compromise at April 1, 1995. FISCAL YEAR. The Company's fiscal year ends on the Saturday nearest the last day of March. The years ended April 1, 1995 ("Fiscal 1995") and April 2, 1994 ("Fiscal 1994") were comprised of 52 weeks and the year ended April 3, 1993 ("Fiscal 1993") was comprised of 53 weeks. PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of Grand Union and its subsidiaries, all of which are wholly owned. Additionally, the financial statements reflect the application of "push down" accounting whereby the assets, liabilities and equity of Grand Union have been adjusted to reflect the consolidated assets, liabilities and equity of Holdings. Intercompany transactions and balances have been eliminated. F - 8 NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) TEMPORARY CASH INVESTMENTS. For purposes of the Statement of Cash Flows, temporary cash investments consist of short-term investments in highly liquid securities and cash equivalents, with initial maturities of three months or less. INVENTORY VALUATION. Grocery and general merchandise inventories are valued at the lower of last-in, first-out ("LIFO") cost or market in order to more accurately match costs and related revenues. At April 1, 1995 and April 2, 1994, approximately $158,755,000 and $173,661,000, respectively, of grocery and general merchandise inventories were valued using the LIFO method. Replacement cost exceeded LIFO cost of these inventories by approximately $7,457,000, $8,567,000 and $7,639,000 at April 1, 1995, April 2, 1994 and April 3, 1993, respectively. During Fiscal 1995 and Fiscal 1994, inventory levels were reduced resulting in a liquidation of LIFO inventories that had been carried at a value lower than current cost. Net loss was decreased by approximately $1,628,000 and $1,160,000, respectively, as a result of these liquidations. Perishable inventories are valued at the lower of average cost or market, which adequately provides for the matching of costs and related revenues due to the rapid turnover of such inventories. PROPERTY. Buildings, fixtures and equipment and leasehold improvements are recorded at cost and include interest on the funds borrowed to finance construction. Depreciation and amortization of buildings, fixtures and equipment and leasehold improvements is computed using the straight line method over estimated useful lives ranging from three to forty years. Properties held under capital leases are capitalized net of gains on sale leaseback transactions and are amortized using the straight line method over the life of each lease. PRE-OPENING COSTS. Store pre-opening costs are charged to expense as incurred. GOODWILL. Goodwill is amortized using the straight-line method over a 40 year life. Management periodically reassesses the appropriateness of both the carrying value and remaining life of goodwill. Based upon its estimation of the enterprise value of Grand Union as of the Effective Date, management believes that the carrying value of goodwill continues to be appropriate. In accordance with Fresh-Start Reporting, the remaining value of goodwill will be written off as of the Effective Date. At April 1, 1995 and April 2, 1994, accumulated amortization was $91,604,000 and $73,779,000, respectively. BENEFICIAL LEASES. Amortization of beneficial leases is computed using the straight line method over the average lease life, which approximates ten years. At April 1, 1995 and April 2, 1994, accumulated amortization was $33,426,000 and $27,570,000, respectively. DEFERRED FINANCING FEES. Financing fees are deferred and amortized over the expected life of the related loan. At April 1, 1995 and April 2, 1994, accumulated amortization was $13,712,000 and $8,610,000, respectively. INCOME TAXES. The Company provides for federal and state income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS No. 109"). Deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts at each year end. F - 9 NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PENSION PLANS. The Company maintains a noncontributory, trusteed pension plan covering eligible employees and a supplemental nonqualified, nontrusteed plan for certain executives. The Company's policy is to fund pension amounts which satisfy the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). POSTRETIREMENT BENEFITS. Effective April 4, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS No. 106"), which requires the Company to accrue the estimated cost of retiree benefit payments during the years each employee provides services. The Company recognized the cumulative effect of this obligation, an increase in accrued postretirement benefit costs and in net loss of $30,308,000, at April 4, 1993. SELF INSURANCE. The Company self insures workers' compensation, automobile liability, general liability and non-union employee medical costs up to varying deductible limits and carries third party insurance in excess of such limits. Reserves are provided for the estimated whole dollar settlement value up to the deductible limits of all claims incurred during each policy year. STORE CLOSURE EXPENSE. Estimated whole dollar net costs of holding and disposing of closed stores are provided as of the date the store is closed. FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying amount of cash, temporary cash investments, receivables, accounts payable and accrued liabilities approximates fair value. Outstanding pre-petition accounts payable and accrued liabilities and long- term debt and redeemable preferred stock are classified at April 1, 1995 as Liabilities Subject to Compromise. The fair value of these liabilities is based on the provisions of the Plan, as discussed in Note 1. The fair value of interest rate swap agreements is the amount at which such agreements could be settled, based on estimates from counterparties. NET LOSS PER SHARE OF COMMON STOCK. Net loss per share of common stock is based upon the weighted average number of shares of common stock outstanding. Fully diluted net loss per share has not been presented since the amounts are antidilutive. F - 10 NOTE 3 - LIABILITIES SUBJECT TO COMPROMISE Certain obligations of the Company which were in existence as of the Filing Date were not paid while the Company continued business operations as a debtor- in-possession. The Company's estimate of these claims is reflected in the accompanying balance sheet as "Liabilities Subject to Compromise" and includes the following at April 1, 1995 (in thousands): Debt (a) GRAND UNION Equipment Mortgage Notes $ 2,997 Bank Credit Agreement (b) 93,144 11.25% Senior Notes 350,000 11.375% Senior Notes 175,000 12.25% Senior Subordinated Notes 500,000 12.25% Senior Subordinated Notes, Series A 50,000 13% Senior Subordinated Notes 16,150 CAPITAL 15% Senior Zero Coupon Notes 170,239 16.5% Senior Subordinated Zero Coupon Notes 100,965 HOLDINGS 12% Junior Subordinated Notes 7,862 ---------- Total debt 1,466,357 Accounts payable (c) 62,006 Accrued liabilities 20,583 Interest payable 68,060 Obligations under capital leases 148,586 Other noncurrent liabilities 52,106 ---------- Total Liabilities Subject to Compromise $1,817,698 ---------- ---------- (a) See Note 12 for additional information on debt securities. (b) Consists of outstanding borrowings of $54,000,000 on the revolving credit facility and $39,144,000 on the term loan. (c) Accounts payable are net of payments made on certain pre-petition liabilities in accordance with first-day orders obtained from the Bankruptcy Court.
These amounts represent management's best estimate of all known or potential claims. Such claims remain subject to future adjustments with respect to disputed claims depending on negotiations and actions of the Bankruptcy Court in the Chapter 11 case. Consequently, the amount included in the Consolidated Balance Sheet as "Liabilities Subject to Compromise" may be subject to further adjustment. F - 11 NOTE 4 - REORGANIZATION ITEMS Reorganization items, incurred during Fiscal 1995 in connection with the reorganization and Chapter 11 filing of the Company, are summarized as follows (in thousands): Professional fees $ 5,704 Debtor-in-Possession financing fees 3,740 Other reorganization costs and expenses 1,499 Interest earned on accumulated cash resulting from Chapter 11 proceedings (173) -------- $ 10,770 -------- --------
NOTE 5 - PROVISION FOR STORE CLOSINGS, NET During Fiscal 1995, the Company established a provision for store closings, net of a non-recurring item, totaling $12,900,000. The provision includes a charge of $16,900,000 relating to the closure of sixteen stores principally consisting of the remaining net book value of store fixed assets, store closing costs, and estimated carrying costs through expected dates of disposition. Additionally, the Company realized $4,000,000 of proceeds from the termination of a warehouse sublease. NOTE 6 - ACQUISITION OF LONG ISLAND STORES On October 18, 1993, the Company acquired five supermarket locations on Long Island. The cost of the acquisition included cash consideration of approximately $16,100,000 (of which approximately $6,000,000 was allocated to property, equipment and leasehold improvements and approximately $10,100,000 was allocated to goodwill) and approximately $2,200,000 for store inventory. The goodwill is being amortized over 40 years. The acquisition was financed through the application of a portion of the proceeds of the sale to institutional investors of $50,000,000 principal amount of Series A 12.25% Subordinated Notes. During Fiscal 1995, one of the stores was closed and the remaining amount of goodwill allocable to the store was written off. NOTE 7- LOSS ON DISPOSAL OF THE SOUTHERN REGION On March 29, 1993, the Company sold 48 of its 51 Southern Region stores to a single buyer and closed and subleased the remaining three stores. The transaction yielded total gross proceeds of approximately $43,000,000, excluding the assumption of capital leases of approximately $4,500,000, of which $25,000,000 related to fixed assets and $17,500,000 related to inventory. The Company recognized a loss of $198,000,000 on the disposal of the Southern Region. The loss is comprised of the following (in thousands): Write-off of goodwill and beneficial leases $106,389 Difference between proceeds received and the book value of tangible assets 37,244 Reserve for remaining Southern Region real estate 26,948 Employee termination expenses 9,846 Operating loss of the Southern Region subsequent to the date the decision was made to sell the region 6,971 Other 10,602 -------- $198,000 -------- --------
F - 12 NOTE 7 - LOSS ON DISPOSAL OF THE SOUTHERN REGION (CONTINUED) The following unaudited pro forma summary represents the consolidated results of the operations of the Company during Fiscal 1993 as though the disposal of the Southern Region had taken place as of the beginning of Fiscal 1993 (in thousands except per share amount): Sales $2,562,796 Gross profit 730,146 Loss before income taxes and extraordinary charges (60,205) Net loss applicable to common stock (127,026) Net loss per share applicable to common stock of Holdings (1,688.08)
NOTE 8 - 1992 RECAPITALIZATION AND EXTRAORDINARY CHARGES On July 22, 1992, Holdings, Capital and Grand Union completed a recapitalization (the "1992 Recapitalization"). In connection with the 1992 Recapitalization, Holdings, through Capital and Grand Union, entered into the Bank Credit Agreement providing for a $210,000,000 term loan facility (the "Term Loan") and a $100,000,000 revolving credit facility (the "Revolving Credit Facility"), issued $350,000,000 principal amount of Grand Union 11.25% Senior Notes and $500,000,000 principal amount of Grand Union 12.25% Subordinated Notes, and sold $343,000,000 principal amount of Capital Senior Zero Notes and $745,000,000 principal amount of Capital Subordinated Zero Notes, together with warrants to purchase at a nominal price approximately 19.9% of the common stock of Holdings on a fully diluted basis, for aggregate gross proceeds of approximately $200,000,000. The 1992 Recapitalization also included the sale to institutional investors of approximately 28.4% of the common stock of Holdings on a fully diluted basis for approximately $25,000,000. The proceeds were used to retire substantially all of the debt of Holdings, GU Acquisition Corporation ("GUAC"), a wholly owned subsidiary of Holdings, and Grand Union as well as to repurchase the shares and option to purchase shares owned by Salomon Brothers Holding Company Inc, certain warrants held by the parties to the term loan and revolving credit facility existing prior to the 1992 Recapitalization and approximately 3.4% of the common stock of Holdings held by Grand Union management. At the time of the 1992 Recapitalization, GUAC and its wholly owned subsidiary, Cavenham Holdings Inc., the former parent of Grand Union, were merged into Grand Union and Grand Union became a wholly owned subsidiary of Capital. On January 28, 1993, Grand Union sold $175,000,000 principal amount of 11.375% Senior Notes in a private placement. Net proceeds of the sale of the 11.375% Senior Notes were used to repay $142,000,000 of indebtedness under the Term Loan and the remainder was used to repay indebtedness under the Revolving Credit Facility. An additional $20,856,000 of the Term Loan was repaid from the proceeds of the sale of the Southern Region on March 29, 1993. All of such repaid indebtedness under the Term Loan and under the Revolving Credit Facility had been incurred in connection with the 1992 Recapitalization. F - 13 NOTE 8 - 1992 RECAPITALIZATION AND EXTRAORDINARY CHARGES (CONTINUED) During Fiscal 1993, the Company recorded $3,516,000 relating to expenses incurred in connection with the 1992 Recapitalization and extraordinary charges of $47,663,000 relating to early retirement of debt. The Company had an operating loss in Fiscal 1993 and was in a net operating loss carryforward position; accordingly, no tax benefit was recorded in connection with the extraordinary charges, which are comprised of the following (in thousands): Premiums paid in connection with the 1992 Recapitalization $24,086 Deferred financing fees written off in connection with the 1992 Recapitalization 16,407 Deferred financing fees written off in connection with the refinancing and prepayment of $142,000,000 of the Term Loan 6,252 Deferred financing fees written off in connection with the prepayment of $20,856,000 of the Term Loan resulting from the disposal of the Southern Region 918 ------- $47,663 ------- -------
NOTE 9 - PROPERTY Property, at cost, consists of the following (in thousands):
April 1, April 2, 1995 1994 -------- -------- Property owned: Land $ 18,815 $ 19,315 Buildings 68,427 53,686 Fixtures and equipment 254,615 248,230 Leasehold improvements 147,050 133,777 -------- -------- 488,907 455,008 Less: accumulated depreciation and amortization 183,968 158,277 -------- -------- Property owned, net 304,939 296,731 -------- -------- Property held under capital leases: Land and buildings 123,030 103,228 Equipment 22,911 16,905 -------- -------- 145,941 120,133 Less: accumulated amortization 23,918 16,310 -------- -------- Property held under capital leases, net 122,023 103,823 -------- -------- Property $426,962 $400,554 -------- -------- -------- --------
Depreciation and amortization of owned and leased property for Fiscal 1995, Fiscal 1994 and Fiscal 1993 was $57,089,000, $52,760,000 and $53,335,000 respectively. F - 14 NOTE 10 - RECEIVABLES AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Receivables at April 1, 1995 and April 2, 1994 are net of allowance for doubtful accounts of $998,000 and $809,000, respectively. Accounts payable and accrued liabilities consist of the following (in thousands):
April 1, April 2, 1995 1994 -------- -------- Accounts and drafts payable $112,647 $136,707 Accrued liabilities: Payroll 19,741 25,073 Interest 12,977 27,258 Self insurance 6,207 15,480 Taxes other than income taxes 8,696 9,036 Store closure reserves 3,200 4,003 Other 10,658 20,668 -------- -------- $174,126 $238,225 -------- -------- -------- --------
NOTE 11 - INCOME TAXES The components of the income tax provision are as follows (in thousands):
Fiscal Fiscal Fiscal 1995 1994 1993 -------- -------- -------- Currently payable State $ - $ - $ 4,535 Federal - - - -------- -------- -------- - - 4,535 -------- -------- -------- Deferred, resulting from: Store closure provision (486) 5,816 (9,243) Accrued insurance 344 2,267 (717) Deferred financing 527 554 (320) Deferred compensation 2 (114) 1,258 Beneficial lease amortization (2,050) (2,054) (2,488) Effect of change in rate on temporary differences - (3,099) - Excess of book over tax depreciation (5,269) (4,171) (14,240) Postretirement benefits other than pension (463) (11,407) - Interest expense (11,661) (12,132) (7,341) Net operating loss (30,659) (13,121) (27,884) Other (1,299) (451) (2,908) Deferred tax asset valuation allowance 51,014 37,912 63,883 -------- -------- -------- - - - -------- -------- -------- Total income tax provision $ - $ - $ 4,535 -------- -------- -------- -------- -------- --------
F - 15 NOTE 11 - INCOME TAXES (CONTINUED) The reconciliation of the income tax provision computed at the federal statutory rate to the reported income tax provision is as follows (in thousands):
Fiscal Fiscal Fiscal 1995 1994 1993 -------- -------- -------- Benefit computed at federal statutory tax rate $(55,941) $(41,284) $(105,021) (Increase) decrease in the benefit resulting from: Write-off of goodwill and beneficial leases from the disposal of the Southern Region - - 36,172 Effect of change in rate on temporary differences - (3,099) - Amortization of goodwill 5,379 5,486 6,011 State and local taxes, net of federal tax benefit - - 2,738 Other (452) 985 752 -------- -------- -------- (51,014) (37,912) (59,348) Deferred tax asset valuation allowance 51,014 37,912 63,883 -------- -------- -------- Total income tax provision $ - $ - $ 4,535 -------- -------- -------- -------- -------- --------
The components of the net deferred tax asset are as follows (in thousands):
April 1, April 2, 1995 1994 -------- -------- Deferred tax assets Non-cash interest $ 31,354 $ 19,693 Insurance reserve 15,470 15,814 Pension asset, net 7,273 5,780 Post retirement benefit liability 11,870 11,407 Other miscellaneous reserves 26,213 26,462 Net operating loss carryforward 132,253 101,594 --------- --------- Total deferred tax assets 224,433 180,750 --------- --------- Deferred tax liabilities Depreciable assets 18,227 25,558 --------- --------- Total deferred tax liabilities 18,227 25,558 --------- --------- Net deferred tax asset before valuation allowance 206,206 155,192 Valuation allowance (206,206) (155,192) --------- --------- Deferred tax asset $ - $ - --------- --------- --------- ---------
As of April 1, 1995, the Company had a net operating loss carryforward of approximately $377,866,000 for tax purposes, expiring in the years 2002 through 2010. Consummation of the Company's Plan has resulted in cancellation of indebtedness income to the extent creditors have received consideration worth less than their claims against the Company. The cancellation of indebtedness income will be offset by existing net operating loss and credit carryforwards. The Company believes that as of the Effective Date there will be no adjustment to the tax basis of its assets and there will be no remaining net operating loss or credit carryforward amounts. F - 16 NOTE 12 - DEBT As previously discussed, all long-term debt as of April 1, 1995 has been classified as Liabilities Subject to Compromise, whereas long-term debt as of April 2, 1994 has not been reclassified. Comparative amounts, had the April 1, 1995 amounts not been reclassified, are as follows (in thousands):
April 1, 1995 April 2, 1994 ------------- ------------- GRAND UNION: Equipment mortgage notes $ 2,997 $ 3,960 Bank Credit Agreement Term Loan 39,144 39,144 Revolving Credit Facility 54,000 25,000 11.25% Senior Notes due July 15, 2000 350,000 350,000 11.375% Senior Notes due February 15, 1999 175,000 175,000 12.25% Senior Subordinated Notes due July 15, 2002 500,000 500,000 12.25% Senior Subordinated Notes, Series A due July 15, 2002 50,000 50,000 13% Senior Subordinated Notes due March 1998 16,150 16,150 CAPITAL: 15% Senior Zero Coupon Notes due July 15, 2004 170,239 150,482 16.50% Senior Subordinated Zero Coupon Notes due January 15, 2007 100,965 88,116 HOLDINGS: 12% Junior Subordinated Notes due March 1999 7,862 7,151 ---------- ---------- 1,466,357 1,405,003 Less: current maturities of long-term debt 1,010 914 ---------- ---------- Long-term debt $1,465,347 $1,404,089 ---------- ---------- ---------- ----------
The Term Loan and Revolving Credit Facility prior to its amendment and restatement on June 15, 1995 provided for interest at either a floating rate of 2% and 1.5%, respectively, per annum above the prime rate, as defined, or 3.5% and 3%, respectively, per annum above the LIBOR rate, as defined, at the option of Grand Union. As of April 1, 1995, borrowings under the Term Loan and Revolving Credit Facility were at weighted interest rates of 13.0% and 12.5% (each including a 2% penalty), respectively. The Term Loan required quarterly payments of approximately $9,786,000 from September 30, 1997 through June 30, 1998. In addition, the Bank Credit Agreement provided for mandatory prepayments of the Term Loan Facility or commitment reductions under the Revolving Credit Facility based on certain asset sales outside the ordinary course of business of Grand Union and its subsidiaries, the proceeds of certain debt and equity issuances and a percentage of excess cash flow, as defined. The Revolving Credit Facility provided for borrowings or issued letters of credit aggregating $100,000,000 through February 28, 1998. Grand Union was charged commitment fees of 1/2 of 1% per annum on the average unused portion of the Revolving Credit Facility. On the Effective Date, obligations relating to the Bank Credit Agreement were paid in full and the Company entered into the New Bank Facility with a group of lenders. The New Bank Facility consists of the New Revolving Credit Facility totaling $100,000,000 and the New Term Loan totaling $104,144,371. The New Bank Facility is secured by substantially all of the assets of the Company and its subsidiaries, whether in existence at the Effective Date or acquired thereafter. The outstanding borrowings will bear interest at a rate equal to the applicable margin (1.5% and 2% for the New Revolving Credit Facility and New Term Loan, respectively) plus the higher of (a) the prime rate, as defined, (b) the adjusted certificate of deposit rate, as defined, plus 1/2 of 1% or (c) the federal funds rate, as defined, plus 1/4 of 1%. The New Bank Facility provides for mandatory prepayments based on the occurrence of certain specified transactions. The New Bank Facility contains certain restrictions and financial covenants relating to, among other things, minimum financial performance and limitations on the incurrence of additional indebtedness, asset sales, dividends, capital expenditures, prepayment of other indebtedness and restrictions on issuance of subsidiary stock. F - 17 NOTE 12 - DEBT (CONTINUED) The Company entered into a debtor-in-possession revolving credit agreement on January 30, 1995 (the "DIP Facility") with the banks party thereto. This agreement amended the bank credit agreement in effect prior to execution of the New Bank Facility. Under the DIP Facility, the Company was allowed to borrow up to $150,000,000 in the form of a revolving credit facility for its working capital and general corporate requirements during the bankruptcy proceedings. The DIP Facility provided for a commitment fee equal to 0.5% of the average unused portion and was secured by first priority liens on all the assets and capital stock of the Company which secured the Bank Credit Agreement. The Company had no borrowings under the DIP Facility during the Chapter 11 proceedings and the DIP Facility terminated on the Effective Date. The 11.25% Senior Notes and the 12.25% Subordinated Notes and Series A 12.25% Subordinated Notes required semi-annual interest payments each January 15 and July 15. The 11.375% Senior Notes required semi-annual interest payments each February 15 and August 15. The 13% Subordinated Notes required semi-annual interest payments each March 31 and September 30. Indebtedness under the Bank Credit Agreement and the Senior Notes was guaranteed by Capital and by Holdings on a pari passu basis and was secured by a pledge of substantially all of the assets of Grand Union. Capital's guarantee of the Bank Credit Agreement and the Senior Notes was secured by a pledge of the Old Common Stock of Grand Union and Holdings' guarantee of the Bank Credit Agreement and the Senior Notes was secured by a pledge of the common stock of Capital. Indebtedness under the Series A 12.25% Subordinated Notes was guaranteed by Capital on a pari passu basis with Capital's guarantee of the 12.25% Subordinated Notes. Capital's guarantee of the Series A 12.25% Subordinated Notes was not secured. As discussed in Note 1, the Company filed a petition under Chapter 11 of the Code on January 25, 1995. Pursuant to the Plan, on the Effective Date, the Senior Notes were deemed cancelled and each holder of Senior Notes became entitled to receive its pro rata share of Grand Union's New Senior Notes having an aggregate principal amount of $595,475,922. Interest on the New Senior Notes will be payable semi-annually each March 1 and September 1, commencing March 1, 1996. As discussed in Note 1, on the Effective Date, the Subordinated Notes were deemed cancelled and each holder of Subordinated Notes became entitled to receive its pro rata share of 10,000,000 shares of Grand Union's New Common Stock. Capital had outstanding $343,000,000 principal amount at maturity of Senior Zero Notes. The original issue discount of $226,855,000 was being amortized recognizing a yield to maturity of 15.71% per annum. The carrying value represented the principal at maturity less the unamortized discount. On July 15, 1999, cash interest was to begin accruing and would have been payable semi- annually on January 15 and July 15 at a rate of 15.00% on the unpaid principal amount. The Senior Zero Notes were issued with detachable warrants to purchase common stock of Holdings. Capital also had outstanding $745,000,000 principal amount at maturity of Subordinated Zero Notes. The original issue discount of $678,802,000 was being amortized recognizing a yield to maturity of 17.41% per annum. The carrying value represented the principal at maturity less the unamortized discount. The Subordinated Zero Notes were issued with detachable warrants to purchase common stock of Holdings. As discussed in Note 1, on the Effective Date, Capital's equity interest in Grand Union was cancelled without receipt by Capital of any consideration for such equity and, under certain conditions, holders of the Capital Notes became entitled to receive their pro rata share of Series 1 Warrants to purchase an aggregate of 300,000 shares of New Common Stock and Series 2 Warrants to purchase an aggregate of 600,000 shares of New Common Stock. The Plan made no provisions for the Holdings Junior Notes. F - 18 NOTE 12 - DEBT (CONTINUED) Effective January 25, 1995, as a result of the Chapter 11 filing, the Company discontinued accruing interest on the Subordinated Notes, the Capital Senior Zero Notes and the Capital Subordinated Zero Notes. Accordingly, interest expense on the debt from January 25, 1995 to April 1, 1995 of $21,269,000 has not been reflected in the Company's operating results for Fiscal 1995. The fair value of all debt instruments as of April 1, 1995 is based on the provisions of the Plan, as discussed in Note 1. In connection with the Bank Credit Agreement, Grand Union entered into an interest rate swap agreement, expiring February 9, 1996, which converts $150,000,000 of fixed rate debt into variable rate debt. Under the terms of this agreement, which continues under the New Bank Facility, Grand Union receives a fixed rate of 4.53% on $150,000,000 and pays a floating rate based on three month LIBOR, as determined in three month intervals. The floating rate at April 1, 1995 was 6.25%. The net amount received or paid is included in interest expense. Grand Union is exposed to credit loss in the event of nonperformance by the other party to the swap agreement. Grand Union does not anticipate nonperformance by the counterparty. At April 1, 1995, the estimated fair value of the interest rate swap agreement was a liability of approximately $2,158,000; this liability has not been recorded on the books of the Company. The effect of the swap was not material to interest expense in any year presented. After giving effect to the debt issued in connection with the Plan, scheduled maturities in each of the next five years are not material. NOTE 13 - PROPERTY LEASES The Company operates principally in leased stores, distribution facilities and offices, and in most cases holds renewal options with varying terms. Many of the leases contain clauses which provide for increased rentals based upon increases in real estate taxes and lessors' operating expenses. As previously discussed, the present value of net minimum lease payments for capital lease obligations as of April 1, 1995 has been reclassified to Liabilities Subject to Compromise. In accordance with the Plan, certain leases were rejected by the Company which the Company estimates will result in a payment of damages to the respective landlords relating to both capitalized and operating lease obligations of approximately $17,000,000. The following is a schedule by year of future minimum payments under capital leases together with the present value of net minimum lease payments, as well as on a pro forma basis (unaudited), excluding the effects of the rejected leases, as of April 1, 1995 (in thousands):
As of Pro forma April 1, After Lease 1995 Rejections -------- ----------- Years ended March: 1996 $ 26,696 $ 21,465 1997 24,790 19,559 1998 23,530 18,298 1999 21,984 16,752 2000 21,024 15,725 Later years 236,046 199,904 -------- -------- Total minimum lease payments 354,070 291,703 Less: estimated executory costs included in total minimum lease payments 632 563 -------- -------- Net minimum lease payments 353,438 291,140 Less: portion representing interest 204,852 175,981 -------- -------- Present value of net minimum lease payments 148,586 115,159 Less: current portion of capital lease obligations 8,331 6,943 -------- -------- Capital lease obligations $140,255 $108,216 -------- -------- -------- --------
F - 19 NOTE 13 - PROPERTY LEASES (CONTINUED) The minimum lease payments shown above do not include future minimum sublease rental income of $2,179,000 under non-cancelable subleases or payments for contingent rentals under certain store leases on the basis of sales in excess of stipulated amounts. Contingent rentals incurred on capital leases for Fiscal 1995, Fiscal 1994 and Fiscal 1993 were $253,000, $313,000 and $358,000, respectively. The following is a schedule by year of future minimum rental payments, less minimum sublease rental income, under operating leases that have initial lease terms in excess of one year as of April 1, 1995, adjusted for the effects of rejected leases (in thousands): Years ended March: 1996 $ 29,756 1997 29,284 1998 28,029 1999 26,101 2000 24,195 Later years 157,629 -------- Total minimum payments 294,994 Less: sublease rental income 6,176 -------- Net minimum rentals $288,818 -------- --------
Total rental expense for all operating leases is as follows (in thousands):
Fiscal Fiscal Fiscal 1995 1994 1993 ------- ------- ------- Minimum rentals $28,786 $26,512 $34,764 Contingent rentals 3,114 3,658 3,963 ------- ------- ------- $31,900 $30,170 $38,727 ------- ------- ------- ------- ------- -------
F - 20 NOTE 14 - STOCKHOLDERS' DEFICIT AND REDEEMABLE AND NONREDEEMABLE COMMON STOCK OF HOLDINGS Changes in Redeemable Common Stock and Nonredeemable Common Stock and Stockholders' Deficit were as follows (in thousands):
Redeemable Additional Common Common Paid-in- Stock Stock Capital (Deficit) ---------- ------ ----------- ---------- Balance at March 28, 1992 $12,358 $1 $ - $(190,812) Net loss - - - (313,421) Capital contribution - - 5,004 - Proceeds from sale of warrants - - 1,187 - Reclassification of redeemable common stock of Holdings sold by management to third parties (3,180) - 3,180 - Accrued preferred stock dividends of Holdings - - (9,371) (5,252) Notes receivable from management investors of Holdings - - - (501) Pension adjustment - - - (358) Proceeds from sale of common stock to management investors of Holdings 369 - - - ------- -- ------- --------- Balance at April 3, 1993 9,547 1 - (510,344) Net loss - - - (117,953) Accrued preferred stock dividends of Holdings - - - (16,011) Pension adjustment - - - (456) Reclassification of redeemable stock of Holdings (140) - - 140 Payments of notes receivable from former management investors of Holdings - - - 7 ------- -- ------- --------- Balance at April 2, 1994 9,407 1 - (644,617) Net loss - - - (159,830) Accrued preferred stock dividends of Holdings - - - (19,480) Pension adjustment - - - (257) ------- -- ------- --------- Balance at April 1, 1995 $ 9,407 $1 $ - ($824,184) ------- -- ------- --------- ------- -- ------- ---------
The Redeemable Common Stock represents shares of Holdings held by management investors, which were redeemable under certain limited circumstances at the option of the holder. Prior to the 1992 Recapitalization, 75,000 shares of common stock of Holdings were issued and outstanding and 17,500 shares of common stock of Holdings were reserved for issuance pursuant to exercise of outstanding options and warrants. The 1992 Recapitalization included the sale of shares of common stock and of options and warrants to purchase common stock held by Salomon Brothers Holding Company Inc, by the banks party to Grand Union's bank credit agreements which were terminated in connection with the 1992 Recapitalization and by certain members of management, as well as the purchase of shares of common stock and of warrants to purchase shares of common stock by various investment funds and institutional investors. Purchases and sales of Holdings common stock interests, including options and warrants, in connection with the 1992 Recapitalization (the "Stock Transactions") were made through a disbursement escrow account established for the purpose of effecting various transfers of interests in Holdings common stock (the "Equity Escrow"). Holdings issued 1,250 new warrants for proceeds of approximately $1,187,000 in connection with the 1992 Recapitalization. The Stock Transactions did not involve any payments by Grand Union or Holdings. Holdings received a capital contribution from the Equity Escrow of approximately $5,004,000 as a result of the net transfer of interests. As part of the Stock Transactions, the Company's Chairman transferred to the Equity Escrow an option, granted in connection with the acquisition of Grand Union by Holdings in July 1989, and a note payable to Holdings in the amount of approximately $3,563,000 in exchange for 8,229 shares of Holdings common stock. The note payable to Holdings has a maturity of 10 years, provides for interest equal to any F - 21 NOTE 14 - STOCKHOLDERS' DEFICIT AND REDEEMABLE AND NONREDEEMABLE COMMON STOCK OF HOLDINGS (CONTINUED) cash dividends paid on the 8,229 shares of Holdings common stock and is secured by, and with recourse limited to, the 8,229 shares of Holdings common stock and any property (other than cash) distributed on or with respect to such shares. The note has been recorded as an offset to the attributed value of the common shares issued by Holdings. During Fiscal 1994, Grand Union purchased 164 shares of common stock of Holdings from former management investors for $156,000 (of which $140,000 was carried as Redeemable Common Stock of Holdings) and in related transactions was repaid $7,000 to fully satisfy notes receivable from these management investors. The Company's Certificate of Incorporation and Bylaws were restated as of the Effective Date. The New Certificate authorizes 40,000,000 shares of stock, of which 30,000,000 shares will be reserved for issuance as New Common Stock and 10,000,000 shares will be reserved for issuance as new preferred stock. Under the Plan, on the Effective Date, the Old Common Stock was cancelled and, as described in Note 1, holders of the Subordinated Notes became entitled to receive an aggregate of 10,000,000 shares of New Common Stock. In addition, on the Effective Date, holders of Capital Senior Zero Notes and Capital Subordinated Zero Notes who executed releases became entitled to receive an aggregate of Series 1 Warrants to purchase 300,000 shares of New Common Stock at an exercise price of $30 per share and Series 2 Warrants to purchase 600,000 shares of New Common Stock at an exercise price of $42 per share. Both the Series 1 Warrants and the Series 2 Warrants are subject to antidilution and both will expire five years after the Effective Date. The New Common Stock and all other equity securities issued under the New Certificate will be voting securities (although the voting rights of any new preferred stock issued will differ from those of New Common Stock) and will not have any preemptive rights to subscribe for additional shares. The New Common Stock is not subject to conversion or redemption and when issued will be fully paid and non-assessable. In accordance with the Plan, the Company will use its reasonable best efforts to cause the New Common Stock to be listed on one or more stock exchanges or quoted on the National Market System within 120 days after the Effective Date. Changes in Redeemable Stock of Holdings were as follows (in thousands):
Series A Series B Series C Common Preferred Preferred Preferred Stock Stock Stock Stock Total ------- --------- --------- --------- --------- Balance at March 28, 1992 $12,358 $48,262 $7,898 $60,396 $128,914 Reclassification of redeemable stock of Holdings (3,180) - - - (3,180) Proceeds from the sale of Holdings common stock to management investors 369 - - - 369 Accrued preferred stock dividends - 6,071 955 7,597 14,623 Preferred stock dividends - - (939) - (939) ------- ------- ------ ------- -------- Balance at April 3, 1993 9,547 54,333 7,914 67,993 139,787 Reclassification of redeemable stock of Holdings purchased from management investors (140) - - - (140) Accrued preferred stock dividends - 6,697 936 8,378 16,011 Preferred stock dividends - - (939) - (939) ------- ------- ------ ------- -------- Balance at April 2, 1994 9,407 61,030 7,911 76,371 154,719 Accrued preferred stock dividends - 8,152 1,099 10,229 19,480 ------- ------- ------ ------- -------- Balance at April 1, 1995 $ 9,407 $69,182 $9,010 $86,600 $174,199 ------- ------- ------ ------- -------- ------- ------- ------ ------- --------
Holdings had outstanding at April 1, 1995 three classes of preferred stock. The Series A cumulative exchangeable redeemable preferred stock ("Series A preferred stock") had a $.01 par value; 500,000 shares authorized; and 351,745 shares issued and outstanding. The Series B cumulative redeemable convertible preferred stock ("Series B preferred stock") had a $.01 par value; 500,000 shares authorized; and 78,256 shares issued and outstanding. The Series C cumulative redeemable convertible preferred stock ("Series C preferred stock") had a $.01 par value; 500,000 shares authorized; and 440,771 shares issued and outstanding. F - 22 NOTE 14 - STOCKHOLDERS' DEFICIT AND REDEEMABLE AND NONREDEEMABLE COMMON STOCK OF HOLDINGS (CONTINUED) The Series A, Series B and Series C preferred stock each carried dividend rates of 12% per annum which would have increased from 12% to 20% as of July 14, 1996. At the discretion of Holdings, cash dividends were payable on the Series A, Series B and Series C preferred stock semi-annually each March 1 and September 1; however, no cash dividends could be declared or paid on the Series A, Series B or Series C preferred stock while the Bank Credit Agreement was outstanding or if such declaration or payment would have violated the terms of indebtedness incurred to refinance the 13% Subordinated Notes or the Bank Credit Agreement. If cash dividends were prohibited, dividends on the Series B preferred stock were payable in Holdings Junior Notes annually each March 1. Series B preferred stock, and accrued and unpaid dividends thereon, could have been converted at any time, at the holder's option, into shares of Series C preferred stock. Series C preferred stock, and accrued and unpaid dividends thereon, could have been converted at any time, at the holder's option, into shares of Series B preferred stock; or the Series C preferred shares could have been converted at any time, at the holder's option, into the same number of shares of Series B preferred stock and the accrued and unpaid dividends on such stock into a principal amount of Holdings Junior Notes. Holdings preferred stock had no voting rights except as required by law and except that holders of each series had a class vote as to any matter which would change the preferences, rights or powers of such series and the vote of all series of preferred stock, voting together, was required to issue any prior ranking preferred stock. Through July 23, 1994, dividends accrued on the preferred stock at a rate of 12% per annum, reflecting management's estimate that the preferred stock would be redeemed prior to the July 14, 1996 dividend step-up date. As of July 24, 1994, the Company changed its estimate of the date on which the preferred stock was expected to be redeemed from on or before the date of the dividend step-up to an indeterminate date. Accordingly, from July 24, 1994 through the Filing Date, the Company accrued dividends recognizing a yield to redemption rate of 18.2% per annum for the Series A preferred stock, 19.3% for the Series B preferred stock and 18.3% for the Series C preferred stock. Accrued undeclared dividends were recorded as an increase of stockholders' deficit and as an increase in the respective preferred stock carrying value. Series A preferred stock could have been exchanged into Holdings Junior Notes at the sole option of Holdings, in whole, or in part. Series A, Series B and Series C preferred stock could have been redeemed at any time at the option of Holdings, in whole, or in part. The redemption of Series A, Series B and Series C preferred stock must be in pro rata amounts. Series A, Series B and Series C preferred stock was redeemable at the holders' option under certain limited circumstances relating to change of control and, accordingly, outstanding amounts of these classes of preferred stock are shown as Redeemable stock of Holdings in the accompanying Consolidated Balance Sheet as of April 2, 1994. The redemption price of Series A, Series B and Series C preferred stock was one hundred dollars per share plus accrued and unpaid dividends as of the date of redemption. The liquidation preference of Series A, Series B and Series C preferred stock was one hundred dollars per share plus accrued and unpaid dividends. Upon the liquidation or dissolution of Holdings, the priority of amounts payable to holders of preferred stock is as follows: (i) the amount of accrued and unpaid dividends on the Series B preferred stock, and any outstanding principal and accrued interest on Holdings Junior Notes; (ii) the amount of accrued and unpaid dividends on the Series A and Series C preferred stock; (iii) one hundred dollars per share for outstanding Series A and Series C preferred stock; and (iv) one hundred dollars per share for outstanding Series B preferred stock. As discussed in Note 1, Holdings filed a voluntary Chapter 11 petition in the Bankruptcy Court on February 16, 1995. The principal asset of Holdings, indirectly, was, until the Effective Date the Old Common Stock of Grand Union. As described in Note 1, the Old Common Stock of Grand Union was cancelled on the Effective Date. The Redeemable Stock of Holdings has been classified as Redeemable Stock Subject to Compromise in the accompanying Balance Sheet. The Plan made no provision for the holders of the Redeemable Preferred Stock or the common shares or warrants to purchase common shares of Holdings. Accordingly, as of the Filing Date, dividends were no longer accrued on the preferred stock. The fair value of Holdings' Redeemable Stock as of April 1, 1995 is based on the provisions of the Plan as discussed in Note 1. F - 23 NOTE 15 - PENSION PLANS The Company's net periodic pension expense for Fiscal 1995, Fiscal 1994 and Fiscal 1993 was $5,947,000, $6,744,000 and $3,867,000, respectively, and included the following components (in thousands):
Fiscal Fiscal Fiscal 1995 1994 1993 -------- -------- -------- Service cost - benefits earned during the period $ 4,715 $ 5,212 $ 5,629 Interest costs on projected benefit obligations 13,706 13,742 13,726 Return on plan assets (12,179) (9,068) (21,504) Net amortization and deferral (4,042) (7,610) 4,337 Charges relating to pension settlement and early retirement programs 3,747 4,468 - Curtailment loss - - 1,679 -------- ------- -------- Net periodic pension expense $ 5,947 $ 6,744 $ 3,867 -------- ------- -------- -------- ------- --------
During Fiscal 1995, the Company incurred charges totaling $3,747,000 relating to pension settlements, under both its qualified and nonqualified pension plans, principally as a result of an early retirement program offered to certain employees. During Fiscal 1994, the Company incurred a charge of $4,468,000 relating to an early retirement program offered to certain employees. As a result of the disposal of the Southern Region and an early retirement program offered to certain employees, a net curtailment loss of approximately $1,679,000 was incurred during Fiscal 1993. The actuarial present value of benefit obligations and the funded status of the Company's qualified pension plan as of April 1, 1995 and April 2, 1994 are as follows (in thousands):
April 1, April 2, 1995 1994 -------- -------- Actuarial present value of benefit obligations: Vested benefits $ 142,272 $ 160,910 Nonvested benefits 4,383 4,503 --------- --------- Total benefits $ 146,655 $ 165,413 --------- --------- --------- --------- Projected benefit obligations ($164,037) ($177,518) Plan assets, primarily stocks and bonds, at fair value 161,201 181,337 --------- --------- Funded status (2,836) 3,819 Unrecognized net loss 20,401 18,299 Unrecognized prior service cost 1,480 1,736 --------- --------- Pension asset $ 19,045 $ 23,854 --------- --------- --------- ---------
F - 24 NOTE 15 - PENSION PLANS (CONTINUED) The actuarial present value of benefit obligations of the Company's unqualified pension plan as of April 1, 1995 and April 2, 1994 is as follows (in thousands):
April 1, April 2, 1995 1994 -------- -------- Actuarial present value of benefit obligations: Vested benefits $ 4,161 $ 5,739 Nonvested benefits - 624 ------- ------- Total benefits $ 4,161 $ 6,363 ------- ------- ------- ------- Projected benefit obligations ($5,076) ($7,110) Unrecognized net loss 1,545 2,033 Unrecognized prior service cost (28) (32) Adjustment required to recognize minimum liability (602) (1,254) ------- ------- Pension obligation ($4,161) ($6,363) ------- ------- ------- -------
The pension asset and pension obligation are included in Other assets and Liabilities subject to compromise, respectively, in the accompanying Consolidated Balance Sheet. Significant actuarial assumptions used in all Company sponsored plans were as follows:
Fiscal Fiscal Fiscal 1995 1994 1993 -------- -------- -------- Discount rates 7.5% 7.0% - 8.0% 8.0% - 8.8% Rates of increase in future compensation 3.5% - 3.9% 3.9% - 4.3% 4.9% - 5.3% Long-term rate of return on plan assets 9.5% 9.5% 9.5%
NOTE 16 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS The Company provides certain health care and life insurance benefits for substantially all of its full-time non-union employees and union employee groups. The Company's postretirement plans currently are not funded. The Company's union employee groups are participants in multi-employer plans which require monthly contributions and which are not subject to the provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS No. 106"). In Fiscal 1993, the Company recognized $2,329,000 as an expense for postretirement health care and life insurance benefits, for its non-union employees, as claims were paid (pay-as-you-go basis). Additionally, at April 3, 1993, in connection with the disposition of the Southern Region, Grand Union provided approximately $2,920,000 relating to anticipated postretirement health care and life insurance benefits of Southern Region employees. Effective April 4, 1993, the Company adopted FAS No. 106, which requires the Company to accrue the estimated cost of retiree benefit payments during the years each employee provides services. The Company recognized the cumulative effect of this obligation, an increase in accrued postretirement benefit costs of $30,308,000 and a decrease in net earnings of $30,308,000, at April 4, 1993. F - 25 NOTE 16 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS (CONTINUED) The unfunded accumulated postretirement benefit obligation consists of the following at April 1, 1995, April 2, 1994 and April 4, 1993, including amounts provided at April 3, 1993 in connection with the disposition of the Southern Region:
April 4, 1993 April 1, 1995 April 2, 1994 (date of adoption) ------------- ------------- ------------------ (in thousands) Retirees $16,062 $17,050 $18,129 Fully eligible active plan participants 2,924 2,411 5,807 Other active plan participants 16,131 15,645 9,292 Unrecognized net loss (1,226) (1,412) - ------- ------- ------- $33,891 $33,694 $33,228 ------- ------- ------- ------- ------- -------
Net postretirement benefit cost for Fiscal 1995 and Fiscal 1994 consisted of the following components (in thousands): Fiscal Fiscal 1995 1994 ------ ------ Service cost - benefits earned during the period $ 695 $ 728 Interest cost on accumulated postretirement benefit obligation 2,604 2,571 ------ ------ $3,299 $3,299 ------ ------ ------ ------
The assumed health care trend cost rate used in measuring the accumulated postretirement obligation as of April 1, 1995 was 13% for associates pre-age 65 and 10% for associates post-age 65 for 1995 decreasing each successive year by 1% until the respective trend rates reach 5.5% after which the trend rate remains constant. An increase of 1% in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation and the net postretirement health care cost by approximately $800,000 and $100,000, respectively. As of April 2, 1994, the rate used in measuring the accumulated postretirement obligation was 14% for associates pre-age 65 and 11% for associates post-age 65, decreasing each successive year by 1% until the respective trend rates reach 5% after which the trend rate remains constant. Prior to January 1, 1994, Grand Union provided medical benefits which were, in part, dependent upon the health care cost rate. Effective January 1, 1994, Grand Union modified its postretirement health care benefits to provide benefits for all future retirees based on a service related flat dollar premium allowance. Accordingly, the health care trend rate will not be a significant factor in determining Grand Union's liability for future retirees under its postretirement health care arrangements. The modification to the plan did not have a material effect on the accumulated postretirement benefit obligation. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 8.0% and 7.5%, respectively, at April 1, 1995 and April 2, 1994, and the interest cost component of the net periodic cost was 7.5% for Fiscal 1995 and 8% for Fiscal 1994. NOTE 17 - RELATED PARTY TRANSACTIONS Prior to the Effective Date, the Company was party to a financial advisory agreement with MTH (the "MTH Agreement"), pursuant to which MTH was to have provided certain financial consulting and business management services to the Company through July 1997. In accordance with the Plan, the MTH Agreement was terminated on the Effective Date and Grand Union executed a settlement agreement (the "MTH Settlement Agreement"). The MTH Settlement Agreement provides for the termination of the MTH Agreement, payment by Grand Union of accrued and unpaid fees under the MTH Agreement through the Effective Date and for the indemnification of MTH and certain entities related to MTH (the "MTH Entities") from certain claims and liabilities, subject to the terms and limitations set forth in the MTH Settlement Agreement (see note 18). During Fiscal 1995, Fiscal 1994 and Fiscal 1993, the Company paid $750,000, $900,000 and $825,000, respectively, to MTH, pursuant to the MTH Agreement. F - 26 NOTE 17 - RELATED PARTY TRANSACTIONS (CONTINUED) In connection with the 1992 Recapitalization, Holdings, through Grand Union, made a $15,000,000 prepayment as required by an agreement (the "Operating Agreement") between Grand Union and P&C Food Markets ("P&C Foods"), then a subsidiary and currently a division of The Penn Traffic Company ("Penn Traffic"), a company indirectly controlled by MTH. Pursuant to the Operating Agreement, Grand Union acquired in July 1990 the right to operate 13 P&C Foods' stores in New England under the Grand Union name until July 2000 for an average annual rent of approximately $10,700,000, with an option to extend the term of such operation for an additional five years. The prepayment results in a reduction of rent payments of approximately $3,200,000 per year over the remaining life of the Operating Agreement. In July 1990, P&C Foods also granted Grand Union an option (the "P&C Foods Purchase Option"), at a cost of $7,500,000, to purchase such stores at an amount defined in the Operating Agreement which approximates fair market value. The Operating Agreement was assumed during the Chapter 11 case and will continue on its current terms. In September 1993, Grand Union entered into a program to consolidate the purchasing, storage and distribution of health and beauty care and general merchandise product with Penn Traffic. Under this program, the inventory of health and beauty care and general merchandise product is owned by Penn Traffic and is stored in Grand Union's warehouse in Montgomery, New York. The products are distributed from the warehouse to Grand Union stores and certain Penn Traffic stores and wholesale customers. Grand Union reimburses Penn Traffic for shipments to Grand Union stores based on terms defined in the agreement. Grand Union purchases the health and beauty care products for both Grand Union and those Penn Traffic stores and wholesale customers serviced by the warehouse and is reimbursed by Penn Traffic for such purchases based on terms defined in the agreement. Penn Traffic purchases the general merchandise product for both Grand Union and Penn Traffic. Under the arrangement, Grand Union and Penn Traffic share the cost of operating the warehouse based on their proportionate usage of the product. In connection with this agreement, Penn Traffic purchased all of the health and beauty care and general merchandise inventories previously owned by Grand Union for approximately $12,821,000. During Fiscal 1995 and Fiscal 1994, Grand Union purchased from vendors approximately $120,027,000 and $75,262,000, respectively, of health and beauty care products under the agreement. Additionally, Grand Union purchased approximately $87,208,000 and $48,163,000, respectively, from Penn Traffic's inventory of health and beauty care and general merchandise products at cost. At April 1, 1995 and April 2, 1994, respectively, Grand Union had recorded a net receivable of approximately $7,705,000 and $5,014,000 related to this agreement. Under the agreement governing such arrangement, either Penn Traffic or Grand Union may terminate the program from and after July 1, 1995, upon six (6) months prior written notice. This agreement is being reevaluated in connection with the Chapter 11 proceedings. Grand Union believes this arrangement will be terminated within the next several months. The Company has no other significant business relationships with Penn Traffic. NOTE 18 - CONTINGENCY MATTERS AND COMMITMENTS As discussed in Note 17, on the Effective Date, the Company entered into the MTH Settlement Agreement which provides for, among other things, the idemnification of MTH and the MTH Entities by Grand Union for certain claims and liabilities, subject to the terms and limitations set forth in the MTH Settlement Agreement. The MTH Settlement Agreement requires Grand Union to pay or reimburse MTH and the MTH Entities for the first $3,000,000 of any liability on certain claims and two-thirds of any additional amount above $3,000,000, provided that the Company's obligation to pay such claims shall not exceed $13,000,000 in the aggregate. In accordance with the terms of the MTH Settlement Agreement, the first $3,000,000 of the Company's obligation for the fund described above was deposited in escrow on the Effective Date. The Company is also subject to certain other legal proceedings and claims arising in connection with its business. It is management's opinion that the ultimate resolution of such claims will not have a material adverse effect on the Company's consolidated results of operations or its financial position. F - 27 NOTE 19 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Fiscal Fiscal Fiscal 1995 1994 1993 -------- -------- -------- (in thousands) Cash paid for interest $89,985 $142,501 $115,612 Cash paid for income taxes - - 3,380 Capital lease obligations incurred 31,686 24,522 22,146 Accrued dividends on preferred stock of Holdings 19,480 16,011 14,623 Issuance of Junior Notes of Holdings - 939 939
NOTE 20 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FISCAL 1995: 1st (a) 2nd 3rd 4th -------- -------- -------- -------- (in thousands) Sales $747,692 $556,663 $563,281 $524,060 Gross profit 224,413 166,098 149,524 147,579 Charge relating to pension settlement and early retirement program - - - (3,747) Reorganization items - - (1,882) (8,888) Net loss (24,982) (29,465) (59,518) (45,865) Accrued preferred stock dividends (5,293) (6,411) (6,469) (1,307) Net loss applicable to common stock (30,275) (35,876) (65,987) (47,172) Net loss per share applicable to common stock (402.46) (476.92) (877.21) (627.09) FISCAL 1994: 1st (a) 2nd 3rd 4th -------- -------- -------- -------- (in thousands) Sales $761,098 $559,769 $583,492 $572,980 Gross profit 215,102 159,614 171,145 165,175 Charge relating to pension settlement and early retirement program - - - (4,468) Loss before income taxes and cumulative effect of accounting change (28,457) (16,546) (16,933) (25,709) Cumulative effect of accounting change (30,308) - - - Net loss (58,765) (16,546) (16,933) (25,709) Accrued preferred stock dividends (4,743) (3,667) (3,760) (3,841) Net loss applicable to common stock (63,508) (20,213) (20,693) (29,550) Net loss per share applicable to common stock (843.20) (268.65) (275.09) (392.83) (a) Represents 16 weeks, all other quarters are 12 weeks.
During each of the 12 weeks ended January 7, 1995 and April 1, 1995, the Company recorded reorganization items of $1,882,000 and $8,888,000, respectively, related to expenses incurred in connection with the restructuring. F - 28 EX-2.2 2 EXHIBIT 2.2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) Chapter 11 ) THE GRAND UNION COMPANY, ) Case No. 95-84 (PJW) also d/b/a Big Star, ) ) Debtor. ) FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER UNDER 11 U.S.C. Section 1129 CONFIRMING SECOND AMENDED PLAN OF REORGANIZATION PROPOSED BY THE GRAND UNION COMPANY The Grand Union Company (with respect to periods prior to the Effective Date, the "Debtor" or, with respect to periods from and after the Effective Date, "Reorganized Grand Union" or, with respect to all periods, "Grand Union")), having filed with this Court on April 19, 1995, the Second Amended Chapter 11 Plan of Reorganization of The Grand Union Company dated April 19, 1995 (as modified or amended pursuant to the Modifications (as defined below in paragraph 38 hereof), the "Plan"); and on April 19, 1995, this Court having entered an order (the "Global Order"), among other things: (a) approving the Disclosure Statement for Second Amended Chapter 11 Plan of Reorganization of The Grand Union Company dated April 19, 1995 (the "Disclosure Statement") as containing adequate information within the meaning of section 1125 of the Bankruptcy Code; (b) fixing May 31, 1995 as the date for the hearing to consider confirmation of the Plan (the "Confirmation Hearing"); and (c) approving proposed solicitation materials (including, without limitation, the proposed form of ballots), solicitation, voting and confirmation procedures, as clarified by this Court's Order Clarifying Disclosure Statement Order, dated May 11, 1995 (the "Voting Procedures")(1); and upon the affidavit of Kathy Gerber regarding Ballots and Labels Respecting Mailing of Solicitation Packages (the "Preparation Affidavit"), the affidavit of Kathy Gerber regarding Service of Solicitation Packages (the "Service Affidavit") and the affidavit of Kathy Gerber regarding Service of Notice of Confirmation Hearing and Time Fixed for Voting on Plan (the "Notice Affidavit"), each sworn to on May 31, 1995, (the Preparation Affidavit, Service Affidavit and Notice Affidavit are hereinafter referred to collectively as the "Mailing Report"), (i) setting forth the time and manner of mailing and transmittal of the Disclosure Statement, the Plan, the Notice of Confirmation Hearing and Time Fixed for Voting on Plan, the appropriate ballots, pre-addressed return envelopes and instructions attached thereto (such ballots, together with the return envelopes and instructions, being hereinafter referred to as the "Ballots"), and (ii) except as otherwise specifically noted in the Service Affidavit and the Notice Affidavit, showing that such documents were mailed and transmitted in accordance with the - - --------------------- (1) Each capitalized term used in this Order and not otherwise defined in this Order shall have the meaning ascribed to such term in the Plan. -2- Voting Procedures; and upon the affidavits or certifications as the case may be setting forth the time and manner of the publication of the notice approved by the Court in paragraph 15 of the Global Order for publication in THE NEW YORK TIMES (national edition), THE WALL STREET JOURNAL (national edition), THE ALBANY TIMES UNION, THE BERGEN COUNTY RECORD and SUPERMARKET NEWS, attesting that such notices were published in accordance with such paragraph; and upon the affidavit of Kathy Gerber, sworn to on May 31, 1995, attesting to the results of voting on the Plan (the "Voting Results Report"); and upon (1) Letter from County of Albany; (2) Limited Response and Request for Clarification of Second Amended Plan of Reorganization by Carolina Reclamation Service, Inc.; (3) Letter from Tax Collector for the Town of Ghent; (4) United States' Objection To Confirmation of Debtor's Second Amended Chapter 11 Plan; (5) Objection to 2nd Amended Plan of Reorganization by William Kuntz, III; (6) Objection to Confirmation of Second Amended Chapter 11 Plan of The Grand Union Company dated April 19, 1995 by Heritage Square Associates, ET AL. (the "Heritage Objection"); (7) Objection to Debtor's Second Amended Plan of Reorganization by Lavaca County, Texas; (8) Letter from Personal Injury Claimant Edna Leeds; (9) Notice of Objection of an Unsecured, Nonpriority Claimant (Nancy Merz) and accompanying Affidavit; (10) Letter from Oakland 202 Investors LP; (11) Objection to Confirmation, or, in the Alternative Motion for Relief from Stay Including Memorandum -3- of Points and Authorities by Marjorie E. Kalback, ET AL.; (12) Objections of The Prudential Insurance Company of America to Confirmation of Debtor The Grand Union Company's Second Amended Chapter 11 Plan of Reorganization; (13) Letter from Personal Injury Claimants Blessed and Tzshanna Shelembe; (14) Notice of Objection of Brenda Phelps; (15) Objection by the New York City Department of Finance to Confirmation of the Debtor's Second Amended Plan of Reorganization; (16) Objection of Oppenheimer East Point Associates to Confirmation of the Debtor's Second Amended Chapter 11 Plan of Reorganization; (17) Objection by the United States to the Second Amended Chapter 11 Plan of the Grand Union Company; (18) Letter of Fruit Salad, Inc.; and (19) Ballot of George Finnegan; and upon the Notice of Identification of Directors of Reorganized Grand Union (the "Notice of Directors"); and based on the Memorandum of Law in Support of Confirmation of the Plan, dated May 30, 1995, filed by Grand Union, the Confirmation Hearing held before this Court, the evidence presented thereat, the argument of counsel and all pleadings, proceedings, and evidence before this Court in this case, and after due deliberation and sufficient cause appearing therefor; it is FOUND and DETERMINED, in accordance with, among other things, sections 363, 365, 1123, 1126, 1127, 1129, -4- 1141 and 1145 of the Bankruptcy Code and Bankruptcy Rules 3018, 3019 and 9019, that:(2) A. This Court has jurisdiction over the Chapter 11 Case pursuant to 28 U.S.C. Sections 157 and 1334 and the "Standing Order of Referral of Cases to Bankruptcy Judges," dated July 23, 1984, of the United States Court for the District of Delaware. Confirmation of the Plan presents a core bankruptcy matter under title 28 of the United States Code, 28 U.S.C. 157(b)(2)(L), over which this Court has jurisdiction to enter appropriate orders and judgments. Venue of the Chapter 11 Case is properly in this District pursuant to 28 U.S.C. Sections 1408 and 1409. B. This Court takes judicial notice of the docket and the claims register maintained by the Clerk of the Bankruptcy Court and/or its duly- appointed agent respecting the Chapter 11 Case. C. The procedures used to distribute and tabulate the Ballots were fair, properly conducted, and in accordance with the Global Order and/or all applicable Bankruptcy Rules. - - ----------------------- (2) The findings, determinations, orders, judgments and decrees set forth herein constitute this Court's findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. Each finding of fact set forth herein, to the extent it is or may be so deemed a conclusion of law, shall also constitute a conclusion of law. Each conclusion of law set forth herein, to the extent it is or may be so deemed a finding of fact, shall also constitute a finding of fact. -5- D. The Disclosure Statement, the Plan, the Ballots, the Notice of Confirmation Hearing and the Global Order were transmitted and served in compliance with the Bankruptcy Rules. The transmittal and service as described in the Mailing Report were adequate and sufficient under the circumstances of this Chapter 11 Case. Adequate and sufficient notice of the Confirmation Hearing and other requirements and deadlines, hearings and other matters described in the Global Order were given in compliance with the Bankruptcy Rules and the Global Order, and no other or further notice is required. E. No modifications to the Plan have been made other than those effected by this Order. The Modification(s) to the Plan effected by this Order are corrective, do not materially and adversely change the treatment of the claim of any creditor or the interest of any equity security holder who has not accepted the Modifications in writing and do not require a re-solicitation of the Plan. Disclosure of the Modifications on the record of the Confirmation Hearing constitutes due and sufficient notice thereof under the circumstances of this Chapter 11 Case. F. The Plan has been accepted in accordance with section 1126(c) of the Bankruptcy Code by Classes 1, 2, 4, 5, 7, 8, 9 and 10. Classes 3 and 6 are not Impaired under the Plan and each holder of a Claim in such Classes is deemed to have accepted the Plan in accordance with section 1126(f) of the Bankruptcy Code. Classes 11 and 12 are not -6- entitled to receive any distribution of any kind under the Plan and therefore are deemed to have rejected the Plan in accordance with section 1126(g) of the Bankruptcy Code. G. Each of the conditions to confirmation of the Plan contained in the Plan has been satisfied or waived in accordance with the terms of the Plan. H. Based on the record before the Court in this Chapter 11 Case, the Debtor, the Official Committee, the Informal Committees, the Capital Committee, the Informal Zero Committee, the Senior Bank Agent and each of their respective directors, officers, employees, shareholders, agents (including MTH), members, representatives, attorneys, accountants and other advisors have acted and, to the extent future actions of the above are consistent with the Plan, the MTH Settlement Agreement, the Zero Settlement, the Voting Procedures or any order entered in this case, will have acted in "good faith" within the meaning of section 1125(e) of the Bankruptcy Code and in compliance with the applicable provisions of the Bankruptcy Code and Bankruptcy Rules in connection with all of their respective activities relating to the solicitation of acceptances to the Plan and their participation in the activities described in section 1125(e) of the Bankruptcy Code. Without limitation, to the extent any such Entity participated or, to the extent future actions of such Entity are consistent with the Plan, the MTH Settlement Agreement, the Zero Settlement, the Voting Procedures or any order entered in this case, participates in -7- the offer, sale, distribution, issuance and purchase of the shares of New Senior Notes, New Common Stock or Warrants, such purchase, offer, sale or issuance is hereby deemed to be in "good faith," within the meaning of section 1125(e) of the Bankruptcy Code and in compliance with the applicable provisions of the Bankruptcy Code and Bankruptcy Rules. I. The Debtor is a proper proponent of the Plan pursuant to section 1121 of the Bankruptcy Code and Bankruptcy Rule 3016. The Plan (and each modification thereto) is dated and identified as the Debtor's, thereby satisfying Bankruptcy Rule 3016(b). The Debtor has filed the Disclosure Statement with the Plan, thereby satisfying Bankruptcy Rule 3016(c). J. The Plan complies with all applicable provisions of the Bankruptcy Code, including sections 1122 and 1123, and thereby satisfies section 1129(a)(1) of the Bankruptcy Code, as: (i) it designates eleven classes of Claims and one class of Interests, (ii) there is a reasonable basis for the classification scheme and all Claims or Interests in each Class are substantially similar, (iii) it specifies that Classes 3 and 6 are not Impaired, (iv) it specifies the treatment of all Impaired Claims, (v) it provides for the same treatment of each Claim or Interest in each respective Class unless the holder of a particular Claim or Interest has agreed to a less favorable treatment of such Claim or Interest, (vi) there are adequate and proper means for the Plan's implementation, (vii) it pro- -8- vides for the effectiveness of the Restated Certificate of Incorporation, which contains provisions restricting the issuance of non-voting equity securities by Reorganized Grand Union to the extent required by the Bankruptcy Code, and (viii) it contains only provisions that are consistent with the interests of creditors and equity security holders and with public policy respecting the manner of selection of each officer and director under the Plan and any successor to such officers and directors. K. The Plan is consistent with section 1123(b) of the Bankruptcy Code, in that it provides: (i) that Claims in Classes 3 and 6 are not Impaired, and that Claims in Classes 1, 2, 4, 5, 7, 8, 9, 10 and 11 and Interests in Class 12 are Impaired; (ii) for the assumption and rejection of certain executory contracts and unexpired leases and those parties to rejected executory contracts or unexpired leases were or will be given adequate notice of the Debtor's rejection and an opportunity to file proofs of claim if they have not already done so; (iii) for approval of the MTH Settlement Agreement and implementation of the Zero Settlement approved by Order of this Court, dated May 18, 1995; and (iv) for the inclusion of other provisions not inconsistent with the applicable provisions of the Bankruptcy Code, including the retention of jurisdiction by the Bankruptcy Court under Section 16.01 of the Plan. L. The Debtor has complied with all applicable provisions of the Bankruptcy Code thereby satisfying section -9- 1129(a)(2) of the Bankruptcy Code, in that, INTER ALIA, the solicitation of acceptances and rejections from holders of Impaired Claims entitled to vote was in compliance with the Voting Procedures, the Bankruptcy Code (including the provisions of sections 1125 and 1126 of the Bankruptcy Code regarding disclosure and plan solicitation) and the Bankruptcy Rules. M. The Debtor has proposed the Plan in good faith and not by any means forbidden by law, thereby satisfying section 1129(a)(3) of the Bankruptcy Code. N. The Plan satisfies section 1129(a)(4) of the Bankruptcy Code in that any payment made or to be made by the Debtor, or by a person issuing securities or acquiring property under the Plan, for services or for costs and expenses in or in connection with the Chapter 11 Case, or in connection with the Plan and incident to the Chapter 11 Case, has been approved by, or is subject to the approval of (in the case of costs and expenses payable pursuant to Section 2.02 of the Plan, upon request of any party in interest), the Bankruptcy Court as reasonable. O. The Debtor has complied with section 1129(a)(5) of the Bankruptcy Code. At or prior to the Confirmation Hearing, the Debtor properly and adequately disclosed or otherwise disclosed the procedures for determining: (i) the identity and affiliations of all individuals proposed to serve as directors or officers on and after the Effective Date, (ii) the compensation and indemnification -10- arrangements for each proposed member of the Post Reorganization Board (which arrangements have not been fully determined, and will be fixed pursuant to the Delaware General Corporation Law, the Restated Certificate of Incorporation and the Restated Bylaws), and (iii) the identity and compensation of each insider, if any, who will be employed or retained on and after the Effective Date. The appointment to such office of each such individual and the proposed compensation and indemnification arrangements (and the procedures for fixing such compensation and indemnification) for Reorganized Grand Union directors and officers is consistent with the interests of the creditors and equity security holders and with public policy. P. Section 1129(a)(6) of the Bankruptcy Code is satisfied because the Plan does not provide for any change in rates over which a governmental regulatory commission has jurisdiction. Q. The Plan satisfies section 1129(a)(7) of the Bankruptcy Code because with respect to each Impaired Class of Claims and Interests under the Plan, each holder of an Allowed Claim or Allowed Interest of such Class either (i) has accepted the Plan or (ii) will receive or retain under the Plan on account of such Claim or Interest property of a value, as of the Effective Date, that is not less than the amount that such holder would receive or retain if the Debtor were liquidated under chapter 7 of the Bankruptcy Code on such date. -11- R. Each Class of Claims (other than Class 11 Subordinated Claims) is either unimpaired by the Plan or has duly accepted the Plan in accordance with section 1126 of the Bankruptcy Code. With respect to Class 11 Claims and Class 12 Interests, the Plan satisfies the requirements of section 1129(b) of the Bankruptcy Code and thus may be confirmed without compliance with section 1129(a)(8) because the Plan does not discriminate unfairly against, and is fair and equitable with respect to, such Classes, each within the meaning of section 1129(b) of the Bankruptcy Code. S. The Plan provides for the treatment of each claim of a kind described in sections 507(a)(1) through 507(a)(7) of the Bankruptcy Code in the manner required by section 1129(a)(9) of the Bankruptcy Code. T. The Plan satisfies section 1129(a)(10) of the Bankruptcy Code because at least one Class of Claims that is impaired under the Plan has accepted the Plan, determined without including any acceptance of the Plan by any insider of the Debtor holding a claim in such Class. U. The Plan satisfies section 1129(a)(11) of the Bankruptcy Code because confirmation of the Plan is not likely to be followed by the liquidation or the need for further financial reorganization of Reorganized Grand Union. The Plan presents a workable scheme of organization and operation and there is a reasonable probability that the provisions of the Plan will be performed. The Plan is found and determined to be feasible. Reorganized Grand Union will -12- have adequate capital to undertake its business plan and meet its ongoing obligations, and will be under the control of competent management. V. All fees payable under 28 U.S.C. Section 1930 have been paid or the Plan provides for the payment of all such fees on the Effective Date, thereby satisfying section 1129(a)(12) of the Bankruptcy Code. W. Section 16.05 of the Plan provides for Reorganized Grand Union to continue to pay all retiree benefits, as that term is defined in section 1114 of the Bankruptcy Code, to the extent required by section 1129(a)(13) of the Bankruptcy Code, without prejudice to Reorganized Grand Union's right under applicable non-bankruptcy law to modify, amend, or terminate the foregoing arrangements, thereby satisfying section 1129(a)(13) of the Bankruptcy Code. X. No governmental unit that is a party in interest in this Chapter 11 Case has asserted that the principal purpose of the Plan is the avoidance of taxes or the avoidance of the application of section 5 of the Securities Act of 1933. Y. Based upon the record of this Chapter 11 Case, including the instruments submitted as part of the evidentiary hearing at the Confirmation Hearing, the New Senior Notes, the New Common Stock, the Warrants and the New Common Stock to be issued upon exercise of the Warrants distributed under the Plan shall be validly issued by, and valid, binding and enforceable obligations of, Reorganized -13- Grand Union (and in the case of New Common Stock will be fully paid and nonassessable) immediately upon their distribution to holders of Allowed Claims pursuant to the Plan (or in the case of New Common Stock to be issued upon exercise of the Warrants, upon such exercise). The offer, distribution and sale of the foregoing (and the right to receive or purchase any New Common Stock upon exercise of the Warrants) to holders of Allowed Claims is in exchange for such Claims within the meaning of section 1145(a)(1)(A) of the Bankruptcy Code. Z. Based on the record in this Chapter 11 Case, it appears that all material information concerning the Debtor and its financial condition is set forth in the Disclosure Statement and has been disclosed fully and adequately and that the liquidation analysis contained in the Disclosure Statement (i) is accurate as of the time it was prepared and subsequent developments have not rendered it inaccurate in any material respect; (ii) is based upon reasonable and sound assumptions; and (iii) provides a reasonable estimate of the liquidation values upon conversion to a chapter 7 proceeding. AA. The making, delivery, issuance, transfer, assignment, exchange, filing or recording at any time of any deed, bill of sale, mortgage, leasehold mortgage, deed of trust, leasehold deed of trust, memorandum of lease, notice of lease, assignment, leasehold assignment, security agreement, financing statement, negative pledge or other instru- -14- ment of absolute or collateral transfer by Grand Union in connection with the consummation of the Plan shall be, and hereby is, "under a plan confirmed under section 1129 of [the Bankruptcy Code]", within the meaning of that phrase in section 1146(c) of the Bankruptcy Code. BB. Prior to the deadline for voting on the Plan, all creditors entitled to vote were specifically notified of the consequences of voting to accept the Plan. The vote by all classes of creditors entitled to vote was overwhelmingly in favor of the Plan. All objections to the Plan based on the existence or scope of Sections 14.01, 14.02, 14.03 or 14.05 of the Plan or the MTH Settlement Agreement (collectively, the "Releases") have been overruled or resolved. CC. Pursuant to and subject to the provisions of Section 14.06 of the Plan and the MTH Settlement Agreement, Reorganized Grand Union will indemnify, among others, MTH and certain of the Debtor's and its Affiliates' officers and directors. The Court finds that the Plan includes compromises and exchanges of consideration among the parties which upon the record herein, the Plan and the Disclosure Statement are integral elements of the restructuring and resolution of this Chapter 11 Case in accordance with the Plan. In determining whether to propose these compromises, the Debtor considered the following: (a) the probability of success in the litigation of causes of action against the beneficiaries of the Releases; (b) the difficulties to be encountered in collecting the possible recoveries under -15- those actions; (c) the complexity, likely duration, and negative impact on the Debtor's business of such litigation and the attendant expense, inconvenience and delay resulting from such litigation, and (d) the paramount interest of its creditors and shareholders including the estimated result of the inability to confirm and consummate a consensual plan of reorganization. DD. Each of the settlements contained in the Plan (including, without limitation, the MTH Settlement Agreement, a copy of which is annexed as Exhibit "B" to the Plan, and the Zero Settlement, a copy of which is annexed as Exhibit "G" to the Plan) and the release and discharge of all claims and causes of action described in Article 14 of the Plan is fair and equitable and in the best interests of creditors and the estate. EE. This Court has jurisdiction over the assets of the Debtor's estate, including to determine the relative rights of creditors of the Debtor to distributions under the Plan. The provisions of Section 14.05 of the Plan constitute a good faith compromise and settlement of any Causes of Action relating to the matters described in such Section that could be brought by any holder of a Claim or Interest against or involving another holder of a Claim or Interest. Such compromise and settlement is in the best interests of creditors and holders of Interests, is fair, equitable and reasonable, and settles all such Causes of Action. -16- FF. As of the occurrence of the Effective Date, Grand Union will not be insolvent and will not reasonably be expected to be rendered insolvent or left with unreasonably small capital to operate its respective business as a result of the Plan, the Post-Confirmation Credit Documents, the New Senior Notes, or any of the transactions contemplated thereby. GG. The execution, delivery or performance by Grand Union of its obligations under the Post-Confirmation Credit Documents, the New Senior Notes, and/or the Plan and compliance by Grand Union with the terms thereof is authorized by and does not conflict with the terms of this Order. The financial accommodations to be extended pursuant to the Post-Confirmation Credit Documents and the New Senior Notes are being extended in good faith and for legitimate business purposes. HH. Entry of this Order satisfies any requirement under the Bankruptcy Code for the Debtor to execute, deliver and perform its obligations under the Post-Confirmation Credit Documents and to consummate the transactions contemplated thereby. II. The Plan satisfies the requirements for confirmation of the Plan set forth in section 1129 of the Bankruptcy Code. NOW, THEREFORE, it is ORDERED, ADJUDGED AND DECREED that: -17- 1. The Modifications are approved. The Modifications satisfy the requirements of sections 1122 and 1123 of the Bankruptcy Code, do not require the re-solicitation of the Plan by the Debtor and are deemed to have been accepted by all creditors who have previously accepted the Plan. 2. Each objection to the Plan and/or confirmation thereof (including each letter or other Pleading filed with the Court that may be deemed to be such an objection) which has not been withdrawn, waived or settled, is overruled. 3. The Plan filed on April 19, 1995 (Docket No. 478), as amended by the Modifications (which are deemed to be incorporated into the Plan), is approved and confirmed pursuant to section 1129 of the Bankruptcy Code. The terms of the Plan are incorporated by reference into and are an integral part of this Order. 4. Subject to the occurrence of the Effective Date: (a) In accordance with section 1141(b) of the Bankruptcy Code, Reorganized Grand Union shall automatically be vested with all of the property of the Debtor's estate; (b) In accordance with section 1141(c) of the Bankruptcy Code, all property of the Debtor shall be free and clear of all claims and interests of creditors and equity security holders of the Debtor, except as otherwise specifically provided in the Plan; and (c) All entities which are parties to adversary proceedings or contested matters pending before this Court, which proceedings are not finally determined as at the date of this Order, are restrained and enjoined from -18- commencing any other action, employment of process or act against Grand Union with respect to any issue raised in such adversary proceedings or contested matters, except upon further order of this Court. 5. On the Effective Date or as soon thereafter as is practicable (or prior to the Effective Date provided such filing is not effective until the Effective Date), Grand Union shall file the Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, and upon such filing, the Restated Bylaws shall be deemed effective pursuant to section 303 of the Delaware General Corporation Law and without further corporate act or action under applicable law and without any requirement of further action by the stockholders or directors of Grand Union. As of the Effective Date, any and all other corporate acts or actions by Grand Union in connection with implementation of the Plan, including, without limitation, the execution, delivery and performance of the Post-Confirmation Credit Documents, the cancellation and release of the DIP Facility (as defined below), and the appointment, election or removal of directors of Grand Union shall be deemed effective pursuant to section 303 of the Delaware General Corporation Law and without further corporate act or action under applicable law and without any requirement of further action by the stockholders or directors of Grand Union. On the Effective Date, the Senior Notes, the Senior Subordinated Notes and the Interests shall be cancelled and the issuance of New Common Stock, Warrants and New Senior Notes, as well as all -19- other matters involving undertakings and commitments relating to such securities as contemplated by the Plan, including but not limited to the listing of securities for trading and the registration of the offer and sale of securities of Grand Union, shall be deemed authorized pursuant to section 303 of the Delaware General Corporation Law and without further corporate act or action under applicable law and without any requirement of further action by the stockholders or directors of Grand Union. Without limitation, as of the Effective Date, each of the directors of the Debtor shall be deemed to have resigned and each of the persons designated in the Notice of Directors shall be deemed to be elected to be a member of the Post Reorganization Board. 6. On the occurrence of the Effective Date, all obligations owed to the various financial institutions that are parties to the debtor in possession financing facility (the "DIP Facility") approved by Order of this Court, dated February 16, 1995 (the "Financing Order"), shall be paid in accordance with the terms thereof and the DIP Facility shall be deemed terminated and cancelled. Any and all liens and security interests granted in connection with the DIP Facility and the Financing Order shall, upon payment of all amounts owed pursuant thereto, be deemed cancelled and released. 7. All exhibits to the Plan and documents and agreements introduced into evidence by the Debtor at the Confirmation Hearing (including all exhibits and attachments -20- thereto) and the execution, delivery and performance thereof by Grand Union in accordance with their respective terms are approved, including, but not limited to (i) the Post-Confirmation Credit Documents, (ii) the Warrant Agreement, (iii) the Registration Rights Agreements, (iv) the New Senior Note Indenture; and (v) the MTH Settlement Agreement. 8. The Post-Confirmation Credit Documents shall constitute legal, valid, binding and authorized obligations of the respective parties thereto, enforceable in accordance with their terms. The Post-Confirmation Credit Documents contemplate the affirmation of certain existing liens and security interests and the creation of new liens and security interests. The security interests and liens affirmed and/or granted to the Post-Confirmation Banks under the Post-Confirmation Credit Documents (and all documents, instruments and agreements related thereto and annexes, exhibits and schedules appended thereto) shall constitute, as of the Effective Date, legal, valid and duly perfected first priority liens and security interests in and to the collateral specified therein, subject only, where applicable, to the pre-existing liens and security interests specified therein or contemplated thereby. 9. On the Effective Date, all of the liens and security interests to be affirmed by and/or created under the Post-Confirmation Credit Documents shall be deemed affirmed and/or created and shall be valid and perfected without any requirement of filing or recording of financing -21- statements, mortgages or other evidence of such liens and security interests and without any approvals or consents from governmental entities or any other persons and regardless of whether or not there are any errors, deficiencies or omissions in any property descriptions attached to any filing or Post-Confirmation Credit Document. In furtherance of the foregoing, unless otherwise agreed by the Senior Bank Agent and Grand Union, Grand Union and the other persons granting such liens and security interests will make all filings and recordings, and will obtain all governmental approvals and consents desirable to establish and perfect such liens and security interests under the provisions of state, provincial, federal or other law (whether domestic or foreign) which would be applicable in the absence of this Confirmation Order, and will thereafter cooperate to make all other filings and recordings which would otherwise be desirable under applicable law to give notice of such liens and security interests to third parties. 10. Grand Union is authorized and empowered to execute and deliver all documents, agreements and instruments and take all actions reasonably necessary to effectuate the consummation and implementation of the Plan, including, without limitation, the execution, delivery and performance of the Post-Confirmation Credit Documents, the New Senior Note Indenture, the Warrant Agreement, the Registration Rights Agreements, the MTH Settlement Agreement and the Zero Settlement (substantially in the forms annexed as -22- exhibits to the Plan or filed with this Court), and the transactions contemplated thereby. All such actions taken or caused to be taken shall be deemed to have been authorized and approved by this Court and shall be deemed effective pursuant to section 303 of the Delaware General Corporation Law and without further corporate act or action under applicable law and without any requirement of further action by the stockholders or directors of Grand Union. Each of such documents and agreements will, upon execution, be valid, binding and enforceable against Grand Union and any other person who is a party thereto, and is entered into for good and valuable consideration, including the benefits of the Plan. 11. Grand Union is authorized and empowered to execute and deliver such other documents as Bankers Trust may reasonably require in order to effectuate the treatment afforded to the Post-Confirmation Banks under the Plan. Without the need for a further Order or authorization of this Court, the Debtor and the Post-Confirmation Banks are authorized and empowered to make such modifications (a) to the Post-Confirmation Credit Agreement as admitted in the evidentiary record at the Confirmation Hearing as are reasonably acceptable to the Official Committee, the Capital Committee and the Informal Committee of Senior Noteholders and (b) to the exhibits and schedules to the Post- Confirmation Credit Documents as admitted in the evidentiary record at the Confirmation Hearing as are acceptable to the Debtor -23- and the Senior Bank Agent; PROVIDED, HOWEVER, (i) no changes to any of the Post-Confirmation Documents as of the Effective Date shall reduce the amount of funding available to the Company under the Post-Confirmation Credit Documents; and (ii) the opportunity to review and comment upon proposed changes to the Post-Confirmation Credit Agreement afforded the Official Committee, the Capital Committee and the Informal Committee of Senior Noteholders shall terminate on the Effective Date. 12. Without the need for a further Order or authorization of this Court, Grand Union is authorized and empowered to make modifications to the exhibits and schedules admitted in the evidentiary record at the Confirmation Hearing as may be necessary (other than the Post-Confirmation Credit Documents and the exhibits and schedules thereto, which are subject to the preceding decretal paragraph), including the New Senior Note Indenture, the Warrant Agreement, the Registration Rights Agreements, the MTH Settlement Agreement and all schedules and exhibits to such documents as are reasonably acceptable to the Senior Bank Agent, the Official Committee, the Capital Committee and the Informal Committee of Senior Noteholders. 13. All indenture trustees and similar parties are authorized and directed to execute any and all collateral releases, lien releases, indenture supplements, agreements and other similar documents, or take other ac- -24- tions, as directed by Grand Union to effectuate the provisions of the Plan. 14. Grand Union is authorized and empowered to retain without further order of this Court one or more exchange, disbursing or similar agents with respect to the distributions to be made under the Plan. 15. The Plan contemplates the pledge of all of the Debtor's or Reorganized Grand Union's interests in Leasehold Interests in order to secure the obligations owed pursuant to the Post-Confirmation Credit Documents. Unless applicable documents expressly provide to the contrary (i.e., a covenant prohibiting leasehold mortgages), pursuant to section 1142 of the Bankruptcy Code, all parties to documents that comprise or in any way relate to the Leasehold Interests are hereby directed to cooperate and to assist the Debtor or Reorganized Grand Union in its efforts to file evidence of the Leasehold Interests of record and/or to pledge its interests in the Leasehold Interests to secure the obligations owed by it pursuant to the Post-Confirmation Credit Documents. 16. Without limiting the Registration Rights Agreements in any respect, pursuant to the Registration Rights Agreements, Reorganized Grand Union is authorized to file, not later than ninety (90) days after the Effective Date, shelf registration(s) pursuant to Rule 415 promulgated under the Securities Act which provide for the sale by the holders of those New Senior Notes and shares of New Common -25- Stock that are covered by the Registration Rights Agreements. Grand Union will use its reasonable best efforts to have such shelf registration(s) thereafter declared effective by the Securities and Exchange Commission not later than 135 days after the Effective Date. 17. Within five (5) Business Days after the occurrence of the Effective Date, Reorganized Grand Union shall send the "Notice to Recipients of New Senior Notes: Registration Rights" and "Notice to Recipients of New Common Stock Registration Rights" (collectively, the "Registration Rights Notices"), substantially in the form annexed hereto as Exhibits A and B to, respectively, each holder of a Senior Note Claim entitled to receive New Senior Notes and each holder of a Senior Subordinated Claim entitled to receive New Common Stock under the Plan. Any such holder shall comply with the procedures and deadlines, if any, set forth in the applicable Registration Rights Notice, if such holder wishes to avail itself of the benefits of the applicable Registration Rights Agreement or be forever barred from availing itself of such benefits. 18. The Claims described in Article 7 of the Plan are allowed in this Chapter 11 Case, subject to the occurrence of the Effective Date, for all purposes in the amounts either set forth in Article 7 of the Plan or, with respect to the Credit Agreement Claims and the Interest Rate Protection Claims, provided in the Order of this Court, dated May 31, 1995, that determined the amounts thereof. -26- 19. Pursuant to section 1141 of the Bankruptcy Code, the Plan and its provisions and exhibits and this Order shall be binding as provided in such documents upon: (i) Grand Union, (ii) each entity and person acquiring, receiving or retaining property under the Plan; (iii) each party to an executory contract or unexpired lease of the Debtor; (iv) each party in interest, creditor and equity security holder of the Debtor, whether or not the Claim or Interest of such person is Impaired under the Plan and whether or not such person has filed a proof of claim or equity interest in this Chapter 11 Case or has accepted the Plan; and (v) each of the foregoing's respective heirs, executors, administrators, successors and assigns. 20. Subject to the occurrence of the Effective Date, the MTH Settlement Agreement is approved and Grand Union, its affiliates, officers, directors, agents and attorneys are hereby authorized and empowered to take all actions necessary to consummate the MTH Settlement Agreement and effectuate the terms thereof including, without limitation, to deposit into the escrow provided for in the MTH Settlement Agreement the sum of $3,000,000. 21. Subject to the occurrence of the Effective Date, Grand Union, its affiliates, officers, directors, agents and attorneys are hereby authorized and empowered to take all actions necessary to consummate the Zero Settlement and effectuate the terms thereof. -27- 22. Grand Union and all of its respective directors, officers, agents and attorneys are authorized and empowered to effectuate the Plan and consummate the transactions contemplated thereby and by the MTH Settlement Agreement and the Zero Settlement, to execute, deliver and file (as appropriate) all documents and take all actions provided in or contemplated by any of same and to accomplish the intent of same. 23. Unless previously assumed or rejected by order of the Court or pursuant to section 365 of the Bankruptcy Code prior to the date hereof and notwithstanding anything to the contrary contained in the Plan, the Debtor may assume, reject and/or assume and assign any executory contract or unexpired lease in accordance with section 365 of the Bankruptcy Code to the extent a motion seeking the assumption, rejection and/or assumption and assignment of such leases or executory contracts is filed on or before entry of this Order (the "Pending Motions"). Grand Union shall have the right to request alternative relief with respect to the Pending Motions, prior to the granting thereof. Grand Union may assign any lease or executory contract that has been assumed in accordance with section 365 of the Bankruptcy Code provided a motion requesting the same is filed with the Court prior to the Effective Date and such motion is ultimately granted. The foregoing shall not affect Grand Union's ability to assign any assumed leases -28- pursuant to the terms of such leases after the Effective Date. 24. With respect to each executory contract and unexpired lease of the Debtor that is being assumed by the Debtor pursuant to the Plan, the Debtor has cured, or provided adequate assurance that the Reorganized Debtor will cure, such defaults on or as soon as practicable after the Effective Date. The holder of any claim arising from the rejection of an unexpired lease or executory contract effectuated by Section 9.01 of the Plan (a) must file a proof of claim respecting such claim no later than thirty (30) days after entry of this Order pursuant and subject to the terms of this Court's Orders, dated April 6, 1995 and May 8, 1995, which established procedures for filing claims in this Chapter 11 Case (the "Bar Orders"). 25. By reason of confirmation of the Plan and the occurrence of the Effective Date: (a) All outstanding certificates, notes, debentures and other instruments issued by the Debtor and evidencing an equity interest in or indebtedness of the Debtor are, to the extent an amendment or restatement is not provided for by this Order or Plan, hereby cancelled, settled and/or compromised as provided in the Plan except for certificates, notes, debentures and other instruments issued to or held by the holders of Credit Agreement Claims and/or Interest Rate Protection Agreement Claims (in such capacities) to the extent provided under, or consistent with, the Plan and this Order; and (b) The releases and exculpation provisions of Article 14 of the Plan are effectuated; provided, however, and notwithstanding anything herein or in the Plan to the contrary, the release set forth in Section 14.01(d)(i)(bb) shall extend to professionals retained by counsel to the Senior Bank Agent. -29- 26. Notwithstanding any other provision in this Order or in the Plan, if the Term Loan Facility under the Post-Confirmation Credit Agreement is not funded in full on the Effective Date, pursuant to the Post-Confirmation Credit Documents, the Effective Date shall be deemed not to have occurred for all purposes. 27. The provisions of section 1145 of the Bankruptcy Code shall be applicable to the offering, issuance, distribution and sale of New Common Stock, New Senior Notes, Warrants and New Common Stock upon exercise of the Warrants. 28. (a) Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer or exchange of any security, or the making or delivery of an instrument of transfer under the Plan, including, without limitation, all transactions and documents relating to the Post-Confirmation Credit Documents, shall not be taxed under any law imposing a stamp tax or similar tax. (b) All filing or recording officers, wherever located and by whomever appointed, are hereby directed to accept for filing or recording, and to file or record immediately upon presentation thereof, all such deeds, bills of sale, mortgages, deeds of trust, assignments, security agreements, financing statements, and other instruments of absolute or collateral transfer without payment of any stamp tax or similar tax imposed by federal, state, or local law. Notice in the form annexed hereto as Exhibit C (i) shall have the effect of an order of the -30- Court, (ii) shall constitute sufficient notice of the entry of this Order to such filing and recording officers, and (iii) shall be a recordable instrument notwithstanding any contrary provision of nonbankruptcy law. This Court specifically retains jurisdiction to enforce the foregoing direction, by contempt or otherwise. 29. The stay in effect in this case pursuant to section 362(a) of the Bankruptcy Code shall continue to be effective until the Effective Date, and at that time shall be dissolved and of no further force or effect, subject to the injunction in the Plan and/or section 1141 of the Bankruptcy Code except that nothing herein shall bar the filing of financing documents or the taking of such other actions as are necessary to effectuate the transactions specifically contemplated by the Plan or by this Order. 30. This Court shall retain exclusive jurisdiction as provided in Section 16.01 of the Plan including over any agreement, order or stipulation entered in connection with the Chapter 11 Case and with respect to the enforcement and interpretation of the provisions of this Order and the Plan. 31. Nothing in this Order or the Plan shall operate as a discharge of Grand Union from claims, obligations or liabilities arising out of, or to be paid or performed under, the Plan, this Order or any agreement to become binding in connection with consummation of the Plan. -31- 32. Except as may otherwise be ordered by the Court, any final request for payment of an Administrative Expense, including a request for compensation in this Chapter 11 Case pursuant to sections 327, 328, 330, 331, 503(b)(3), (4) and (5) or 1103 of the Bankruptcy Code, must be filed no later than 45 days after the Effective Date; provided that no request for payment of an Administrative Expense need be filed with respect to an Administrative Expense which is paid or payable by the Debtor or Reorganized Grand Union in the ordinary course. 33. This Order shall not be deemed to affect any rights preserved pursuant to Section 14.06 of the Plan. 34. For purposes of determining the record holders of claims for distributions under the Plan, the record date shall be May 24, 1995. 35. Based upon the record of this Chapter 11 Case, the security interests to be affirmed and/or granted by the Debtor and/or Reorganized Grand Union pursuant to the Post-Confirmation Credit Documents (i) are legal, valid and enforceable, and (ii) do not constitute preferential transfers or fraudulent conveyances under the Bankruptcy Code or any federal or state law. 36. The failure to specifically discuss any particular provision of the Plan in this Confirmation Order shall have no effect on the validity, binding effect and enforceability of such provision and such provision shall have the same validity, binding effect and enforceability as -32- every other provision of the Plan; the terms of the Plan are incorporated herein pursuant to decretal paragraph 3 hereof. 37. Upon the occurrence of the Effective Date, the Plan shall be deemed to be substantially consummated. 38. The provisions of the Plan and of this Order shall be construed in a manner consistent with each other so as to effect the purposes of each; PROVIDED, HOWEVER, that if there is determined to be any inconsistency between any Plan provision and any provision of this Order that cannot be so reconciled, then solely to the extent of such inconsistency, the provisions of this Order shall govern and any such provision of this Order shall be deemed a modification to the Plan and shall control and take precedence (collectively, the "Modifications"). 39. Any liability of a transferor arising under sections 1440-1449 of the New York Tax Law or under Chapter 236 of the Vermont Statutes or any similar state law imposing a tax on gain from the transfer of an interest in real property, related to or resulting from the transactions implemented by the Plan, including, without limitation, the cancellation of common stock of the Debtor and the issuance of the New Common Stock under the Plan, shall be paid by Grand Union. 40. Grand Union shall be authorized to pay any expenses, including any fees and expenses of professionals, accruing from and after the Effective Date, without any application to the Court. -33- 41. Contracts and leases assigned by the Debtor prior to the Filing Date (collectively, the "Assigned Agreements") are not executory or unexpired within the meaning of section 365 of the Bankruptcy Code. Any Claims asserted against the Debtor under the Assigned Agreements that have been filed in accordance with the Bar Orders are contingent or unliquidated and shall be estimated by this Court pursuant to section 502(c) of the Bankruptcy Code. If any Claim is asserted against the Debtor by a party to an Assigned Agreement, the time for the Debtor to assume, reject or assume and assign such Assigned Agreement pursuant to section 365 of the Bankruptcy Code shall be extended to five (5) Business Days after the determination of such Claim. 42. Notwithstanding anything herein or in the Plan to the contrary, consummation of the Plan shall not relieve any assignee of an Assigned Agreement of any obligations under such Assigned Agreement. 43. The automatic stay imposed by Bankruptcy Code section 362(a) shall be modified and lifted with respect to two non-residential real property leases (the "Florida Leases") between and among the Debtor and Marjorie E. Kalback, Joanne Riley, Helen Solomon, Irving F. Kalback and David Solomon (collectively, the "Florida Landlords") solely for the purpose of allowing the Florida Landlords to proceed against the Debtor with their lawsuit pending in Dade County, Florida, Circuit Court, Case No. 94-20065-CA-01 (the -34- "Dade County Lawsuit") up to and including the entry of judgment only. To preserve their rights against the Debtor with respect to the matter set forth herein, within thirty (30) days of the entry of a final, non-appealable order in the Dade County Lawsuit, the Florida Landlords must file a motion with this Court for its determination of what, if any, amount of such judgment constitutes the Debtor's obligation to cure with respect to the Debtor's assumption of the Florida Leases. The Court shall retain jurisdiction to entertain such motion pursuant to Article 16 of the Plan. Notwithstanding anything to the contrary contained in the Plan, any such amount determined by the Bankruptcy Court to be a cure obligation under Bankruptcy Code section 365 shall be entitled to administrative priority; provided, however, the foregoing shall not prejudice the Debtor's rights to assert all defenses and counterclaims. Subject to the occurrence of the Effective Date, the Florida Leases are assumed pursuant to Section 9.01 of the Plan. The hearing regarding the Florida Landlords' pending motion for relief from the automatic stay currently scheduled for July 11, 1995, is hereby cancelled and withdrawn with the consent of the parties and no further appearances are required. 44. Notwithstanding anything herein or in the Plan to the contrary: (a) Sections 14.01(b), 14.01(c) and 14.03 of the Plan shall not be construed to release or enjoin the Internal Revenue Service ("IRS") from assessing and collecting any taxes, pursuant to 26 U.S.C. Section 6672, should it be determined that the Debtor failed to pay its employment -35- taxes (Form 940 and Form 941 taxes) to the Internal Revenue Service; (b) The Debtor shall pay the IRS interest at the rate of 8% (rather than the United States Treasury rate) on any Allowed Priority Tax Claim of the IRS stretched pursuant to Section 3.01 of the Plan; (c) Subject to this Court's approval, the Debtor shall be authorized to pay interest on any Allowed Priority Tax Claim stretched pursuant to Section 3.01 of the Plan at an interest rate other than the United States Treasury rate provided such interest rate is approved in writing with respect to each such Claim by the Senior Bank Agent, the Official Committee (until such Committee has been dissolved) and the Informal Committee of Senior Noteholders (until such Informal Committee has been dissolved); and (d) The receipt of distributions under the Plan by the United States of America shall not prejudice any right of the United States to argue that the releases afforded all present and former stockholders, officers, directors, advisors and employees of the Debtor pursuant to Sections 14.01, 14.02 and 14.03 of the Plan are not permitted to be enforced in full or in part pursuant to applicable law nor shall the United States be deemed to have consented to such releases. 45. Notwithstanding anything in this Order or the Plan to the contrary, the Assigned Agreements with Heritage Square Associates, S.L. Nusbaum and Associates of Ocean View, Amy Development Company (both leases) and Park Hill Plaza Associates, that are the subject of the Heritage Objection (the "Affected Assigned Agreements"), shall be treated as if assumed by Grand Union (pursuant to section 365 of the Bankruptcy Code) and Grand Union shall remain obligated under such Affected Assigned Agreements as if this Chapter 11 Case had not been commenced. 46. The agreement between Grand Union and The Prudential Insurance Company of America and Oppenheimer East Point Associates with respect to the resolution and with- -36- drawal of their pending objections to confirmation of the Plan is as read into the record at the Confirmation Hearing, is approved and shall constitute a Modification; and Grand Union is authorized to document and implement such agreement without further order of the Court. 47. Within 5 days after entry of this Order, or within such further time as this Court may allow, the Debtor shall cause to be published one time in THE NEW YORK TIMES (national edition), The WALL STREET JOURNAL (national edition) and as soon as practicable in the SUPERMARKET NEWS notice of the entry of this Order. 48. In addition to the retention of jurisdiction set forth in Section 16.01 of the Plan, this Court shall retain jurisdiction over any matters relating to or arising from this Order, including any such matters that arise prior to the Effective Date. Dated: Wilmington, Delaware May 31, 1995 /s/ ------------------------------ UNITED STATES BANKRUPTCY JUDGE -37- EX-2.3 3 EXHIBIT 2.3 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) Chapter 11 ) THE GRAND UNION COMPANY, ) Case No. 95-84 (PJW) also d/b/a Big Star, ) ) Debtor. ) MINUTE ORDER CLARIFYING FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER UNDER 11 U.S.C. Section 1129 CONFIRMING SECOND AMENDED PLAN OF REORGANIZATION PROPOSED BY THE GRAND UNION COMPANY After reviewing the Findings of Fact, Conclusions of Law and Order Under 11 U.S.C. Section 1129 Confirming the Second Amended Plan of Reorganization Proposed by The Grand Union Company (the "Confirmation Order") dated May 31, 1995, the Court has concluded that it is in the best interest of The Grand Union Company ("Grand Union") and its estate to clarify that "[t]he Plan . . . approved and confirmed pursuant to section 1129 of the Bankruptcy Code" as set forth in decretal paragraph 3 of the Confirmation Order and as otherwise referenced in the Confirmation Order consists of the Second Amended Chapter 11 Plan of The Grand Union Company (the "Plan") which was appended as Appendix A to the Disclosure Statement served by Grand Union on April 26, 1995 and made part of the record at the May 31, 1995 hearing to consider confirmation of the Plan, as amended by the "Modifications" (as defined in the Confirmation Order). Dated: Wilmington, Delaware June 14, 1995 /s/ ------------------------------ United States Bankruptcy Judge EX-3.1 4 EXHIBIT 3.1 Exhibit 3.1 RESTATED CERTIFICATE OF INCORPORATION OF THE GRAND UNION COMPANY Pursuant to Section 303 of the General Corporation Law of the State of Delaware and Orders of the United States Bankruptcy Court for the District of Delaware -------------------- THE GRAND UNION COMPANY, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), DOES HEREBY CERTIFY: 1. The name of the Corporation is The Grand Union Company and the date of filing of its original Certificate of Incorporation in the office of the Secretary of State was May 17, 1928. 2. Pursuant to a court order issued in the proceedings of the Corporation under Chapter 11, Title 11 of the United States Code (the "Bankruptcy Code") before the United States Bankruptcy Court for the District of Delaware, Case No. 95-84-PJW, filed on January 25, 1995 (the "Bankruptcy Case") all authorized and issued and outstanding shares of common stock of the Corporation are hereby cancelled. 3. The following Restated Certificate of Incorporation was duly adopted in accordance with the applicable provisions of Sections 245 and 303 of the General Corporation Law of the State of Delaware, pursuant to the Comfirmation Order with respect to the Bankruptcy Case entered on May 31, 1995 by such court under Section 1129 of the Bankruptcy Code. 4. Pursuant to Sections 245 and 303 of the General Corporation Law of the State of Delaware, the text of the Certificate of Incorporation as amended or supplemented heretofore, is further amended and restated hereby to read in its entirety as follows: FIRST: The name of the Corporation is THE GRAND UNION COMPANY (hereinafter called the "Corporation"). SECOND: The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a Corporation may be organized under the General Corporation Law of the State of Delaware (the "DGCL"). FOURTH: (A) The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 40,000,000, of which 10,000,000 shares shall be Preferred Stock of the par value of $1.00 per share and 30,000,000 shares shall be Common Stock of the par value of $1.00 per share. (B) The Board of Directors is expressly authorized, by resolution or resolutions, to provide for the issue of all or any shares of the Preferred Stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereon, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a "Preferred Stock Designation") and as may be permitted by the DGCL and as are consistent with paragraph (C) of this Article FOURTH. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of a majority of the holders of the voting power of all the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock") voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation. (C) The Corporation is subject to the requirements of Section 1123(a)(6) of the United States Bankruptcy Code (11 U.S.C. 1123(a)(6)) ("Section 1123(a)(6)") and shall be prohibited from issuing any nonvoting equity securities, and shall, at all times, provide, as to the several classes of securities from time-to-time possessing voting power, an appropriate distribution of power among such classes. A Preferred Stock Designation shall not authorize the issuance of such nonvoting equity securities, and shall include in its provisions, if the class designated by such Preferred Stock -2- Designation has a preference in respect of dividends, adequate provisions for the election of directors representing such preferred class in the event of default in the payment of such dividends consistent with the requirements of Section 1123(a)(6). FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation: (1) Election of directors of the Corporation need not be by written ballot unless the By-Laws so provide. (2) All the powers of this Corporation, insofar as the same may be lawfully vested by this Restated Certificate of Incorporation in the Board of Directors, are hereby conferred upon the Board of Directors of this Corporation. In furtherance and not in limitation of that power the Board of Directors is authorized to make, adopt, alter, amend and repeal from time to time the By-Laws of the Corporation, by vote of a majority of the directors present at any regular meeting of the Board, or at any special meeting of the Board, provided that notice of such proposed alternation, amendment, repeal or adoption of new By-Laws is given in the notice of such special meeting, or by written consent without a meeting signed by all directors. The power of the Board of Directors to adopt, amend or repeal By-Laws is subject to the right of stockholders entitled to vote with respect thereto to alter and repeal By-Laws made by the Board of Directors. (3) The Corporation shall, to the maximum extent permitted from time to time under the DGCL, indemnify and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending, or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of the Corporation or while a director or officer is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorney's fees and expenses), judgment, fines, penalties and amounts paid in settlement incurred in connection with the investigation, preparation to defend or defense of such action, suit proceeding or claim; PROVIDED, HOWEVER, that the foregoing shall not require the -3- Corporation to indemnify or advance expenses to any person in connection with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any person seeking indemnification under this paragraph (3) of ARTICLE FIFTH shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. Any repeal or modification of the foregoing provisions of this paragraph (3) of ARTICLE FIFTH shall not adversely affect any right or protection of a director or officer of the Corporation with respect to any acts or omissions of such director or officer occurring prior to such repeal or modification. (4) A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that exculpation from liability is not permitted under the DGCL at the time such liability is determined. No amendment or repeal of this paragraph (4) of ARTICLE FIFTH shall apply to or have any effect on the liability or alleged liability to any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. SIXTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights preferences and privileges of whatever nature conferred upon stockholders, directors or any other persons whomsoever, by and pursuant to this Restated Certificate of Incorporation in its present form or as amended are granted subject to this reservation. SEVENTH: If at any time the Corporation shall have a class of stock registered pursuant to the provisions of the Securities Exchange Act of 1934, for so long as such class is so registered, any action by the stockholders of such class -4- must be taken at an annual or special meeting and may not be taken by written consent. IN WITNESS WHEREOF, The Grand Union Company has caused this Restated Certificate of of Incorporation to be signed on its behalf by Joseph J. McCaig, its President and Chief Executive Officer, and its corporate seal to be hereunto affixed by Kenneth R. Baum, its Secretary, this day of June, 1995. THE GRAND UNION COMPANY By: /s/ Joeseph McCaig - - -------------------- President and Chief Executive Officer By: /s/ Kenneth R. Baum - - -------------------- Secretary -5- EX-3.2 5 EXHIBIT 3.2 EXHIBIT 3.2 THE GRAND UNION COMPANY BY-LAWS As restated on June 15, 1995. ARTICLE I. Stockholders Section I. The annual meeting of the stockholders of the Corporation for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting shall be held at such place, within or without the State of Delaware, and at such hour, as may be determined by the Board of Directors, on the third Wednesday in June of each year (or if said day be a legal holiday then on the next succeeding day not a legal holiday), or on such later date, not later than 30 days thereafter, as may be fixed by the Board of Directors. Section II. Special meetings of the stockholders may be held upon call of the Board of Directors or of the Executive Committee or of the Chairman of the Board (and shall be called by the Chairman of the Board at the request in writing of stockholders owning a majority of the outstanding shares of the Corporation entitled to vote at the meeting) at such time and at such place within or without the State of Delaware, as may be fixed by the Board of Directors or by the Executive Committee or the Chairman of the Board or by the stockholders owning a majority of the outstanding stock of the Corporation entitled to vote, as the case may be, and as may be stated in the notice setting forth such call. Section III. Notice of the time and place of every meeting of stockholders shall be delivered personally or mailed at least ten days previous thereto to each stockholder of record entitled to vote at the meeting, who shall have furnished a written address to the Secretary of the Corporation for the purpose. Such further notice shall be given as may be required by law. Meetings may be held without notice if all stockholders entitled to vote at the meeting are present, or if notice is waived by those not present. Section IV. The holders of record of a majority of the issued and outstanding shares of the Corporation, which are entitled to vote at the meeting, shall, except as otherwise provided by law, constitute a quorum at all meetings of the stockholders. If there be no such quorum present in person or by proxy, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time. Section V. Meetings of the stockholders shall be presided over by the Chairman of the Board or, if the Chairman is not present, by the President or a Vice-President or, if no such officer is present, by a chairman to be chosen at the meeting. The Secretary of the Corporation, or in his absence, an Assistant Secretary shall act as secretary of the meeting, if present. Section VI. Each stockholder entitled to vote at any meeting shall have one vote in person or by proxy for each share of stock held by him which has voting power upon the matter in question at the time; but no proxy shall be voted after three years from its date, unless such proxy expressly provides for a longer period. Section VII. When a quorum is present at any meeting, a plurality of the votes properly cast for election to any office shall elect to such office and a majority of the votes properly cast upon any question other than election to an office shall decide the question, except when a larger vote is required by law, by the certificate of incorporation or by these by-laws. No ballot shall be required for any election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election. In the event a ballot shall be required, the chairman of each meeting at which directors are to be elected shall appoint two inspectors of election, unless such appointment shall be unanimously waived by those stockholders present or represented by proxy at the meeting and entitled to vote in the election of directors. No director, or candidate for the office of director, shall be appointed as such inspector. The inspectors shall first take and subscribe an oath or affirmation faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of their ability, and shall take charge of the polls and after the balloting shall make a certificate of the result of the vote taken. Except where the stock transfer books of the Corporation shall have been closed or a date shall have been fixed as a record date for the determination of the stockholders entitled to vote, as hereinafter provided, no share of stock shall be voted at any -2- election of directors which shall have been transferred on the books on the Corporation within twenty days next preceding such election. Section VIII. The Board of Directors may close the stock transfer books of the Corporation for a period not exceeding sixty days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of stock shall go into effect; or, in lieu of closing the stock transfer books, the Board of Directors may fix in advance a date, not exceeding sixty days preceding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for allotment of rights, or the date when any change or conversion or exchange of stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date as aforesaid. ARTICLE II. Board of Directors Section I. The Board of Directors of the Corporation shall consist of not less than three nor more than twelve persons, who shall hold office until the annual meeting of the stockholders next ensuing after their election and until their respective successors are elected and shall qualify and shall initially consist of seven directors. Within the limits above specified, the number of directors shall be determined by resolutions of the Board of Directors or by the stockholders at an annual meeting. Newly created directorships resulting from any increase in the authorized number of Directors shall be filled in the same manner and with the same effect prescribed in Section 2 of this Article -3- II with respect to vacancies. A majority of the Board of Directors shall constitute a quorum. Section II. Vacancies in the Board of Directors shall be filled by a majority of the remaining directors, though less than a quorum, and the directors so chosen shall hold office until the next annual election and until their successors shall be duly elected and qualified, unless sooner displaced pursuant to law. Section III. Meetings of the Board of Directors shall be held at such place within or without the State of Delaware as may from time to time be fixed by resolution of the Board or as may be specified in the call of any meeting. Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board; and special meetings may be held at any time upon the call of the Executive Committee or the Chairman of the Board, by oral, telegraphic or written notice, duly served on or sent or mailed to each director not less than two days before the meeting. A meeting of the Board may be held without notice immediately after the annual meeting of stockholders at the same place at which such meeting is held. Notice need not be given of regular meetings of the Board held at times fixed by resolutions of the Board. Meetings may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in writing. Section IV. Except as may be otherwise provided by law, by the certificate of incorporation or by these by-laws, when a quorum is present at any meeting the vote of a majority of the directors present shall be the act of the Board of Directors. Section V. Any action required or permitted to be taken at any meeting of the Board of Directors or a committee thereof may be taken without a meeting if all the members of the Board or of such committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the records of the meetings of the Board or of such committee. Such consent shall be treated for all purposes as the act of the Board or of such committee, as the case may be. Section VI. Members of the Board of directors, or any committee designated by such Board, may participate in a meeting of such Board or committee by means of conference -4- telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other or by any other means permitted by law. Such participation shall constitute presence in person at such meeting. Section VII. The Board of Directors may also, by resolution or resolutions, passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in said resolution or resolutions, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. A majority of the members of any such committee may determine its action and fix the time and place of its meetings unless the Board of Directors shall otherwise provide. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. ARTICLE III. Officers Section I. The Board of Directors as soon as may be after the election held in each year shall choose a President of the Corporation, one or more Vice Presidents, a Secretary, Treasurer, such Assistant Secretaries, Assistant Treasurers and such other officers, agents, and employees as it may deem proper. Section II. The term of office of all officers shall be one year, or until their respective successors are chosen; but any officer may be removed from office at any time by the affirmative vote of a majority of the members of the Board. Section III. Subject to such limitations as the Board of Directors, or the Executive Committee may from time to time prescribe, the officers of the Corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from -5- time to time may be conferred by the Board of Directors or by the Executive Committee. ARTICLE IV. Certificates of Stock Section I. The interest of each stockholder of the Corporation shall be evidenced by a certificate or certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The shares in the stock of the Corporation shall be transferable on the books of the Corporation by the holder thereof in person or by his attorney, upon surrender for cancellation of a certificate or certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. Section II. The certificates of stock shall be signed by the Chairman of the Board or the President or a Vice President and by the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer, shall be sealed with the seal of the Corporation (or shall bear a facsimile of such seal), and shall be countersigned and registered in such manner, if any, as the Board of Directors may by resolution prescribe. Section III. Certificates for shares of Stock in the Corporation may be issued in lieu of certificates alleged to have been lost, stolen, destroyed or mutilated, upon the receipt of (1) such evidence of loss, theft, destruction or mutilation, and (2) a bond of indemnity in such amount, upon such terms and with such surety, if any, as the Board of Directors may require in each specific case or in accordance with general resolutions. ARTICLE V. Corporate Books The books of the Corporation, except the original or duplicate stock ledger, may be kept outside of the State of Delaware, at the office of the Corporation in Wayne, New -6- Jersey or at such other place or places as the Board of Directors may from time to time determine. ARTICLE VI. Checks, Notes, Etc. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers or agent or agents as shall be thereunto authorized from time to time by the Board of Directors. ARTICLE VII. Fiscal Year The fiscal year of the Corporation shall end on the Saturday nearest the thirty-first day of March in each year. ARTICLE VIII. Corporate Seal The corporate seal shall have inscribed thereon the name of the Corporation and the words "Incorporated Delaware 1928." In lieu of the corporate seal, when so authorized by the Board of Directors or a duly empowered committee thereof, a facsimile thereof may be impressed or affixed or reproduced. ARTICLE IX. Offices The Corporation and the stockholders and the directors may have offices outside of the State of Delaware at such places as shall be determined from time to time by the Board of Directors. -7- ARTICLE X. Amendments The by-laws of the Corporation, regardless of whether made by the stockholders or by the Board of Directors, may be amended, added to, rescinded or repealed at any meeting of the Board of Directors or of the stockholders, provided notice of the proposed change is given in the notice of the meeting. No change of the time or place for the annual meeting of the stockholders for the election of directors shall be made except in accordance with the laws of the State of Delaware. -8- EX-4.1 6 EXHIBIT 4.1 EXHIBIT 4.1 TEMPORARY CERTIFICATE -- Exchangeable for Definitive Certificate When Ready for Delivery. NUMBER SHARES G THE GRAND UNION COMPANY INCORPORATED UNDER THE LAWS SEE REVERSE FOR OF THE STATE OF DELAWARE CERTAIN DEFINITIONS THIS CERTIFIES THAT CUSIP 386532 30 3 IS THE OWNER OF FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF - - --------------------------- ------------------------- - - --------------------------- THE GRAND UNION COMPANY ------------------------- - - --------------------------- ------------------------- C E R T I F I C A T E O F S T O C K transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Certificate of Incorporation and all amendments thereto, to all of which the holder by acceptance thereof assents. This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated SEAL /s/ THE GRAND UNION COMPANY /s/ SECRETARY INCORPORATED PRESIDENT DELAWARE COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE The Corporation will furnish without charge to each Stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock of the Corporation, or series thereof, and the qualifications, limitations or restrictions of such preferences and/or rights. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- ........Custodian.............. (Cust) (Minor) Under Uniform Gifts to Minors Act ............ (State) Additional abbreviations may also be used though not in the above list. For Value Received, ______________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - - ---------------------------------------------- - - ---------------------------------------------- _______________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE) _______________________________________________________________________________ _______________________________________________________________________________ _________________________________________________________________________ Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _____________________________________________________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated ________________________________ __________________________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. The signature of the person executing this power must be guaranteed by an Eligible Guarantor institution such as a Commercial Bank, Trust Company, Securities Broker/Dealer, Credit Union, or a Savings Association participating in a Medallion program approved by the Securities Transfer Association, Inc. EX-4.2 7 EXHIBIT 4.2 Exhibit 4.2 THE GRAND UNION COMPANY, as Issuer and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee $595,475,922 - - ------------------------------------------------------------------------------- INDENTURE Dated as of June 15, 1995 - - ------------------------------------------------------------------------------- 12% Senior Notes due September 1, 2004 CROSS REFERENCE TABLE(1) [SUBJECT TO FURTHER REVIEW] Trust Indenture Reference Act Section Section - - --------------- --------- 310(a)(1) 6.10 (a)(2) 6.10 (a)(3) N.A. (a)(4) N.A. (a)(5) 6.10 (b) 6.10, 6.08(c) (c) N.A. 311(a) 6.11 (b) 6.11 (c) N.A. 312(a) 2.05 (b) 10.03 (c) 10.03 313(a) 6.06 (b)(1) N.A. (b)(2) 6.06 (c) 6.06, 10.02 (d) 6.06 314(a) 3.07(a), 3.18(a), 10.05 (b) N.A. (c)(1) 10.04 (c)(2) 10.04 (c)(3) N.A. (d) N.A. (e) 10.05 315(a) 6.01(b) (b) 6.05, 10.02 (c) 6.01(a) (d) 6.01(c), 6.02 (e) 5.11 316(a) 2.09 (a)(1)(A) 5.05 (a)(1)(B) 5.04 (a)(2) N.A. (b) 5.07 (c) 8.04(b) 317(a)(1) 5.08 (a)(2) 5.09 (b) 2.04 318(a) 10.01 N.A. means not applicable - - -------------------- 1 This Cross-Reference Table is not part of the Indenture TABLE OF CONTENTS Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . 1 SECTION 1.01. (a) DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 (b) ACCOUNTING TERMS. . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 1.02. OTHER DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.. . . . . . . . . . . . . . . . . . . . . 17 SECTION 1.04. RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 2 THE SECURITIES. . . . . . . . . . . . . . . 18 SECTION 2.01. FORM AND DATING . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.02. EXECUTION AND AUTHENTICATION. . . . . . . . . . . . . . . . . 18 SECTION 2.03. REGISTRAR AND PAYING AGENT. . . . . . . . . . . . . . . . . . 19 SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST . . . . . . . . . . . . . 19 SECTION 2.05. HOLDER LISTS. . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.06. TRANSFER AND EXCHANGE . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.07. REPLACEMENT SECURITIES. . . . . . . . . . . . . . . . . . . . 21 SECTION 2.08. OUTSTANDING SECURITIES. . . . . . . . . . . . . . . . . . . . 21 SECTION 2.09. TREASURY SECURITIES . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.10. TEMPORARY SECURITIES. . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.11. CANCELLATION. . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.12. DEFAULTED INTEREST. . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE 3 -i- Page ---- COVENANTS. . . . . . . . . . . . . . . . 23 SECTION 3.01. PAYMENT OF SECURITIES . . . . . . . . . . . . . . . . . . . . 23 SECTION 3.02. LIMITATION ON RESTRICTED PAYMENTS . . . . . . . . . . . . . . 23 SECTION 3.03. LIMITATION ON INDEBTEDNESS. . . . . . . . . . . . . . . . . . 25 SECTION 3.04. LIMITATION ON LIENS . . . . . . . . . . . . . . . . . . . . . 29 SECTION 3.05. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 3.06. LIMITATION ON ASSET SALES . . . . . . . . . . . . . . . . . . 31 SECTION 3.07. SEC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 3.08. LIMITATION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . 35 SECTION 3.09. LIMITATION ON INDEBTEDNESS AND PREFERRED STOCK OF SUBSIDIARIES (OTHER THAN NON-BORROWING SUBSIDIARIES) . . . . . . . . . . . . . . . . . 36 SECTION 3.10. LIMITATION ON INDEBTEDNESS OF NON-BORROWING SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 3.11. TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . . . . . 39 SECTION 3.12. RESTRICTIONS ON BECOMING AN INVESTMENT COMPANY. . . . . . . . . . . . . . . . . . . . . . 40 SECTION 3.13. CONTINUED EXISTENCE AND RIGHTS. . . . . . . . . . . . . . . . 40 SECTION 3.14. MAINTENANCE OF PROPERTIES AND OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 3.15. TAXES AND CLAIMS. . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 3.16. STAY, EXTENSION AND USURY LAWS. . . . . . . . . . . . . . . . 42 SECTION 3.17. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST . . . . . . . . . . . . . . . . . . . . . 42 SECTION 3.18. COMPLIANCE CERTIFICATE. . . . . . . . . . . . . . . . . . . . 43 -ii- Page ---- ARTICLE 4 SUCCESSORS; CHANGE OF CONTROL; OPTIONAL PREPAYMENT. . . . . . 44 SECTION 4.01. WHEN COMPANY MAY MERGE, ETC.; CHANGE OF CONTROL; HOLDERS' RIGHT OF OPTIONAL PREPAYMENT. . . . . . . . . . . . . . . . . 44 ARTICLE 5 DEFAULTS AND REMEDIES. . . . . . . . . . . . . 46 SECTION 5.01. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 5.02. ACCELERATION. . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.03. OTHER REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.04. WAIVER OF DEFAULTS. . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.05. CONTROL BY MAJORITY . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.06. LIMITATION ON SUITS . . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. . . . . . . . . . . . . 50 SECTION 5.08. COLLECTION SUIT BY TRUSTEE. . . . . . . . . . . . . . . . . . 50 SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . . . . . . . 51 SECTION 5.10. PRIORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 5.11. UNDERTAKING FOR COSTS . . . . . . . . . . . . . . . . . . . . 52 ARTICLE 6 TRUSTEE . . . . . . . . . . . . . . . . 52 SECTION 6.01. DUTIES OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 6.02. RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . . . 54 SECTION 6.04. TRUSTEE'S DISCLAIMER. . . . . . . . . . . . . . . . . . . . . 54 SECTION 6.05. NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . . . . . . . 55 SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS . . . . . . . . . . . . . . . . 55 -iii- Page ---- SECTION 6.07. COMPENSATION AND INDEMNITY. . . . . . . . . . . . . . . . . . 55 SECTION 6.08. REPLACEMENT OF TRUSTEE. . . . . . . . . . . . . . . . . . . . 56 SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER, ETC. . . . . . . . . . . . . . . 57 SECTION 6.10. ELIGIBILITY; DISQUALIFICATION . . . . . . . . . . . . . . . . 57 SECTION 6.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. . . . . . . . . . . . . . . . . . . . 58 SECTION 6.12. AUTHENTICATING AGENT. . . . . . . . . . . . . . . . . . . . . 58 ARTICLE 7 DISCHARGE OF INDENTURE. . . . . . . . . . . . . 59 SECTION 7.01. TERMINATION OF COMPANY'S OBLIGATIONS. . . . . . . . . . . . . 59 SECTION 7.02. APPLICATION OF TRUST MONEY. . . . . . . . . . . . . . . . . . 62 SECTION 7.03. REPAYMENT TO COMPANY. . . . . . . . . . . . . . . . . . . . . 62 SECTION 7.04. REINSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . 63 ARTICLE 8 AMENDMENTS. . . . . . . . . . . . . . . . 63 SECTION 8.01. WITHOUT CONSENT OF HOLDERS. . . . . . . . . . . . . . . . . . 63 SECTION 8.02. WITH CONSENT OF HOLDERS . . . . . . . . . . . . . . . . . . . 64 SECTION 8.03. COMPLIANCE WITH TRUST INDENTURE ACT . . . . . . . . . . . . . 64 SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS . . . . . . . . . . . . . . 65 SECTION 8.05. NOTATION ON EXCHANGE OF SECURITIES. . . . . . . . . . . . . . 65 SECTION 8.06. TRUSTEE PROTECTED . . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE 9 REDEMPTIONS . . . . . . . . . . . . . . . 66 SECTION 9.01. NOTICE TO TRUSTEE . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 9.02. SELECTION OF THE SECURITIES TO BE REDEEMED. . . . . . . . . . 66 SECTION 9.03. NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . . . . . . 67 -iv- Page ---- SECTION 9.04. EFFECT OF NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . 67 SECTION 9.05. DEPOSIT OF REDEMPTION PRICE ON OPTIONAL REDEMPTION. . . . . . . . . . . . . . . . . . . . . 68 SECTION 9.06. SECURITIES REDEEMED IN PART . . . . . . . . . . . . . . . . . 68 ARTICLE 10 MISCELLANEOUS. . . . . . . . . . . . . . . 68 SECTION 10.01. TRUST INDENTURE ACT CONTROLS. . . . . . . . . . . . . . . . . 68 SECTION 10.02. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. . . . . . . . . . . . . . . . . . . . . . 70 SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 70 SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. . . . . . . . . . . . . . . . . . . . 70 SECTION 10.06. RULES BY TRUSTEE AND AGENTS . . . . . . . . . . . . . . . . . 71 SECTION 10.07. LEGAL HOLIDAYS. . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 10.08. NO RECOURSE AGAINST OTHERS. . . . . . . . . . . . . . . . . . 71 SECTION 10.09. DUPLICATE ORIGINALS . . . . . . . . . . . . . . . . . . . . . 71 SECTION 10.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 10.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 71 SECTION 10.12. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 10.13. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 10.14. TABLE OF CONTENTS, HEADINGS, ETC. . . . . . . . . . . . . . . 72 SECTION 10.15. BENEFITS OF INDENTURE . . . . . . . . . . . . . . . . . . . . 73 -v- INDENTURE dated as of June 15, 1995 between THE GRAND UNION COMPANY, a Delaware corporation (the "Company"), and IBJ SCHRODER BANK & TRUST COMPANY, a banking company organized under the laws of the State of New York, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 12% Senior Notes due September 1, 2004 (the "Securities"). ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. (a) DEFINITIONS. "ADDITIONAL ASSETS" means any Property or assets substantially related to the Company's primary business. "AFFILIATE" means, with respect to any referenced Person, a Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under direct or indirect common control with, such referenced Person, (ii) which directly or indirectly through one or more intermediaries beneficially owns or holds 5% or more of the combined voting power of the total Voting Stock of such referenced Person or (iii) of which 5% or more of the combined voting power of the total Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) directly or indirectly through one or more intermediaries is beneficially owned or held by such referenced Person, or a Subsidiary of such referenced Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER, that beneficial ownership of 5% or more of the voting securities of another Person, shall be deemed to be control. When used herein without reference to any Person, Affiliate means an Affiliate of the Company. "AGENT" means any Registrar, Paying Agent or co-Registrar. "ASSET SALE" means the sale or other disposition, in a transaction which is not a Sale and Leaseback Transaction permitted under the terms of this Indenture, by the Company or any of its Subsidiaries to any Person other than the Company or another of its Subsidiaries of (i) any of the Capital Stock of any of the Subsidiaries of the Company or (ii) any other assets of the Company or any other assets of its Subsidiaries outside the ordinary course of business of the Company or such Subsidiary. "AVERAGE LIFE" means, as of the date of determination, with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of (x) the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such debt security multiplied by (y) the amount of such principal payment by (ii) the sum of all such principal payments. "BANK CREDIT AGREEMENT" means either (i) the Bankers Trust Bank Credit Agreement, (ii) the Alternative Credit Documents (as defined in the Plan), if the Company has made the election provided for in Section 6.01(a) (ii) of the Plan, or (iii) any successor agreement, together with documents related thereto, including, without limitation, any security agreements, pledge agreements, mortgages or guarantees, in the case of each of clause (i), (ii) or (iii) hereof as such agreements may be amended, restated, supplemented or otherwise modified from time to time and includes any agreement renewing, extending the maturity of, refinancing (including by way of placement or issuance of notes) or restructuring (including the inclusion of additional borrowers, guarantors or lenders) all or any portion of the Indebtedness under such agreements. "BANKERS TRUST BANK CREDIT AGREEMENT" means the Amended and Restated Credit Agreement dated as of June 15, 1995 among the Company, Bankers Trust Company, for itself and as agent, and the other parties thereto. "BANKRUPTCY CODE" means Title 11 of the United States Code, as from time to time in effect. For purposes of Sections 5.01, 6.07 and 6.08 hereof, the term "Bankruptcy Code" also includes any similar federal, state or foreign law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any duly authorized committee of such board. "BORROWING SUBSIDIARY" means any direct or indirect wholly-owned Subsidiary of the Company which is permitted to -2- incur Indebtedness under the terms of this Indenture pursuant to Section 3.09 hereof and which is primarily engaged in any business in which a supermarket chain is at the time engaged or any related business or in any business in which the Company is engaged on the Issue Date. "BUSINESS DAY" means any day which is not a Legal Holiday. "CAPITAL STOCK" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, including, without limitation, preferred or preference stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "CAPITALIZED LEASE OBLIGATIONS" means, at the time any determination thereof is made, as to any Person, the obligation of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real or personal Property which obligation is required to be classified and accounted for as a capital lease obligation on a balance sheet of such Person under GAAP and, for purposes of this Indenture, the amount of such obligation at any date shall be the outstanding amount thereof at such date, determined in accordance with GAAP. "CHANGE OF CONTROL" means the occurrence of any of the following events: (a) any Person or Persons acting together which would constitute a "group" (a "Group") for purposes of Section 13(d) of the Exchange Act, or any successor provision thereto, together with any Affiliates thereof (other than a Permitted Holder or Permitted Holders), is or becomes the beneficial owner of more than 50% of the total Voting Stock of the Company; (b) the Company consolidates with, or merges into, another Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person in one transaction or a series of related transactions, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities (other than Voting Stock) or other property with the effect that any Person or Group (other than a Permitted Holder or Permitted Holders) becomes the beneficial owner of more than 50% of the total Voting Stock of the Company or any successor -3- corporation or securities representing more than 50% of the total Voting Stock of the Company or any successor corporation; (c) during any consecutive two-year period, commencing as of the date of this Indenture, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason (other than death or disability) to constitute a majority of the Board of Directors of the Company then in office; or (d) any order, judgment or decree shall be entered against the Company decreeing the dissolution or split-up of the Company and such order shall remain undischarged or unstayed for a period in excess of 60 days; PROVIDED, HOWEVER, that none of the events described in the foregoing clauses (a) through (d) shall constitute a "Change of Control" unless Standard & Poor's Corporation or Moody's Investors Service, Inc. or, if both of the two named rating agencies cease publishing ratings of investments, another nationally recognized rating service which publicly rates investments shall within 180 days after the occurrence of such event (such 180-day period to be extended by that number of days, not exceeding 45 days, during which the Securities shall have been placed after the date of such event on credit watch with negative implications status) have downgraded the rating assigned by such agency to the Securities on the date of such event. "COMPANY" means the Person designated as the "Company" in the first paragraph of this instrument until any successor corporation shall have become such Person pursuant to the terms of this Indenture, and thereafter means any such successor. "CONSOLIDATED INTEREST COVERAGE RATIO" means, with respect to the Company for any period, the ratio of: (i) the aggregate amount of Consolidated Operating Income of the Company for the four consecutive fiscal quarters for which financial information in respect thereof is available immediately prior to the Transaction Date -4- to (ii) the aggregate amount of Consolidated Interest Expense of the Company for the four consecutive fiscal quarters for which financial information in respect thereof is available immediately prior to the Transaction Date; PROVIDED, HOWEVER, that, for purposes of calculating the Consolidated Interest Coverage Ratio of the Company, (a) Consolidated Operating Income shall be calculated on the basis of the first-in, first-out method of inventory valuation, as determined in accordance with GAAP, (b) the Consolidated Operating Income and Consolidated Interest Expense of the Company shall include the Consolidated Operating Income and Consolidated Interest Expense of any Person to be acquired by the Company or any of its Subsidiaries in connection with the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio, on a pro forma basis for the four consecutive fiscal quarters for which financial information in respect thereof is available immediately prior to the Transaction Date and shall also include the Consolidated Operating Income and Consolidated Interest Expense of any other Person which has been acquired during such four consecutive fiscal quarters, on a pro forma basis from the beginning of such four consecutive fiscal quarters through the date first included in the Company's Consolidated Operating Income and Consolidated Interest Expenses, such pro forma Consolidated Operating Income and Consolidated Interest Expense to be determined on the same basis as used in determining such items for the Company, and (c) Consolidated Interest Expense and Redeemable Dividends shall be calculated as if (i) any Indebtedness incurred or proposed to be incurred or issued since the beginning of the four consecutive fiscal quarters for which financial information in respect thereof is available immediately prior to the Transaction Date, or to be incurred or issued at or prior to the time of the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio is effected (the "Transaction Time"), had been incurred or issued as of the beginning of such four quarter period, and (ii) any Indebtedness repaid since the beginning of such four quarter period or to be repaid with the proceeds of such Indebtedness or equity incurred or issued or to be incurred or issued at or prior to the Transaction Time, had been repaid as of the beginning of such four quarter period. For purposes of determining the Consolidated Interest Coverage Ratio of the Company for any period, (i) any Indebtedness incurred or proposed to be incurred or Redeemable Stock issued or proposed to be issued which for purposes of clause (c) above is deemed to have been -5- incurred or issued as of the beginning of the four quarter period described in clause (c) which bearsinterest at a fluctuating rate will be deemed to have borne interest during such four quarter period at the rate in effect on the Transaction Date and (ii) "Subsidiary" shall mean any Subsidiary of the Company other than any Subsidiary (and Subsidiaries of such Subsidiary) of which the Company does not own or control, directly or indirectly, a sufficient amount of Voting Stock in order to cause a merger of such Subsidiary into the Company or another Subsidiary without the approval of any other holder of Voting Stock of such Subsidiary. "CONSOLIDATED INTEREST EXPENSE" means, for any period, without duplication (A) the sum of (i) the aggregate amount of interest recognized by the Company and its Subsidiaries during such period in respect of Indebtedness of the Company and its Subsidiaries (including, without limitation, all interest capitalized by the Company or any of its Subsidiaries during such period and all commissions, discounts and other fees and charges owed by the Company and its Subsidiaries with respect to letters of credit and bankers' acceptance financing and the net costs associated with Interest Swap Obligations of the Company and its Subsidiaries), (ii) to the extent any Indebtedness of any Person is guaranteed by the Company or any of its Subsidiaries, the aggregate amount of interest paid or accrued by such Person during such period attributable to any such Indebtedness, and (iii) any cash [Redeemable Dividend] accrued and payable, and less (B) amortization or write-off of deferred financing costs of the Company and its Subsidiaries during such period and, to the extent included in (A) above, any charge related to any premium or penalty paid in connection with redeeming or retiring any Indebtedness prior to its stated maturity, and in the case of both (A) and (B) above, elimination of intercompany accounts among the Company and its Subsidiaries and as determined in accordance with GAAP. "CONSOLIDATED NET INCOME" means, for any period, the aggregate net income of the Company and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP but excluding for such purpose the impact of any Fresh Start Accounting adjustment; PROVIDED, HOWEVER, that there shall be excluded therefrom, after giving effect to any related tax effect, (i) gains and losses from Asset Sales or reserves relating thereto, (ii) items classified as extraordinary or nonrecurring, including without limitation income relating to the cancellation of Indebtedness resulting from the Restructuring, (iii) the income (or loss) of any Joint Venture, except to the extent of the amount of cash dividends or other distributions in respect of its capital -6- stock or interest in the Joint Venture actually paid to, and received by, the Company or any of its Subsidiariesduring such period by such Joint Venture out of funds legally available therefor, (iv) except to the extent includable pursuant to clause (iii), the income (or loss) of any Person accrued or attributable to any period prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with the Company or any of its Subsidiaries or that Person's assets (or a portion thereof) are acquired by the Company or any of its Subsidiaries and (v) the cumulative effect of changes in accounting principles in the year of adoption of such change. "CONSOLIDATED OPERATING INCOME" means, with respect to the Company for any period, the Consolidated Net Income of the Company and its Subsidiaries for such period (A) increased by the sum of (i) Consolidated Interest Expense of the Company for such period, (ii) income tax expense of the Company and its Subsidiaries, on a consolidated basis, for such period (after giving effect to any income tax expense adjustments made in arriving at Consolidated Net Income), (iii) depreciation expense of the Company and its Subsidiaries, on a consolidated basis, for such period, (iv) amortization expense of the Company and its Subsidiaries, on a consolidated basis, for such period, (v) amortization or write-off of deferred financing costs of the Company and its Subsidiaries, on a consolidated basis, for such period and (vi) other non cash items, but only to the extent the items referred to in subclauses (i) through (vi) of this clause (A) reduced such Consolidated Net Income and (B) decreased by the sum of (i) non cash items increasing such Consolidated Net Income and (ii) any revenues received or accrued by the Company or any of its Subsidiaries from any Person (other than the Company or any of its Subsidiaries) in respect of any Investment for such period (other than revenue from any Qualified Investment), but only to the extent that subclauses (i) and (ii) of this clause (B) increased such Consolidated Net Income, all as determined in accordance with GAAP. "DEFAULT" means an event or condition that is, or, with the lapse of time or the giving of notice or both, would become, an Event of Default as defined in Section 5.01. "FAIR MARKET VALUE" means, with respect to any Asset Sale or any non-cash consideration received by or transferred to any Person, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer, as determined in good faith by the Board of Directors of the Company. -7- "FISCAL YEAR" means the Company's fiscal year ended the Saturday closest to the last day of March in any calendar year or such other date as the Company shall designate for use in connection with its obligations under the federal taxing laws of the United States and relevant accounting standards. "FRESH START ACCOUNTING" means Fresh Start Accounting as described in Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" (Am. Inst. of Certified Public Accountants 1990), as then in effect, or such comparable statement then in effect. "GAAP" means, at any particular time, generally accepted accounting principles as in effect in the United States of America at such time. "GUARANTEE" means any direct or indirect obligation, contingent or otherwise, of a Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person in any manner. "HOLDER" means a Person in whose name a Security is registered. "INDEBTEDNESS," as applied to any Person, means, without duplication, (i) any obligation, contingent or otherwise, for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (ii) any obligation owed for all or any part of the purchase price of Property or other assets or for the cost of Property or other assets constructed or of improvements thereto (including any obligation under or in connection with any letter of credit related thereto), other than accounts payable included in current liabilities incurred in respect of Property and services purchased in the ordinary course of business which are not overdue by more than 90 days, according to the terms of sale, unless being contested or negotiated in good faith, (iii) any obligation, contingent or otherwise, of a Person under or in connection with any letter of credit issued for the account of such Person, and all drafts drawn, or demands for payment honored, thereunder, (iv) any obligation, contingent or otherwise, as set forth in subclauses (i) and (ii) of this definition, secured by any Lien in respect of Property even though the Person owning the Property has not assumed or become liable for payment of such obligation, (v) any Capitalized Lease Obligation, (vi) any note payable, bond, debenture, draft accepted or similar instrument representing an extension of credit (other than extensions of credit for Property and services purchased in the ordinary course of business which are not overdue by more than 90 days, according to the terms of sale, unless being -8- contested or negotiated in good faith), whether or not representing an obligation for borrowed money, (vii) the maximum fixed repurchase price of any Redeemable Stock, (viii) any obligations of such Person in respect of Interest Swap Obligations and (ix) any Guarantees and any obligation which is in economic effect a Guarantee, regardless of its characterization, with respect to Indebtedness (of a kind otherwise described in this definition) of another Person. For purposes of the preceding sentence, the maximum fixed repurchase price of any Redeemable Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such contingent obligations at such date. "INDENTURE" means this Indenture, as amended, modified or supplemented from time to time, together with any exhibits, schedules or other attachments hereto. "INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to any interest rate swap agreement, interest rate cap, collar or floor agreement or other similar agreement or arrangement. "INVESTMENT" means, with respect to any Person (such Person being referred to in this definition as the "Investor"), (i) any amount paid by the Investor, directly or indirectly, or any transfer of Property by the Investor, directly or indirectly (such amount to be the Fair Market Value of such Property at the time of transfer by the Investor), to any other Person for Capital Stock of, or as a capital contribution to, any other Person; (ii) any direct or indirect loan or advance to any other Person (other than accounts receivable of such Investor arising in the ordinary course of business); and (iii) Guarantees of the Indebtedness of another Person. "ISSUE DATE" means June 15, 1995, the date on which the Securities are first to be issued under this Indenture. "JOINT VENTURE" means any Person (other than a Subsidiary of the Company) in which any Person other than the Company or any of its Subsidiaries has a joint or shared equity interest with the Company or any of its Subsidiaries. "LIEN" means any mortgage, lien (statutory or other), charge, pledge, hypothecation, conditional sales agreement, adverse claim, title retention agreement or other -9- security interest, encumbrance or title defect in or on, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale, trust receipt or other title retention agreement with respect to, any Property or asset of such Person. "MATERIAL ACQUISITION" means any merger, consolidation, acquisition or lease of assets, acquisition of securities or other business combination or acquisition, or any two or more such transactions if part of a common plan to acquire a business or group of businesses, if the assets thus acquired in the aggregate would have constituted a Material Subsidiary if they had been acquired as a Subsidiary, based upon the consolidated financial statements of the Company and its Subsidiaries for the most recent Fiscal Year for which financial statements are available. "MATERIAL SUBSIDIARY" means, with respect to the Company, at any time, each existing Subsidiary and each Subsidiary hereafter acquired or formed which (i) for the most recent Fiscal Year of the Company for which financial statements are available accounted for more than 10% of the consolidated revenues of the Company and its Subsidiaries or (ii) as of the end of such Fiscal Year, was the owner (beneficial or otherwise) of more than 10% of the consolidated assets of the Company and its Subsidiaries, all as shown on the consolidated financial statements of the Company and its Subsidiaries for such Fiscal Year. "NET PROCEEDS" means, with respect to an Asset Sale by the Company or any of its Subsidiaries, (i) the gross proceeds received by the Company or its Subsidiary in connection with such Asset Sale (the amount of any non-cash consideration received as proceeds to be the Fair Market Value of such consideration, provided that liabilities assumed by the buyer shall not be deemed proceeds received by the Company or its Subsidiary), minus (ii) the sum of (a) reasonable fees and expenses incurred by the Company or such Subsidiary in connection with such Asset Sale, including any tax on income resulting from the gain realized from such Asset Sale, (b) payments made with respect to liabilities associated with the assets which are the subject of the Asset Sale, including without limitation, trade payables and other accrued liabilities, and payments made to retire Indebtedness where the assets disposed of in such Asset Sale constituted security for or had been pledged to secure such Indebtedness and payment of such Indebtedness is required in connection with such Asset Sale and (c) appropriate amounts to be provided by the Company or any Subsidiary thereof, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such assets and retained by the Company or any -10- Subsidiary thereof, as the case may be, after such Asset Sale, including, without limitation, liabilities under any indemnification obligations and severance and other employee termination costs associated with such Asset Sale. "NON-BORROWING SUBSIDIARY" means any direct or indirect wholly-owned Subsidiary of the Company which (i) is not permitted to incur Indebtedness and does not at any time, in the present or future, have outstanding Indebtedness and (ii) is not permitted to issue preferred or preference stock, pursuant to its certificate of incorporation or otherwise, and does not at any time, in the present or the future, have outstanding preferred or preference stock. "OFFICER" means the Chairman of the Board of Directors, the Chief Executive Officer, the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers of the Company, one of whom must be the Chairman of the Board of Directors, the Chief Executive Officer, the President, any Vice President or the Treasurer of the Company. "OPINION OF COUNSEL" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "PERMITTED HOLDERS" means any Person which directly or indirectly through one or more intermediaries beneficially owns or holds or is entitled to receive on the Issue Date 20% or more of the combined voting power of the Voting Stock of the Company, or any Affiliate of any such Person. "PERSON" means any individual, corporation, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PLAN" means the plan of reorganization of the Company, as confirmed by the United States Bankruptcy Court for the District of Delaware on May 31, 1995. "PRINCIPAL", or "PRINCIPAL" of a debt security means the principal amount of a debt security plus the premium, if any, on such debt security. "PROPERTY" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. -11- "QUALIFIED INVESTMENT" means the following kinds of instruments if, on the date of purchase or other acquisition of any such instrument by the Company or any Subsidiary the remaining term to maturity thereof is not more than one year: (i) obligations issued or unconditionally guaranteed as to principal and interest by the United States of America or by any agency or authority controlled or supervised by and acting as an instrumentality of the United States of America; (ii) obligations (including, but not limited to, demand or time deposits, bankers' acceptances and certificates of deposit) issued by (a) a depository institution or trust company incorporated under the laws of the United States of America, any state thereof or the District of Columbia or (b) a branch office or agency located in the United States of any foreign depository institution and guaranteed by such a U.S. trust company or depository, provided that, in the case of both clause (a) and clause (b), such U.S. trust company or depository has, at the time of the Company's or any Subsidiary's investment therein or contractual commitment providing for such investment, capital, surplus and undivided profits (as of the date of such institution's most recently published financial statements) in excess of $100 million and the long-term unsecured debt obligations (other than such obligations rated on the basis of the credit of a person or entity other than such institution) of such institution, at the time of the Company's or any Subsidiary's investment therein or contractual commitment providing for such investment, is rated at least A-1 by Standard & Poor's Corporation or A3 by Moody's Investors Service, Inc. or carries an equivalent rating from a nationally recognized rating agency, if both these two named rating agencies cease publishing ratings of investments; and (iii) debt obligations (including, but not limited to, commercial paper and medium-term notes) issued or unconditionally guaranteed as to principal and interest by any corporation, state or municipal government or agency or instrumentality thereof, or foreign sovereignty if the commercial paper of such corporation, state or municipal government or foreign sovereignty has, at the time of the Company's or any Subsidiary's investment therein or contractual commitment providing for such investment, credit ratings of A-1 by Standard & Poor's Corporation, or P-1 by Moody's Investors Service, Inc. or carries an equivalent rating from a nationally recognized rating agency, if both these two named rating agencies cease publishing ratings of investments, or the debt obligations of such corporation, state or municipal government or foreign sovereignty, at the time of the Company's or any Subsidiary's investment therein or contractual commitment providing for such investment, have credit ratings of at least A-1 by Standard & Poor's Corporation or A3 by Moody's Investors Service, Inc. or carry an equivalent rating from a nationally recognized rating -12- agency, if both these two named rating agencies cease publishing ratings of investments. "REDEEMABLE DIVIDEND" means, for any dividend payable with regard to Redeemable Stock, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Redeemable Stock. "REDEEMABLE STOCK" means, with respect to any Person, any equity security that by its terms or otherwise is required to be redeemed or is redeemable at the option of the holder thereof at any time prior to the maturity of the Securities. "REDEMPTION DATE" means, when used with respect to any Security to be redeemed, the date fixed for such redemption pursuant to this Indenture and the Securities. "REDEMPTION PRICE" means, when used with respect to any Security to be redeemed, the price fixed for such redemption pursuant to this Indenture and the Securities as set forth in Article 9 of this Indenture and paragraph 6 of the Securities. "RESTRICTED PAYMENT" means (i) a dividend or other distribution declared and paid on the Capital Stock of the Company to its stockholders (in their capacity as such), other than dividends or distributions consisting of shares of the Company's Capital Stock (or rights or warrants to subscribe for or purchase shares of such Capital Stock), (ii) a payment made by the Company or any Subsidiary to purchase, redeem, acquire or retire any Capital Stock of the Company (or rights or warrants to subscribe for or purchase shares of such Capital Stock), (iii) a payment made by the Company or any Subsidiary to acquire, retire or redeem any debt of or equity interest in any Affiliate of the Company or any of its Subsidiaries, (iv) any other Investment in any Affiliate of the Company or any of its Subsidiaries (other than in any Non-Borrowing Subsidiary) or (v) a payment made in purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Debt. For purposes of this Indenture, a guarantee of Indebtedness of the Company by a Subsidiary of the Company required by the Bank Credit Agreement shall not be deemed a Restricted Payment. "RESTRUCTURING" means the restructuring of the Company's debt and equity capitalization pursuant to the Plan. "REVOLVING CREDIT FACILITY" means the revolving credit facility (or any similar facility) available under the -13- Bank Credit Agreement, including any related letters of credit. "SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement with any Person or to which such Person is a party, providing for the leasing to the Company or a Subsidiary of any Property, whether owned at the date of this Indenture or thereafter acquired, which has been or is to be sold or transferred by the Company or such Subsidiary to such Person, or to any other Person to whom funds have been or are to be advanced by such Person, on the security of such Property. "SEC" means the Securities and Exchange Commission or any successor thereto. "SECURITIES" has the meaning set forth in the second paragraph of this Indenture. "SENIOR INDEBTEDNESS" means, at any date, (i) Indebtedness under the Bank Credit Agreement and the Securities including, in each case, interest thereon accruing at the contract rate, whether or not an allowed claim in a case under the Bankruptcy Code, and all other obligations and indemnities owing thereunder; (ii) any renewals, extensions, modifications, amendments or refundings of Indebtedness under the Securities; (iii) Indebtedness arising as a result of Interest Swap Obligations of the Company or any Subsidiary; and (iv) any other Indebtedness of the Company for money borrowed or under letters of credit, in either case entered into in compliance with the Indenture, unless the instrument under which such Indebtedness is created, incurred, assumed or guaranteed expressly provides that such Indebtedness is subordinated in right of payment to any Indebtedness. "SUBORDINATED DEBT" means, at any date, any Indebtedness of the Company that is expressly subordinated in any respect in right of payment to the Securities, Indebtedness under the Bank Credit Agreement or to any other Senior Indebtedness, including, without limitation, principal, premium, interest, fees, indemnities and amounts in respect of claims and rights of rescission. "SUBSIDIARY" means, with respect to any Person, any corporation, association or other business entity of which securities representing more than 50% of the combined voting power of the total Voting Stock (or in the case of an association or other business entity which is not a corporation, more than 50% of the equity interest) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination -14- thereof. When used herein without reference to any Person, Subsidiary means a Subsidiary of the Company. "SURVIVING CORPORATION" means the corporation formed by or surviving any consolidation or merger involving the Company or to which a transfer, sale or lease of all or substantially all of the Company's Property is made. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa- 77bbbb), as amended by the Trust Indenture Reform Act of 1990, as in effect on the date of execution of this Indenture, except as provided in Section 8.03. "TRANSACTION DATE" means the date of the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio; PROVIDED that if such transaction is related to or in connection with any acquisition of any Person, the Transaction Date shall be the earlier of (i) the date on which the Company or any of its Subsidiaries enters into an agreement with such Person to effect such acquisition, (ii) the date on which the Company or any of its Subsidiaries first makes a public announcement of any offer or proposal to effect such acquisition, (iii) the date on which the Company or any of its Subsidiaries first makes a filing with the SEC or the Federal Trade Commission in connection with any proposed acquisition, and (iv) the date such acquisition is consummated, PROVIDED, HOWEVER, that if subsequent to the occurrence of an event described in clause (i), (ii) or (iii) above or clause (A), (B) or (C) below the Company or any of its Subsidiaries shall amend the terms of such acquisition with respect to the consideration payable by the Company or any of its Subsidiaries in connection with such acquisition, the Transaction Date shall be the earlier of (A) the date on which the Company or any of its Subsidiaries enters into a binding written agreement with such Person to effect such acquisition on such amended terms, (B) the date on which the Company or any of its Subsidiaries makes a public announcement of any offer or proposal to effect such acquisition on such amended terms and (C) the date on which the Company or any of its Subsidiaries first makes a filing disclosing such amended terms with the SEC or the Federal Trade Commission in connection with any proposed acquisition. "TRUSTEE" means the party named as such above unless and until a successor replaces it in accordance with the terms of this Indenture and thereafter means such successor. "TRUST OFFICER," when used with respect to the Trustee, means any officer within the Corporate Trust Department (or any successor group) of the Trustee, including without limitation any Vice President, Assistant Vice President, Secretary or any other officer customarily perform- -15- ing functions similar to those performed by any of the above-designated officers who shall, in any case, be responsible for the administration of this Indenture or have familiarity with it, and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "VOTING STOCK" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to vote for the election of directors, managers or trustees of any Person (irrespective of whether or not at the time stock of any class or classes will have or might have voting power by the reason of the happening of any contingency). (b) ACCOUNTING TERMS. Unless otherwise specified herein, all accounting terms herein shall be interpreted, all accounting determinations shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP. SECTION 1.02. OTHER DEFINITIONS. Term Defined in Section "Authenticating Agent" 6.12 "Custodian" 5.01 "Discharged" 7.01 "Event of Default" 5.01 "Exchange Act" 3.07 "Legal Holiday" 10.07 "Paying Agent" 2.03 "Registrar" 2.03 "Repayment Date" 4.01 "Repurchase Date" 3.06 "U.S. Government Obligations" 7.01 -16- SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Securities; "indenture security holder" means a Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Securities means the Company. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings assigned to them thereby. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in effect on the date of the construction of such term; (c) "OR" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; and (e) provisions apply to successive events and transactions. -17- ARTICLE 2. THE SECURITIES SECTION 2.01. FORM AND DATING. The Securities shall be substantially in the form of Exhibit A, which is part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. If determined to be necessary by the Company or its counsel, the Company may require that a legend be placed on the Securities relating to original issue discount or other applicable tax matters or as required by any securities exchange on which the Securities may be listed. The Company shall furnish any such legend in writing to the Trustee. Each Security shall be dated the date of its authentication. SECTION 2.02. EXECUTION AND AUTHENTICATION. The Securities shall be signed for the Company by the Company's President or a Vice President and shall be attested by the Company's Secretary or an Assistant Secretary, in each case by manual or facsimile signature. The Company's seal shall be reproduced on the Securities. If an Officer whose signature is on a Security no longer holds that office at the time the Security is authenticated, the Security shall nevertheless be valid. A Security shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue up to $595,475,922 pursuant to a written order of the Company signed by two Officers. The aggregate principal amount of Securities outstanding at any time may not exceed the amount of $595,475,922 except as provided in Section 2.07. Such order shall specify the amount of the Securities to be authorized and the date or dates upon which the original issue of Securities is to be authenticated. The Trustee may appoint an Authenticating Agent acceptable to the Company to authenticate Securities. An Authenticating Agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An Authenticating Agent has the same rights as an Agent to deal with the Company or an Affiliate. The Securities shall be issuable in denominations of $1,000 and any integral multiples thereof. -18- SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Securities may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may appoint one or more co-Registrars and one or more additional Paying Agents. The term Paying Agent includes any additional Paying Agent. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-Registrar. Upon any bankruptcy or reorganization proceeding relative to the Company, the Trustee shall serve as the Paying Agent. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture that shall implement the provisions of this Indenture that relate to such Agent. The Company shall give prompt written notice to the Trustee of the name and address of any such Agent and any change in the address of such Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Company initially appoints the Trustee as Paying Agent and Registrar. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of, premium, if any, or interest on the Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal, premium, if any, or interest; and (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. Upon such payment over to the Trustee, the Paying Agent shall have no further liability for such money. -19- If the Company or any of its Subsidiaries acts as Paying Agent, it shall comply with the requirements of Section 3.17 of this Indenture. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee not less than ten days before each interest payment date and at such other times as the Trustee may request in writing all information in the possession or control of the Company or any Paying Agent as to the names and addresses of the Holders, in such form and as of such date as the Trustee may reasonably require. SECTION 2.06. TRANSFER AND EXCHANGE. When Securities are presented to the Registrar or a co-Registrar with a request to register the transfer of, or to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange provided that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instruction of transfer in form acceptable to the Registrar duly executed by the Holder thereof or his attorney duly authorized in writing and its requirements for such transactions are met. To permit registrations of transfer and exchanges, the Company shall issue and the Trustee shall authenticate Securities at the Registrar's request. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange. The Company shall not be required (i) to issue, register the transfer of or exchange Securities during a period beginning at the opening of business 15 days before the day of any selection of Securities for redemption under Section 9.02 and ending at the close of business on the day of such day of selection, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. -20- SECTION 2.07. REPLACEMENT SECURITIES. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements are met, provided that the Trustee shall not be required to authenticate or replace any such Security which has been called for redemption. If required by the Trustee or the Company, such Holder shall provide an indemnity bond sufficient in the judgment of both the Company and the Trustee to protect the Company, the Trustee, any Agent or any Authenticating Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge the Holder for its expenses in replacing a Security. Every replacement Security issued pursuant to the provisions of this Section 2.07 by virtue of the fact that any Security is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionally with any and all other Securities duly issued hereunder. SECTION 2.08. OUTSTANDING SECURITIES. The Securities outstanding at any time are all the Securities authenticated by the Trustee except for (a) those canceled by it, (b) those delivered to it for cancellation and (c) those described in this Section as not outstanding. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If Securities are considered paid under Section 3.01, they cease to be outstanding and interest on them ceases to accrue. Except as provided in Section 2.09, a Security does not cease to be outstanding because the Company or an Affiliate holds the Security. -21- SECTION 2.09. TREASURY SECURITIES. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or an Affiliate shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee actually knows are so owned shall be so considered. SECTION 2.10. TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and deliver to the Trustee, and the Trustee shall authenticate, definitive Securities in exchange for temporary Securities. SECTION 2.11. CANCELLATION. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Securities surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall, upon the request of the Company, destroy canceled Securities and deliver a certificate of such destruction to the Company. Subject to Section 2.07, the Company may not issue new Securities to replace Securities that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. If the Company fails to make a payment of interest on the Securities, it shall pay such interest thereafter in any lawful manner. It may pay such interest, plus any interest payable on such interest, to the Persons who are Holders on a subsequent special record date. The Company shall fix in a manner satisfactory to the Trustee such special record date and payment date, except for a payment of interest made within the 30-day period referred to in paragraph (i) of Section 5.01 of this Indenture which may be paid to the holders of the Securities on the regular record date for such interest payment. Such special record date shall not be less than 10 days prior to the payment date of such defaulted interest. -22- The Company shall notify the Trustee, in a writing delivered to the Trustee, of the amount of defaulted interest proposed to be paid on each Security and the date of the proposed payment, and at the same time, the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money, when deposited, to be held in trust for the benefit of the Person entitled to such defaulted interest as provided in this section. At least 5 days before such special record date, the Company shall deliver to the Trustee and mail to Holders a notice that states the special record date, payment date, and amount of such interest to be paid. ARTICLE 3 .. COVENANTS SECTION 3.01. PAYMENT OF SECURITIES. The Company shall punctually pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent has received by 10:00 a.m. New York City time on that date immediately available funds designated for and sufficient to pay all principal and interest then due. The Company shall pay interest on overdue principal and premium, if any, at the rate borne by the Securities; it shall pay interest on overdue installments of interest at the same rate to the extent permitted by law. SECTION 3.02. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, nor shall it permit any of its Subsidiaries to, make any Restricted Payment (other than Investments in (i) Affiliates which are not wholly-owned Subsidiaries in an aggregate amount not to exceed $20 million at any time outstanding and (ii) Borrowing Subsidiaries in an aggregate amount at any time outstanding not to exceed the sum of (x) $30 million less (y) the aggregate amount of outstanding Investments in Affiliates which are not wholly-owned Subsidiaries permitted by clause (i) hereof) if, after giving effect thereto: (A) any Default shall have occurred and be continuing, or -23- (B) the Company could not incur at least $1.00 of additional Indebtedness pursuant to Section 3.03(a) of this Indenture, or (C) the aggregate amount of Restricted Payments made subsequent to the date of this Indenture by the Company and its Subsidiaries (other than (i) Investments in Affiliates which are not wholly-owned Subsidiaries in an amount not to exceed $20 million in the aggregate and (ii) Investments in Borrowing Subsidiaries in an aggregate amount not to exceed the sum of (x) $30 million less (y) the aggregate amount of outstanding Investments in Affiliates which are not wholly-owned Subsidiaries permitted by clause (i) of the first paragraph of this Section 3.02(a)) would exceed the sum of (a) 50% (or minus 100% in the event of a deficit) of aggregate Consolidated Net Income (which is defined to exclude the impact of any Fresh Start Accounting adjustment and any extraordinary income, including income relating to cancellation of indebtedness resulting from the Restructuring) of the Company for the period commencing on April 2, 1995 and ending on the last day of the fiscal quarter immediately preceding the date of such payment, and (b) the aggregate Net Proceeds, including cash and the Fair Market Value of Property other than cash, received by the Company subsequent to the Issue Date from capital contributions from any of its stockholders or from the issuance or sale (other than to a Subsidiary) subsequent to the Issue Date of shares of its Capital Stock (other than Redeemable Stock) of any class (or rights or warrants to subscribe for or purchase shares of such capital stock) or of any convertible securities or debt obligations which have been converted into, exchanged for or satisfied by the issuance of shares of the Company's Capital Stock (other than Redeemable Stock). (b) The provisions of this Section 3.02 shall not prevent the Company from (i) paying a dividend on Capital Stock within 60 days after the declaration thereof if, on the date on which the dividend was declared, the Company could have paid such dividend in accordance with the provisions of this Indenture, or (ii) repurchasing shares of its Capital Stock (X) solely in exchange for other shares of its Capital Stock (other than Redeemable Stock) or (Y) pursuant to a court order. (c) The provisions of this Section 3.02 shall not prevent redemptions or repurchases of the Company's common stock in connection with repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management employees, PROVIDED that such redemptions or purchases shall not exceed $2,000,000 in any Fiscal Year or $5,000,000 in the aggregate subsequent to the date hereof. -24- (d) Payments made in purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Debt must meet the tests set forth in paragraph (a) of this Section 3.02 except to the extent that any such purchase, redemption, defeasance or other acquisition or retirement for value is made out of the proceeds of the issuance of (i) Subordinated Debt having a final maturity no earlier than the final maturity of, and an Average Life equal to or longer than, the Indebtedness being retired or repurchased or (ii) Capital Stock (other than Redeemable Stock) of the Company. SECTION 3.03. LIMITATION ON INDEBTEDNESS. (a) The Company shall not create, incur, assume, guarantee or otherwise become liable with respect to, or become responsible for the payment of, any Indebtedness, unless, after giving effect thereto, the Consolidated Interest Coverage Ratio of the Company on a pro forma basis for the four consecutive fiscal quarters for which financial information in respect thereof is available immediately prior to any Transaction Date that is prior to September 1, 1997 would be greater than 1.85:1 and for any Transaction Date thereafter would be greater than 2.0:1. (b) Notwithstanding the foregoing, the Company may incur, create, assume, guarantee or otherwise become liable with respect to, any or all of the following Indebtedness: (i) Indebtedness evidenced by the Securities, and Indebtedness under the Bank Credit Agreement (including any refinancings thereof permitted by clause (ii) of this Section 3.03(b)) in a maximum principal amount at any time outstanding not to exceed the greater of (x) $250 million or (y) the sum of $100 million plus 65% of the total inventory of the Company and its Subsidiaries (calculated on a "first-in" "first-out" basis) plus 85% of the total accounts receivable of the Company and its Subsidiaries, subject to one or more permanent reductions of both (x) and (y) as provided in clause (iii) of Section 3.05 and the proviso set forth in the second paragraph of Section 3.06(a); (ii) Indebtedness the proceeds of which are used to refinance (x) all or a portion of the Indebtedness evidenced by the Securities, or (y) Indebtedness under the Bank Credit Agreement (as limited by clause (i) of this Section 3.03(b)) or (z) other Indebtedness of the Company and of its Subsidiaries, in each case in a principal amount not to exceed the principal amount so refinanced (or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the matu- -25- rity thereof, in an amount not greater than such lesser amount) plus any prepayment penalties and premiums, accrued and unpaid interest on the Indebtedness so refinanced, plus customary fees, expenses and costs related to the incurrence of such refinancing Indebtedness, PROVIDED that, in the case of this clause (ii), (1) if the Securities are refinanced in part, such new Indebtedness is expressly made pari passu or subordinate in right of payment to the remaining Securities, (2) if the Indebtedness to be refinanced is subordinate in right of payment to the Securities, such new Indebtedness is subordinate in right of payment to the Securities at least to the extent that the Indebtedness to be refinanced is subordinate in right of payment to the Securities, (3) if the Indebtedness to be refinanced is pari passu in right of payment to the Securities, such new Indebtedness is expressly made pari passu or subordinate in right of payment to the Securities, and (4) if the Securities are refinanced in part or if the Indebtedness to be refinanced is pari passu or subordinate in right of payment to the Securities and scheduled to mature after the maturity date of the Securities, such new Indebtedness as of the date of incurrence does not mature prior to the final scheduled maturity date of the Securities and has an Average Life equal to or greater than the remaining Average Life of the Securities; (iii) Indebtedness of the Company remaining outstanding immediately after the issuance of the Securities; (iv) Indebtedness to a Subsidiary of the Company; (v) Indebtedness incurred in connection with the refurbishment, improvement, construction or acquisition (whether by acquisition of stock, assets or otherwise) of any Property or Properties of the Company or of any Subsidiary that constitute a part of the then present business of the Company or of any Subsidiary (or incurred within twelve months of any such acquisition or the completion of such refurbishment, improvement or construction), PROVIDED THAT at the time of the incurrence thereof: -26- (a)(1) such Indebtedness, together with any other then outstanding Indebtedness incurred during the most recently completed four consecutive fiscal quarter period in reliance upon either this clause (v) or clause (vi) of Section 3.09 hereof does not exceed, in the aggregate, 3% of consolidated net sales of the Company and its Subsidiaries during the four consecutive fiscal quarter period ended immediately prior to the date of calculation; provided, that for purposes of this clause (a)(1), such Indebtedness shall include, without limitation, an amount equal to (x) the aggregate outstanding principal amount of any mortgages that the Company or any Subsidiary is deemed to have entered into in connection with any Sale and Leaseback Transaction that the Company or any Subsidiary has entered into during the four consecutive fiscal quarter period ended immediately prior to the date of calculation, less (y) the aggregate principal amount of any Senior Indebtedness that has been repaid with the Net Proceeds of any Sale and Leaseback Transaction that the Company or any Subsidiary has entered into within twelve months of the acquisition, or completion of construction or refurbishment, of the Property that is the subject of any such transaction; and (2) such Indebtedness, together with all then outstanding Indebtedness incurred in reliance upon either this clause (v) or clause (vi) of Section 3.09 hereof does not exceed, in the aggregate, 3% of the consolidated net sales of the Company and its Subsidiaries during the most recently completed twelve consecutive fiscal quarter period; provided that, for purposes of this clause (a)(2), such Indebtedness shall include, without limitation, an amount equal to (x) the aggregate outstanding principal amount of any mortgages that the Company or any Subsidiary is deemed to have entered into in connection with any Sale and Leaseback Transactions to which the Company or any Subsidiary is then a party less (y) the aggregate principal amount of any Senior Indebtedness that has been repaid with the Net Proceeds of any Sale and Leaseback Transaction that the Company or any Subsidiary has entered into within twelve months of the acquisition, or completion of construction or refurbishment, of the Property that is the subject of any such transaction; except that, for purposes of calculating the limitation set forth in clause (a)(2) the seven Sale and Leaseback Transactions -27- identified in clause (ii) of Section 3.05 hereof shall not be included; or (b) such Indebtedness (including an amount equal to the sum of (x) the aggregate outstanding principal amount of any mortgages that the Company or any Subsidiary is deemed to have entered into in connection with any Sale and Leaseback Transaction to which the Company or any Subsidiary is then a party less (y) the aggregate principal amount of any Senior Indebtedness that has been repaid with the Net Proceeds of any Sale and Leaseback Transaction) does not exceed the amount of proceeds received by the Company or any of its Subsidiaries from insurance policies maintained by the Company or any Subsidiary in respect of such Property or Properties; (vi) Indebtedness consisting of Guarantees by the Company of Indebtedness of any Subsidiary, provided that such Indebtedness is otherwise permitted under this Indenture; (vii) Indebtedness under Interest Swap Obligations, PROVIDED that such Interest Swap Obligations are related to payment obligations on Indebtedness otherwise permitted under this Section 3.03; (viii) commercial letters of credit and standby letters of credit incurred in the ordinary course of business by the Company; (ix) Indebtedness represented by industrial revenue or development bonds, provided that the aggregate amount of Indebtedness incurred in reliance upon the exception of this clause (ix) or of clause (x) of Section 3.09 shall not exceed at any one time an aggregate principal amount outstanding of $25,000,000; (x) Capitalized Lease Obligations relating to Property used in the business of the Company; (xi) Indebtedness incurred in respect of performance bonds and performance and completion Guarantees incurred in the ordinary course of business; (xii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, PROVIDED that such -28- Indebtedness is extinguished within five Business Days from the date of its incurrence; and (xiii) other Indebtedness for borrowed money in an amount not to exceed $75,000,000 in the aggregate. SECTION 3.04. LIMITATION ON LIENS. Neither the Company nor any Subsidiary shall create, incur, assume or permit to exist any Lien on or with respect to any Property or assets of the Company or of any Subsidiary or any interest therein or any income or profits therefrom, other than: (i) any Lien existing as of the date of this Indenture and any Lien securing Indebtedness under the Bank Credit Agreement pursuant to the terms of such Bank Credit Agreement as in effect on the Issue Date; (ii) any Lien arising in the ordinary course of business, other than in connection with Indebtedness for borrowed money; (iii) any Lien on the Company's or a Subsidiary's accounts receivable, inventories, and proceeds thereof securing Indebtedness incurred pursuant to the provisions of the Revolving Credit Facility; (iv) any Lien on Property acquired by the Company or by any Subsidiary after the date of this Indenture created solely to secure Indebtedness incurred to finance such acquisition or assumed in connection with such acquisition, whether by acquisition of stock, assets or otherwise (or entered into in connection with Indebtedness that is permitted under clause (v) of Section 3.03(b) or clause (vi) of Section 3.09), PROVIDED that in each case such acquisition does not constitute a Material Acquisition; (v) any Lien on Property acquired by the Company or any Subsidiary which constitutes a Material Acquisition created solely to secure Indebtedness incurred to finance such Material Acquisition or assumed in connection with such Material Acquisition, PROVIDED that after giving effect to such Indebtedness the Consolidated Interest Coverage Ratio would be greater than the then applicable Consolidated Interest Coverage Ratio described in Section 3.03(a) above; (vi) any Lien on any asset of the Company or any Subsidiary created solely to secure Indebtedness incurred to finance the refurbishment, improvement, construction -29- or acquisition (whether by acquisition of stock, assets or otherwise) of such asset (or created within twelve months of any such acquisition or the completion of such refurbishment, improvement or construction) or relating to Indebtedness assumed in connection with any such acquisition, PROVIDED that such Lien secures Indebtedness permitted under clause (v) of Section 3.03(b), or clause (vi) of Section 3.09; (vii) any Lien created in connection with a Capitalized Lease Obligation that the Company or a Subsidiary is permitted to enter into under the terms of this Indenture; (viii) any Lien relating to judgments or awards that the Company or any Subsidiary is contesting in good faith; (ix) any Lien for taxes that are not yet due or that the Company or any Subsidiary is contesting in good faith; and (x) any Lien extending, renewing or replacing any Liens permitted by clauses (i), (iv), (v), (vi) or (vii). In the case of Liens permitted under clauses (i), (iv), (v), (vi), (vii) and (x), such Liens may relate solely to the Property (including any improvements thereon) subject thereto as of the date of this Indenture or the date such Lien was incurred, as the case may be (and, in the case of Indebtedness under the Bank Credit Agreement, any after acquired Property), and may secure the payment only of the Indebtedness so secured as of such date. SECTION 3.05. Limitation on Sale and Leaseback TRANSACTIONS. The Company shall not, and shall not permit any Subsidiary to, enter into, assume, guarantee or otherwise become liable with respect to any Sale and Leaseback Transaction, PROVIDED, that the Company may enter into: (i) a Sale and Leaseback Transaction that, had such Sale and Leaseback Transaction been structured as a mortgage rather than as a Sale and Leaseback Transaction, the Company would have been permitted to enter into such transaction pursuant to clause (v) of Section 3.03(b), clause (vi) of Section 3.04 and clause (vi) of Section 3.09, PROVIDED, HOWEVER, that such Sale and Leaseback Transaction is entered into within twelve months of the acquisition, or completion of construction or -30- refurbishment, of the Property that is the subject of any such transactions; (ii) a Sale and Leaseback Transaction with respect to the Company's Property located in New Fairfield, Connecticut, Dumont, New Jersey, Valatie, New York, Morrisville, Vermont, Corinth, New York, Tannersville, New York and Manchester Center, Vermont; and (iii) a Sale and Leaseback Transaction if within 90 days of entering into such arrangement either (1) the Company applies the Net Proceeds of the sale of the Property leased pursuant to such Sale and Leaseback Transaction to the payment of Senior Indebtedness other than Indebtedness incurred under the Bank Credit Agreement (except that Indebtedness under the Bank Credit Agreement may be repaid from such Net Proceeds to the extent the principal amount of Indebtedness under the Bank Credit Agreement permitted by Section 3.03(b) is permanently reduced by an amount equal to the principal amount of the Indebtedness under the Bank Credit Agreement so repaid from Net Proceeds) or (2)(a) if such arrangement is entered into prior to September 1, 2000, the Company makes a pro rata offer to all Holders of Securities to repurchase Securities at 104% of their principal amount, plus accrued and unpaid interest through the date of repurchase, or (b) if such arrangement is entered into on or after September 1, 2000, the Company redeems the Securities, in either case at par plus the then applicable premium, if any, and in an aggregate amount equal to the greater of the Net Proceeds of the sale of the Property leased pursuant to such Sale and Leaseback Transaction or the Fair Market Value of the Property so leased at the time of entering into such Sale and Leaseback Transaction. SECTION 3.06. LIMITATION ON ASSET SALES. (a) The Company shall not consummate, and shall not permit any Subsidiary to consummate, any Asset Sale unless (i) such sale is for Fair Market Value and (ii) at least 75% of the Net Proceeds thereof received by the Company or such Subsidiary is in the form of cash; PROVIDED, that for purposes of this covenant securities received by the Company or any Subsidiary from such transferee that are promptly converted by the Company or such Subsidiary into cash shall be deemed to be cash, and provided further, that notwithstanding any other provision in this paragraph, the Company or any Subsidiary may consummate Asset Sales for which it receives, in a single transaction or in a series of related transactions, aggregate Net Proceeds in an amount not to exceed $25,000,000 without -31- regard to the foregoing limitation on receiving a specified percentage of the Net Proceeds in cash. To the extent the Company or such Subsidiary has not reinvested such Net Proceeds in Additional Assets or used such Net Proceeds to repay Senior Indebtedness (other than the Securities) within twelve months following the consummation of the Asset Sale (or in the case of Net Proceeds received in the form of securities, within twelve months after such securities are converted into cash), the Company shall, not later than ten (10) days after the expiration of such twelve months, either apply such Net Proceeds (or any portion thereof) to the repayment of such Senior Indebtedness or commence an offer to repurchase the Securities to which such Net Proceeds (or the remaining portion thereof) shall be applied (such offer to repurchase to be made on the terms described in the following paragraph); PROVIDED, HOWEVER, that if Net Proceeds of Asset Sales are applied to reduce the Indebtedness under the Bank Credit Agreement (or any refinancing or renewal thereof), the principal amount of Indebtedness under the Bank Credit Agreement permitted by Section 3.03(b) shall be reduced permanently by an amount equal to the principal amount of the Indebtedness under the Bank Credit Agreement so repaid from Net Proceeds. If (1) no Senior Indebtedness other than the Securities is outstanding at such time or the Company does not apply any or applies only a portion of such Net Proceeds to the repayment of Senior Indebtedness other than the Securities or (2) the application of such Net Proceeds results in the payment of all outstanding Senior Indebtedness other than the Securities, then such Net Proceeds or any remaining portion thereof, in each case not so applied to the reinvestment in Additional Assets or the payment of Senior Indebtedness other than the Securities, shall, except as otherwise provided in this Indenture, be applied to a pro rata offer to all Holders of Securities to repurchase the Securities at a purchase price in cash equal to 102% of their principal amount plus accrued and unpaid interest through the Repurchase Date. Not less than twenty (20) nor more than sixty (60) Business Days prior to the Repurchase Date, the Company shall give Holders prior written notice of such right of repurchase, mailed by first class mail to the Holders' last addresses as they appear upon the register. Such notice shall state: (i) that Holders are entitled to have their Securities repurchased in whole or in part at 102% of their principal amount plus accrued and unpaid interest through the Repurchase Date, (ii) the date of repurchase (the "Repurchase Date"), (iii) the name and address of the Paying Agent, (iv) that the Securities must be tendered to the Paying Agent by five Business Days prior to the Repurchase Date to collect the principal, premium and accrued interest thereon, (v) that any Security not tendered by five -32- Business Days prior to the Repurchase Date shall continue to accrue interest at the applicable rate borne by the Security, (vi) that any Security accepted for payment shall cease to accrue interest after the Repurchase Date, (vii) that Holders electing to have a Security repurchased shall be required to surrender the Security, with the form entitled "Option of Holder to Elect Repurchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice on or prior to the close of business on the fifth Business Day preceding the Repurchase Date, (viii) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the fifth Business Day preceding the Repurchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Securities the Holder delivered for repurchase, the certificate number(s) of the Securities the Holder delivered for repurchase and a statement that such Holder is withdrawing his election to have such Securities repurchased, (ix) that, if the aggregate repurchase price of the Securities surrendered exceeds the available Net Proceeds, the Company shall select the Securities to be purchased on pro rata basis (with such adjustment as may be deemed appropriate by the Company so that only Securities in denominations of $1,000 or multiples thereof shall be purchased); (x) that Holders whose Securities are purchased in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered; and (xi) any other information necessary to enable Holders to tender Securities and have such Securities repurchased pursuant to this Section. Notwithstanding the foregoing, in the event the Net Proceeds resulting from any Asset Sale, after giving effect to any related repayment of Senior Indebtedness other than Securities and any reinvestment in Additional Assets are less than $25,000,000, the Company may defer extending such pro rata offer to repurchase Securities until such time as such Net Proceeds, plus the aggregate amount of Net Proceeds resulting from any subsequent Asset Sale or Asset Sales not otherwise reinvested in Additional Assets or applied to repay Senior Indebtedness other than Securities, are equal to at least $25,000,000, at which time the Company shall apply the aggregate amount of such Net Proceeds to a pro rata offer to repurchase the Securities at a purchase price in cash equal to 102% of their principal amount, plus accrued and unpaid interest through the date of repurchase. (b) Pending the application thereof in accordance with paragraph (a) of this Section, the Company shall either apply the Net Proceeds of any Asset Sale to repay temporarily any Senior Indebtedness other than the Securities or invest such Net Proceeds in Qualified Investments. -33- SECTION 3.07. SEC REPORTS. (a) The Company shall deliver to the Trustee within 5 days after filed with the SEC, copies of the annual, quarterly and periodic reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company files with the SEC pursuant to Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Whether or not required by the rules and regulations of the SEC, as long as any Securities are outstanding, the Company shall continue to file with the SEC for public availability (unless the SEC will not accept such a filing) and the Trustee on the same timely basis such reports, information and other documents as the Company would be required to file with the SEC if the Company were subject to the requirements of such Section 13 or 15(d) of the Exchange Act and had a class of securities listed on a national securities exchange. The Company also will make such information available to Holders who request it in writing and shall comply with the other provisions of TIA Section 314(a). (b) So long as any of the Securities remain outstanding, the Company shall cause any annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders, excluding internal management reports and distributions to stockholders in their capacity as directors or officers of the Company, to be filed with the Trustee and mailed to the Holders at their addresses appearing in the register of Securities maintained by the Registrar within 5 days after having been provided to stockholders. If the Company is not required to furnish annual or quarterly reports to its stockholders pursuant to the Exchange Act, the Company shall cause its consolidated financial statements, including any notes thereto, and with respect to the annual information only, a report thereon by the Company's certified independent accountants, and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," comparable to that which would have been required to appear in annual or quarterly reports filed under Section 13 or 15(d) of the Exchange Act if the Company had a class of securities listed on a national securities exchange, to be so filed with the Trustee and mailed to the Holders at their addresses appearing in the register of Securities maintained by the Registrar within 100 days after the end of each Fiscal Year and within 60 days after the end of each of the Company's first three fiscal quarters in each Fiscal Year. The Company shall advise the Trustee promptly in writing of any change of its Fiscal Year, provided that a failure by the Company to advise the Trustee of such change shall not affect the effectiveness of such change. -34- (c) The Company shall furnish to Holders and to beneficial owners of Securities and to prospective purchasers of Securities that are designated by Holders, upon their request, the information required to be delivered pursuant to Rule 144(A)(d)(4) under the Securities Act of 1933, as amended. SECTION 3.08. LIMITATION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction that by its terms expressly restricts the ability of any Subsidiary to: (a) pay dividends or make any other distributions on such Subsidiary's capital stock or pay any Indebtedness owed to the Company or any Subsidiary, (b) make any loans or advances to the Company or any Subsidiary, or (c) transfer any of its Property to the Company or any Subsidiary, other than, with respect to clauses (b) and (c) of this Section, encumbrances or restrictions specifically: (i) permitted under the terms of any instrument or agreement relating to any Indebtedness of the Company or any Subsidiary existing on the date of this Indenture, including, without limitation, this Indenture or the Bank Credit Agreement; (ii) relating to any Property acquired by the Company or any of its Subsidiaries after the date of this Indenture, provided that such encumbrance or restriction relates only to the Property which is acquired, and, in the case of any encumbrance or restriction that constitutes a Lien, the Company or such Subsidiary would be permitted to incur the Lien under Section 3.04 of this Indenture; (iii) relating to (x) any industrial revenue or development bonds, (y) any obligation of the Company or any Subsidiary incurred in the ordinary course of business to pay the purchase price of Property acquired by the Company or such Subsidiary, or (z) any lease of Property by the Company or such Subsidiary in the ordinary course of business, provided that such encumbrance or restriction relates only to the Property which is the subject of such industrial revenue or development bond, such Property -35- purchased or such Property leased and any such lease, as the case may be; (iv) relating to any Indebtedness of any Subsidiary at the date of acquisition of such Subsidiary by the Company or any Subsidiary of the Company, provided that such Indebtedness was not incurred in connection with or in anticipation of such acquisition and, provided further that the Company or Subsidiary would be permitted to incur any Lien securing such Indebtedness under Section 3.04 of this Indenture; or (v) under any replacement or refinancing agreements of instruments referred to in clauses (i), (ii) and (iii), provided that the provisions relating to such encumbrance or restriction contained in any such replacement or refinancing agreement or instrument are no more restrictive than the provisions relating to such encumbrance or restriction contained in such original agreement or instrument. SECTION 3.09. LIMITATION ON INDEBTEDNESS AND PREFERRED STOCK OF SUBSIDIARIES (OTHER THAN NON-BORROWING SUBSIDIARIES). The Company shall not permit any Subsidiary to create, incur, guarantee, assume or issue any Indebtedness or issue any preferred or preference stock, except for: (i) Indebtedness or preferred stock outstanding on the date of this Indenture; (ii) Indebtedness or preferred stock issued to and held by the Company or a wholly-owned Subsidiary (but only as long as held or owned by the Company or a wholly-owned Subsidiary); (iii) Indebtedness or preferred stock issued by a Person prior to the time (a) such Person becomes a Subsidiary, (b) such Person merges with or into a Subsidiary or (c) a Subsidiary merges with or into such Person, provided that such Indebtedness or preferred stock was not issued or incurred by such Person in anticipation of the type of transaction contemplated by subclauses (a), (b) or (c); (iv) Indebtedness under the Bank Credit Agreement; (v) Indebtedness the proceeds of which are used to refinance any other Indebtedness of any Subsidiary, in each case in a principal amount not to exceed -36- the principal amount so refinanced (or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof, in an amount not greater than such lesser amount), plus any prepayment penalties and premiums, accrued and unpaid interest on the Indebtedness so refinanced, plus customary fees, expenses and costs related to the incurrence of such refinancing Indebtedness; (vi) Indebtedness incurred in connection with the refurbishment, improvement, construction or acquisition (whether by acquisition of stock, assets or otherwise) of any Property or Properties of a Subsidiary of the Company that constitute a part of the then present business of the Company or any Subsidiary of the Company (or incurred within twelve months of any such acquisition or the completion of such refurbishment, improvement or construction), provided that either: (a) (1) such Indebtedness, together with any other then outstanding Indebtedness incurred during the most recently completed four consecutive fiscal quarter period in reliance upon either this clause (vi) or clause (v) of Section 3.03(b) hereof does not exceed in the aggregate 3% of consolidated net sales of the Company and its Subsidiaries during the four consecutive fiscal quarter period ended immediately prior to the date of calculation; provided that for purposes of this subclause (a)(1), such Indebtedness shall include, without limitation, an amount equal to (x) the aggregate outstanding principal amount of any mortgages that the Company or any Subsidiary is deemed to have entered into in connection with any Sale and Leaseback Transaction that the Company or any Subsidiary has entered into during the four consecutive fiscal quarter period ended immediately prior to the date of calculation, less (y) the aggregate principal amount of any Senior Indebtedness that has been repaid with the Net Proceeds of any Sale and Leaseback Transaction that the Company or any Subsidiary has entered into within twelve months of the acquisition, or completion of construction or refurbishment, of the Property that is the subject of any such transaction; and (2) such Indebtedness, together with all then outstanding Indebtedness incurred in reliance upon either this clause (vi) or clause (v) under Section 3.03(b) hereof does not exceed in the aggregate 3% -37- of the consolidated net sales of the Company and its Subsidiaries during the most recently completed twelve consecutive fiscal quarter period; provided that, for purposes of this SUBCLAUSE (a)(2), such Indebtedness shall include, without limitation, an amount equal to (x) the aggregate outstanding principal amount of any mortgages that the Company or any Subsidiary is deemed to have entered into in connection with any Sale and Leaseback Transactions to which the Company or any Subsidiary is then a party less (y) the aggregate principal amount of any Senior Indebtedness that has been repaid with the Net Proceeds of any Sale and Leaseback Transaction that the Company or any Subsidiary has entered into within twelve months of the acquisition, or completion of construction or refurbishment, of the Property that is the subject of any such transaction; except that, for purposes of calculating the limitation set forth in SUBCLAUSE (a)(2), the seven Sale and Leaseback Transactions identified in clause (ii) of Section 3.05 shall not be included; or (b) such Indebtedness (including an amount equal to the sum of (x) the aggregate outstanding principal amount of any mortgages that the Company or any Subsidiary is deemed to have entered into in connection with any Sale and Leaseback Transaction to which the Company or any Subsidiary is then a party less (y) the aggregate principal amount of any Senior Indebtedness that has been repaid with the Net Proceeds of any such Sale and Leaseback Transaction) does not exceed the amount of proceeds received by the Company or any of its Subsidiaries from insurance maintained by the Company or any Subsidiary in respect of such Property or Properties; (vii) Indebtedness consisting of Guarantees by a Subsidiary of Indebtedness of the Company or any other Subsidiary, provided that such Indebtedness is otherwise permitted under this Indenture; (viii) Indebtedness under Interest Swap Obligations, provided that such Interest Swap Obligations are related to payment obligations on Indebtedness otherwise permitted under this Section 3.09; (ix) commercial letters of credit and standby letters of credit incurred in the ordinary course of business by a Subsidiary; -38- (x) Indebtedness represented by industrial revenue or development bonds, provided that the aggregate amount of Indebtedness incurred in reliance upon this clause (x) or clause (ix) of Section 3.03(b) shall not exceed at any one time an aggregate principal amount outstanding of $25,000,000; (xi) Capitalized Lease Obligations relating to Property used in the business of a Subsidiary; (xii) Indebtedness incurred in respect of performance bonds and performance and completion Guarantees incurred in the ordinary course of business; and (xiii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within five Business Days of its incurrence. SECTION 3.10. LIMITATION ON INDEBTEDNESS OF NON-BORROWING SUBSIDIARIES. Notwithstanding Section 3.09, the Company shall not permit any Non-Borrowing Subsidiary to create, incur, assume, issue or guarantee any Indebtedness or issue any preferred or preference stock, or to engage in any Sale and Leaseback Transaction. SECTION 3.11. TRANSACTIONS WITH AFFILIATES. (a) The Company shall not, and shall not permit any Subsidiary to, enter into any transaction after the Issue Date of the Securities with any Affiliate (other than the Company or a Subsidiary) unless (i) the Board of Directors of the Company determines, in its reasonable good faith judgment, that such transaction is in the best interests of the Company or such Subsidiary, based on full disclosure of all relevant facts and circumstances, (ii) such transaction is on terms no less favorable to the Company or such Subsidiary than those that could be obtained in a comparable arm's-length transaction with an entity that is not an Affiliate, and (iii) the transaction is otherwise permissible under this Indenture. (b) This covenant does not apply to redemptions or repurchases of common stock in connection with repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management employees, PROVIDED that such redemptions or purchases shall not -39- exceed $2,000,000 in any Fiscal Year or $5,000,000 in the aggregate subsequent to the date of this Indenture. (c) The provisions of this Section 3.11 shall not prevent the Company from (i) paying a dividend on Capital Stock within 60 days after the declaration thereof if, on the date on which the dividend was declared, the Company could have paid such dividend in accordance with the provisions of this Indenture, or (ii) repurchasing shares of its Capital Stock (x) solely in exchange for other shares of its Capital Stock (other than Redeemable Stock) or (y) pursuant to a court order. SECTION 3.12. RESTRICTIONS ON BECOMING AN INVESTMENT COMPANY. Neither the Company nor any Subsidiary shall become an investment company within the meaning of the Investment Company Act of 1940, as such statute and the regulations thereunder and any successor statute or regulations thereto may from time to time be in effect. SECTION 3.13. CONTINUED EXISTENCE AND RIGHTS. Subject to Article 4, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its existence as a corporation, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the licenses, rights (charter and statutory) and franchises of the Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole. SECTION 3.14. MAINTENANCE OF PROPERTIES AND OTHER MATTERS. (a) The Company shall, and shall cause each of its Subsidiaries to, maintain its Properties in good working order and condition to the extent material to the operations of the Company and make all necessary repairs, renewals, replacements, additions, betterments and improvements thereto, ordinary wear and tear excepted, to the extent and in the manner customary for similar types of business; PROVIDED, HOWEVER, that nothing in this Section shall prevent the Company or any of its Subsidiaries from discontinuing the -40- operation and maintenance of any of its Properties, if such discontinuance is, in the judgment of the Company or the Subsidiary, as the case may be, desirable in the conduct of its respective business and not disadvantageous in any material respect to the Holders. (b) The Company shall insure and keep insured, and shall cause each Subsidiary to insure and keep insured, with financially sound and reputable insurers, so much of their respective Properties and in such amounts as is usually and customarily insured by companies engaged in a similar business with respect to Properties of a similar character against loss by fire and the extended coverage perils. The Trustee shall not be required to see that such insurance is effected or maintained. (c) The Company shall keep, and shall cause each Subsidiary to keep, proper books of record and account in which full and correct entries shall be made of all its business transactions, and shall reflect in its financial statements adequate accruals and appropriations to reserves. The Company shall cause its books of record and account and those of each of its Subsidiaries to be examined, either on a consolidated or an individual basis, by one or more firms of independent public accountants not less frequently than annually and shall not make any change in the accounting principles applied to its financial statements not concurred in by such firm or firms. The Company shall prepare its financial statements in accordance with GAAP. (d) The Company shall, and shall cause each of its Subsidiaries to, comply with all applicable statutes, laws, orders, ordinances and all rules, regulations and restrictions of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing and to obtain all licenses, permits, franchises and other governmental authorizations necessary to the ownership or operation of its Properties and to the conduct of its business, except such as are being contested in good faith and by appropriate proceedings and except if such non-compliance or failure to obtain does not materially adversely affect, and as far the Company can at the time foresee, is not reasonably likely to materially and adversely affect, the business, earnings, Properties, prospects or condition, financial or other, of the Company and its Subsidiaries taken as a whole. SECTION 3.15. TAXES AND CLAIMS. The Company shall pay, and shall cause each of its Subsidiaries to, pay (or, if appropriate, withhold and pay over) prior to delinquency: -41- (i) all material taxes, assessments and governmental charges or levies imposed upon it or its Property (or required by it to withhold and pay over), and (ii) all material claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which if unpaid might result in the creation of a Lien upon its Properties; PROVIDED that items of the foregoing description need not be paid while being contested in good faith (and by appropriate proceedings in the opinion of the Company's independent counsel in any case involving more than $1,000,000); and PROVIDED FURTHER that adequate book reserves (in the opinion of the Company's independent accountants) have been established with respect thereto; and PROVIDED FURTHER that the owning company's title to, and its right to use, its Property is not materially adversely affected thereby. SECTION 3.16. STAY, EXTENSION AND USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants, or the performance, of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 3.17. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST. (a) If the Company or any of its Subsidiaries shall at any time act as the Paying Agent, it shall, on or before each due date of the principal of, premium, if any, and interest on the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, and interest so becoming due until such sum shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act. (b) Whenever the Company shall have one or more Paying Agents, it shall, prior to or by 10:00 a.m. New York City time on each date for the payment of the principal of or interest on the Securities, deposit immediately available -42- funds with a Paying Agent a sum sufficient to pay the principal, premium, if any, and interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such payments; and, unless such Paying Agent is the Trustee, the Company shall promptly notify the Trustee of its action or failure so to act. (c) For the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, the Company may at any time pay, or direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by the Company or any Paying Agent to the Trustee, the Company or such Paying Agent, as the case may be, shall be released from all further liability with respect to such money. SECTION 3.18. COMPLIANCE CERTIFICATE. 1. The Company shall deliver to the Trustee, within 120 days after the end of each Fiscal Year of the Company, an Officers' Certificate, complying with Section 314(a)(4) of the TIA, stating that a review of the activities of the Company and its Subsidiaries during the preceding Fiscal Year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Defaults of which he or she may have knowledge and the status thereof). (b) The Company shall, as long as any of the Securities are outstanding, deliver to the Trustee, promptly, but in any case within 10 Business Days of any Officer becoming aware of any Default, Event of Default or default in the performance of any covenant, agreement or condition contained in this Indenture, an Officers' Certificate specifying such Default or Event of Default and the status thereof. (c) Upon payment in full of all outstanding Indebtedness under the Bank Credit Agreement, the Company shall deliver an Officers' Certificate to the Trustee stating that such Indebtedness has been paid in full and discharged. -43- ARTICLE 4 SUCCESSORS; CHANGE OF CONTROL; OPTIONAL PREPAYMENT SECTION 4.01. WHEN COMPANY MAY MERGE, ETC.; CHANGE OF CONTROL; HOLDERS' RIGHT OF OPTIONAL PREPAYMENT. (a) The Company shall not consolidate with or merge into, or transfer, sell or lease all or substantially all of its Property to, another Person unless (i) the Surviving Corporation is a United States corporation, (ii) the Surviving Corporation is bound by all the terms of this Indenture, (iii) immediately after giving effect to such transaction no Default or Event of Default exists, (iv) the consolidated net worth (determined in accordance with GAAP) of the Surviving Corporation is equal to or greater than the consolidated net worth of the Company immediately prior to such transaction and (v) in the case of any such consolidation, merger, transfer, sale or lease other than into or to a wholly-owned Subsidiary of the Company, immediately after and giving effect to any such consolidation, merger, transfer, sale or lease and any financings or other transactions in connection therewith the Consolidated Interest Coverage Ratio of the Surviving Corporation would be greater than the then applicable Consolidated Interest Coverage Ratio described under paragraph (a) of Section 3.03 of this Indenture. (b) In the event of a Change of Control, the Company shall be obligated to make an offer to purchase all of the then outstanding Securities at a purchase price in cash equal to 101% of its principal amount plus accrued interest, after the occurrence of such Change of Control. (c) Not less than 20 nor more than 60 Business Days prior to the consummation of a merger, consolidation, transfer, sale or lease that would constitute a Change of Control and not more than 45 Business Days following the occurrence of any other event constituting a Change of Control, the Company shall give Holders notice of such right of prepayment, mailed by first class mail to the Holders' last addresses as they appear upon the register. Such notice shall state: (i) that Holders are entitled to have their Securities prepaid in whole but not in part at 101% of their principal amount plus accrued interest through the payment date pursuant to this Section 4.01; (ii) if a Change of Control has occurred, that a Change of Control has occurred, or, if a proposed merger, consolidation, transfer, sale or lease would constitute a Change of Control, the proposed date of the consummation of the merger, consolidation, transfer, sale or lease; (iii) that Holders shall be entitled to tender their Securities for repayment, specifying the repayment price and -44- the repayment date (the "Repayment Date") (which, in the case of a merger, consolidation, transfer, sale or lease that would constitute a Change of Control shall not be later than the consummation date of the merger, consolidation, transfer, sale or lease, and, in the case of any other Change of Control, shall be no earlier than 30 days and no later than 60 days after the date such notice is mailed) and that Holders shall be entitled to tender their Securities for repayment until five Business Days prior to the Repayment Date, (iv) the name and address of the Paying Agent, (v) that the Securities must be tendered to the Paying Agent by five Business Days prior to the Repayment Date to collect the principal, premium and accrued interest thereon, (vi) that any Security not tendered by five Business Days prior to the Repayment Date shall continue to accrue interest at the applicable rate borne by the Security, (vii) that any Security accepted for payment shall cease to accrue interest after the Repayment Date, (viii) that Holders electing to have a Security repurchased shall be required to surrender the Security, with the form entitled "Option of Holder to Elect Repurchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice on or prior to the close of business on the fifth Business Day preceding the Repayment Date, (ix) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the fifth Business Day preceding the Repayment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Securities the Holder delivered for repurchase, the certificate number(s) of the Securities the Holder delivered for repurchase and a statement that such Holder is withdrawing his election to have such Securities repurchased, (x) that Holders electing to have their Securities repurchased must tender all Securities which they hold, (xi) that the Company shall have no obligation to consummate a merger, consolidation, transfer, sale or lease that would constitute a Change of Control that is the subject of any such notice, provided that the Company shall mail a notice to Holders and the Trustee, stating that the proposed merger, consolidation, transfer, sale or lease was not consummated within the specified period and (xii) any other information necessary to enable Holders to tender Securities and have such Securities repurchased pursuant to this Section. Notwithstanding that the Company shall have given any such notice pursuant to this paragraph, the Company shall have no obligation to consummate a merger, consolidation, transfer, sale or lease that would constitute a Change of Control that is the subject of any such notice, provided that the Company shall mail a notice to Holders and the Trustee, stating that the proposed merger, consolidation, transfer, sale or lease was not consummated and that Holders shall not have the right to require the Company to prepay their Securities, not later than two Business Days after the -45- Company determines that such proposed merger, consolidation, transfer, sale or lease shall not be consummated, and the Company shall promptly return any Securities tendered for prepayment to their respective Holders. (d) The Company shall deliver to the Trustee, contemporaneously with the mailing of the notice specified in paragraph (c) of this Section informing Holders of their right to tender their Securities for prepayment, (i) an Officers' Certificate to the foregoing effect stating that the Holders are entitled to have their Securities repaid and (ii) an Opinion of Counsel stating that the proposed transaction complies with this Indenture and that all conditions precedent to the consummation of the transaction under this Indenture have been met. The Company shall also deliver to the Trustee an Officers' Certificate and an Opinion of Counsel in connection with any Supplemental Indenture upon the execution thereof, as specified in Section 8.06 of this Indenture. ARTICLE 5 DEFAULTS AND REMEDIES SECTION 5.01. EVENTS OF DEFAULT. Each of the following events is an "EVENT OF DEFAULT": (i) the failure by the Company to pay interest on any Security for a period of 30 days after such interest becomes due and payable; (ii) the failure by the Company to pay the principal of (or premium, if any, on) any Security when such principal becomes due and payable, whether at the stated maturity or upon acceleration, redemption or otherwise; (iii) a default in the observance of any other covenant contained in this Indenture that continues for 30 days after the Company has been given notice of the default by the Trustee or the Holders of 25% in principal amount of the Securities then outstanding; (iv) a default or defaults on other Indebtedness of the Company or any Subsidiary, which Indebtedness has an outstanding principal amount of more than $15,000,000 individually or in the aggregate if such Indebtedness has attained final maturity or if the holders of such Indebtedness have accelerated payment thereof under the terms of the instrument under which such Indebtedness is or may be outstanding and, in each case, it remains unpaid; -46- (v) one or more judgments or decrees is entered against the Company or any Subsidiary involving a liability (not paid or fully covered by insurance) of $5,000,000 or more in the case of any one such judgment or decree or $10,000,000 or more in the aggregate for all such judgments and decrees for the Company and all its Subsidiaries and all such judgments and decrees have not been vacated, discharged or stayed or bonded pending appeal within 30 days from the date of entry thereof; (vi) the Company or any Material Subsidiary pursuant to or within the meaning of the Bankruptcy Code: (1) commences a voluntary case in bankruptcy or any other action or proceeding for any other relief under any law affecting creditors' rights that is similar to the Bankruptcy Code; (2) consents by answer or otherwise to the commencement against it of an involuntary case or proceeding of bankruptcy or insolvency; (3) seeks or consents to the appointment of a receiver, trustee, assignee, liquidator, custodian or similar official (collectively, a "Custodian") of it or for all or substantially all of its Property; (4) makes a general assignment for the benefit of its creditors; or (5) consents to the entry of a judgment, decree or order for relief against it in an involuntary case; and (vii) a court of competent jurisdiction enters a judgment, order or decree under any Bankruptcy Code that is for relief against the Company or any Material Subsidiary in an involuntary case OR proceeding which shall: (1) approve a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company or any Material Subsidiary of the Company, (2) appoint a Custodian for the Company or any Material Subsidiary or for all or substantially all of the Property of any of them; or (3) order the winding up or liquidation of the Company or any Material Subsidiary, -47- and in each case the judgment, order or decree remains unstayed and in effect for 60 days, or any dismissal, stay, rescission or termination ceases to remain in effect. SECTION 5.02. ACCELERATION. If an Event of Default (other than an Event of Default relating to the Company or a Material Subsidiary described in paragraphs (vi) or (vii) of Section 5.01 of this Indenture) shall have occurred and be continuing, the Trustee by written notice to the Company, or the Holders of at least 25% in principal amount of the Securities by written notice to the Company and the Trustee, may declare to be due and payable the principal amount of the Securities, plus accrued interest, and such amounts shall become due and payable upon the earlier of (x) five days from the date of such notice, so long as the Event of Default giving rise to such notice has not been cured or waived and (y) the acceleration of the Indebtedness under the Bank Credit Agreement (or any renewal or refinancing thereof). If an Event of Default relating to the Company or a Material Subsidiary of the kind described in paragraphs (vi) or (vii) of Section 5.01 of this Indenture shall occur, such amount shall IPSO FACTO become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Subject to Sections 5.07 and 8.02, the Holders of not less than a majority in principal amount of the then outstanding Securities by written notice to the Trustee, on behalf of the Holders of all the Securities, may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration, (a) if the rescission would not conflict with any judgment or decree, (b) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration, (c) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by the declaration of acceleration, has been paid, and (d) in the event of the cure or waiver of a Default or Event of Default under Section 5.01(iv), the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Default or Event of Default has been cured or waived. Upon any such rescission, such Default shall cease to exist and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no rescission shall extend to any subsequent or other Default or impair any right consequent thereon. -48- SECTION 5.03. OTHER REMEDIES. (a) If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by an action at law, suit in equity or other appropriate proceeding to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. (b) The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default or a Default shall not impair the right or remedy or constitute a waiver of or acquiescence in such Event of Default or a Default. All remedies are cumulative to the extent permitted by law. SECTION 5.04. WAIVER OF DEFAULTS. Subject to Sections 5.07 and 8.02, the Holders of not less than a majority in principal amount of the then outstanding Securities by written notice to the Trustee may waive any existing Default or Event of Default and its consequences except a continuing Default or Event of Default (i) in the payment of the principal, premium, if any, or interest on any Security as specified in paragraphs (i) or (ii) of Section 5.01 or (ii) in respect of a covenant or provision hereof which under Article 8 cannot be modified or amended without the consent of each Holder affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 5.05. CONTROL BY MAJORITY. The Holders of a majority in principal amount of the then outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or is unduly prejudicial to the rights of other Holders or would subject the Trustee to personal liability. The Company may, but shall not be obligated to, pursuant to the procedures of paragraph (b) of Section 8.04 of this Indenture, fix a record date for the purpose of determining the Holders entitled to vote on the direction of any such proceeding. -49- SECTION 5.06. LIMITATION ON SUITS. (a) Except to enforce the right to receive payment of principal, premium (if any) or interest when due (including in connection with an offer to purchase or call), no Holder may institute any proceeding with respect to this Indenture or for any remedy hereunder unless such Holder has previously given to the Trustee written notice of a continuing Event of Default and unless the Holders of at least 25% in principal amount of the Securities have requested the Trustee in writing to pursue remedies in respect of such Event of Default and have offered the Trustee indemnity satisfactory to the Trustee against loss, liability, or expense to be thereby incurred and the Trustee has failed so to act for 60 days after receipt of the same and during which 60 days no contrary instruction has been received by the Trustee from the Holders of a majority in principal amount of the then outstanding Securities. (b) A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal, premium (if any) and interest on the Securities on or after the respective due dates expressed in the Securities (including in connection with an offer to purchase or call), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 5.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in paragraphs (i) or (ii) of Section 5.01 of this Indenture occurs and is continuing, the Trustee is authorized to recover, in any proceeding that it deems, in its sole discretion, most effective to protect the interests of the Holders, judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal, premium (if any) and interest remaining unpaid on the Securities and interest on overdue principal and to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due to the Trustee pursuant to Section 6.07 hereof. -50- SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM. (a) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other securities or property payable or deliverable upon the conversion or exchange of the Securities or upon any such claims and to distribute the same; and any receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07 of this Indenture. (b) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. -51- SECTION 5.10. PRIORITIES. Any money collected by the Trustee pursuant to this Article shall be paid and applied in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 6.07 of this Indenture; Second: to Holders for amounts due and unpaid on the Securities for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, premium, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders under this Section. SECTION 5.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted to be taken by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs including reasonable attorneys' fees and disbursements, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 5.06 of this Indenture, or a suit by Holders of more than 10% in principal amount of the then outstanding Securities. ARTICLE 6 TRUSTEE SECTION 6.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. -52- (b) Except during the continuance of an Event of Default: (1) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, in the absence of bad faith on its part, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee, however, shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.05 of this Indenture or any other direction of the Holders permitted under this Indenture. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company in writing. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk any of its own funds or incur any liability. -53- SECTION 6.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. The Trustee may conclusively rely as to the identity and addresses of Holders and other matters contained therein on the register of the Securities maintained by the Registrar pursuant to Section 2.03 of this Indenture and shall not be affected by notice to the contrary. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Certificate or Opinion or both. The Trustee may consult with counsel and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and reliance thereon. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or any Affiliate with the same rights it would have as if it were not Trustee. Any Agent may do the same with like rights. The Trustee, however, is subject to Sections 6.10 and 6.11 of this Indenture. SECTION 6.04. TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities; it shall not be accountable for the Company's use of the proceeds from the Securities, or any money paid to the Company or upon the Company's direction under any provision hereof; it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee; and it shall not be responsible for any statement in the Securities other than its certificate of authentication or for any statement of the Company in this Indenture. -54- SECTION 6.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to a Trust Officer of the Trustee, the Trustee shall mail the Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment on any Security, the Trustee may withhold notice if and so long as a committee of Trust Officers in good faith determines that withholding the notice is in the interest of Holders. SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS. If required by the TIA, within 60 days after each February 15 following the date of this Indenture, the Trustee shall mail to Holders and the Company a brief report dated as of such February 15 that complies with TIA Section 313(a). The Trustee shall also comply with TIA Section 313(b)(2) and transmit all reports in accordance with TIA Section 313(c). A copy of each such report shall be filed, at the time of its mailing to Holders, with the SEC and each stock exchange, if any, on which the Securities are listed. The Company shall notify the Trustee in writing when the Securities are listed or delisted on or from any stock exchange. SECTION 6.07. COMPENSATION AND INDEMNITY. (a) The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred by it. Such expenses shall include the reasonable compensation and out-of-pocket expenses of the Trustee's agents and counsel. (b) The Company shall defend and indemnify the Trustee, its officers, directors, employees and agents, against any loss or liability incurred by any of them in connection with the Trustee's duties hereunder except as set forth in the next paragraph. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity; PROVIDED that the failure to give prompt notice shall not release the Company from any liability to the Trustee to the extent the Company is not prejudiced thereby. The Company shall defend such claim and the Trustee shall cooperate in such defense. (c) The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence, bad faith or wilful misconduct. -55- (d) The Trustee may have separate counsel, and the Company shall pay the reasonable fees and expenses of such counsel. (e) To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or Property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Securities. Such lien shall survive the satisfaction and discharge of this Indenture or any other termination under the Bankruptcy Code. (f) When the Trustee incurs expenses or renders services after an Event of Default specified in paragraph (vi) or (vii) of Section 5.01 of this Indenture occurs, such expenses and the compensation for such services are intended to constitute expenses of administration under the Bankruptcy Code. (g) The Company's payment obligations under this Section 6.07 shall survive the discharge of this Indenture. SECTION 6.08. REPLACEMENT OF TRUSTEE. (a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. (b) The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Securities may remove the Trustee by so notifying the Trustee and the Company. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 6.10; (2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under the Bankruptcy Code; (3) a Custodian or public officer takes charge of the Trustee or its Property; or (4) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding -56- Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the then outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee fails to comply with Section 6.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all Property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 6.07 of this Indenture. (g) Notwithstanding the replacement of the Trustee pursuant to this Section 6.08, the Company's obligations under Section 6.07 of this Indenture hereof shall continue for the benefit of the retiring Trustee in connection with the rights and duties hereunder prior to such replacement. SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 6.10. ELIGIBILITY; DISQUALIFICATION. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a). The Trustee shall always have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. Neither the Company nor any Person directly or indirectly controlling, controlled by, or under common control with the Company shall serve as trustee. The Trustee is subject to TIA Section 310(b). -57- SECTION 6.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA Section 311(a). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. SECTION 6.12. AUTHENTICATING AGENT. (a) Each Authenticating Agent appointed by the Trustee pursuant to Section 2.02 of this Indenture (an "Authenticating Agent") shall at all times be a corporation organized and doing business under the laws of the United States, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $5,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. (b) Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, PROVIDED such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Company, the Trustee or the Authenticating Agent. (c) An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.12, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment to all Holders of the Se- -58- curities. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. (d) The Company agrees to pay each Authenticating Agent from time to time reasonable compensation for its services under Section 2.02 of this Indenture and this Section 6.12 and the Trustee shall be entitled to be reimbursed for any such payments made by it. (e) If an appointment is made pursuant to Section 2.02 of this Indenture or this Section 6.12, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: "This is one of the 12% Senior Notes due September 1, 2004 issued under the within-mentioned Indenture. Dated: IBJ SCHRODER BANK & TRUST COMPANY, as Trustee By:______________________________ as Authenticating Agent By:______________________________ Authorized Signatory" ARTICLE 7. DISCHARGE OF INDENTURE SECTION 7.01. TERMINATION OF COMPANY'S OBLIGATIONS. This Indenture shall cease to be of further effect (except that the Company's obligations under Sections 6.07 and 7.04 and the Trustee's and Paying Agent's obligations under Section 7.03 shall survive) when all outstanding Securities theretofore authenticated and issued have been delivered -59- (other than mutilated, destroyed, lost or stolen Securities which have been replaced or paid) to the Trustee for cancellation, the Company has paid all sums payable by it hereunder, and the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent specified herein relating to the Indenture ceasing to be of further effect have been complied with. In addition, subject to the remaining provisions of this Section 7.01, the Company may, by resolution of its Board of Directors filed with the Trustee, elect to either (i) terminate its obligations under this Indenture and the outstanding Securities or (ii) be released and discharged from its obligations under any covenant contained in Sections 3.02, 3.03, 3.04, 3.05, 3.06, 3.08, 3.09, 3.10, 3.11, 3.14 and 4.01 and the omission to comply with any such covenant shall not constitute a Default or an Event of Default, if, in either case: (1) the Company has irrevocably deposited in trust with the Trustee or, at the option of the Trustee, with a trustee satisfactory to the Trustee and the Company under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, money or U.S. Government Obligations sufficient (without reinvestment thereof) in the opinion of a nationally recognized accounting firm to pay principal and interest on the Securities to maturity, and to pay all other sums then payable by it to the Trustee under Section 6.07 of this Indenture, provided that (i) the trustee of the irrevocable trust shall have been irrevocably instructed to pay such money or the proceeds of such U.S. Government Obligations to the Trustee and (ii) the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of said principal and interest with respect to the Securities; PROVIDED, however, that the Trustee shall have received an Opinion of Counsel stating that after the passage of 90 days following the deposit of the trust funds (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the Bankruptcy Code, after one year following the deposit) such funds will not be subject to any bankruptcy laws affecting creditors' rights generally; (2) the Company delivers to the Trustee an Officers' Certificate stating that all conditions precedent to (i) the termination of the Company's obligations under this Indenture and the outstanding Securities or (ii) the Company's release and discharge from the covenants set forth in clause (ii) of the second -60- sentence of this Section 7.01, have been complied with, and an Opinion of Counsel to the same effect; (3) the Company shall have delivered to the Trustee (x) in the case of the Company terminating its obligations under the Indenture and the Securities pursuant to clause (i) of the second sentence of this Section 7.01, an Opinion of Counsel (which shall be accompanied by a ruling from the Internal Revenue Service), which Opinion of Counsel provides that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of the Company's exercise of its option under clause (i) of the second sentence of this Section 7.01 and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised or (y) in the case of the Company being released and discharged from the covenants set forth in clause (ii) of the second sentence of this Section 7.01, an Opinion of Counsel to the effect that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of the Company's exercise of its option under clause (ii) of the second sentence of this Section 7.01 and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such option had not been exercised; and (4) the Company has delivered to the Trustee an Opinion of Counsel to the effect that such deposit will not cause the Trustee or the trust so created to be subject to the Investment Company Act of 1940, as amended; and, in each case, the Trustee shall have received such other documents and assurances as the Trustee may reasonably request. Then, this Indenture or such covenants, as the case may be, shall cease to be of further effect (except as provided below), and the Trustee, on demand of the Company, shall execute proper instruments acknowledging confirmation of and discharge under this Indenture or such covenants, as the case may be. However, in the case of the Company terminating its obligations under the Indenture and the Securities pursuant to clause (i) of the second sentence of this Section 7.01, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 3.17, 6.07, 6.08 and 7.04 and the Trustee's and Paying Agent's obligations in Section 7.02 and 7.03 shall survive until the Securities are no longer outstanding. Thereafter, only the Company's obligations in Section 6.07 and 7.04 and the Trustee's and Paying Agent's obligations in Section 7.03 shall survive. In the case of the Company's being released and discharged from the covenants set forth in -61- clause (ii) of the second sentence of this Section 7.01, all of the remaining provisions of the Indenture shall survive until the Securities are no longer outstanding. Thereafter, only the Company's obligations in Section 6.07 and 7.04, and the Trustee's and Paying Agent's obligations in Section 7.03 shall survive. In order to have money available on a payment date to pay principal or interest on the Securities, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer's option. "U.S. Government Obligations" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged. SECTION 7.02. APPLICATION OF TRUST MONEY. The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 7.01 of this Indenture. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal and interest on the Securities. SECTION 7.03. REPAYMENT TO COMPANY. (a) The Trustee and the Paying Agent shall promptly pay to the Company upon written request any excess money or securities held by them at any time. (b) The Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years after the date upon which such payment shall have come due; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, shall, upon the written request and at the expense of the Company, cause to be published once in a newspaper of general circulation in The City of New York or mailed to each such Holder, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining shall be repaid to the Company. After payment to the Company, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person. -62- SECTION 7.04. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Sections 7.01 and 7.02 of this Indenture by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 7.01 of this Indenture until such time as the Trustee or Paying Agent is permitted to apply such money or U.S. Government Obligations in accordance with Section 7.01 of this Indenture; PROVIDED, HOWEVER, that if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 8. AMENDMENTS SECTION 8.01. WITHOUT CONSENT OF HOLDERS. The Company, when duly authorized by resolution of its Board of Directors, and the Trustee may amend this Indenture or the Securities without the consent of any Holder: (a) to cure any ambiguity, defect or inconsistency with any other provision herein; (b) to comply with Section 4.01 of this Indenture; (c) to secure the Securities; (d) to make any change that does not adversely affect the legal rights hereunder of any Holder; or (e) to comply with the requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. After an amendment under this Section becomes effective, the Company shall mail to Holders a notice briefly describing the amendment. -63- SECTION 8.02. WITH CONSENT OF HOLDERS. The Company, when duly authorized by resolution of its Board of Directors, and the Trustee may amend this Indenture or the Securities with the written consent of the Holders of at least a majority in principal amount of the then outstanding Securities. However, without the consent of each Holder affected, an amendment under this Section may not: (a) reduce the amount of Securities whose Holders must consent to an amendment; (b) reduce the rate of or change the time for payment of interest, including defaulted interest, on any Security; (c) reduce the principal of or change the fixed maturity of any Security, or change the date on which any Security may be subject to redemption or reduce the Redemption Price therefor; (d) make any Security payable in currency other than that stated in the Security; (e) make any change in Section 5.04 or 5.07 or this Section 8.02 of this Indenture; (f) make any change in the ranking of the Securities with respect to any other obligation of the Company in a way that adversely affects the rights of any Holder; or (g) waive a Default in the payment of the principal of, and interest on, any Security. After an amendment under this Section becomes effective, the Company shall mail to Holders a notice briefly describing the amendment. SECTION 8.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to this Indenture or the Securities shall be set forth in a supplemental indenture that complies with the TIA as then in effect. -64- SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS. (a) Until an amendment or waiver becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security if the Trustee receives written notice of revocation before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented to such amendment or waiver. An amendment or waiver becomes effective upon receipt by the Trustee of such Officers' Certificate and the written consents from the Holders of the requisite percentage in principal amount of Securities. (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver, which record date shall be at least 5 Business Days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the second and third sentence of paragraph (a) of this Section, those persons who were Holders at such record date (or their duly designated proxies), and only those persons, shall be entitled to consent to such amendment or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. (c) After an amendment or waiver becomes effective, it shall bind every Holder. SECTION 8.05. NOTATION ON EXCHANGE OF SECURITIES. Upon the Company's written request, the Trustee shall place an appropriate notation (to be provided by the Company) about an amendment or waiver on any Security thereafter authenticated. The Company in exchange for all Securities may issue and the Trustee shall authenticate new Securities that reflect the amendment or waiver. SECTION 8.06. TRUSTEE PROTECTED. The Trustee shall sign all supplemental indentures, except that the Trustee need not sign any supplemental indenture that adversely affects its rights. In signing or refusing to sign such amendment or supplemental indenture, the Trustee shall be entitled to receive and, subject to Section 6.01 of this Indenture, shall be fully protected in relying -65- upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence that such amendment or supplemental indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, that all conditions precedent to the execution thereof have been met, that it will be valid and binding upon the Company in accordance with its terms and that, after the execution thereof, the Company will not be in Default and no Event of Default will have occurred and be continuing. ARTICLE 9. REDEMPTIONS SECTION 9.01. NOTICE TO TRUSTEE. If the Company elects to redeem Securities pursuant to the optional redemption provisions of paragraph 6 of the Securities and Section 9.03 hereof, the Company shall notify the Trustee in writing of the Redemption Date, the principal amount of Securities to be redeemed, and the Redemption Price and shall deliver to the Trustee an Officers' Certificate certifying resolutions of the Board of Directors authorizing the redemption and an Opinion of Counsel with respect to the due authorization of such redemption and that such redemption is being made in accordance with this Indenture and the Securities and does not violate any other agreement binding on the Company. The Company shall give the notice to the Trustee provided for in this Section at least 45 days (unless such shorter period shall be satisfactory to the Trustee) but not more than 60 days before a Redemption Date. SECTION 9.02. SELECTION OF THE SECURITIES TO BE REDEEMED. If less than all of the Securities are to be redeemed, the Trustee, PRO RATA or by lot, or by any manner that is acceptable to the Trustee, shall select, subject to the remainder of this Section, the Securities to be redeemed. The Trustee shall make the selection not more than 60 days and not less than 30 days before each Redemption Date from Securities outstanding not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them it selects shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of this Indenture that apply to Securities called for redemption shall also apply to portions of Securities called for redemption. The Trustee shall notify the Company -66- promptly in writing of the Securities or portions of Securities to be called for redemption. SECTION 9.03. NOTICE OF REDEMPTION. (a) At least 30 but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail to each Holder whose Securities are to be redeemed at the Holder's last address as it appears upon the register. (b) The notice shall identify the Securities to be redeemed and shall state: (i) the Redemption Date; (ii) the Redemption Price and the amount of accrued interest to be paid; (iii) the name and address of the Paying Agent; (iv) that the Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and accrued interest, if any; (v) that, unless the Company defaults in making the redemption payment, interest on the Securities called for redemption ceases to accrue on and after the specified Redemption Date; and (vi) if any Security is being redeemed in part, the portion of the principal amount (equal to $1,000 or any integral multiple thereof) of such Security to be redeemed and that, on or after the Redemption Date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion thereof will be issued. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. SECTION 9.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed pursuant to paragraph 6 of the Securities and in accordance with Section 9.03 hereof, the Securities called for redemption become irrevocably due and payable on the specified Redemption Date at the Redemption Price. A notice of redemption may not be conditional. -67- Notice of redemption shall be deemed to be given when mailed, whether or not the Holder receives such notice. In any event, failure to give such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of the Securities. SECTION 9.05. DEPOSIT OF REDEMPTION PRICE ON OPTIONAL REDEMPTION. On or before each Redemption Date the Company shall deposit with the Trustee or the Paying Agent money (which shall be immediately available funds if deposited on the Redemption Date and which must be received by such Paying Agent prior to 10:00 a.m. New York City time) sufficient to pay the Redemption Price of and accrued interest on all Securities to be redeemed on that date. The Paying Agent shall return to the Company any money not required for that purpose. SECTION 9.06. SECURITIES REDEEMED IN PART. Upon surrender of a Security that is redeemed in part, the Company shall issue and the Trustee shall authenticate a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE 10. MISCELLANEOUS SECTION 10.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 10.02. NOTICES. Any notice or communication to the Company or the Trustee is duly given if in writing and (a) delivered in Person, (b) mailed by first-class mail or (c) transmitted by facsimile transmission (confirmed by guaranteed overnight courier) to the following addresses: -68- The Company's address is: 201 Willowbrook Boulevard Wayne, New Jersey 07470 Attn: Kenneth R. Baum Telephone number: (201) 890-6000 Facsimile number: (201) 890-6540 The Trustee's address is: One State Street New York, New York 10004 Attn: Corporate Trust Department Telephone number: (212) 858-2000 Facsimile number: (212) 858-2952 At the date of execution hereof, the Paying Agent's and Registrar's address is: One State Street New York, New York 10004 Attn: Corporate Trust Department Telephone number: (212) 858-2000 Facsimile number: (212) 858-2952 The Company or the Trustee by written notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication to a Holder shall be mailed by first-class mail (registered or certified, return receipt requested) or overnight air courier guaranteeing next day delivery, to his address shown on the register kept by the Registrar; PROVIDED that items required under the TIA to be sent to Holders in compliance with TIA Section 313(c) shall be mailed to Holders in compliance with such section. Failure to mail a notice or a communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is delivered, mailed or transmitted in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. -69- SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Trustee shall comply with the provisions of TIA Section 312(b). The Company, the Trustee, the Registrar and any agent of any of them shall have the protection of TIA Section 312(c). SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with and that any such action or inaction does not conflict with the terms of this Indenture. SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. -70- SECTION 10.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 10.07. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions in the State of New York are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 10.08. NO RECOURSE AGAINST OTHERS. The Securities and the obligations of the Company under this Indenture are solely obligations of the Company and no officer, director, employee or stockholder, as such, shall be liable for any failure by the Company to pay amounts on the Securities when due or perform any such obligation. SECTION 10.09. DUPLICATE ORIGINALS. The parties may sign any number of copies or counterparts of this Indenture. One signed copy is enough to prove this Indenture. SECTION 10.10. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES THEREOF. SECTION 10.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. -71- SECTION 10.12. SUCCESSORS. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 10.13. SEVERABILITY. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 10.14. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Indenture have been inserted for the convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. -72- SECTION 10.15. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SIGNATURES Dated: June 15, 1995 THE GRAND UNION COMPANY By: /s/ Francis Nicastro ------------------------ Name: Francis E. Nicastro Title: Corporate Vice President and Treasurer Attest: /s/ Linda Villano (SEAL) - - --------------------------- Assistant Secretary Dated: June 15, 1995 IBJ SCHRODER BANK & TRUST COMPANY, Trustee By: /s/ Nancy R. Besse ------------------------ Name: Nancy R. Besse Title: Vice President Attest: /s/ (SEAL) - - --------------------------- -73- Exhibit A No. $________ THE GRAND UNION COMPANY Incorporated under the laws of the State of Delaware 12% Senior Notes due September 1, 2004 THE GRAND UNION COMPANY promises to pay to __________________ or registered assigns, the principal sum of _______ Dollars on September 1, 2004 and to pay interest thereon semiannually in arrears from September 1, 1995 (notwithstanding that the date of issue is prior thereto) at the rate of 12% per annum on March 1 and September 1 of each year commencing March 1, 1996 until the principal hereof is paid or made available for payment. Payment of principal and premium, if any, and interest shall be made in the manner and subject to the terms set forth in provisions appearing on the reverse hereof, which provisions, in their entirety, shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, THE GRAND UNION COMPANY has caused this instrument to be executed in its corporate name by the manual or facsimile signature of its President or a Vice President and attested by its Secretary or an Assistant Secretary. THE GRAND UNION COMPANY By --------------------------- Name: Title: Attest: -------------------- Name: Title: SEAL A-1 Exhibit A FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 12% Senior Notes due September 1, 2004 issued under the within-mentioned Indenture. Dated: IBJ SCHRODER BANK & TRUST COMPANY, as Trustee By: ----------------------------- Authorized Signatory A-2 Exhibit A (Back of Security) THE GRAND UNION COMPANY 12% Senior Notes due September 1, 2004 1. INTEREST. THE GRAND UNION COMPANY (the "Company"), a Delaware corporation, promises to pay interest on the principal amount of this Security at the rate per annum shown above from September 1, 1995. The Company will pay interest semiannually in arrears on March 1 and September 1 of each year, commencing March 1, 1996. Interest on the Securities will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from September 1, 1995. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the regular record date, which shall be the February 15 and August 15, as the case may be, next preceding the interest payment date even though Securities are canceled after the record date and on or before the interest payment date. Any such interest not so punctually paid or duly provided for or paid within the 30-day period in paragraph (i) of Section 5.01 of the Indenture, and any interest payable on such defaulted interest (to the extent lawful), will forthwith cease to be payable to the Holder on such regular record date and shall be payable to the Person in whose name this Security 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 of which shall be given to Holders not less than 5 days prior to such special record date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder Bank & Trust Company, a banking company organized under the laws of the State of New York (the "Trustee"), will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to any Holder. The Company may act in any such capacity. 4. INDENTURE. The Company has issued the Securities under an Indenture dated as of June 15, 1995 (the A-3 Exhibit A "Indenture") between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb), as amended by the Trust Indenture Reform Act of 1990, as in effect on the date of the Indenture ("TIA"). The Securities are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of such terms. The Securities are obligations of the Company limited to $595,475,922 in aggregate principal amount. The Securities are unsecured general obligations of the Company. Unless otherwise defined herein, all capitalized terms shall have the meanings assigned to them in the Indenture. 5. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in registered form without coupons in denominations of $1,000 and integral multiples thereof. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Security or portion of a Security selected for redemption. Also, it need not exchange or register the transfer of any Securities for a period of 15 days before a selection of Securities to be redeemed. 6. OPTIONAL REDEMPTION. The Securities may not be redeemed at the option of the Company prior to September 1, 2000, except as set forth below. On or after such date, the Securities may be redeemed at the election of the Company as a whole at any time or in part from time to time at the Redemption Prices (expressed in percentages of principal amount) set forth below plus accrued interest to the Redemption Date, if redeemed during the 12-month period beginning on September 1 of the years indicated below: Year Percentage 2000 104% 2001 102 2002 and thereafter 100 Notwithstanding the foregoing, the Securities may be redeemed at the election of the Company on or after September 1, 1995 and prior to September 1, 1998 with the proceeds of one or more issuances of equity securities, so long as such redemption, when aggregated with all prior such redemptions, shall not result in more than 33 1/3% of the principal amount of the Securities originally issued having been so redeemed, at the Redemption Prices (expressed in percentages of A-4 Exhibit A principal amount) set forth below plus accrued interest to the Redemption Date, if redeemed during the 12-month period beginning September 1 of the years indicated below: Year Percentage 1995 103% 1996 106 1997 106 Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed, at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. On and after the Redemption Date interest ceases to accrue on Securities or portions of them called for redemption. The Securities will not have the benefit of any sinking fund obligation. 7. PERSONS DEEMED OWNERS. The registered Holder of a Security may be treated as its owner for all purposes. 8. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or the Securities may be amended with the consent of the Holders of at least a majority in principal amount of the then outstanding Securities. Without the consent of any Holder, the Indenture or the Securities may be amended to cure any ambiguity, defect or inconsistency, to comply with Section 4.01 of the Indenture, to secure the Securities, to make any change that does not adversely affect the legal rights of any Holder or to comply with the requirements of the SEC to maintain qualification of the Indenture under the TIA. 9. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, pay dividends or make certain other Restricted Payments, incur additional Indebtedness or Liens, enter into transactions with Affiliates, merge or consolidate with any other person or sell, lease, transfer or otherwise dispose of substantially all of its properties or assets or enter into sale and leaseback transactions. The limitations are subject to certain qualifications and exceptions. 10. DEFAULTS AND REMEDIES. An Event of Default, as defined in the Indenture, is: a. the failure to pay interest on the Securities for a period of 30 days after such interest becomes due and payable; (ii) the failure to pay the principal or premium, if any, on the Securities when such principal becomes due and payable, whether at the stated maturity or A-5 Exhibit A upon acceleration, redemption or otherwise; (iii) a default in the observance of any other covenant contained in the Indenture that continues for 30 days after the Company has been given notice of the default by the Trustee or the Holders of 25% in principal amount of the Securities then outstanding, (iv) a default or defaults on other Indebtedness of the Company or any Subsidiary, which Indebtedness has an outstanding principal amount of more than $15,000,000 individually or in the aggregate if such Indebtedness has attained final maturity or if the holders of such Indebtedness have accelerated payment thereof under the terms of the instrument under which such Indebtedness is or may be outstanding and it remains unpaid; (v) one or more judgments or decrees is entered against the Company or any Subsidiary involving a liability (not paid or fully covered by insurance) of $5,000,000 or more in the case of any one such judgment or decree or $10,000,000 or more in the aggregate for all such judgments and decrees for the Company and all its Subsidiaries and all such judgments and decrees have not been vacated, discharged or stayed or bonded pending appeal within 30 days from the entry thereof; or (vi) certain events of bankruptcy, insolvency or reorganization affecting the Company or any Material Subsidiary as provided in the Indenture. In case an Event of Default (other than an Event of Default resulting from bankruptcy, insolvency, or reorganization of the Company or a Material Subsidiary) shall have occurred and be continuing, the Trustee by written notice to the Company, or the Holders of at least 25% in principal amount of the Securities by written notice to the Company and the Trustee, may declare to be due and payable the principal amount of the Securities, plus accrued interest, and such amounts shall become due and payable upon the earlier of (i) five days from the date of such notice, so long as the Event of Default giving rise to such notice has not been cured or waived and (ii) the acceleration of the Indebtedness under the Bank Credit Agreement (or any renewal or refinancing thereof). In case an Event of Default resulting from bankruptcy, insolvency, or reorganization of the Company or a Material Subsidiary shall occur, such amount shall ipso facto become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Such declaration or acceleration by the Trustee or the Holders may be rescinded and past defaults may be waived (except, unless theretofore cured, a default in payment of principal of or interest on the Securities issued under the Indenture) by the Holders of a majority in principal amount of the Securities upon conditions provided in the Indenture. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may institute any proceeding with respect to the Indenture or for any remedy thereunder except as provided in the Indenture. Subject to certain A-6 Exhibit A restrictions, the Holders of a majority in principal amount of the Securities have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture, that is unduly prejudicial to the rights of any Holder, or that would subject the Trustee to personal liability. The Company must furnish an annual compliance certificate to the Trustee. 11. PREPAYMENT AT HOLDER'S OPTION UPON CHANGE OF CONTROL EVENTS. In the event of a Change of Control, the Company shall be obligated to make an offer to purchase this Security at a purchase price in cash equal to 101% of its principal amount plus accrued interest, after the occurrence of such Change of Control. Holders of Securities which are the subject of such an offer to repurchase shall receive an offer to repurchase and may elect to have such Securities repurchased in accordance with the provisions of the Indenture. The Company shall give the Holder of this Security notice of such right of repurchase not less than 20 nor more than 60 Business Days prior to the consummation of a merger, consolidation, transfer, sale or lease that would constitute a Change of Control and not more than 45 Business Days following any other event constituting a Change of Control, mailed by first-class mail to the Holder's last address as it appears upon the register. The Holder shall have the right to have this Security repurchased if, among other things, the Security is tendered for repurchase no later than five Business Days prior to the applicable repurchase date. The Company shall have no obligation to consummate any merger, consolidation, transfer, sale or lease that would constitute a Change of Control, and, if any such merger, consolidation, transfer, sale or lease that was the subject of any notice described above is not consummated, the Holder will not be entitled to have this Security prepaid, and any Securities tendered for prepayment will be returned. 12. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company or any Affiliate with the same rights it would have as if it were not the Trustee. 13. OFFERS TO PURCHASE. Under certain circumstances, if the Company or any Subsidiary consummates an Asset Sale, the Company will be required to make an offer to purchase a portion of the Securities pursuant to the provisions of Section 3.06 of the Indenture. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall A-7 not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 15. UNCLAIMED MONEY. If money for the payment of principal of or interest on any Security remains unclaimed for two years after the date on which such payment shall have come due, the Trustee or Paying Agent will pay the money back to the Company at the Company's written request. After that, Holders entitled to this money must look to the Company for payment, unless a law governing abandoned property designates another Person. 16. DISCHARGE UPON REDEMPTION OR MATURITY. Subject to the terms of the Indenture, the Indenture will be discharged and canceled upon the payment of all Securities. The Indenture contains provisions for defeasance at any time of certain restrictive covenants with respect to this Security (in each case upon compliance with certain conditions set forth therein). 17. AUTHENTICATION. This Security shall not be valid until authenticated by the manual signature of the Trustee or an Authenticating Agent. 18. GOVERNING LAW. The laws of the State of New York shall govern this Security and the Indenture, without regard to the conflicts of laws rules thereof. 19. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and UNIF GIFT MIN ACT (= Uniform Gifts to Minors Act). The Company will furnish to any Holder upon written request and without charge a copy of the Indenture, which contains, in larger type, the text of this Security. Requests may be made to The Grand Union Company, 201 Willowbrook Boulevard, Wayne, New Jersey 07470, Attention: Kenneth R. Baum. A-8 Exhibit A OPTION OF HOLDER TO ELECT REPURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 3.06 or 4.01 of the Indenture, check the box below*: / / Section 3.06 / / Section 4.01 If you want to elect to have only part of this Security purchased by the Company pursuant to Section 3.06 of the Indenture, state the amount you elect to have purchased: $___________ Date: Your signature ------------- --------------------------- (Sign exactly as your name appears on the other side of this Security) Tax Identification No.: ---------- Signature Guarantee: ---------------------- (Signature must be guaranteed by an eligible institution within the meaning of Rule 17(A)(d)-15 under the Securities Exchange Act of 1934, as amended) - - ------------------------- * Check applicable box. A-9 Exhibit A ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to _______________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint_____________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. _______________________________________________________________________________ Date: Your signature ----------------- ------------------- (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: -------------------------------------- (Signature must be guaranteed by an eligible institution within the meaning of Rule 17(A)(d)-15 under the Securities Exchange Act of 1934, as amended) A-10 EX-4.3 8 EXHIBIT 4.3 AMENDED AND RESTATED BORROWER PLEDGE AGREEMENT AMENDED AND RESTATED BORROWER PLEDGE AGREEMENT (this "Agreement"), dated as of June 15, 1995, made by THE GRAND UNION COMPANY, a Delaware corporation (the "Pledgor"), to BANKERS TRUST COMPANY, as Collateral Agent, (the "Pledgee") for the benefit of (x) the Banks and the Agent from time to time party to the Credit Agreement hereinafter referred to (such Banks and the Agent, the "Bank Creditors"), and (y) any Bank that enters into an interest rate protection agreement (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements, collectively, the "Interest Rate Protection Agreements") guaranteed by the Pledgor, even if such Bank sub- sequently ceases to be a Bank under the Credit Agreement for any reason and for so long as any such Bank participates in the extension of any Interest Rate Protection Agreements, and any subsequent assignee, (collectively, the "Interest Rate Protection Creditors" and, together with the Bank Creditors, the "Secured Creditors"). Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement shall be used herein as so defined. W I T N E S S E T H : WHEREAS, certain of the parties hereto entered into the Original Credit Agreement; WHEREAS, the Pledgor, the various Banks from time to time party thereto and Bankers Trust Company, as Agent (the "Agent") have agreed to amend and restate the Original Credit Agreement and have entered into the Amended and Restated Credit Agreement, dated as of June 15, 1995, providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contem- plated therein (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph, as the same may be amended, modified, extended, renewed, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring (including, but not limited to, any increase in the amount Page 2 borrowed) all or any portion of the Indebtedness under such agreement or any successor agreements; WHEREAS, the Pledgor may at any time and from time to time enter into one or more Interest Rate Protection Agreements with one or more Interest Rate Protection Creditors in compliance with the provisions of the Credit Agreement; WHEREAS, the parties hereto (or their predecessors) entered into the Borrower Pledge Agreement, dated as of July 14, 1992, and now desire to amend and restate such pledge in its entirety; WHEREAS, it is a condition precedent to each of the above-described extensions of credit to the Pledgor that Pledgor shall have executed and delivered to the Pledgee this Agreement; WHEREAS, the Pledgor desires to execute and deliver this Agreement to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the above-described extensions of credit made and to be made to the Pledgor and other benefits accruing to the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby makes the following representations and warranties to the Pledgee for the benefit of the Secured Creditors and hereby covenants and agrees with the Pledgee for the benefit of the Secured Creditors as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by the Pledgor for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of, and interest on, the Notes issued, and Loans made, under the Credit Agreement, and all reimbursement obligations and Unpaid Drawings with respect to the Letters of Credit under the Credit Agreement and (y) all other obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Pledgor to the Bank Creditors now existing or Page 3 hereafter incurred under, arising out of, or in connection with the Credit Agreement and the due performance and compliance by the Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement (all such principal, interest, obligations and liabilities described in this clause (i), the "Credit Agreement Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities owing by the Pledgor to the Interest Rate Protection Creditors under, or with respect to, any Interest Rate Protection Agreement, whether such Interest Rate Protection Agreement is now in existence or hereafter arising, and the due performance and compliance by the Pledgor with the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (iii), the "Interest Rate Protection Obligations"); (iii) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral in a manner not in violation of the terms hereof; and (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Pledgor referred to in clauses (i), (ii) and (iii) after an Event of Default shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs. All such obligations, liabilities, sums and expenses set forth in clauses (i) through (iv) of this Section 1 being herein collectively called the "Obligations," it being acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. Page 4 2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein, (i) the term "Stock" shall mean all of the issued and outstanding shares of capital stock at any time owned by the Pledgor of any Person and (ii) the term "Notes" shall mean all promissory notes at any time issued to the Pledgor by any Person. As used herein, the term "Securities" shall mean all of the Stock and Notes. The Pledgor represents and warrants, as to the stock of corporations and promissory notes owned by the Pledgor, that on the date hereof (a) the Stock consists of the number and type of shares of the stock of the corporations as described in Part I of Annex A hereto; (b) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Part I of Annex A hereto; (c) the Notes consist of the promissory notes described in Part II of Annex A hereto; and (d) the Pledgor is the holder of record and sole beneficial owner of the Stock and the Notes and there exist no options or preemption rights in respect of any of the Stock. 3. PLEDGE OF SECURITIES, ETC. 3.1. PLEDGE. To secure the Obligations and for the purposes set forth in Section 1, the Pledgor hereby (i) grants to the Pledgee a security interest in all of the Collateral, (ii) pledges and deposits with the Pledgee the Securities owned by the Pledgor on the date hereof, and delivers to the Pledgee certificates or instruments therefor, duly endorsed in blank in the case of promissory notes and accompanied by undated stock powers duly executed in blank by the Pledgor in the case of capital stock, or such other instruments of transfer as are acceptable to the Pledgee and (iii) assigns, transfers, hypothe- cates and sets over to the Pledgee all of the Pledgor's right, title and interest in, to and under such Securities (and in, to and under the certificates or instruments evidencing such Securities), and all principal, interest, dividends, cash, certificates, instruments and other property from time to time received, receivable, or otherwise distributed in respect of or in exchange for any and all of such Securities and all proceeds of the foregoing, all to be held by the Pledgee, upon the terms and conditions set forth in this Agreement. Page 5 3.2. SUBSEQUENTLY ACQUIRED SECURITIES. If the Pledgor shall acquire (by purchase, stock dividend or otherwise) any additional Securities at any time or from time to time after the date hereof, the Pledgor will promptly thereafter pledge and deposit such Securities (or certificates or instruments representing Securities) as security with the Pledgee and deliver to the Pledgee certificates or instruments therefor, duly endorsed in blank in the case of promissory notes and accompanied by undated stock powers duly executed in blank by the Pledgor in the case of capital stock, or such other instruments of transfer as are accept- able to the Pledgee, and will promptly thereafter deliver to the Pledgee a certificate executed by an Authorized Officer of the Pledgor describing such Securities and certifying that the same has been duly pledged with the Pledgee hereunder. 3.3. UNCERTIFICATED SECURITIES. Notwithstanding anything to the contrary contained in Sections 3.1 and 3.2, if any Securities (whether now owned or hereafter acquired) are uncertificated securities, the Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all actions required to perfect the security interest of the Pledgee under applicable law (including, in any event, under Sections 8-313 and 8-321 of the New York Uniform Commercial Code if applicable). The Pledgor further agrees to take such actions as the Pledgee deems necessary or desirable to effect the foregoing and to permit the Pledgee to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to any such pledge of uncertificated Securities promptly upon request of the Pledgee. 3.4. DEFINITIONS OF PLEDGED STOCK; PLEDGED NOTES; PLEDGED SECURITIES AND COLLATERAL. All Stock at any time pledged or required to be pledged hereunder is hereinafter called the "Pledged Stock;" all Notes at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged Notes;" all Pledged Stock and Pledged Notes together are called the "Pledged Securities;" and the Pledged Securities, together with all proceeds thereof, including any securities and moneys received and at the time held by the Pledgee hereunder, are hereinafter called the "Collateral." Page 6 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the discre- tion of the Pledgee) in the name of the Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub- agent appointed by the Pledgee. 5. VOTING, ETC., WHILE NO SPECIFIED EVENT OF DEFAULT. Unless and until an Event of Default shall have occurred and be continuing and the Pledgee, acting at the direction of the Required Banks, shall have notified the Pledgor that the Pledgor may no longer exercise the rights referred to below (except that no such notice shall be required in the case of a Bankruptcy Default (as defined in the Borrower Security Agreement) with respect to the Pledgor), the Pledgor shall be entitled to exercise all voting rights attaching to any and all Pledged Securities, and to give consents, waivers or ratifications in respect thereof, PROVIDED that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate, or be inconsistent with, any of the terms of this Agreement or the Credit Agreement, or which would have the effect of impairing the position or interests of the Pledgee or any Secured Creditor. All such rights of the Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing and, except in the case of a Bankruptcy Default with respect to the Pledgor, the Pledgee, acting at the direction of the Required Banks, shall have notified the Pledgor of such cessation, and Section 7 hereof shall become applicable. The Pledgor will not, at any time, amend, restate, sup- plement, waive or otherwise modify in any respect adverse to the interests of the Secured Creditors any provision of any Pledged Note, nor take any action which would release or render unenforceable any of the obligations of any Person under its respective Pledged Note. 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event (as defined in the Borrower Security Agreement) or (ii) any other Event of Default or Acceleration Event (as defined in the Borrower Security Agreement), but in the case of this Page 7 clause (ii) only to the extent the Pledgee (acting at the direction of the Required Banks) has so notified the Pledgor, all dividends and distributions payable in respect of the Pledged Stock and all payments in respect of the Pledged Notes shall be paid to the Pledgor, provided that the Pledgee shall be entitled to receive directly, and to retain as part of the Collateral: (a) all other or additional stock or securities (other than cash) paid or distributed by way of dividend or otherwise, as the case may be, in respect of the Pledged Stock; (b) all other or additional stock or other securities paid or distri- buted in respect of the Pledged Stock by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; (c) all other or additional stock or other securities or property (excluding cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization; and (d) unless the payment or any such cash dividend shall have been consented to by the Pledgee (acting at the direction of the Required Banks), any cash dividends or distributions declared or paid in violation of the provisions of the Credit Agreement. Nothing contained in this Section 6 shall limit or restrict in any way the Pledgee's right to receive proceeds of the Collateral in any form in accordance with Section 3 of this Agreement. All dividends, distributions or other payments which are received by the Pledgor contrary to the provisions of this Section 6 or Section 7 shall be received in trust for the benefit of the Pledgee, shall be segregated from other property or funds of the Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement). 7. REMEDIES IN CASE OF SPECIFIED EVENTS. If there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) Page 8 any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, then and in every such case, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement, any other Credit Document, any Interest Rate Protection Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code and also shall be entitled, without limitation, to exercise the following rights, which the Pledgor hereby agrees to be commercially reasonable: (a) to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 to the Pledgor; (b) to transfer all or any part of the Collateral into the Pledgee's name or the name of its nominee or nominees; (c) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note; (d) to vote all or any part of the Pledged Stock (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (the Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of the Pledgor, with full power of substitution to do so); and (e) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of per- formance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by the Pledgor), for cash, on credit or for other property, for immediate or future delivery Page 9 without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine, PROVIDED that at least 10 days' notice of the time and place of any such sale shall be given to the Pledgor. The Pledgee shall not be obligated to make any such sale of Collateral regardless of whether any such notice of sale has theretofore been given. The Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of a Class (or, to the extent agreed to by the Required Creditors of each such Class, two or more Classes acting together) may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Pledgee nor any Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. (e) to settle, adjust, compromise and arrange all accounts, controversies, questions, claims and demands whatsoever in relation to all or any part of the Collateral; (f) in respect of the Collateral, to execute all such contracts, agreements, deeds, documents and instruments; to bring, defend and abandon all such actions, suits and proceedings, and to take all actions in relation to all or any part of the Collateral as the Pledgee in its absolute discretion may determine; (g) to appoint managers, sub-agents, officers and servants for any of the purposes mentioned in the foregoing provisions of this Section 7 and to dismiss the same, all as the Pledgee in its absolute discretion may determine; and (h) generally, to take all such other action as the Pledgee in its absolute discretion may determine Page 10 as incidental or conducive to any of the matters or powers mentioned in the foregoing provisions of this Section 7 and which the Pledgee may or can do lawfully and to use the name of the Pledgor for the purposes aforesaid and in any proceedings arising therefrom. 8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of the Pledgee provided for in this Agreement, the other Credit Documents or the Interest Rate Protection Agreements, or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement, the other Credit Documents, or the Interest Rate Protection Agreements or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. No notice to or demand on the Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Pledgee or any Secured Creditor to any other or further action in any circumstances without notice or demand. 9. APPLICATION OF PROCEEDS. All moneys collected by the Pledgee upon any sale or other disposition of the Collateral, together with all other moneys received by the Pledgee hereunder, shall be applied to the payment of the Obligations in the manner provided by Section 7.4 of the Borrower Security Agreement. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid Page 11 over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11. INDEMNITY. The Pledgor agrees to indemnify and hold harmless the Pledgee and each Secured Creditor and their respective successors, assigns, employees, agents and servants (individually an "Indemnitee," and collectively the "Indemnitees") from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and to reimburse each Indemnitee for all costs and expenses, including reasonable attorneys' fees, growing out of or resulting from this Agreement or the exercise by any Indemnitee of any right or remedy granted to it hereunder or under the other Credit Documents or the Interest Rate Protection Agreements, PROVIDED that the Pledgor shall not be required to indemnify any Indemnitee in respect of any claims, demands, losses, judgments, liabilities, costs or expenses arising from the gross negligence or willful misconduct of such Indemnitee. In no event shall any Indemnitee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for moneys actually received by it in accordance with the terms hereof. If and to the extent that the obligations of the Pledgor under this Section 11 are unenforceable for any reason, the Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under appli- cable law. The Pledgor agrees that upon written notice by any Indemnitee of the assertion of any liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the Pledgor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the Pledgor of any such assertion of which such Indemnitee has knowledge. 12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) The Pledgor agrees that it will join with the Pledgee in executing and, at its own expense, file and refile under the Uniform Commercial Code or other applicable law such finan- cing statements, continuation statements and other documents in such offices as the Pledgee may deem necessary or appropriate and wherever required by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file finan- Page 12 cing statements and amendments thereto relative to all or any part of the Collateral without the signature of the Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments (including, without limitation, proxies and dividend payment orders) as the Pledgee may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. (b) The Pledgor hereby appoints the Pledgee the Pledgor's attorney- in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default, in the Pledgee's discretion to take any action and to execute any instrument which the Pledgee may reasonably deem necessary or advisable to accomplish the purposes of this Agreement. 13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein and in Annex B hereto. 14. TRANSFER BY THE PLEDGOR. Except for sales of Collateral permitted (i) pursuant to the Credit Agreement or (ii) at any time with the written consent of the Required Banks, the Pledgor will not sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except in accordance with the terms of this Agreement). 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. The Pledgor represents and warrants that (a) it is, or at the time when pledged hereunder will be, the legal, record and beneficial owner of, and has (or will Page 13 have) good and merchantable title to, all Securities pledged hereunder, subject to no Lien (except the Lien created by this Agreement); (b) it has full corporate power, authority and legal right to pledge all the Securities pursuant to this Agreement; (c) all the shares of the Stock have been duly and validly issued, are fully paid and non-assessable and are subject to no options to purchase or similar rights; (d) no consent of any other party and no order, consent, license, permit, approval, validation or authorization of, exemption by, notice to or registration, recording, filing or declaration with, any governmental or public body or authority is required to be obtained by the Pledgor in connection with the execution, delivery or performance of this Agreement or consummation of the transactions contemplated hereby, including, without limitation, the exercise by the Pledgee of the voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement (except in connection with the disposition of the Pledged Securities by laws affecting the offering and sale of securities generally); (e) the pledge, assignment and delivery of the Securities, pursuant to this Agreement, creates a valid and perfected security interest in the Securities and the proceeds thereof superior to and prior to the rights of all other Persons therein (as provided in the Uniform Commercial Code) and (f) each of the Pledged Notes, when executed by the obligor thereof, will be the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and equitable principles (regardless of whether enforcement is sought in equity or at law). The Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and the Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the Secured Creditors. The Pledgor covenants and agrees that the Pledgor will not, with respect to any Collateral, enter into any shareholder agreements, voting Page 14 agreements, voting trusts, trust deeds, irrevocable proxies or any other similar agreements or instruments. 16. PLEDGOR'S OBLIGATIONS ABSOLUTE ETC. The Obligations of the Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (a) any change in the time, place or manner of payment of, or in any other term of, all or any of the Obligations, any renewal, extension, amendment or modification of or addition or supplement to or deletion from the Credit Documents, the Interest Rate Protection Agreements or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (c) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (d) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Pledgor or any Subsidiary of the Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not the Pledgor shall have notice or knowledge of any of the foregoing; or (f) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Pledgor. 17. REGISTRATION, ETC. (a) If there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed then, and in every such case, upon receipt by the Pledgor from the Pledgee of a written request or requests that the Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Page 15 Pledged Stock, the Pledgor as soon as practicable and at its expense will use its best efforts to cause such registration to be effected (and be kept effective) and will use its best efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act of 1933, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements, PROVIDED that the Pledgee shall furnish to the Pledgor such information regarding the Pledgee as the Pledgor may request in writing and as shall be required in connection with any such registration, qualification or compliance. The Pledgor will cause the Pledgee to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars or other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee and all others participating in the distribution of such Pledged Stock against all claims, los- ses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to the Pledgor by the Pledgee expressly for use therein. (b) If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7, and such Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as Pledgee may deem Page 16 necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale, and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof. In the event of any such sale, the Pledgee shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price which the Pledgee, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 18. TERMINATION; RELEASE. (a) After the Termination Date (as defined below), this Agreement shall terminate, and the Pledgee, at the request and expense of the Pledgor, will execute and deliver to the Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment has been terminated, no Note remains outstanding, all Letters of Credit have been terminated and all Credit Agreement Obligations then owing by the Pledgor have been paid in full. (b) It is expressly acknowledged and agreed that the Liens and security interests granted under this Agreement for the benefit of the Secured Creditors (i) with respect to any portion of the Collateral sold in accordance with the Credit Agreement, shall be released in connection with such sale and (ii) with respect to all of the Collateral, shall be released on the Termination Date. Page 17 Upon any release of the type described in the preceding sentence, the Pledgee shall, at the request and expense of the Pledgor, and without the further consent of, or liability to, any Secured Creditor, release such Collateral and execute and deliver to the Pledgor a proper instrument or instruments acknowledging the release of such Collateral from this Agreement, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) the Collateral being sold or released as described above; and (c) At any time that the Pledgor desires that Collateral be released as provided in the foregoing Section 18 (a) or (b), it shall deliver to the Pledgee a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to such Section 18 (a) or (b), as the case may be. 19. NOTICES ETC. All notices and other communications hereunder shall be in writing and shall be delivered or mailed by first class mail, postage prepaid, addressed as follows: (a) if to the Pledgor, at: The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-6799 Attention: Robert Terrence Galvin (b) if to the Pledgee, at: Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Attention: Mary Kay Coyle (c) if to any Bank Creditor, either (x) to the Agent, at the address of the Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Interest Rate Protection Creditor, either (x) to the paying agent or other representative for the Interest Rate Protection Creditors, at such address as such representative may have provided to Page 18 the Pledgor and the Pledgee from time to time, or (y) directly to the Interest Rate Protection Creditors at such address as the Interest Rate Protection Creditors shall have specified in writing to the Pledgor and the Pledgee. 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Pledgor and the Pledgee (with the written consent of the Required Banks); PROVIDED, HOWEVER, that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Required Creditors (as defined in the Borrower Security Agreement) of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, I.E., whether (x) the Bank Creditors as holders of the Credit Agreement Obligations, or (y) the Interest Rate Protection Creditors as the holders of the Interest Rate Protection Obligations. 21. MISCELLANEOUS. This Agreement shall create a continuing security interest in the Collateral, shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns. This Agreement shall be construed and enforced in accordance with and governed by the law of the State of New York. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agree- ment shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. 22. WAIVER OF JURY TRIAL. The Pledgor hereby irrevocably waives all right to a trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement or the transactions contemplated hereby. Page 19 IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. THE GRAND UNION COMPANY, as Pledgor By /s/ Francis E. Nicastro --------------------------- Title: Vice President and Treasurer BANKERS TRUST COMPANY, as Collateral Agent, as Pledgee By /s/ Mary Kay Coyle ---------------------------- Title: Vice President ANNEX A to BORROWER PLEDGE AGREEMENT ------------------------- Part I. PLEDGED STOCK -------------
NUMBER OF PERCENTAGE OF OUTSTANDING NAME OF ISSUING CORPORATION TYPE OF SHARES CERTIFICATE NUMBER SHARES PLEDGED SHARES OF CAPITAL STOCK - - --------------------------- -------------- ------------------ -------------- ------------------------- Merchandising Services, Inc. Common Stock 2 500 100% Grand Union Stores, Inc. of Common Stock 6 45 90% Vermont Grand Union Stores of Common Stock 7,8 200 100% New Hampshire, Inc.
ANNEX A Page 2 Part II. PLEDGED NOTES -------------
PRINCIPAL LENDER BORROWER AMOUNT - - ------------ -------------- ------------- (1)The Grand Union Company Myron Hunt 525,000.00 (2)The Grand Union Company Burlington Coat Factory Whse. Corp. 1,100,000.00 (3)The Grand Union Company Hillside K Food Corp. 330,000.00 (4)The Grand Union Company Bonfeld Incorporated 47,400.00 (5)The Grand Union Company 3151 Westchester Ave. Food Corp. 500,000.00 (6)The Grand Union Company DeCicco of New City, Inc. 400,000.00 (7)The Grand Union Company Hansfood II Corp. 100,000.00 (8)The Grand Union Company Westfall Town Center Joint Venture 1,733,000.00 (9)The Grand Union Company 289 North Main Street, Inc. 200,000.00 (10)The Grand Union Company Shree Bhagyalaxmi, Inc. 100,000.00 (11)The Grand Union Company Friends of Elmendorph, Inc. 28,000.00 (12)The Grand Union Company James M. Holmes and Myra Holmes 26,000.00
ANNEX B to BORROWER PLEDGE AGREEMENT ------------------------- THE PLEDGEE 1. APPOINTMENT. The Secured Creditors (all capitalized terms used herein and not otherwise defined shall have the respective meanings provided in the Pledge Agreement to which this Annex B is attached (the "Pledge Agreement")), by their acceptance of the benefits of the Pledge Agreement, hereby irrevocably designate Bankers Trust Company as Pledgee to act as specified herein and in the Pledge Agreement. Each Secured Creditor hereby irrevocably authorizes, and each holder of any promissory note which is secured pursuant to the Pledge Agreement (each a "Note" and collectively the "Notes") by the acceptance of such Note shall be deemed irrevocably to authorize, the Pledgee to take such action on its behalf under the provisions of the Pledge Agreement and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are spe- cifically delegated to or required of the Pledgee by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Pledgee may perform any of its duties hereunder by or through its agents or employees. 2. NATURE OF DUTIES. The Pledgee shall have no duties or responsibilities except those expressly set forth in the Pledge Agreement. Neither the Pledgee nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by it as such under the Pledge Agree- ment or hereunder or in connection herewith or there- with, unless caused by its or their gross negligence or willful misconduct. The duties of the Pledgee shall be mechanical and administrative in nature; the Pledgee shall not have by reason of the Pledge Agreement or any other Financing Document a fiduciary relationship in respect of any Secured Creditor; and nothing in the Pledge Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Pledgee any obligations in respect of the Pledge Agreement except as expressly set forth herein. 3. LACK OF RELIANCE ON THE PLEDGEE. Independently and without reliance upon the Pledgee, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Pledgor and its Sub- sidiaries in connection with the making and the con- tinuance Annex B page 2 of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Pledgor and its Subsidiaries, and the Pledgee shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any Notes, or at any time or times thereafter. The Pledgee shall not be responsible to any Secured Creditor for any recitals, statements, information, representations or warranties herein or in any docu- ment, certificate or other writing delivered in connection herewith or for the execution, effec- tiveness, genuineness, validity, enforceability, per- fection, collectibility, priority or sufficiency of the Pledge Agreement or the financial condition of the Pledgor or any Subsidiary of the Pledgor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of the Pledge Agreement, or the financial condition of the Pledgor or any Subsidiary of the Pledgor, or the existence or possible existence of any Event of Default. 4. CERTAIN RIGHTS OF THE PLEDGEE. No Secured Creditor shall have the right to cause the Pledgee to take any action with respect to the Collateral, with only the Required Banks (as hereinafter defined) having the right to direct the Pledgee to take any such action. If the Pledgee shall request instructions from the Required Banks with respect to any act or action (including failure to act) in connection with the Pledge Agreement, the Pledgee shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Banks, and to the extent requested, appropriate indemnification in respect of actions to be taken; and the Pledgee shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Pledgee as a result of the Pledgee acting or refraining from acting (x) hereunder in accordance with the instructions of the Required Banks or (y) under any other Credit Document as pro- vided for therein. 5. RELIANCE. The Pledgee shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, Annex B page 3 teletype or facsimile message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining to the Pledge Agreement and its duties thereunder, upon advice of counsel selected by it. 6. INDEMNIFICATION. To the extent the Pledgee is not reimbursed and indemnified by the Pledgor and/or its Subsidiaries, the Secured Creditors will reimburse and indemnify the Pledgee, in proportion to their respective principal amounts of Obligations, for and against any and all liabilities, obligations, losses, damages,penalties, actions, judg- ments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Pledgee in performing its duties hereunder or under the Pledge Agreement, or in any way relating to or arising out of the Pledge Agreement except for those resulting solely from the Pledgee's own gross negligence or willful misconduct. 7. THE PLEDGEE IN ITS INDIVIDUAL CAPACITY. With respect to its obligations as a lender under the Credit Agreement and any other credit facilities to which the Pledgee is a party, and to act as agent under one or more of such credit facilities, the Pledgee shall have the rights and powers specified therein and herein for a "Bank", and may exercise the same rights and powers as though it were not per- forming the duties specified herein; and the terms "Banks", "holders of notes", or any similar terms shall, unless the context clearly otherwise indicates, include the Pledgee in its individual capacity. The Pledgee may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with Pledgor or any affiliate or Subsidiary of Pledgor as if it were not performing the duties specified herein, and may accept fees and other consideration from Pledgor for services in connection with the Credit Agreement, the other Credit Documents and otherwise without having to account for the same to the Secured Creditors. 8. HOLDERS. The Pledgee may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Pledgee. Any request, authority or Annex B page 4 consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or any Note(s) issued in exchange therefor. 9. RESIGNATION BY THE PLEDGEE. (a) The Pledgee may resign from the performance of all its functions and duties under the Pledge Agreement at any time by giving 20 Business Days' prior written notice (as provided in the Pledge Agreement) to the Pledgor and the Secured Creditors. Such resignation shall take effect upon the appointment of a successor Pledgee pursuant to clauses (b) and (c) below. (b) Upon any such notice of resignation, the Required Banks shall appoint a successor Pledgee hereunder who shall be a commercial bank organized under the laws of the United States of America or any State thereof and having combined capital and surplus of at least $500,000,000. (c) If a successor Pledgee shall not have been so appointed within said 20 Business Day period, the Pledgor shall then appoint a successor Pledgee who shall serve as Pledgee hereunder or thereunder until such time, if any, as the Required Banks appoint a successor Pledgee as provided above. (d) If no successor Pledgee is appointed pursuant to clauses (b) and (c) above within said 20 Business Day period, the resignation of the Pledgee shall become effective and the duties of the Pledgee shall be performed by the Required Banks. EX-4.4 9 EXHIBIT 4.4 Exhibit 4.4 AMENDED AND RESTATED BORROWER SECURITY AGREEMENT between THE GRAND UNION COMPANY and BANKERS TRUST COMPANY, as Collateral Agent Dated as of June 15, 1995 TABLE OF CONTENTS Page ARTICLE I SECURITY INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . 2 1.1. Grant of Security Interests. . . . . . . . . . . . . . . . . . . 2 1.2. Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.1. Necessary Filings. . . . . . . . . . . . . . . . . . . . . . . . 5 2.2. No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.3. Other Financing Statements . . . . . . . . . . . . . . . . . . . 6 2.4. Chief Executive Office; Records. . . . . . . . . . . . . . . . . 6 2.5. Location of Inventory and Equipment. . . . . . . . . . . . . . . 7 2.6. Location of Vehicles . . . . . . . . . . . . . . . . . . . . . . 8 2.7. Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.8. Trade Names; Change of Name. . . . . . . . . . . . . . . . . . . 9 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.1. Additional Representations and Warranties. . . . . . . . . . . . 10 3.2. Maintenance of Records . . . . . . . . . . . . . . . . . . . . . 10 3.3. Direction to Account Debtors; Contracting Parties; etc.. . . . . 11 3.4. Modification of Terms; etc.. . . . . . . . . . . . . . . . . . . 12 3.5. Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.6. Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.7. Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS. . . . . . . . . . . . . . . 13 4.1. Additional Representations and Warranties. . . . . . . . . . . . 13 4.2. Licenses and Assignments . . . . . . . . . . . . . . . . . . . . 14 4.3. Infringements. . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.4. Preservation of Marks. . . . . . . . . . . . . . . . . . . . . . 15 4.5. Maintenance of Registration. . . . . . . . . . . . . . . . . . . 15 4.6. Future Registered Marks. . . . . . . . . . . . . . . . . . . . . 16 4.7. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 17 5.1. Additional Representations and Warranties. . . . . . . . . . . . 17 5.2. Licenses and Assignments . . . . . . . . . . . . . . . . . . . . 18 5.3. Infringements. . . . . . . . . . . . . . . . . . . . . . . . . . 18 5.4. Maintenance of Patents and Copyrights. . . . . . . . . . . . . . 18 5.5. Prosecution of Patent Application. . . . . . . . . . . . . . . . 19 5.6. Other Patents and Copyrights . . . . . . . . . . . . . . . . . . 19 5.7. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL . . . . . . . . . . . . . . 20 6.1. Protection of Collateral Agent's Security. . . . . . . . . . . . 20 6.2. Warehouse Receipts Non-negotiable. . . . . . . . . . . . . . . . 21 6.3. Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . 21 6.4. Financing Statements . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE VII REMEDIES UPON OCCURRENCE OF SPECIFIED EVENTS . . . . . . . . . . . . . . . . . . . . . . . . 22 7.1. Remedies; Obtaining the Collateral Upon Default. . . . . . . . . 22 7.2. Remedies; Disposition of the Collateral. . . . . . . . . . . . . 23 7.3. Waiver of Claims . . . . . . . . . . . . . . . . . . . . . . . . 25 7.4. Application of Proceeds. . . . . . . . . . . . . . . . . . . . . 26 7.5. Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 29 7.6. Discontinuance of Proceedings. . . . . . . . . . . . . . . . . . 30 ARTICLE VIII INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 30 8.1. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 8.2. Indemnity Obligations Secured by Collateral; Survival. . . . . . 32 ARTICLE IX DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE X THE COLLATERAL AGENT . . . . . . . . . . . . . . . . . . . . . . 40 10.1. Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . 40 10.2. Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . 40 10.3. Lack of Reliance on the Collateral Agent . . . . . . . . . . . . 41 10.4. Certain Rights of the Collateral Agent . . . . . . . . . . . . . 42 10.5. Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 10.6. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 43 10.7. The Collateral Agent in its Individual Capacity. . . . . . . . . 44 10.8. Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 10.9. Resignation by the Collateral Agent. . . . . . . . . . . . . . . 45 10.10. Fees and Expenses of Collateral Agent. . . . . . . . . . . . . . 45 (ii) ARTICLE XI MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 46 11.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 11.2. Waiver; Amendment. . . . . . . . . . . . . . . . . . . . . . . . 47 11.3. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . 47 11.4. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 48 11.5. Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . 49 11.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 49 11.7. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 49 11.8. Assignor's Duties. . . . . . . . . . . . . . . . . . . . . . . . 49 11.9. Termination; Release . . . . . . . . . . . . . . . . . . . . . . 49 11.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 50 ANNEX A Schedule of Permitted Filings ANNEX B Schedule of Record Locations ANNEX C Schedule of Inventory and Equipment Locations ANNEX D Schedule of Vehicles Locations ANNEX E Schedule of Trade, Fictitious and Other Names ANNEX F Schedule of Marks ANNEX G Schedule of License Agreements and Assignments ANNEX H Schedule of Patents and Applications ANNEX I Schedule of Copyrights and Applications EXHIBIT 1 U.S. Trademark Security Agreement EXHIBIT 2 U.S. Patent Security Agreement EXHIBIT 3 U.S. Copyright Security Agreement (iii) AMENDED AND RESTATED BORROWER SECURITY AGREEMENT AMENDED AND RESTATED BORROWER SECURITY AGREEMENT (this "Agreement"), dated as of June 15, 1995, between THE GRAND UNION COMPANY, a Delaware corporation (the "Assignor"), and BANKERS TRUST COMPANY, as Collateral Agent (the "Collateral Agent") for the benefit of (x) the Banks and the Agent from time to time party to the Credit Agreement hereinafter referred to (such Banks and the Agent the "Bank Creditors") and (y) any Bank that enters into an interest rate protection agreement (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements, collectively, the "Interest Rate Protection Agreements") guaranteed by the Assignor, even if any such Bank subsequently ceases to be a Bank under the Credit Agreement for any reason and for so long as any such Bank participates in the extension of any such Interest Rate Protection Agreements, and any subsequent assignee, (collectively, the "Interest Rate Protection Creditors" and, together with the Bank Creditors, the "Secured Creditors"). All capitalized terms used herein shall have the meanings provided in Article IX of this Agreement and, if not so defined herein, capitalized terms used herein and defined in the Credit Agreement shall be used herein as so defined. The schedules, annexes and exhibits hereto are incorporated herein by reference and this Agreement together with all schedules, annexes and exhibits hereto and any future filings of any of the exhibits hereto shall constitute the "Borrower Security Agreement" referred to in the Credit Agreement. W I T N E S S E T H : WHEREAS, certain of the parties hereto entered into the Original Credit Agreement; WHEREAS, the Assignor, the various Banks from time to time party thereto, and Bankers Trust Company, as Agent (the "Agent") have agreed to amend and restate the Original Credit Agreement and have entered into the Amended and Restated Credit Agreement, dated as of June 15, 1995, providing for the making of Loans and the issuance Page 2 of, and participation in, Letters of Credit as contemplated therein (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph, as the same may be amended, modified, extended, renewed, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring (including, but not limited to, any increase in the amount borrowed) all or any portion of the Indebtedness under such agreement or any successor agreements; WHEREAS, the Assignor may at any time and from time to time enter into one or more Interest Rate Protection Agreements with one or more Interest Rate Protection Creditors in compliance with the provisions of the Credit Agreement; WHEREAS, the parties hereto (or their predecessors) entered into the Borrower Security Agreement dated as of July 14, 1992, and now desire to amend and restate such agreement in its entirety; WHEREAS, it is a condition precedent to each of the above-described extensions of credit to the Assignor that the Assignor shall have executed and delivered to the Collateral Agent this Agreement; WHEREAS, the Assignor desires to execute and deliver this Agreement to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the extensions of credit made and to be made to the Assignor and other benefits accruing to the Assignor, the receipt and sufficiency of which are hereby acknowledged, the Assignor hereby makes the following representations and warranties to the Collateral Agent for the benefit of the Secured Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditors as follows: ARTICLE I SECURITY INTERESTS Page 3 1.1. GRANT OF SECURITY INTERESTS. (a) As security for the full and prompt payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all of the Obligations, the Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest of first priority (subject to Liens evidenced by Permitted Filings and other Liens permitted under Section 8.2 of the Credit Agreement and existing on the Effective Date) in, all of the right, title and interest of the Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired (collectively, the "Collateral"): (i) each and every Receivable, (ii) all Contracts, together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) the Cash Collateral Account established for the Assignor and all monies, securities and instruments deposited or required to be deposited in such Cash Collateral Account, (v) all Equipment, including, without limitation, all of the Vehicles (and the certificates of title and other registrations relating thereto), (vi) all Marks and the goodwill of the business of the Assignor symbolized by the Marks, (vii) all Patents and Copyrights, (viii) all computer programs of the Assignor and all intellectual property rights therein and all other proprietary information of the Assignor, including, but not limited to, trade secrets, (ix) all other Goods, General Intangibles, Chattel Paper, Documents and Instruments (other than the Pledged Securities and any other capital stock or promissory notes not required to be pledged pursuant to the Borrower Pledge Agreement), (x) any and all books and records relating to any of the property described in the foregoing clauses (i) through (ix) and (xi) all Proceeds and products of any and all Collateral referred to in clauses (i) through (x) above and this clause (xi); PROVIDED, HOWEVER, that to the extent that any Contract may be terminated (in accordance with the terms thereof after giving effect to any applicable laws) in the event of granting of a security interest therein, or in the event the granting of a security interest in any Contract shall violate applicable law, then the security interest granted hereby shall be limited to the extent necessary so that such Contract may not be so terminated or no such violation of law shall exist, as the case may be; PROVIDED, FURTHER, that upon the termination or expiration of such prohibition Page 4 or restriction, such Contract shall become subject to the security deemed to be Collateral. (b) The security interests of the Collateral Agent under this Agreement extend to all Collateral now existing or hereafter acquired, of the kind which is the subject of this Agreement which the Assignor may acquire at any time during the continuation of this Agreement. (c) If (i) a Bankruptcy Default or Notified Acceleration Event has occurred and is continuing or (ii) any other Event of Default or Acceleration Event has occurred and is continuing, but in the case of this clause (ii) only if, and to the extent that, the Collateral Agent (acting at the direction of the Required Banks) has given notice to the Assignor to take the actions specified below in this sentence, then in either such case all cash Proceeds of, and cash payments received in respect of, Collateral shall be paid by the Assignor (or the respective payor) directly to the Cash Collateral Account or as otherwise directed by the Collateral Agent. At any time while the circumstances described in the immediately preceding sentence do not exist, all cash payments received in respect of the Collateral (including, without limitation, all payments received in respect of Receivables and Contracts, or in payment for sales of Inventory, but excluding cash Proceeds of sales of other Collateral unless the respective sale and release of Collateral is permitted pursuant to this Agreement and the Credit Agreement) shall be paid to the Assignor for application in accordance with (and to the extent provided by) the Credit Agreement. 1.2. POWER OF ATTORNEY. The Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of the Assignor or otherwise), in the Collateral Agent's discretion, to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, which appointment as attorney is coupled with an interest. Page 5 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS The Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1. NECESSARY FILINGS. All filings, registrations and recordings, including filings in the United States Patent and Trademark Office or the United States Copyright Office or similar agencies in any State thereof or political subdivision thereof necessary or appropriate to create, preserve, protect and perfect the security interest granted by the Assignor to the Collateral Agent hereby in respect of the Collateral have been or shall have been accomplished in a timely manner and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral constitutes or shall constitute a perfected security interest therein (as provided in the Uniform Commercial Code), which is superior and prior to the rights of all other Persons therein and subject to no other Liens (except that the Collateral may be subject to the security interests evidenced by the financing statements disclosed on Annex A hereto, but only to the respective date, if any, set forth on Annex A (the "Permitted Filings") and to any other Liens permitted under Section 8.2 of the Credit Agreement and existing on the Effective Date) and is or shall be entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests. 2.2. NO LIENS. The Assignor is, and as to Collateral acquired by it from time to time after the date hereof, the Assignor will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Liens created hereby, Liens permitted under Section 8.2 of the Credit Agreement or evidenced by the Permitted Filings), and the Assignor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. Page 6 2.3. OTHER FINANCING STATEMENTS. As of the date hereof, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) on file or of record in any relevant jurisdiction covering or purporting to cover any interest of any kind in the Collateral except as disclosed in Annex A hereto and so long as the Termination Date has not occurred or any of the Credit Agreement Obligations remain unpaid, the Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by the Assignor and to the extent permitted to be granted by the Assignor pursuant to Section 8.2 of the Credit Agreement. 2.4. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of the Assignor is located at 201 Willowbrook Boulevard, Wayne, New Jersey 07470- 6799. The Assignor will not move its chief executive office except to such new location as the Assignor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights of the Assignor and the only original books of account and records of the Assignor relating thereto are, and will continue to be, kept at such chief executive office, at such other locations shown on Annex B hereto or at such new locations as the Assignor may establish in accordance with the last sentence of this Section 2.4, PROVIDED that, so long as (x) true and correct copies of all documents evidencing such Receivables and Contract Rights and copies of such books and records are kept at such chief executive office or at such other locations shown on Annex B hereto, and (y) the failure to maintain any original copies of the foregoing at such locations could not have an adverse effect upon the validity, perfection or priority of any security interest granted hereunder, the Assignor shall be permitted to keep original copies of the foregoing at other locations to be determined in a manner consistent with its past practices. All Receivables and Contract Rights of the Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described Page 7 above. The Assignor shall not establish new locations for such offices until (i) it shall have given to the Collateral Agent not less than 45 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. 2.5. LOCATION OF INVENTORY AND EQUIPMENT. All Inventory and Equipment (other than Vehicles) held on the date hereof by the Assignor is located at one of the locations shown on Annex C hereto. The Assignor agrees that all Inventory and all Equipment (other than Vehicles) now held or subsequently acquired by it shall be kept at (or shall be in transport to) any one of the locations shown on Annex C hereto, or such new location as the Assignor may establish in accordance with the last sentence of this Section 2.5. The Assignor may establish a new location for Inventory and Equipment (other than Vehicles) only if (i) it shall give to the Collateral Agent written notice of such new location as promptly as practicable and in no event later than 60 days after the establishment thereof, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, as promptly as practicable and in no event later than 75 days after the establishment thereof, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably Page 8 acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. 2.6. LOCATION OF VEHICLES. (a) All vehicles owned on the date hereof by the Assignor are of the type and quantity, bear the certificate of title numbers and are registered in the jurisdictions listed on Annex D hereto (the "Vehicles"). The Assignor agrees that after acquiring any Vehicle subsequent to the date hereof, it shall (i) give the Collateral Agent written notice of such acquisition in accordance with Section 11.9(c) hereof and provide the type(s), quantity, certificate of title number(s) and jurisdiction(s) of registration of each such Vehicle and provide such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to each such subsequently acquired Vehicle, take such action reasonably satisfactory to the Collateral Agent as is necessary or appropriate to create, preserve, protect and perfect the security interest of the Collateral Agent in such Vehicle intended to be granted hereby. The Assignor further agrees (except as otherwise provided in Section 11.9(c) hereof) that it shall (i) not remove any Vehicle now owned or hereafter acquired from (x) with respect to Vehicles held on the date hereof, the jurisdiction in which such Vehicle is registered on the date hereof or (y) with respect to Vehicles acquired after the date hereof, the jurisdiction in which such Vehicle is registered at the time of its acquisition, in each case, to the extent the removal of such Vehicle from such jurisdiction would require the Collateral Agent to take any action whatsoever with respect to such Vehicle in order to maintain the security interest of the Collateral Agent in the Vehicle so removed at all times fully perfected and in full force and effect, unless the Assignor shall have given not less than 30 days' prior written notice to the Collateral Agent of the requirement to take any such action and (ii) take such action reasonably satisfactory to the Collateral Agent as is necessary or appropriate to maintain the security interest of the Collateral Agent in the Page 9 Vehicle so removed at all times fully perfected and in full force and effect. 2.7. RECOURSE. This Agreement is made with full recourse to the Assignor and pursuant to and upon all the warranties, representations, covenants, and agreements on the part of the Assignor contained herein, in the other Credit Documents, in the Interest Rate Protection Agreements and otherwise in writing in connection herewith or therewith. 2.8. TRADE NAMES; CHANGE OF NAME. The Assignor does not have or operate in any jurisdiction under, or in the preceding 12 months has not had or has not operated in any jurisdiction under, any trade names, fictitious names or other names (including, without limitation, any names of divisions or operations) except its legal name and such other trade, fictitious or other names as are listed on Annex E hereto. The Assignor shall not change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on Annex E hereto and new names (including, without limitation, any names of divisions or operations) established in accordance with the last sentence of this Section 2.8. The Assignor shall not assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new name, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. Page 10 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS 3.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. As of the time when each of its Receivables arises, the Assignor shall be deemed to have represented and warranted that (x) such Receivable, and all records, papers and documents relating thereto (if any) are genuine and in all respects what they purport to be, and that all papers and documents (if any) relating thereto (i) will represent the obligation of the account debtor evidencing indebtedness unpaid and owed by the respective account debtor arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes), and (iii) will be in compliance and will conform in all material respects with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction and (y) there is no fact or circumstance known to Assignor which would suggest that any such Receivable (i) will not represent the genuine, legal, valid and binding obligation of such account debtor or (ii) will not evidence true and valid obligations, enforceable in accordance with their respective terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 3.2. MAINTENANCE OF RECORDS. The Assignor will keep and maintain at its own cost and expense satisfactory and complete records of its Receivables and Contracts, including, but not limited to, the originals of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and the Assignor will make the same available on the Assignor's premises to the Collateral Agent for inspection, at the Assignor's own cost and expense, at any and all reasonable times upon demand. Upon Page 11 the occurrence and during the continuance of any of the conditions specified in the first sentence of Section 1.1(c) of this Agreement, and upon the request of the Collateral Agent, the Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by the Assignor). If the Collateral Agent so directs, the Assignor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, the Receivables and the Contracts, as well as books, records and documents of the Assignor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 3.3. DIRECTION TO ACCOUNT DEBTORS; CONTRACTING PARTIES; ETC. Upon the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c) of this Agreement, and if the Collateral Agent so directs the Assignor, the Assignor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account established for the Assignor, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in preceding clause (x) and (z) that the Collateral Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent that the Assignor might have done. Without notice to or assent by the Assignor, the Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses (including attorneys' fees) of collection, whether incurred by the Assignor or the Collateral Agent, shall be borne by the Assignor. 3.4. MODIFICATION OF TERMS; ETC. The Assignor shall not rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or modify any term Page 12 thereof or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent, except as permitted by Section 3.5 and except, so long as none of the conditions described in the first sentence of Section 1.1(c) shall occur and be continuing, such modifications, adjustments and sales effected by the Assignor in the ordinary course of business consistent with past practice. The Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.5. COLLECTION. The Assignor shall endeavor to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, at any time when payments in respect of Receivables and Contracts may be made to the Assignor in accordance with the second sentence of Section 1.1(c) of this Agreement, the Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which the Assignor finds appropriate in accordance with sound business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services. The reasonable costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by the Assignor or the Collateral Agent, shall be borne by the Assignor. 3.6. INSTRUMENTS. If the Assignor owns or acquires any Instrument constituting Collateral in an amount equal to or greater than $1,000,000, the Assignor will within ten days notify the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver Page 13 such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. Upon the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c) of this Agreement, if any of the Receivables becomes evidenced by an Instrument, the Assignor will within 10 days notify the Collateral Agent thereof, and upon written request by the Collateral Agent promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. 3.7. FURTHER ACTIONS. The Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS 4.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. The Assignor represents and warrants that it is the true and lawful exclusive owner of the Marks listed in Annex F hereto and that Annex F includes all the Marks that are registered or applied for and all material unregistered Marks that the Assignor now owns in connection with its business. The Assignor represents and warrants that it is the sole and exclusive beneficial owner of each Mark. The Assignor represents and warrants that it owns or is licensed to use all Marks that it uses. The Assignor represents and warrants that it is the owner of record of all registrations and applications listed in Annex E hereto and that said registrations are valid, subsisting, have not been cancelled and that the Assignor is not aware of any third-party claim pending, threatened or supportable that any of said registrations is invalid or unenforceable. The Assignor represents and warrants that all registration and Page 14 maintenance fees that have become due and payable in respect of any Mark have been paid and, to the best knowledge of the assignor, no act has been done or omitted to be done by the Assignor to entitle any governmental authority to cancel, forfeit, modify or hold abandoned any of the Marks. The Assignor represents and warrants that there are no pending or threatened suits, claims, oppositions, or other challenges by any person against the ownership by the Assignor of any of the Marks, and the conduct of the business of the Assignor and its use of any Mark in connection therewith does not infringe upon or otherwise violate any right of any third party. The Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. 4.2. LICENSES AND ASSIGNMENTS. The Assignor represents and warrants that Annex G sets forth a complete and accurate list of all license agreements and other agreements pursuant to which the Assignor has granted to any third party any right in and to any of the Marks. Other than the license agreements listed on Annex G hereto and any extensions or renewals thereof, the Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent. 4.3. INFRINGEMENTS. The Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who, in any material respect, may be infringing or otherwise violating any of the Assignor's rights in and to any Mark, or with respect to any party claiming that the Assignor's use of any Mark violates or infringes upon, in any material respect, any right of that party. The Assignor further agrees, unless otherwise agreed by the Collateral Agent, diligently to prosecute any Person infringing, in any material respect, any material Mark. Page 15 4.4. PRESERVATION OF MARKS. The Assignor agrees to use each of its material Marks in interstate or foreign commerce in each and every trademark class of goods and/or services in which such Mark is currently used during the time in which this Agreement is in effect, sufficiently to preserve such Marks as trademarks or service marks under the laws of the United States, any State thereof or any political subdivision thereof. The Assignor agrees that (i) it shall maintain at a level at least in accordance with past practice the quality of products and services offered under the Marks, (ii) it shall employ such Marks as are registered with the notice of Federal or other registration as the case may be, (iii) it shall not use any Mark or otherwise operate its business in violation of any third party's rights, and (iv) it shall not (and shall not permit any licensee or sublicensee to) do any act or omit to do any act that could result in cancellation, forfeiture, modification or abandonment of any Mark. 4.5. MAINTENANCE OF REGISTRATION. The Assignor shall, at its own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. Sections 1051 ET SEQ. to maintain trademark registration (or, with respect to applications, to make best efforts to have a registration issue therefrom), including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its material Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith and shall not abandon any registration or application for any Mark prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent. The Assignor agrees to notify the Collateral Agent six (6) months prior to the dates on which the affidavits of use or the applications for renewal registration are due with respect to any material Mark, that the affidavits of use or the renewal has been filed with the appropriate agency and is being processed thereby. 4.6. FUTURE REGISTERED MARKS. If any Mark registration issues hereafter to the Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office or any similar office or any similar office or agency of any jurisdiction, or if the Assignor acquires any Marks within thirty (30) Page 16 days of receipt of such certificate or the effectiveness of the acquisition thereof, as appropriate, the Assignor shall deliver a copy of such certificate or sufficient documents to evidence such acquisition, and a grant of security in such mark to the Collateral Agent, confirming the grant thereof hereunder substantially in the form of Exhibit 1 hereto or, for registrations and applications for registration of any Mark in any foreign jurisdiction, such form as is acceptable to the Collateral Agent for use in such jurisdiction. 4.7. REMEDIES. If there shall occur and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, the Collateral Agent may, by written notice to the Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of the Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of the Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of the Assignor in connection with which the Marks have been used; and (iii) direct the Assignor to refrain, in which event the Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, change the Assignor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. Page 17 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS 5.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. The Assignor represents and warrants that it is the true and lawful exclusive owner of all rights in the Patents listed in Annex H hereto and in the Copyrights listed in Annex I hereto, that said Patents include all the Patents that the Assignor now owns and that said Copyrights constitute all the Copyrights registered with the United States Copyright Office or any similar office or agency of any jurisdiction and applications for copyright registration that the Assignor now owns and all material unregistered copyrights, including without limitation copyrights in computer software, that the Assignor now owns. The Assignor represents and warrants that it owns or is licensed to practice under all Patents and Copyrights that it now uses or practices under. The Assignor represents and warrants that all registration and maintenance fees that have become due and payable in respect of any Patent or Copyright have been paid and no act has been done or omitted to be done by the Assignor to impair or dedicate to the public, or to otherwise entitle any governmental authority to cancel, forfeit, modify or hold abandoned any of the Patents or Copyrights. The Assignor represents and warrants that there are no pending or threatened suits, claims, oppositions, or other challenges by any person against the ownership by the Assignor of any of the Patents or Copyrights, and the conduct of the present or contemplated business of the Assignor and its use of any Patent or Copyright in connection therewith does not infringe upon or otherwise violate any right of any third party. The Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, any document which may be required by the United States Patent and Trademark Office or the United States Copyright Office in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and record the same. Page 18 5.2. LICENSES AND ASSIGNMENTS. The Assignor represents and warrants that Annex G sets forth a complete and accurate list of all license agreements and other agreements pursuant to which the Assignor has granted to any third party any right in and to any of the Patents or Copyrights. Other than the license agreements listed on Annex G hereto and any extensions or renewals thereof, the Assignor hereby agrees not to divest itself of any right under any Patent or Copyright absent prior written approval of the Collateral Agent. 5.3. INFRINGEMENTS. The Assignor agrees that it shall not use its Patents or Copyrights or otherwise operate its business in violation of any third party's rights. The Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to the Assignor with respect to any material infringement or other material violation of the Assignor's rights in any Patent or Copyright, or with respect to any claim that practice of any Patent or Copyright materially violates any right of any party. The Assignor further agrees, absent direction of the Collateral Agent to the contrary, diligently to prosecute any Person infringing, in any material respect, any significant Patent or Copyright. 5.4. MAINTENANCE OF PATENTS AND COPYRIGHTS. At its own expense, the Assignor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. Section 41 to maintain in force rights under each Patent. The Assignor agrees that it shall not (and shall not permit any licensee or sublicensee to) do or omit any act that could result in the impairment, cancellation, forfeiture, modification, abandonment, or dedication to the public of any Patent or Copyright. 5.5. PROSECUTION OF PATENT APPLICATION. At its own expense, the Assignor shall diligently prosecute all applications for Patents listed in Annex H hereto and all applications for Copyright registration listed in Annex I hereto and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent. 5.6. OTHER PATENTS AND COPYRIGHTS. Within 30 days of acquisition, issuance or registration of a Patent Page 19 or Copyright, or of filing of an application for a United States Patent or Copyright, the Assignor shall deliver to the Collateral Agent a copy of said Patent or Copyright or such application, as the case may be, with a grant of security as to such Patent or Copyright, as the case may be, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially in the form of Exhibit 2 hereto (for Patents) or Exhibit 3 hereto (for Copyrights), as appropriate, or, for any Patents and Copyright registrations and applications for the foregoing in any foreign jurisdiction, such form as is acceptable to the Collateral Agent for use in such jurisdiction. 5.7. REMEDIES. If there shall occur and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, the Collateral Agent may by written notice to the Assignor, take any or all of the following actions: (i) declare the entire right, title, and interest of the Assignor in each of the Patents and Copyrights vested, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct the Assignor to refrain, in which event the Assignor shall refrain, from practicing the Patents and Copyrights directly or indirectly, and the Assignor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1. PROTECTION OF COLLATERAL AGENT'S SECURITY. The Assignor will do nothing to impair the rights of the Collateral Agent in the Collateral. The Assignor will at all times keep its Inventory and Equipment (including, Page 20 without limitation, the Vehicles) insured in favor of the Collateral Agent, at the Assignor's own expense to the extent and in the manner provided in the Credit Agreement; all policies or certificates (or certified copies thereof) with respect to such insurance (and any other insurance maintained by the Assignor) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee), (ii) shall state that such insurance policies shall not be cancelled or revised without 30 days' prior written notice thereof by the insurer to the Collateral Agent (but only 10 days' prior written notice of cancellation for failure to make payments under such policies), (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors and (iv) shall be deposited with the Collateral Agent. If the Assignor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if the Assignor shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and the Assignor agrees to reimburse the Collateral Agent for all costs and expenses of procuring such insurance. The Collateral Agent may apply any proceeds of such insurance in accordance with Section 7.4. The Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of the Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to the Assignor. 6.2. WAREHOUSE RECEIPTS NON-NEGOTIABLE. The Assignor agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law). 6.3. FURTHER ACTIONS. The Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time Page 21 such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title (including, without limitation, original certificates of title, and other registration with respect to the Vehicles), vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 6.4. FINANCING STATEMENTS. The Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. The Assignor will pay any applicable filing fees, recordation taxes and related expenses. The Assignor authorizes the Collateral Agent to file any such financing statements without the signature of the Assignor where permitted by law. ARTICLE VII REMEDIES UPON OCCURRENCE OF SPECIFIED EVENTS 7.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT. The Assignor agrees that, if there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all Page 22 rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and may also: (a) personally, or by agents or attorneys, immediately retake possession of the Collateral or any part thereof, from the Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Assignor's premises or, to the extent that the Assignor has a right to consent thereto, such other Person's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of the Assignor; and (b) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent and may exercise any and all remedies of the Assignor in respect of such Collateral; and (c) withdraw all monies, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4; and (d) sell, assign or otherwise liquidate, or direct the Assignor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; and (e) take possession of the Collateral or any part thereof, by directing the Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event the Assignor shall at its own expense: (i) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, and Page 23 (ii) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2, and (iii) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and (f) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine; it being understood that the Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by the Assignor of said obligation. 7.2. REMEDIES; DISPOSITION OF THE COLLATERAL. Any Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' written notice to the Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right Page 24 of the Assignor or any nominee of the Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the City of New York. To the extent permitted by any such requirement of law, the Collateral Agent and the Secured Creditors may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to the Assignor. In the payment of the purchase price of the Collateral, the purchaser shall be entitled to have credit on account of the purchase price thereof of amounts owing to such purchaser on account of any of the Obligations which would be payable to it in accordance with the terms and provisions of the Credit Agreement, and any such purchaser may deliver notes, claims for interest, or claims for other payment with respect to such Obligations in lieu of cash up to the amount which would, upon distribution of the net proceeds of such sale, be payable thereon. Such notes, if the amount payable hereunder shall be less than the amount due thereon, shall be returned to the holder thereof after being appropriately stamped to show partial payment. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the Assignor as hereinabove specified, the Collateral Agent need give the Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. The Assignor agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make such sale or sales of all or any portion of the Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Assignor's expense. Page 25 7.3. WAIVER OF CLAIMS. Except as otherwise provided in this Agreement, THE ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and the Assignor hereby further waives, to the extent permitted by law: (a) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (b) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (c) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and the Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against the Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the Assignor. 7.4. APPLICATION OF PROCEEDS. (a) All moneys collected by the Collateral Agent (or, to the extent a Mortgage to which the Borrower is a party requires proceeds of Collateral under such agreement to be applied in Page 26 accordance with the provisions of this Agreement, the Mortgagee under such other agreement) upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied, subject to the following clause (b), as follows: (i) first, to the payment of all amounts owing the Collateral Agent of the type described in clauses (iii) and (iv) of the definition of "Obligations"; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations (as defined below) shall be paid to the Secured Creditors as provided in Section 7.4(f), with each Secured Creditor receiving an amount equal to such outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share (as defined below) of the amount remaining to be distributed; (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations (as defined below) shall be paid to the Secured Creditors as provided in Section 7.4(f), with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), inclusive, and following the termination of this Agreement pursuant to Section 11.9(a) hereof, to the Assignor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement (w) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Primary Obligations or Secondary Page 27 Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (x) "Primary Obligations" shall mean (i) in the case of the Credit Agreement Obligations, all principal of, and interest on, all Loans under the Credit Agreement, all Unpaid Drawings theretofore made (together with all interest accrued thereon), and the aggregate Stated Amounts of all Letters of Credit issued (or deemed issued) under the Credit Agreement, and all regularly accruing fees owing by the Assignor under the Credit Agreement, and (ii) in the case of the Interest Rate Protection Obligations, all amounts due under the Interest Rate Protection Agreements (other than indemnities, fees (including, without limitation, attorneys' fees) and similar obligations and liabilities) and (y) "Secondary Obligations" shall mean all Obligations other than Primary Obligations. (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall be applied (for purposes of making determinations under this Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) Each of the Secured Creditors agrees and acknowledges that if the Bank Creditors are to receive a distribution on account of undrawn amounts with respect to Letters of Credit issued (or deemed issued) under the Credit Agreement (which shall only occur after all outstanding Loans and Unpaid Drawings with respect to such Letters of Credit have been paid in full), such amounts Page 28 shall be paid to the Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Bank Creditors, as cash security for the repayment of Obligations owing to the Bank Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be returned by the Agent to the Collateral Agent for distribution in accordance with Section 7.4(a) hereof. (e) All payments required to be made hereunder shall be made to the respective Representative of the Secured Creditors entitled to such payments. (f) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon the respective Representatives for a determination (which each Representative for any Secured Creditors and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Bank Creditors or the Interest Rate Protection Creditors, as the case may be. Unless it has actual knowledge (including by way of written notice from a Bank Creditor or an Interest Rate Protection Creditor) to the contrary, each Representative, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no Secondary Obligations are outstanding. Unless it has actual knowledge (including by way of written notice from an Interest Rate Protection Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection Agreements are in existence. (g) It is understood and agreed that the Assignor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the sums referred to in clauses (i) through (iii), inclusive, of Section 7.4(a). Page 29 7.5. REMEDIES CUMULATIVE. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, the Interest Rate Protection Agreements or the other Credit Documents or now or hereafter existing at law or in equity, or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on the Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6. DISCONTINUANCE OF PROCEEDINGS. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. Page 30 ARTICLE VIII INDEMNITY 8.1. INDEMNITY. (a) The Assignor agrees to indemnify, reimburse and hold the Collateral Agent, each Secured Creditor and their respective successors, assigns, employees, agents and servants (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any Interest Rate Protection Agreement, any other Credit Document or any other document executed in connection herewith and therewith or in any other way connected with the administration of the transactions contemplated hereby and thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), any contract claim or, to the maximum extent permitted under applicable law, the violation of the laws of any country, state or other governmental body or unit, or any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage); provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for expenses to the extent caused by the gross negligence or willful misconduct of such Indemnitee. The Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the Page 31 Assignor of any such assertion to which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a), the Assignor agrees to pay, or reimburse the Collateral Agent for (if the Collateral Agent shall have incurred fees, costs or expenses because the Assignor shall have failed to comply with its obligations under this Agreement, any other Credit Document or any Interest Rate Protection Agreement, any and all fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) Without limiting the application of Section 8.1(a) or (b), the Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any misrepresentation by the Assignor in this Agreement, any Interest Rate Protection Agreement, any other Credit Document, or in any writing contemplated by or made or delivered pursuant to or in connection with this Agreement, any Interest Rate Protection Agreement, or any other Credit Document. (d) If and to the extent that the obligations of the Assignor under this Section 8.1 are unenforceable for any reason, the Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement Page 32 shall constitute Obligations secured by the Collateral. The indemnity obligations of the Assignor contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all the Notes issued under the Credit Agreement, the termination of all Interest Rate Protection Agreements and the payment of all other Obligations and notwithstanding the discharge thereof. ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. Except as otherwise defined herein, including in the recital paragraphs, capitalized terms used herein and defined in the Credit Agreement shall be used herein as so defined. "Acceleration Event" shall mean the acceleration prior to the stated final maturity, or the failure to pay at the stated final maturity, of Obligations representing principal of, or interest on, extensions of credit (including without limitation all Letter of Credit Outstandings) pursuant to the Credit Agreement or any Interest Rate Protection Agreement, PROVIDED that in each case, any such Acceleration Event shall cease to exist upon payment in full of the Obligations so accelerated or not paid. "Agent" shall have the meaning provided in the second WHEREAS clause of this Agreement. "Agreement" shall mean this Borrower Security Agreement including all schedules, annexes and exhibits hereto and any future filings of any of the exhibits hereto, in each case as the same may be modified, supplemented or amended from time to time in accordance with its terms (it being understood that the foregoing collectively consititute the "Borrower Security Agreement" referred to in the Credit Agreement). "Assignor" shall have the meaning provided in the first paragraph of this Agreement. Page 33 "Bank Creditor" shall have the meaning provided in the first paragraph of this Agreement. "Bankruptcy Default" shall mean any Default or Event of Default with respect to the Assignor pursuant to Section 9.5 of the Credit Agreement. "Banks" shall have the meaning provided in the second WHEREAS clause of this Agreement. "Cash Collateral Account" shall mean a non-interest bearing cash collateral account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditors. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Class" shall have the meaning provided in Section 11.2 of this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of the Assignor (including, without limitation, all rights to payment) under each Contract. "Contracts" shall mean all contracts, licenses and other agreements between the Assignor and one or more additional parties as such Contract may be amended, modified or supplemented from time to time. "Copyrights" shall mean any copyright now held or hereafter acquired by the Assignor and all registrations and applications to register the same in the United States Copyright Office or any similar office or agency of any other jurisdiction, and all renewals thereof, now held or hereafter acquired or made by the Assignor. "Credit Agreement" shall have the meaning provided in the second WHEREAS clause of this Agreement. Page 34 "Credit Agreement Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Assignor and, in any event, shall include, but shall not be limited to, the Vehicles, all machinery, all manufacturing, distributing, selling, data processing and office equipment, all computers, all furniture, furnishings, movable trade fixtures and vehicles now or hereafter owned by the Assignor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Event of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement and shall in any event, without limitation, include any payment default on any of the Obligations after the expiration of any applicable grace period. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York and shall in any event include all of the Assignor's claims, rights, powers, privileges, authority, options, security interests, liens and remedies under any partnership agreement to which the Assignor is a party or with respect to any partnership of which the Assignor is a partner. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. Page 35 "Indemnitee" shall have the meaning provided in Section 8.1 of this Agreement. "Instruments" shall mean all notes, drafts, stocks, bonds and debt and equity securities, whether or not certificated, and warrants, options, puts and other rights to acquire or otherwise relating to the same and all other writings which evidence a right to payment for money, including, in any event, and without limitation, all "instruments," "certificated securities" or "uncertificated securities" each as defined the Uniform Commercial Code as in effect on the date hereof in the State of New York and all payments thereunder and instruments and other property from time to time delivered in respect thereof or in exchange therefor, together with all security pledged, assigned, hypothecated, granted or held to secure the foregoing. "Interest Rate Protection Agreements" shall have the meaning provided in the first paragraph of this Agreement. "Interest Rate Protection Creditors" shall have the meaning provided in the first paragraph of this Agreement. "Interest Rate Protection Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production -- from raw materials through work- in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from the Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Assignor. Page 36 "Marks" shall mean any trademarks and service marks now held or hereafter acquired by the Assignor, which are registered in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any foreign jurisdiction or any political subdivision thereof and any renewal or application for such trademarks and service marks now held or hereafter acquired or made by the Assignor, as well as any unregistered trademarks, service marks, logos, designs, trade names, trade dress, company names, business names, fictitious business names and other business identifiers or similar indications of source or origin now held or hereafter acquired by the Assignor. "Notified Acceleration Event" shall mean any Acceleration Event with respect to which the Required Banks have given written notice to the Collateral Agent that a "Notified Acceleration Event" exists, PROVIDED that such written notice may only be given if such Acceleration Event is continuing and, PROVIDED FURTHER that any such Notified Acceleration Event shall cease to exist once there is no longer any Acceleration Event in existence. "Obligations" shall mean (i) (x) the principal of and interest on the Notes issued, and Loans made, under the Credit Agreement, and all reimbursement obligations and Unpaid Drawings with respect to the Letters of Credit under the Credit Agreement and (y) all other obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Assignor to the Bank Creditors now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the due performance and compliance by the Assignor with all of the terms, conditions and agreements contained in the Credit Agreement (all such principal, interest, obligations and liabilities, the "Credit Agreement Obligations"); (ii) all obligations and liabilities owing by the Assignor to the Interest Rate Protection Creditors under, or with respect to, any Interest Rate Protection Agreement, whether such Interest Rate Protection Agreement is now in existence or hereafter arising, and the due performance and compliance by the Assignor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (ii), the "Interest Rate Protection Obligations"); (iii) any and all sums advanced by the Collateral Agent in order to preserve the Page 37 Collateral or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Assignor referred to in clauses (i), (ii) and (iii), after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement. It is acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. "Patents" shall mean any United States or foreign patent and all reissues, divisions, continuations, continuations-in-part, renewals and extensions thereof now held or hereafter made or acquired by the Assignor, as well as any application for a United States patent now held or hereafter made or acquired by the Assignor, and all inventions and improvements described and claimed in any of the foregoing. "Permitted Filings" shall have the meaning provided in Section 2.1 of this Agreement. "Pledged Securities" shall have the meaning provided in the Borrower Pledge Agreement. "Primary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this Agreement. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or the Assignor from time to time with respect to any of the Collateral, Page 38 (ii) any and all payments (in any form whatsoever) made or due and payable to the Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof, now or hereafter owned by the Assignor and, in any event, shall include, but shall not be limited to, all of the Assignor's rights to payment for goods sold or leased or services performed by the Assignor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by the Assignor to secure the foregoing, (b) all of the Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto, and (h) all other writings related in any way to the foregoing; PROVIDED that "Receivables" shall not include any Pledged Note or other promissory note not required to be pledged pursuant to the Borrower Pledge Agreement. "Representative" shall mean (x) for the Bank Creditors, the Agent under the Credit Agreement and (y) for the Interest Rate Protection Creditors, the Representative for the Interest Rate Protection Creditors or, in the absence of such a Representative, the Interest Rate Protection Creditors. Page 39 "Required Creditors" shall mean the requisite percentage of Secured Creditors which are needed to take actions with respect to a given Class of Obligations, I.E., whether the Required Banks or the Required Interest Rate Protection Creditors. "Required Interest Rate Protection Creditors" shall mean the holders of 51% of all Obligations outstanding from time to time under the Interest Rate Protection Agreements, determined in such reasonable fashion as is acceptable to the Collateral Agent. "Secondary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Secured Creditors" shall have the meaning provided in the first paragraph of this Agreement. "Termination Date" shall have the meaning provided in Section 11.9 of this Agreement. "Vehicles" shall have the meaning provided in Section 2.6 of this Agreement. ARTICLE X THE COLLATERAL AGENT 10.1. APPOINTMENT. The Secured Creditors, by their acceptance of the benefits of this Agreement hereby irrevocably designate Bankers Trust Company, as Collateral Agent, to act as specified herein. Each Secured Creditor hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note, and by the acceptance of the benefits of this Agreement shall be deemed irrevocably to authorize, the Collateral Agent to take such action on its behalf under the provisions of this Agreement and any other instruments and agreements referred to herein and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder or thereunder by or through its authorized agents or employees. Page 40 10.2. NATURE OF DUTIES. (a) The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have by reason of this Agreement, any other Credit Document or any Interest Rate Protection Agreement a fiduciary relationship in respect of any Secured Creditor; and nothing in this Agreement, any other Credit Document or any Interest Rate Protection Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement except as expressly set forth herein. (b) The Collateral Agent shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of liens upon the Collateral or otherwise as to the maintenance of the Collateral. (c) The Collateral Agent shall not be required to ascertain or inquire as to the performance by the Assignor of any of the covenants or agreements contained in this Agreement, any other Credit Document or any Interest Rate Protection Agreement. (d) The Collateral Agent shall be under no obligation or duty to take any action under this Agreement or any Credit Document if taking such action (i) would subject the Collateral Agent to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Collateral Agent to qualify to do business in any jurisdiction where it is not then so qualified, unless the Collateral Agent receives security or indemnity satisfactory to it against such tax (or equivalent liability), or any liability resulting from such qualification, in each case as results from the taking of such action under this Agreement or (iii) would subject the Collateral Agent to IN PERSONAM jurisdiction in any locations where it is not then so subject. (e) Notwithstanding any other provision of this Agreement, neither the Collateral Agent nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance Page 41 with this Agreement except for its own gross negligence or willful misconduct. 10.3. LACK OF RELIANCE ON THE COLLATERAL AGENT. Independently and without reliance upon the Collateral Agent, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Assignor and its Subsidiaries in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Assignor and its Subsidiaries, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any Notes or at any time or times thereafter. The Collateral Agent shall not be responsible in any manner whatsoever to any Secured Creditor for the correctness of any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or the security interests granted hereunder or the financial condition of the Assignor or any Subsidiary of the Assignor or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, or the financial condition of the Assignor or any Subsidiary of the Assignor, or the existence or possible existence of any Default or Event of Default. The Collateral Agent makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of the Assignor thereto or as to the security afforded by this Agreement. 10.4. CERTAIN RIGHTS OF THE COLLATERAL AGENT. (a) No Secured Creditor shall have the right to cause the Collateral Agent to take any action with respect to the Collateral, with only the Required Banks having the right to direct the Collateral Agent to take any such action. If the Collateral Agent shall request instructions from the Required Banks, with respect to any act or action Page 42 (including failure to act) in connection with this Agreement, the Collateral Agent shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Banks and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Collateral Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Banks. (b) The Collateral Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Secured Creditors, unless such Secured Creditors shall have offered to the Collateral Agent reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. 10.5. RELIANCE. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining to this Agreement and the other Security Documents and its duties thereunder and hereunder, upon advice of counsel selected by it. 10.6. INDEMNIFICATION. To the extent the Collateral Agent is not reimbursed and indemnified by the Assignor under this Agreement, the Secured Creditors will reimburse and indemnify the Collateral Agent, in proportion to their respective outstanding principal amounts (including, for this purpose, the stated amount of outstanding letters of credit and any unreimbursed drawings in respect of letters of credit, as well as any unpaid Primary Obligations in respect of Interest Rate Protection Agreements, as outstanding principal) of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever Page 43 which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder, or in any way relating to or arising out of its actions as Collateral Agent in respect of this Agreement except for those resulting solely from the Collateral Agent's own gross negligence or willful misconduct. The indemnities set forth in this Article X shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Collateral Agent is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of this Agreement. The indemnities set forth in this Article X are in addition to any indemnities provided by the Banks to the Collateral Agent pursuant to the Credit Agreement, with the effect being that the Banks shall be responsible for indemnifying the Collateral Agent to the extent the Collateral Agent does not receive payments pursuant to this Section 10.6 from the Secured Creditors (although in such event, and upon the payment in full of all such amounts owing to the Collateral Agent, the respective Banks who paid same shall be subrogated to the rights of the Collateral Agent to receive payment from the Secured Creditors). 10.7. THE COLLATERAL AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its obligations as a lender under the Credit Agreement and any other Credit Documents to which the Collateral Agent is a party, and to act as agent under one or more of such Credit Documents, the Collateral Agent shall have the rights and powers specified therein and herein for a "Bank" or an "Agent", and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Banks," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Collateral Agent in its individual capacity. The Collateral Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Assignor or any Affiliate or Subsidiary of the Assignor as if it were not performing the duties specified herein or in the other Credit Documents, and may accept fees and other consideration from the Assignor for Page 44 services in connection with the Credit Agreement, the other Credit Documents and otherwise without having to account for the same to the Secured Creditors. 10.8. HOLDERS. The Collateral Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Collateral Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or Note issued in exchange therefor. 10.9. RESIGNATION BY THE COLLATERAL AGENT. (a) The Collateral Agent may resign from the performance of all of its functions and duties under this Agreement at any time by giving 20 Business Days' prior written notice to the Assignor and the Secured Creditors. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clause (b), (c) or (d) below. (b) If a successor Collateral Agent shall not have been appointed within said 20 Business Day period by the Required Banks, the Collateral Agent, with the consent of the Assignor, which consent shall not be unreasonably withheld, shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder or thereunder until such time, if any, as the Required Banks appoint a successor Collateral Agent as provided above. (c) If no successor Collateral Agent has been appointed pursuant to clause (b) above by the 20th Business Day after the date of such notice of resignation was given by the Collateral Agent, as a result of a failure by the Assignor to consent to the appointment of such a successor Collateral Agent, the Required Banks shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder or thereunder until such time, if any, as the Required Banks appoint a successor Collateral Agent as provided above. (d) If no successor Collateral Agent is appointed pursuant to clauses (b) and (c) above within said Page 45 20 Business Day period, the resignation of the Collateral Agent shall become effective and the duties of the Collateral Agent shall be performed by the Required Banks. 10.10. FEES AND EXPENSES OF COLLATERAL AGENT. (a) The Assignor (by its execution and delivery hereof) hereby agrees that it shall pay to Bankers Trust Company as the original Collateral Agent, such fees as have been separately agreed to in writing with Bankers Trust Company for acting as Agent and as Collateral Agent hereunder. In the event a successor Collateral Agent is at any time appointed pursuant to the preceding Section 10.9, the Assignor hereby agrees to pay such successor Collateral Agent such fees for acting as such as would customarily be charged by such Collateral Agent for acting in such capacity in similar situations. (b) In addition, the Assignor agrees to pay all reasonable out-of- pocket costs and expenses of the Collateral Agent in connection with this Agreement and any actions taken by the Collateral Agent hereunder, and agrees to pay all costs and expenses of the Collateral Agent in connection with the enforcement of this Agreement and the documents and instruments referred to herein (including, without limitation, reasonable fees and disbursements of counsel for the Collateral Agent). ARTICLE XI MISCELLANEOUS 11.1. NOTICES. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed as follows: (a) if to the Assignor, at: The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-6799 Attention: Robert Terrence Galvin Page 46 (b) if to the Collateral Agent: Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Attention: Mary Kay Coyle (c) if to any Bank Creditor, either (x) to the Agent, at the address of the Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Interest Rate Protection Creditor, either (x) to the Representative for the Interest Rate Protection Creditors, at such address as such Representative may have provided to the Assignor and the Collateral Agent from time to time, or (y) directly to the Interest Rate Protection Creditors at such address as the Interest Rate Protection Creditors shall have specified in writing to the Assignor and the Collateral Agent. 11.2. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Assignor and the Collateral Agent with the consent of the Required Banks, PROVIDED, HOWEVER, that no modifications shall be made to Section 7.4(a) of this Agreement without the consent of each Secured Creditor adversely affected thereby; and PROVIDED FURTHER that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Required Creditors of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, I.E., whether (x) the Bank Creditors as holders of the Credit Agreement Obligations or (y) the Interest Rate Protection Creditors as the holders of the Interest Rate Protection Obligations. 11.3. OBLIGATIONS ABSOLUTE. The obligations of the Assignor hereunder shall be absolute and unconditional in accordance with its terms and shall remain in full force and effect without regard to, and shall not be impaired, released, discharged, terminated or otherwise affected by Page 47 any circumstance or occurrence whatsoever, including, without limitation: (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement, any other Credit Document, or any Interest Rate Protection Agreement except as specifically set forth in a waiver granted pursuant to Section 11.2 hereof; (c) any furnishing of any additional security to the Collateral Agent, the other Secured Creditors or their assignees or any acceptance thereof or any release of any security by the Collateral Agent, the other Secured Creditors or their assignees; (d) any lack of validity or enforceability of the Credit Agreement, any Note, any Interest Rate Protection Agreement, any other Credit Document or any other documents, instruments or agreements referred to therein or any assignment or transfer of any thereof; (e) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; (f) any amendment, indulgence, renewal, extension, modification or addition, consent or supplement to or deletion from any Credit Document or any Interest Rate Protection Agreement or any security for any of the Obligations; whether or not the Assignor shall have notice or knowledge of any of the foregoing or (g) any other circumstance which might otherwise constitute a defense available to, or a discharge of the Assignor. The rights and remedies of the Collateral Agent herein provided are cumulative and not exclusive of any rights or remedies which the Collateral Agent would otherwise have. 11.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and each Secured Creditor and their respective successors and assigns, provided that the Assignor may not transfer or assign any or all of its rights or obligations hereunder without the written consent of the Required Banks. All agreements, statements, representations and warranties made by the Assignor herein or in any certificate or other instrument delivered by the Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall Page 48 survive the execution and delivery of this Agreement, the other Credit Documents and the Interest Rate Protection Agreements regardless of any investigation made by the Secured Creditors or on their behalf. 11.5. HEADINGS DESCRIPTIVE. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 11.6. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 11.8. ASSIGNOR'S DUTIES. It is expressly agreed, anything herein contained to the contrary notwithstanding, that the Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of the Assignor under or with respect to any Collateral. 11.9. TERMINATION; RELEASE. (a) After the Termination Date, this Agreement shall terminate and the Collateral Agent, at the request and expense of the Assignor, will execute and deliver to the Assignor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Assignor (without recourse and without any representation or warranty) such of the Collateral of the Assignor as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Page 49 Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment has been terminated, no Note remains outstanding, all Letters of Credit have been terminated and all Credit Agreement Obligations then owing by the Assignor have been paid in full. (b) It is expressly acknowledged and agreed that all or a portion of the Collateral shall be released from the Liens and security interests created hereunder upon any sale thereof from time to time to the extent permitted by, and in accordance with the terms of, the Credit Agreement. Upon any sale of the type described in the preceding sentence, the Collateral Agent shall, at the request and expense of the Assignor, and without the further consent of, or liability to, any Secured Creditor, release such Collateral and execute and deliver to the Assignor a proper instrument or instruments acknowledging the release of such Collateral from this Agreement, and will duly assign, transfer and deliver to the Assignor (without recourse and without any representation or warranty) the Collateral being sold or released as described above. (c) At any time that the Assignor desires that the Collateral Agent take any action to acknowledge or give effect to any release of Collateral pursuant to the foregoing Section 11.9(a) or (b), it shall deliver to the Collateral Agent a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to Section 11.9(a) or (b). If requested by the Collateral Agent (although the Collateral Agent shall have no obligation to make any such request), the Assignor shall furnish appropriate legal opinions (from counsel acceptable to the Collateral Agent) to the effect set forth in the immediately preceding sentence. The Collateral Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this Section 11.9. Upon any release of Collateral pursuant to Section 11.9(a) or (b), none of the Secured Creditors shall have any continuing right or interest in such Collateral, or the proceeds thereof. 11.10. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when Page 50 so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with Assignor and the Collateral Agent. Page 51 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ADDRESSES 201 Willowbrook Boulevard THE GRAND UNION COMPANY, Wayne, New Jersey 07470 as Assignor Attn: Robert Terrence Galvin By /s/ Francis E. Nicastro ----------------------------- Name: Francis E. Nicastro Title: Vice President and Treasurer One Bankers Trust Plaza BANKERS TRUST COMPANY, New York, New York 10006 as Collateral Agent Attn: Mary Kay Coyle By /s/ Mary K. Coyle ------------------------------ Name: Mary Kay Coyle Title: Vice President ANNEX A to BORROWER SECURITY AGREEMENT SCHEDULE OF PERMITTED FILINGS
SECURED ORIGINAL DESCRIPTION LOCATION PARTY/IES NUMBER FILE DATE OF COLLATERAL PERMITTED - - -------- --------- ------ --------- ------------- --------- SEE ATTACHED
ANNEX B to BORROWER SECURITY AGREEMENT SCHEDULE OF RECORD LOCATIONS
LOCATION COUNTY -------- ------ THE GRAND UNION COMPANY Passaic 201 Willowbrook Blvd. Wayne, NJ 07407 THE GRAND UNION COMPANY Saratoga 150 Hudson River Road Waterford, NY 12188 THE GRAND UNION COMPANY Westchester 333 N. Bedford Road Mt. Kisco, NY 10549 THE GRAND UNION COMPANY Orange 7 Governor Drive Newburgh, NY 12550 THE GRAND UNION COMPANY - Orange MONTGOMERY WAREHOUSE 124 Bracken Road Montgomery, NY 12549 BIG STAR Fulton 2251 N. Sylvan Road Eastpoint, GA 30344
ANNEX C to BORROWER SECURITY AGREEMENT SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS SEE ATTACHED ANNEX D to BORROWER SECURITY AGREEMENT SCHEDULE OF VEHICLES
QUANTITY OF CERTIFICATE STATE OF TYPE OF VEHICLE VEHICLES OF TITLE REGISTRATION --------------- ----------- ----------- ------------ See Attached
ANNEX E to BORROWER SECURITY AGREEMENT SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES Grand Union Insurance Services Laurent ANNEX F to BORROWER SECURITY AGREEMENT SCHEDULE OF MARKS TRADEMARKS CURRENTLY IN USE
MARK JURISDICTION REGISTRATION # STATUS REG. DATE - - ---- ------------ -------------- ------ --------- Aisle of Values US supplemental register Basics Food Warehouse US 1159551 not in use to be abandoned 6/30/81 The Big Freezer US 1847154 valid in use 7/26/94 Big Gold Top US 1893249 valid in use 5/9/95 Clean, Fresh & Good US 1851804 valid in use 8/30/94 Colonial US 1035986 not in use 3/16/76 to be abandoned Colonial GA None not in use to be abandoned 3/24/50 Colonial and Design US 390269 not in use 9/16/41 to be abandoned Consumer Price Finder US 1653649 valid in use 8/13/91 Consumer Price Finder US 1326461 to be abandoned 3/19/85 supplemental register Dancers US 1191747 not in use to be abandoned 3/9/82 Date Line Dairy US 1891492 valid in use 4/25/95 Farm Charm US 961628 not in use 6/19/73 to be abandoned Farm Charm US 880973 not in use 11/18/69 to be abandoned Freshbake US 875718 not in use 8/26/69 to be abandoned Freshpak US 635293 not in use 10/02/56 to be abandoned Gold Label US 1031628 not in use 1/27/76 to be abandoned Grand Classics US 1866538 not in use 12/6/94 to be abandoned Grand Premium US App. #576481 pending Grand Rx US 927516 valid in use 1/18/72 Grand Savings Plus and Design US App. #454391 pending Grand Union Canada 189/48026 to be abandoned 6/17/83 Grand Union US 961583** see note 6/19/73 Grand Union US 872242** see note 7/1/69 Grand Union US 427406** see note 2/11/47 Grand Union US 64732** see note 8/20/07 Grand Union VT 2548 to be abandoned 12/9/85
ANNEX F Page 2
MARK JURISDICTION REGISTRATION # STATUS REG. DATE - - ---- ------------ -------------- ------ --------- Grand Union W. VA to be abandoned 8/5/65 Grand Union and Design US 1834134 valid in use 5/3/94 Grand Union and G Design US 817482 not in use 10/25/66 to be abandoned Grand Union Food Markets US 624620 not in use 4/3/56 & Design to be abandoned Grand Union G NH to be abandoned 6/13/75 Grand Union G and Design VT 4121 to be abandoned 6/21/75 Grand Union Design Only NY 0S11898 to be abandoned 2/22/90 Grand Union G (Design) US 909392 not in use 3/9/71 to be abandoned Grand Union G and Design US 817567 not in use to be abandoned 10/25/66 Grand Union Housemark US App. #424141 pending Grand Union Suntime US App. #562067 to be abandoned Grand Way W. VA to be abandoned 6/28/65 Grand-Way US 666060 not in use 8/19/58 to be abandoned Holland Hall US App. #437650 pending Homestead US 1683445 not in use to be abandoned 4/14/92 Laurent US 1613089 valid in use 9/11/90 Laurent and Design US 1354484 not in use 8/13/85 to be abandoned Nancy Lynn US 621415 not in use to be abandoned 2/14/56 Our Pride US 1053702 not in use to be abandoned 11/30/76 Penguin US 1536635 valid in use Penguin US 855169 valid in use Red Dot NJ SM1081*** valid in use 1/10/80 Red Dot CT 4569*** vallid in use 5/12/80 Red Dot Design US App. #415618 pending Red Dot Special US App. #415614 pending Red Gate US 696545 not in use to be abandoned 4/19/60 Rogers Gold Label and Design US 326008 not in use to be abandoned 7/9/35 Sugar & Spice US 859005 not in use to be abandoned 10/22/68 The Taste Place US 1854767 valid in use 9/20/94 Today's Catch US 1887313 valid in use 4/4/95 Ultra Trim US 1479798 valid in use 3/8/88 Ultra Trim NJ to be abandoned 7/30/87 USDA Choice A Cut Above US 1876769 valid in use 1/31/95
ANNEX F Page 3
MARK JURISDICTION REGISTRATION # STATUS REG. DATE - - ---- ------------ -------------- ------ --------- & Design Warehouse Buy US 1841076 valid in use 6/21/94 When You See The Dot, You US 1860129 valid in use 10/25/94 Save A Lot * The Company has certain common law rights in and to the Marks "Corner Deli", "Early Morn" and "Just Baked." However, there are no unregistered or unapplied for material trademarks. ** Will most likely not be renewed upon registration of housemark. *** Will not be renewed if registered with US Trademark Commission.
ANNEX G to BORROWER SECURITY AGREEMENT SCHEDULE OF LICENSE AGREEMENTS AND ASSIGNMENTS 1. Florida Supermarkets, Inc. t/a Grand Union Supermarkets of Virgin Islands, Inc. dated September 15, 1986 to use "Grand Union". 2. Food-A-Rama-GU, Inc., dated March 26, 1984 to use "Basics Food Warehouse". ANNEX H to BORROWER SECURITY AGREEMENT SCHEDULE OF PATENTS AND APPLICATIONS
PATENT NUMBER DATE ISSUED RECORD TITLE INVENTOR (APPLICATION) (APPLIED) STATUS OWNER - - ----- -------- ------------- ----------- ------ ------ NONE
ANNEX I to BORROWER SECURITY AGREEMENT SCHEDULE OF COPYRIGHTS AND APPLICATIONS
REG. NO. REG. DATE RECORD TITLE (APPLICATION) (FILING) STATUS OWNER - - ----- ------------- ---------- ------ ------ NONE
Exhibit 1 Amended and Restated BORROWER SECURITY AGREEMENT U.S. TRADEMARK SECURITY AGREEMENT TRADEMARK SECURITY AGREEMENT ("Agreement") dated as of __________________, 1995, is entered into between The Grand Union Company, a Delaware corporation ("Assignor") with principal offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-6799 and Bankers Trust Company, a New York corporation, as collateral agent, with principal offices at One Bankers Trust Plaza, New York, New York 10006 ("Collateral Agent"). Capitalized terms not otherwise defined herein have the meanings set forth in the Amended and Restated Borrower Security Agreement, dated as of June 15, 1995, among, INTER ALIA, Assignor and Collateral Agent ("Security Agreement"). WHEREAS, pursuant to the Security Agreement, Assignor is granting a security interest to the Collateral Agent for the benefit of itself and the Secured Creditors in certain collateral, including the Marks (as defined herein), NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Assignor and Collateral Agent hereby agree as follows: 1. GRANT OF SECURITY INTEREST (a) As security for the full and prompt payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations, the Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest in all of the right, title and interest of the Assignor in, to and under the U.S. trademarks, trademark registrations, and trademark applications (the "Marks") more particularly set forth on Schedule A attached hereto, together with the goodwill of the business symbolized by the Marks. (b) The security interest granted hereby is granted in conjunction with the security interest granted to the Collateral Agent under the Security Agreement. The rights and remedies of the Collateral Agent on behalf of itself and the other Secured Creditors with respect to the security interest granted hereby are in addition to those set forth in the Security Agreement and the other Credit Documents and those which are now or hereafter available to Collateral Agent on behalf of itself and the other Secured Creditors as a matter of law or equity. Each right, power and remedy of the Collateral Agent provided for herein, in the Security Agreement, in the other Credit Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power, or remedy provided for herein, and the exercise by Collateral Agent on behalf of itself and the other Secured Parties of any one or more of the rights, powers or remedies provided for in this Agreement, in the Security Agreement, in the other Credit Documents or now or hereafter existing at law or in equity shall not preclude the simultaneous or later exercise by any person, including Collateral Agent, of any or all other rights, powers or remedies. 2. GOVERNING LAW THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 3. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. THE GRAND UNION COMPANY, as Assignor By: ______________________ Name: ____________________ Title: ___________________ BANKERS TRUST COMPANY, as Collateral Agent By: ______________________ Name: ____________________ Title: ___________________ STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of The Grand Union Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by The Grand Union Company. ______________________ Notary Public STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of Bankers Trust Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by Bankers Trust Company. ______________________ Notary Public SCHEDULE A U.S. TRADEMARK SECURITY AGREEMENT
REG. NO. REG. DATE MARK (SERIAL NO.) (FILING DATE) ---- ------------ -------------
Exhibit 2 Amended and Restated BORROWER SECURITY AGREEMENT U.S. PATENT SECURITY AGREEMENT PATENT SECURITY AGREEMENT ("Agreement") dated as of __________________, 1995, is entered into between The Grand Union Company, a Delaware corporation ("Assignor") with principal offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-6799 and Bankers Trust Company, a New York corporation, as collateral agent, with principal offices at One Bankers Trust Plaza, New York, New York 10006 ("Collateral Agent"). Capitalized terms not otherwise defined herein have the meanings set forth in the Amended and Restated Borrower Security Agreement, dated as of June 15, 1995, among, INTER ALIA, Assignor and Collateral Agent ("Security Agreement"). WHEREAS, pursuant to the Security Agreement, Assignor is granting a security interest to the Collateral Agent for the benefit of itself and the Secured Creditors in certain collateral, including the Patents (as defined herein), NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Assignor and Collateral Agent hereby agree as follows: 1. GRANT OF SECURITY INTEREST (a) As security for the full and prompt payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations, the Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest in all of the right, title and interest of the Assignor in, to and under the U.S. patent and patent applications and all inventions and improvements described and claimed in any of the foregoing (the "Patents") more particularly set forth on Schedule A attached hereto. (b) The security interest granted hereby is granted in conjunction with the security interest granted to the Collateral Agent under the Security Agreement. The rights and remedies of the Collateral Agent on behalf of itself and the other Secured Creditors with respect to the security interest granted hereby are in addition to those set forth in the Security Agreement and the other Credit Documents and those which are now or hereafter available to Collateral Agent on behalf of itself and the other Secured Creditors as a matter of law or equity. Each right, power and remedy of the Collateral Agent provided for herein, in the Security Agreement, in the other Credit Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power, or remedy provided for herein, and the exercise by Collateral Agent on behalf of itself and the other Secured Parties of any one or more of the rights, powers or remedies provided for in this Agreement, in the Security Agreement, in the other Credit Documents, or now or hereafter existing at law or in equity shall not preclude the simultaneous or later exercise by any person, including Collateral Agent, of any or all other rights, powers or remedies. 2. GOVERNING LAW THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 3. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. THE GRAND UNION COMPANY, as Assignor By: ______________________ Name: ____________________ Title: ___________________ BANKERS TRUST COMPANY, as Collateral Agent By: ______________________ Name: ____________________ Title: ___________________ STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of The Grand Union Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by The Grand Union Company. ______________________ Notary Public STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of Bankers Trust Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by Bankers Trust Company. ______________________ Notary Public SCHEDULE A U.S. PATENT SECURITY AGREEMENT
PATENT NO. DATE ISSUED TITLE INVENTOR (APP. NO.) (APP. DATE) ----- -------- ---------- -----------
Exhibit 3 Amended and Restated BORROWER SECURITY AGREEMENT U.S. COPYRIGHT SECURITY AGREEMENT COPYRIGHT SECURITY AGREEMENT ("Agreement") dated as of __________________, 1995, is entered into between The Grand Union Company, a Delaware corporation ("Assignor") with principal offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-6799 and Bankers Trust Company, a New York corporation, as collateral agent, with principal offices at One Bankers Trust Plaza, New York, New York 10006 ("Collateral Agent"). Capitalized terms not otherwise defined herein have the meanings set forth in the Amended and Restated Borrower Security Agreement, dated as of June 15, 1995, among, INTER ALIA, Assignor and Collateral Agent ("Security Agreement"). WHEREAS, pursuant to the Security Agreement, Assignor is granting a security interest to the Collateral Agent for the benefit of itself and the Secured Creditors in certain collateral, including the Copyrights (as defined herein), NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Assignor and Collateral Agent hereby agree as follows: 1. GRANT OF SECURITY INTEREST (a) As security for the full and prompt payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations, the Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest in all of the right, title and interest of the Assignor in, to and under the U.S. copyrights and all registrations and applications to register the same in the United States Copyright Office, and all renewals thereof (the "Copyrights") more particularly set forth on Schedule A attached hereto. (b) The security interest granted hereby is granted in conjunction with the security interest granted to the Collateral Agent under the Security Agreement. The rights and remedies of the Collateral Agent on behalf of itself and the other Secured Creditors with respect to the security interest granted hereby are in addition to those set forth in the Security Agreement and the other Credit Documents and those which are now or hereafter available to Collateral Agent on behalf of itself and the other Secured Creditors as a matter of law or equity. Each right, power and remedy of the Collateral Agent provided for herein, in the Security Agreement, in the other Credit Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power, or remedy provided for herein, and the exercise by Collateral Agent on behalf of itself and the other Secured Parties of any one or more of the rights, powers or remedies provided for in this Agreement, in the Security Agreement, in the other Credit Documents or now or hereafter existing at law or in equity shall not preclude the simultaneous or later exercise by any person, including Collateral Agent, of any or all other rights, powers or remedies. 2. GOVERNING LAW THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 3. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. THE GRAND UNION COMPANY, as Assignor By: ______________________ Name: ____________________ Title: ___________________ BANKERS TRUST COMPANY, as Collateral Agent By: ______________________ Name: ____________________ Title: ___________________ STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of The Grand Union Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by The Grand Union Company. ______________________ Notary Public STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of Bankers Trust Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by Bankers Trust Company. ______________________ Notary Public SCHEDULE A U.S. COPYRIGHT SECURITY AGREEMENT
REG. NO. REG. DATE TITLE (APP. NO.) (APP. DATE) ---------- -----------
EX-4.5 10 EXHIBIT 4.5 Exhibit 4.5 - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- WARRANT AGREEMENT between THE GRAND UNION COMPANY and AMERICAN STOCK TRANSFER & TRUST COMPANY as Warrant Agent 300,000 Series 1 Warrants 600,000 Series 2 Warrants Dated as of June 15, 1995 - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 ISSUANCE OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . 6 2.1 Initial Issuance . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.2 Initial Share Amount . . . . . . . . . . . . . . . . . . . . . . . 7 2.3 Form of Warrant Certificates . . . . . . . . . . . . . . . . . . . 7 2.4 Execution of Warrant Certificates. . . . . . . . . . . . . . . . . 7 2.5 Countersignature of Warrant Certificates . . . . . . . . . . . . . 7 ARTICLE 3 EXERCISE PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE 4 EXERCISE PRICES. . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1 Series 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.2 Series 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE 5 EXERCISE OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . 9 5.1 Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . 9 5.2 When Exercise Effective. . . . . . . . . . . . . . . . . . . . . . 9 5.3 Delivery of Certificates, etc. . . . . . . . . . . . . . . . . . . 9 5.4 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . .10 ARTICLE 6 ADJUSTMENT OF THE AMOUNT OF COMMON STOCK ISSUABLE AND THE EXERCISE PRICES UPON EXERCISE . . . . . . . . . .10 6.1 Stock Dividends, Split-ups and Combinations of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 6.2 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . .11 6.3 Common Stock (or Other Securities) Issued for less than Fair Value . . . . . . . . . . . . . . . . . . . . . . .12 6.4 Adjustments for Mergers and Consolidations . . . . . . . . . . . .13 6.5 Calculation to Nearest Cent and One-hundredth of Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 6.6 Notice of Adjustment in Exercise Price . . . . . . . . . . . . . .14 6.7 Other Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .14 6.8 No Change in Warrant Terms on Adjustment . . . . . . . . . . . . .15 6.9 Treasury Shares. . . . . . . . . . . . . . . . . . . . . . . . . .15 ARTICLE 7 CONSOLIDATION, MERGER, ETC.. . . . . . . . . . . . . . . . . . . .15 7.1 Cancellation of Warrants upon Non-Surviving Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 7.2 Assumption of Obligations. . . . . . . . . . . . . . . . . . . . .15 ARTICLE 8 LISTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . .16 ARTICLE 9 NO DILUTION OR IMPAIRMENT. . . . . . . . . . . . . . . . . . . . .16 ARTICLE 10 REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 -i- Page ---- ARTICLE 11 NOTIFICATION OF CERTAIN EVENTS . . . . . . . . . . . . . . . . . .18 11.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . .18 11.2 Available Information. . . . . . . . . . . . . . . . . . . . . . .19 ARTICLE 12 RESERVATION OF STOCK . . . . . . . . . . . . . . . . . . . . . . .19 12.1 Reservation; Due Authorization, etc. . . . . . . . . . . . . . . .19 12.2 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . .20 ARTICLE 13 PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . . . .20 ARTICLE 14 LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . . . . .21 ARTICLE 15 WARRANT REGISTRATION . . . . . . . . . . . . . . . . . . . . . . .21 15.1 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . .21 15.2 Transfer or Exchange . . . . . . . . . . . . . . . . . . . . . . .22 15.3 Valid and Enforceable. . . . . . . . . . . . . . . . . . . . . . .22 15.4 Endorsement. . . . . . . . . . . . . . . . . . . . . . . . . . . .22 15.5 No Service Charge. . . . . . . . . . . . . . . . . . . . . . . . .22 15.6 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . .22 ARTICLE 16 WARRANT AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . .23 16.1 Obligations Binding. . . . . . . . . . . . . . . . . . . . . . . .23 16.2 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . .23 16.3 Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . .24 16.4 Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 16.5 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . .24 16.6 Agent Only . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 16.7 Right to Counsel . . . . . . . . . . . . . . . . . . . . . . . . .24 16.8 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .25 16.9 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 16.10 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . .25 16.11 Resignation; Termination . . . . . . . . . . . . . . . . . . . . .25 16.12 Change of Warrant Agent. . . . . . . . . . . . . . . . . . . . . .26 16.13 Successor Warrant Agent. . . . . . . . . . . . . . . . . . . . . .27 ARTICLE 17 REMEDIES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . .27 17.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 17.2 Warrant Holder Not Deemed a Stockholder. . . . . . . . . . . . . .27 17.3 Right of Action. . . . . . . . . . . . . . . . . . . . . . . . . .28 ARTICLE 18 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .28 18.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 18.2 Governing Law and Consent to Forum . . . . . . . . . . . . . . . .29 18.3 Benefits of this Agreement . . . . . . . . . . . . . . . . . . . .29 18.4 Agreement of Holders of Warrant Certificates . . . . . . . . . . .29 18.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .29 -ii- Page ---- 18.6 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 18.7 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . .30 18.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 -iii- EXHIBITS Exhibit A: Forms of Warrant Certificate A-1: Series 1 Warrant Certificate A-2: Series 2 Warrant Certificate Exhibit B: Release -iv- WARRANT AGREEMENT THIS WARRANT AGREEMENT, is made and entered into as of June 15, 1995 (the "Agreement"), by and between THE GRAND UNION COMPANY, a Delaware corporation (the "Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, as Warrant Agent (the "Warrant Agent"). WITNESSETH: WHEREAS, in connection with the financial restructuring of the Company pursuant to its plan of reorganization (the "Plan"), and in settlement of certain litigation in the Bankruptcy Case and in the Capital Case (each as defined herein) (the "Settlement"), the Company proposes, INTER ALIA, to issue two series of warrants which, in aggregate, are exercisable to purchase up to 900,000 shares of Common Stock (as defined herein), subject to adjustment as provided herein (the "Warrants"), to the holders of the Zero Coupon Notes (as defined herein) in exchange for such Zero Coupon Notes and any and all claims such holders may have against the Company and in exchange for the release by such holders of any and all claims against or interests in the Released Persons; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to act, in connection with the issuance, transfer, exchange, replacement and exercise of the Warrant Certificates and other matters as provided herein; and WHEREAS, the Company desires to enter into this Agreement to set forth the terms and conditions of the Warrants and the rights of the holders thereof; NOW, THEREFORE, in consideration of the foregoing premises and of the mutual agreements set forth herein, the Company and the Warrant Agent hereby agree as follows: ARTICLE 1 DEFINITIONS As used herein, the following terms have the following respective meanings: "AFFILIATE" means with respect to any Person, any Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For purposes of this definition, (a) "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting Common Stock (or equivalent equity interests), by contract or otherwise, and the terms "controlling" or "controlled" have meanings correlative to the foregoing, and (b) a subsidiary of a Person is an Affiliate of such Person and of each other subsidiary of that Person. "AGREEMENT" means this Warrant Agreement, as the same may be amended or modified from time to time hereafter. "BANKRUPTCY CODE" means title 11, United States Code. "BANKRUPTCY COURT" means the United States Bankruptcy Court for the District of Delaware. "BUSINESS DAY" means any day other than a Saturday or a Sunday or a day on which commercial banking institutions in New York City, New York are authorized or required by law to be closed; PROVIDED THAT, in determining the period within which certificates or Warrants are to be issued and delivered at a time when shares of Common Stock (or Other Securities) are listed or admitted to trading on any national securities exchange or in the over-the-counter market and in determining the Fair Value of any securities listed or admitted to trading on any national securities exchange or in the over-the-counter market, "Business Day" shall mean any day when the principal exchange on which such securities are then listed or admitted to trading is open for trading or, if such securities are traded in the over-the-counter market in the United States, such market is open for trading; AND PROVIDED FURTHER that any reference in this Agreement to "days" (unless Business Days are specified) shall mean calendar days. "CAPITAL" means Grand Union Capital Corporation, a Delaware corporation, and the corporate parent of the Company prior to the Effective Date. "CAPITAL CASE" means the case under chapter 11 of the Bankruptcy Code concerning Capital which was commenced on February 6, 1995 before the Bankruptcy Court. "CHAPTER 11 CASE" means the case under Chapter 11 of the Bankruptcy Code concerning the Company which was commenced January 25, 1995 before the Bankruptcy Court. "COMMON STOCK" means the Company's Common Stock par value $1.00 per share as authorized from and after the Effective Date. "COMMISSION" means the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act or the Exchange Act, whichever is the relevant statute for the particular purpose. "COMPANY" means The Grand Union Company, a Delaware corporation. "EFFECTIVE DATE" has the meaning specified in the Plan. "EXCHANGE ACT" means the Securities Exchange Act of 1934, or any successor Federal statute, and the rules and regulations of -2- the Commission thereunder, all as the same shall be amended and in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934 shall include a reference to the comparable section, if any, of any such successor Federal statute. "EXERCISE PERIOD" has the meaning specified in Article 3. "EXERCISE PRICE" has the meaning specified in Article 4. "FAIR VALUE" means (i) with respect to Common Stock or any Other Security, in each case if such security is listed on one or more stock exchanges or quoted on the National Market System of NASDAQ (the "National Market System"), the average of the closing sales prices of a share of such Common Stock or, if an Other Security in the minimum denomination in which such security is traded, on the primary national or regional stock exchange on which such security is listed or on the National Market System if quoted thereon or (ii) if the Common Stock or Other Security, as the case may be, is not so listed or quoted but is traded in the over-the-counter market (other than the National Market System), the average of the closing bid and asked prices of a share of such Common Stock or Other Security, in each case for the 30 Business Days (or such lesser number of Business Days as such Common Stock or other security shall have been so listed, quoted or traded) next preceding the date of measurement; PROVIDED, HOWEVER, that if no such sales price or bid and asked prices have been quoted during the preceding 30-day period or there is otherwise no established trading market for such security, then "Fair Value" means the value of such Common Stock or Other Security as determined reasonably and in good faith by the Board of Directors of the Company; AND PROVIDED, FURTHER, HOWEVER, that in the event the current market price of a share of such Common Stock or of the minimum traded denomination of such Other Security is determined during a period following the announcement by the Company of (i) a dividend or distribution on the Common Stock or Other Security payable in shares of Common Stock or in such Other Security, or (ii) any subdivision, combination or reclassification of the Common Stock or Other Security, and prior to the expiration of 30 Business Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the "Fair Value" shall be appropriately adjusted to take into account ex-dividend trading. Anything herein to the contrary notwithstanding, in case the Company shall issue any shares of Common Stock, rights, options, or Other Securities in connection with the acquisition by the Company of the stock or assets of any other Person or the merger of any other Person into the Company, the Fair Value of the Common Stock or Other Securities so issued shall be determined as of the date the number of shares of Common Stock, rights, options or Other Securities was determined (as set forth in a written agreement between the Company and the other party to the transaction) rather than on the date of issuance of such shares of Common Stock, rights, options or Other Securities. -3- "JUNIOR ZERO COUPON NOTES" means the aggregate $745 million principal amount 16.50% Junior Subordinated Zero Coupon Notes of Capital due January 15, 2007. "ORIGINAL ISSUE DATE" has the meaning specified in Section 2.1. "OTHER SECURITIES" means any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or otherwise) that the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Common Stock, or that at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities. "PERSON" means any individual, partnership, association, joint venture, corporation, business, trust, unincorporated organization, government or department, agency or subdivision thereof, or other person or entity. "PLAN" means the plan of reorganization of the Company, as confirmed by order of the Bankruptcy Court entered on May 31, 1995. "PUBLIC OFFERING" means any offering of Common Stock (or Other Securities) to the public pursuant to an effective registration statement under the Securities Act. "RELEASE" means the release to be executed by the holders of the Zero Coupon Notes which hold, in aggregate, $200,000 or more in face amount of the Zero Coupon Notes, as a condition to their receipt of the Warrants, such release in the form attached hereto as Exhibit B. "RELEASED PERSONS" means the beneficiaries of the Release, as set forth therein. "SECURITIES ACT" means the Securities Act of 1933, or any successor Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be amended and in effect at the time. Reference to a particular section of the Securities Act of 1933 shall include a reference to the comparable section, if any, of any such successor Federal statute. "SENIOR ZERO COUPON NOTES" means the aggregate $343 million principal amount 15.00% Senior Zero Coupon Notes of Capital due July 15, 2004. "SERIES 1 WARRANTS" means the Warrants to purchase, in aggregate, 300,000 shares of Common Stock at the Exercise Price described herein, subject to adjustment as provided herein, issued in exchange for Zero Coupon Notes pursuant to the Plan and the Settlement. -4- "SERIES 2 WARRANTS" means the Warrants to purchase, in aggregate, 600,000 shares of Common Stock at the Exercise Price described herein, subject to adjustment as provided herein, issued in exchange for Zero Coupon Notes pursuant to the Plan and the Settlement. "SETTLEMENT" means the settlement of certain litigation in the Capital Case and the Chapter 11 Case effected pursuant to the Plan pursuant to which the Company has assumed claims arising from and relating to the Zero Coupon Notes. "WARRANT AGENT" means American Stock Transfer & Trust Company. "WARRANT CERTIFICATES" has the meaning specified in Section 2.3. "WARRANTS" means, collectively, the two series of the Company's Warrants to purchase up to an aggregate of 900,000 shares of Common Stock at the Exercise Price specified for each such series, subject to adjustment as provided herein, issued in exchange for the Zero Coupon Notes pursuant to the Plan and the Settlement. "ZERO COUPON NOTES" means, collectively, the Senior Zero Coupon Notes and the Junior Zero Coupon Notes. ARTICLE 2 ISSUANCE OF WARRANTS 2.1 INITIAL ISSUANCE. On the date hereof (the "Original Issue Date"), which is also the Effective Date, the Company shall, pursuant to the Plan and the Settlement, deliver to the Company's disbursing agent under the Plan for re-distribution to the holders of the Zero Coupon Notes, global certificates for an aggregate of 900,000 Warrants, consisting of 300,000 Series 1 Warrants and 600,000 Series 2 Warrants. The global certificates shall be issued in the following denominations: (i) for the holders of the Senior Zero Coupon Notes, a global certificate for 240,000 Series 1 Warrants and a global certificate for 480,000 Series 2 Warrants; and (b) for the holders of the Junior Zero Coupon Notes, a global certificate for 60,000 Series 1 Warrants and a global certificate for 120,000 Series 2 Warrants. Subject, solely with respect to any holder of Zero Coupon Notes which holds, in aggregate, $200,000 or more in face amount of Zero Coupon Notes, to the delivery by such holder to the Company of an executed Release in the form attached hereto as Exhibit B by each holder of a Zero Coupon Note which is to receive a Warrant as a condition to such receipt, and upon the direction of the Company, the Warrant Agent shall issue and deliver such additional Warrant Certificates, as increments of, and in reduction of, the global certificates described above, as are required from time to time in order to effect the distributions with respect to the Zero Coupon Notes provided under the Plan and Settlement. -5- 2.2 INITIAL SHARE AMOUNT. The number of shares of Common Stock purchasable upon exercise of the Warrants shall be one (1) Warrant to one (1) share of Common Stock, subject to adjustments from and after the Original Issue Date as provided in Article 6 of this Agreement. 2.3 FORM OF WARRANT CERTIFICATES. The Series 1 Warrants and Series 2 Warrants shall be evidenced, respectively, by certificates substantially in the forms attached hereto as Exhibit A-1 and A-2 (collectively, the "Warrant Certificates"). Each Warrant Certificate shall be dated as of the date on which it is countersigned by the Warrant Agent, which shall be on the Original Issue Date or, in the event of a division, exchange, substitution or transfer of any of the Warrants, on the date of such event. The Warrant Certificate may have such further legends and endorsements stamped, printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation pursuant thereto or with any rule or regulation of any securities exchange on which the Warrants may be listed. 2.4 EXECUTION OF WARRANT CERTIFICATES. Warrant Certificates shall be executed on behalf of the Company by its President, any Vice President, its Treasurer or Secretary, either manually or by facsimile signature printed thereon. In case any such officer of the Company whose signature shall have been placed upon any Warrant Certificate shall cease to be such officer of the Company before countersignature by the Warrant Agent or issuance and delivery thereof, such Warrant Certificate nevertheless may be countersigned by the Warrant Agent and issued and delivered with the same force and effect as though such person had not ceased to be such officer of the Company. 2.5 COUNTERSIGNATURE OF WARRANT CERTIFICATES. Warrant Certificates shall be manually countersigned by an authorized signatory of the Warrant Agent and shall not be valid for any purpose unless so countersigned. Such manual countersignature shall constitute conclusive evidence of such authorization. The Warrant Agent is hereby authorized to countersign, in accordance with the provisions of this Section 2.5, and deliver any new Warrant Certificates, as directed by the Company pursuant to Section 2.1 and as and when required pursuant to the provisions of Articles 14 and 15. Each Warrant Certificate shall, when manually countersigned by an authorized signatory of the Warrant Agent, entitle the registered holder thereof to exercise the rights as the holder of the number of Warrants set forth thereon, subject to the provisions of this Agreement. -6- ARTICLE 3 EXERCISE PERIOD Each Warrant shall entitle the holder thereof to purchase from the Company one (1) share of Common Stock (subject to the adjustments provided herein), at any time during the five (5) year period that commences on the First Business Day that is one (1) day after the Original Issue Date, and that terminates at 5:00 p.m., New York City time on the First Business Day that is five (5) years after the Original Issue Date (the "Exercise Period"); PROVIDED, HOWEVER, that in the event of a reorganization of the Company of the nature described in Article 7.1 hereof, any Warrants that are not exercised prior to consummation of such transaction shall be cancelled upon consummation of such transaction, and the holders of such cancelled Warrants shall not be entitled to receive any property with respect to their cancelled Warrants. ARTICLE 4 EXERCISE PRICES 4.1 SERIES 1. The Exercise Price for the Series 1 Warrants shall be $30.00 per share of Common Stock (subject to adjustment pursuant to Article 6 hereof). 4.2 SERIES 2. The Exercise Price for the Series 2 Warrants shall be $42.00 per share of Common Stock (subject to adjustment pursuant to Article 6 hereof). ARTICLE 5 EXERCISE OF WARRANTS 5.1 MANNER OF EXERCISE. All or any of the Warrants represented by a Warrant Certificate may be exercised by the registered holder thereof during normal business hours on any Business Day, by surrendering such Warrant Certificate, with the subscription form set forth therein duly executed by such holder, by hand or by mail to the Warrant Agent at its office addressed to American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005, or, if such exercise shall be in connection with an underwritten Public Offering, at the location designated by the Company. Such Warrant Certificate shall be accompanied by payment in respect of each Warrant that is exercised, which shall be made by certified or official bank or bank cashier's check payable to the order of the Company, except as otherwise provided herein. Such payment shall be in an amount equal to the product of the number of shares of Common Stock (without giving effect to any adjustment therein) designated in such subscription form multiplied by the original Exercise Price for the Series of Warrants being exercised (plus such additional consideration as may be provided herein). Upon such surrender and payment, such holder shall thereupon be entitled to receive the number of duly -7- authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) determined as provided in Articles 2 and 3, and as and if adjusted pursuant to Article 6. 5.2 WHEN EXERCISE EFFECTIVE. Each exercise of any Warrant pursuant to Section 5.1 shall be deemed to have been effected immediately prior to the close of business on the Business Day on which the Warrant Certificate representing such Warrant, duly executed, with accompanying payment shall have been delivered as provided in Section 5.1, and at such time the Person or Persons in whose name or names the certificate or certificates for Common Stock (or Other Securities) shall be issuable upon such exercise as provided in Section 5.3 shall be deemed to have become the holder or holders of record thereof. 5.3 DELIVERY OF CERTIFICATES, ETC. (a) As promptly as practicable after the exercise of any Warrant, and in any event within five (5) Business Days thereafter (or, if such exercise is in connection with an underwritten Public Offering, concurrently with such exercise), the Company at its expense (other than as to payment of transfer taxes which will be paid by the holder) will cause to be issued and delivered to such holder, or as such holder may otherwise direct in writing (subject to Article 14), (i) a certificate or certificates for the number of shares of Common Stock (or Other Securities) to which such holder is entitled, and (ii) if less than all the Warrants represented by a Warrant Certificate are exercised, a new Warrant Certificate or Certificates of the same tenor and for the aggregate number of Warrants that were not exercised, executed and countersigned in accordance with Sections 2.4 and 2.5. (b) The Warrant Agent shall countersign any new Warrant Certificate, register it in such name or names as may be directed in writing by such holder, and shall deliver it to the person entitled to receive the same in accordance with this Section 5.3. The Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrant Certificates executed on behalf of the Company for such purpose. 5.4 FRACTIONAL SHARES. No fractional shares of Common Stock (or Other Securities) shall be issued upon any exercise of Warrants. If more than one Warrant Certificate shall be delivered for exercise at one time by the same holder, the number of full shares or securities that shall be issuable upon exercise shall be computed on the basis of the aggregate number of Warrants exercised. As to any fraction of a share of Common Stock (or Other Securities), the Company shall pay a cash adjustment in respect thereto in an amount equal to the product of the Fair Value per share of Common Stock (or Other Securities) as of the Business Day next preceding the date of such exercise multiplied by such fraction of a share. -8- ARTICLE 6 ADJUSTMENT OF THE AMOUNT OF COMMON STOCK ISSUABLE AND THE EXERCISE PRICES UPON EXERCISE 6.1 STOCK DIVIDENDS, SPLIT-UPS AND COMBINATIONS OF SHARES. If after the date hereof the number of outstanding shares of Common Stock is increased by a dividend or share distribution in each case payable in shares of Common Stock or by a split-up or other reclassification of shares of Common Stock, then, in the case of such events, the amount of Common Stock issuable for each Warrant and the Exercise Price will be adjusted as follows: on the day following the date fixed for the determination of holders of shares of Common Stock entitled to receive such dividend or share distribution, and in the cases of split-ups, combinations and other reclassifications, on the day following the effective date thereof: (a) the Exercise Price in effect immediately prior to such action shall be adjusted to a new Exercise Price that bears the same relationship to the Exercise Price in effect immediately prior to such event as the total number of shares of Common Stock outstanding immediately prior to such action bears to the total number of shares of Common Stock outstanding immediately after such event, and (b) the number of shares of Common Stock purchasable upon the exercise of any Warrant after such event shall be the number of Shares of Common Stock obtained by multiplying the number of shares of Common Stock purchasable immediately prior to such adjustment upon the exercise of such Warrant by the Exercise Price in effect immediately prior to such adjustment and dividing the product so obtained by the Exercise Price in effect after such adjustment. 6.2 DISTRIBUTIONS. If after the date hereof the Company shall distribute to all holders of its shares of Common Stock evidences of its indebtedness or assets (excluding cash distributions made as a dividend payable out of earnings or out of surplus legally available for dividends under the laws of the jurisdiction of incorporation of the Company) or rights to subscribe to shares of Common Stock expiring more than 45 days after the issuance thereof, then in each such case the Exercise Price in effect immediately prior to such distribution shall be decreased to an amount determined by multiplying such Exercise Price by a fraction, the numerator of which is the Fair Value of a share of the Common Stock at the date of such distribution less the Fair Value per share of Common Stock outstanding at such date of the assets or evidences of indebtedness so distributed or of such subscription rights (as determined by the Board of Directors of the Company, whose determination shall be conclusive, and described in a statement filed with the Warrant Agent) and the denominator of which is the Fair Value of a share of Common Stock at such date. Such adjustment shall be made whenever any such distribution is made, and shall become effective retroactively on the date immediately after the record date for the determination of stockholders entitled to receive such distribution. -9- 6.3 COMMON STOCK (OR OTHER SECURITIES) ISSUED FOR LESS THAN FAIR VALUE. (a) If at any time or from time to time after the Original Issue Date shares of Common Stock (or Other Securities) shall be issued, distributed or sold to holders of Common Stock for a consideration less than Fair Value (or, with respect to distributions of Other Securities, for no consideration), then the equivalent number of shares of Common Stock (or such Other Securities) shall also be issuable upon exercise of the Warrants, and the Exercise Price shall be adjusted to include the Fair Value of the consideration paid by holders of Common Stock for such shares of Common Stock (or Other Securities), if any; PROVIDED, HOWEVER, that only such shares of Common Stock (or Other Securities) issued for consideration less than Fair Value (or, with respect to Other Securities, without consideration) shall be taken into account for purposes of this adjustment; AND PROVIDED FURTHER, that any consideration paid, in whatever form, by the holders of Common Stock for such Common Stock (or Other Securities) shall be taken into account for purposes of determining the adjustment required to be made hereunder, such that an adjustment shall be made solely if and to the extent that the Fair Value of such Common Stock (or Other Securities) exceeds the Fair Value of any consideration paid. (b) For purposes of this Section 6.3, Common Stock (or Other Securities) shall be deemed to have been issued for Fair Value if issued to the Company's employees or directors under BONA FIDE employee benefit or stock option plans, or issued by the Company pursuant to an employment agreement or consulting agreement, which plan or agreement has been adopted or approved by the board of directors of the Company and, when required by law, approved by the holders of Common Stock. (c) All options or convertible securities issued or delivered in payment of any dividend or other distribution on any class of stock of the Company, shall be deemed to have been issued without consideration. (d) For purposes of this Section 6.3, and except as otherwise provided herein, options or convertible securities shall be deemed to have been issued for a consideration per share determined by dividing (i) the total amount, if any, received and receivable by the Company as consideration for the issuance, sale, grant or assumption of the relevant options or convertible securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision thereof for subsequent adjustment of such consideration) payable to the Company upon the exercise in full of such options or the conversion or exchange of such convertible securities (and in the case of options for convertible securities, the exercise of such options and the conversion or exchange of such convertible securities), -10- by (ii) the maximum number of shares of Common Stock issuable (as set forth in the instruments relating thereto, without regard to any provision thereof for subsequent adjustment of such number) upon the exercise of such options or the conversion or exchange of such convertible securities (and in the case of options for convertible securities, the exercise of such options and the conversion or exchange of such convertible securities). 6.4 ADJUSTMENTS FOR MERGERS AND CONSOLIDATIONS. In case the Company, after the date hereof, shall merge or consolidate with another Person, other than in a Non-Surviving Merger (upon which, pursuant to Section 7.1, the Warrants shall be cancelled), then, in the case of any such transaction, proper provision shall be made so that, upon the basis and terms and in the manner provided in this Warrant Agreement, the holders of the Warrants, upon the exercise thereof at any time after the consummation of such transaction (subject to the Exercise Period), shall be entitled to receive (at the aggregate Exercise Price in effect at the time of the transaction for all Common Stock or Other Securities issuable upon such exercise immediately prior to such consummation), in lieu of the Common Stock or Other Securities issuable upon such exercise prior to such consummation, the greatest amount of securities, cash or other property to which such holder would have been entitled as a holder of Common Stock (or Other Securities) upon such consummation if such holder had exercised the rights represented by the Warrants held by such holder immediately prior thereto, subject to adjustments (subsequent to such consummation) as nearly equivalent as possible to the adjustments provided for in Sections 6.1, 6.2 and 6.3 hereof. 6.5 CALCULATION TO NEAREST CENT AND ONE-HUNDREDTH OF SHARE. All calculations under this Article 6 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. 6.6 NOTICE OF ADJUSTMENT IN EXERCISE PRICE. Whenever the Exercise Price and securities issuable shall be adjusted as provided in this Article 6, the Company shall forthwith file with the Warrant Agent a statement, signed by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, the President or any Vice President of the Company and by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary, stating in detail the facts requiring such adjustment, the Exercise Price that will be effective after such adjustment and the impact of such adjustment on the number and kind of securities issuable upon exercise of the Warrants. The Company shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to each registered holder of Warrants at his address appearing on the Warrant register. The Warrant Agent shall have no duty with respect to any statement filed with it except to keep the same on -11- file and available for inspection by registered holders of Warrants during reasonable business hours. The Warrant Agent shall not at any time be under any duty or responsibility to any holder of a Warrant to determine whether any facts exist which may require any adjustment to the Exercise Price or securities issuable, or with respect to the nature or extent of any adjustment of the Exercise Price or securities issuable when made or with respect to the method employed in making such adjustment. 6.7 OTHER NOTICES. In case the Company after the date hereof shall propose to take any action of the type described in sections 6.1, 6.2, 6.3 or 6.4 of this Article 6, the Company shall give notice to the Warrant Agent and to each registered holder of a Warrant in the manner set forth in subsection 6.6 of this Article 6, which notice shall specify, in the case of action of the type specified in subsection 6.2, 6.3 or 6.4, the date on which a record shall be taken with respect to any such action. Such notice shall be given, in the case of any action of the type specified in subsection 6.2, 6.3 or 6.4, at least ten days prior to the record date with respect thereto. Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action. Where appropriate, such notice may be given in advance and may be included as part of a notice required to be mailed under the provisions of subsection 6.6 of this Article 6. 6.8 NO CHANGE IN WARRANT TERMS ON ADJUSTMENT. Irrespective of any adjustments in the Exercise Price or the number of shares of Common Stock (or any inclusion of Other Securities) issuable upon exercise, Warrants theretofore or thereafter issued may continue to express the same prices and number of shares as are stated in the similar Warrants issuable initially, or at some subsequent time, pursuant to this Agreement, and the Exercise Price and such number of shares issuable upon exercise specified thereon shall be deemed to have been so adjusted. 6.9 TREASURY SHARES. Shares of Common Stock at any time owned by the Company shall not be deemed to be outstanding for the purposes of any computation under this Article 6. ARTICLE 7 CONSOLIDATION, MERGER, ETC. 7.1 CANCELLATION OF WARRANTS UPON NON-SURVIVING MERGER. In the event of a merger or consolidation of the Company with another Person in which (i) the Company is not the continuing or surviving corporation of such consolidation or merger AND (ii) immediately prior to the transaction either (x) such continuing or surviving corporation was not an Affiliate of the Company or (y) such continuing or surviving corporation was an Affiliate of the Company but the board of directors of the Company has determined in good faith that the merger or consolidation is an arms length transaction, i.e., on terms comparable to those on which the Company would enter into a transaction with a non- -12- Affiliate, then any Warrants which are not exercised prior to consummation of such merger or consolidation (a "Non-Surviving Merger") shall be cancelled upon consummation of the transaction, and the holders of such cancelled Warrants shall not be entitled to receive any property with respect to their cancelled Warrants. 7.2 ASSUMPTION OF OBLIGATIONS. Notwithstanding anything contained herein to the contrary, the Company will not effect a merger or consolidation other than a Non-Surviving Merger unless, prior to the consummation of such transaction, each Person (other than the Company) which may be required to deliver any Common Stock, Other Securities, securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to the Warrant Agent, with a copy delivered to each holder of a Warrant hereunder, the obligations of the Company under this Warrant Agreement and under each of the Warrants, including, without limitation, the obligation to deliver such shares of Common Stock, Other Securities, cash or property as may be required pursuant to Article 6 hereof. ARTICLE 8 LISTING RIGHTS If the Common Stock is listed on one or more stock exchanges or quoted on the National Market System, then the Company shall use its best efforts to have the Warrants listed on such stock exchange(s) or quoted on the National Market System, as applicable. ARTICLE 9 NO DILUTION OR IMPAIRMENT The Company will not, by amendment of its certificate of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issuance or sale of securities or any other voluntary action or omission, avoid or seek to avoid the observance or performance of any of the terms of this Agreement or any of the Warrants issued hereunder, but will at all times in good faith observe and perform all such terms and take all such action as may be necessary or appropriate in order to protect the rights of each holder of a Warrant against dilution or other impairment of the kind specified herein PROVIDED, HOWEVER, that, subject to compliance with the applicable provisions of this Agreement, the Company shall not be prohibited by this Article 9 or by any provision of this Agreement from making decisions providing for, INTER ALIA, the merger or consolidation of the Company or the sale of its assets which transactions, in the judgment of the Company's board of directors, are in the best interests of the Company and the shareholders. Without limiting the generality of the foregoing, the Company (a) will not permit the par value of any shares of stock receivable upon the exercise of any Warrant to exceed the -13- amount payable therefor upon such exercise, (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock upon the exercise of all of the Warrants from time to time outstanding, (c) will not take any action that results in any adjustment of the shares issuable upon exercise of the Warrants (or which entitles the holders of the Warrants to receive Other Securities upon such exercise) if the total number of shares of Common Stock (or Other Securities) issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock (or Other Securities) then authorized by the Company's certificate of incorporation and available for the purpose of issuance upon such exercise and (d) will not issue any capital stock of any class that is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or winding-up, unless such stock is sold for a cash consideration at least equal to the amount of such preference upon voluntary or involuntary dissolution, liquidation or winding-up. ARTICLE 10 REPORTS In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable upon the exercise of the Warrants, the Company at its expense will promptly compute such adjustment or readjustment after giving effect to such, in accordance with the terms of this Agreement and shall prepare a report setting forth such adjustment or readjustment and showing in reasonable detail the method of calculation thereof and the facts upon which such adjustment or readjustment is based. The Company will forthwith mail a copy of each such report to the Warrant Agent, which shall promptly mail a copy to each holder of a Warrant. The Warrant Agent will cause the same to be available for inspection at its principal office during normal business hours by any holder of a Warrant or any prospective purchaser of a Warrant designated by the holder thereof. ARTICLE 11 NOTIFICATION OF CERTAIN EVENTS 11.1 CORPORATE ACTION. In the event of: (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a regular periodic dividend payable in cash out of earned surplus) or other distribution of any kind, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right or interest of any kind; or -14- (b) (i) any capital reorganization of the Company, (ii) any reclassification of the capital shares of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a split-up or combination), (iii) the consolidation or merger of the Company with or into any other corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any change in the shares of Common Stock) including a consolidation or merger which would result in the cancellation of any outstanding Warrants pursuant to Section 7.1 hereof, (iv) the sale of the properties and assets of the Company as, or substantially as, an entirety to another Person, or (v) an exchange offer for Common Stock (or Other Securities); or (c) the voluntary or involuntary dissolution, liquidation, or winding up of the Company, the Company shall cause to be filed with the Warrant Agent and mailed to each holder of a Warrant a notice specifying (x) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution, rights, event, transaction or amendment (or vote thereon) and the amount and character of any such dividend, distribution, exchange, rights, or vote, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, exchange or rights are to be determined, and the amount and character of such dividend, distribution or rights, or (y) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, sale, transfer, exchange offer, dissolution, liquidation or winding up is expected to become effective, and the time, if any such time is to be fixed, as of which holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock (or Other Securities) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, sale, transfer, exchange offer, dissolution, liquidation or winding up and in the case of a transaction which would cause the cancellation of any outstanding Warrants, the effect of such transaction, if known. Such notice shall be delivered not less than 20 days prior to such date therein specified, in the case of any such date referred to in clause (x) of the preceding sentence, and not less than 30 days prior to such date therein specified, in the case of any such date referred to in clause (y) of the preceding sentence. Failure to give such notice within the time provided or any defect therein shall not affect the legality or validity of any such action. 11.2 AVAILABLE INFORMATION. The Company shall promptly file with the Warrant Agent copies of its annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) that the Company is required to file -15- with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. If the Company is not required to make such filings, the Company shall promptly deliver to the Warrant Agent copies of any annual, quarterly or other reports and financial statements that are provided to any holders of equity or debt securities of the Company (other than bank debt) in their capacity as holders of such securities. ARTICLE 12 RESERVATION OF STOCK 12.1 RESERVATION; DUE AUTHORIZATION, ETC. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock (or out of authorized Other Securities), solely for issuance and delivery upon exercise of Warrants, the full number of shares of Common Stock (and Other Securities) from time to time issuable upon the exercise of all Warrants and any other outstanding warrants, options or similar rights, from time to time outstanding. All shares of Common Stock (and Other Securities) shall be duly authorized and, when issued upon such exercise, shall be duly and validly issued, and (in the case of shares) fully paid and nonassessable, and free from all taxes, liens, charges, security interests, encumbrances and other restrictions created by or through the Company. 12.2 COMPLIANCE WITH LAW. The Company will use its best efforts, at its expense and on a continual basis, to assure that all shares of Common Stock (and Other Securities) that may be issued upon exercise of Warrants may be so issued and delivered without violation of any Federal or state securities law or regulation, or any other law or regulation applicable to the Company or any of its subsidiaries, PROVIDED THAT with respect to any such exercise involving a sale or transfer of Warrants or any such securities issuable upon such exercise, the Company shall have no obligation to register such Warrants or securities under any such securities law except as provided in Article 8 hereof or in a registration rights agreement entered into by the parties. ARTICLE 13 PAYMENT OF TAXES The Company will pay any and all documentary stamp or similar issue taxes payable to the United States of America or any State, or any political subdivision or taxing authority thereof or therein, in respect of the issuance or delivery of shares of Common Stock (or Other Securities) on exercise of Warrants, PROVIDED that the Company shall not be required to pay any tax that may be payable in respect of any transfer of a Warrant or any transfer involved in the issuance and delivery of Common Stock (or Other Securities) in a name other than that of the registered holder of the Warrants to be exercised, and no -16- such issuance or delivery shall be made unless and until the person requesting such issuance has paid to the Company the amount of any such tax or has established, to the reasonable satisfaction of the Company, that such tax has been paid. ARTICLE 14 LOSS OR MUTILATION Upon receipt by the Company and the Warrant Agent of evidence reasonably satisfactory to them of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate and of an indemnity bond reasonably satisfactory to them in form or amount, and (in the case of mutilation) upon surrender and cancellation thereof, then, in the absence of notice to the Company or the Warrant Agent that the Warrants represented thereby have been acquired by a bona fide purchaser, the Company shall execute and deliver to the Warrant Agent and, upon the Company's request, an authorized signatory of the Warrant Agent shall manually countersign and deliver, to the registered holder of the lost, stolen, destroyed or mutilated Warrant Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of the same tenor and for a like aggregate number of Warrants. Upon the issuance of any new Warrant Certificate under this Article 14, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the reasonable fees and expenses of the Warrant Agent) in connection therewith. Every new Warrant Certificate executed and delivered pursuant to this Article 14 in lieu of any lost, stolen or destroyed Warrant Certificate shall be entitled to the same benefits of this Agreement equally and proportionately with any and all other Warrant Certificates, whether or not the allegedly lost, stolen or destroyed Warrant Certificate shall be at any time enforceable by anyone. The provisions of this Article 14 are exclusive and shall preclude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, lost, stolen or destroyed Warrant Certificates. ARTICLE 15 WARRANT REGISTRATION 15.1 REGISTRATION. The Warrant Certificates shall be issued in registered form only and shall be registered in the names of the record holders of the Warrant Certificates to whom they are to be delivered. The Company shall maintain or cause to be maintained a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Warrants and of transfers or exchanges of Warrant Certificates as provided in this Agreement. Such register shall be maintained at the office of the Company or the Warrant Agent located at the respective address therefor as provided in Section 18.1. Such register shall be open for -17- inspection upon notice at all reasonable times by the Warrant Agent and each holder of a Warrant. 15.2 TRANSFER OR EXCHANGE. Subject to Section 2.1 hereof, at the option of the holder, Warrant Certificates may be exchanged or transferred for other Warrant Certificates for a like aggregate number of Warrants, upon surrender of the Warrant Certificates to be exchanged at the office of the Company or the Warrant Agent maintained for such purpose at the respective address therefor as provided in Section 18.1, and upon payment of the charges herein provided. Whenever any Warrant Certificates are so surrendered for exchange or transfer, the Company shall execute, and an authorized signatory of the Warrant Agent shall manually countersign and deliver, the Warrant Certificates that the holder making the exchange is entitled to receive. 15.3 VALID AND ENFORCEABLE. All Warrant Certificates issued upon any registration of transfer or exchange of Warrant Certificates shall be the valid obligations of the Company, evidencing the same obligations, and entitled to the same benefits under this Agreement, as the Warrant Certificates surrendered for such registration of transfer or exchange. 15.4 ENDORSEMENT. Every Warrant Certificate surrendered for registration of transfer or exchange shall (if so required by the Company or the Warrant Agent) be duly endorsed, or be accompanied by an instrument of transfer in form reasonably satisfactory to the Company and the Warrant Agent and duly executed by the registered holder thereof or such holder's officer or representative duly authorized in writing. 15.5 NO SERVICE CHARGE. No service charge shall be made for any registration of transfer or exchange of Warrant Certificates. 15.6 CANCELLATION. Any Warrant Certificate surrendered for registration of transfer, exchange or the exercise of the Warrants represented thereby shall, if surrendered to the Company, be delivered to the Warrant Agent, and all Warrant Certificates surrendered or so delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent. Any such Warrant Certificate shall not be reissued by the Company and, except as provided in this Article 15 in case of an exchange or transfer, in Article 14 in case of a mutilated Warrant Certificate and in Article 3 in case of the exercise of less than all the Warrants represented thereby, no Warrant Certificate shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to the Company from time to time or otherwise dispose of such cancelled Warrant Certificates in a manner reasonably satisfactory to the Company. -18- ARTICLE 16 WARRANT AGENT 16.1 OBLIGATIONS BINDING. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the terms and conditions set forth in this Article 16. The Company, and the holders of Warrants by their acceptance thereof, shall be bound by all of such terms and conditions. 16.2 NO LIABILITY. The Warrant Agent shall not by countersigning Warrant Certificates or by any other act hereunder be accountable with respect to or be deemed to make any representations as to the validity or authorization of the Warrants or the Warrant Certificates (except as to its countersignature thereon), as to the validity, authorization or value (or kind or amount) of any Common Stock or of any Other Securities or other property delivered or deliverable upon exercise of any Warrant, or as to the purchase price of such Common Stock, securities or other property. The Warrant Agent shall not (i) be liable for any recital or statement of fact contained herein or in the Warrant Certificates or for any action taken, suffered or omitted by the Warrant Agent in good faith in the belief that any Warrant Certificate or any other document or any signature is genuine or properly authorized, (ii) be responsible for determining whether any facts exist that may require any adjustment of the purchase price and the number of shares of Common Stock purchasable upon exercise of Warrants, or with respect to the nature or extent of any such adjustments when made, or with respect to the method of adjustment employed, (iii) be responsible for any failure on the part of the Company to issue, transfer or deliver any Common Stock or Other Securities or property upon the surrender of any Warrant for the purpose of exercise or to comply with any other of the Company's covenants and obligations contained in this Agreement or in the Warrant Certificates or (iv) be liable for any act or omission in connection with this Agreement except for its own bad faith, negligence or willful misconduct. 16.3 INSTRUCTIONS. The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties hereunder from the President, any Vice President, the Treasurer or any Assistant Treasurer of the Company and to apply to any such officer for advice or instructions. The Warrant Agent shall not be liable for any action taken, suffered or omitted by it in good faith in accordance with the instructions of any such officer. 16.4 AGENTS. The Warrant Agent may execute and exercise any of the rights and powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys, agents or employees, provided reasonable care has been exercised in the selection and in the continued employment of any such attorney, agent or employee. The Warrant Agent shall not be under any obligation or duty to institute, appear in, or defend -19- any action, suit or legal proceeding in respect hereof, but this provision shall not affect the power of the Warrant Agent to take such action as the Warrant Agent may consider proper. The Warrant Agent shall promptly notify the Company in writing of any claim made or action, suit or proceeding instituted against the Warrant Agent arising out of or in connection with this Agreement. 16.5 COOPERATION. The Company will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further acts, instruments and assurances as may reasonably be required by the Warrant Agent in order to enable the Warrant Agent to carry out or perform its duties under this Agreement. 16.6 AGENT ONLY. The Warrant Agent shall act solely as agent. The Warrant Agent shall not be liable except for the performance of such duties as are specifically set forth herein, and no implied covenants or obligations shall be read into this Agreement against the Warrant Agent, whose duties and obligations shall be determined solely by the express provisions hereof. 16.7 RIGHT TO COUNSEL. The Warrant Agent may at any time consult with legal counsel satisfactory to it (who may be legal counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any Warrant holder for any action taken, suffered or omitted by the Warrant Agent in good faith in accordance with the opinion or advice of such counsel. 16.8 COMPENSATION. The Company agrees to pay the Warrant Agent reasonable compensation for its services hereunder and to reimburse the Warrant Agent for its reasonable expenses hereunder; and further agrees to indemnify the Warrant Agent and hold it harmless against any and all liabilities, including, but not limited to, judgments, costs and counsel fees, for anything done, suffered or omitted by the Warrant Agent in the execution of its duties and powers hereunder, except for any such liabilities that arise as a result of the Warrant Agent's bad faith, negligence or willful misconduct. 16.9 ACCOUNTING. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all moneys received by the Warrant Agent on behalf of the Company on the purchase of shares of Common Stock (or Other Securities) through the exercise of Warrants. 16.10 NO CONFLICT. The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall -20- preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. 16.11 RESIGNATION; TERMINATION. The Warrant Agent may resign its duties and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent's negligence or willful misconduct), after giving 30 days' prior written notice to the Company. The Company may remove the Warrant Agent upon 30 days written notice, and the Warrant Agent shall thereupon in like manner be discharged from all further duties and liabilities hereunder, except as to liabilities arising as a result of the Warrant Agent's bad faith, negligence or willful misconduct. The Company shall cause to be mailed (by first class mail, postage prepaid) to each registered holder of a Warrant at such, holder's last address as shown on the register of the Company, at the Company's expense, a copy of such notice of resignation or notice of removal, as the case may be. Upon such resignation or removal the Company shall promptly appoint in writing a new warrant agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation by the resigning Warrant Agent or after such removal, then the holder of any Warrant may apply to any court of competent jurisdiction for the appointment of a new warrant agent. Pending appointment of a successor to the Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. Any successor warrant agent, whether appointed by the Company or by such a court, shall be a corporation, incorporated under the laws of the United States or of any State thereof and authorized under such laws to exercise corporate trust powers, be subject to supervision and examination by Federal or State authority, and have a combined capital and surplus of not less than $100,000,000 as set forth in its most recent published annual report of condition. After acceptance in writing of such appointment by the new warrant agent it shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the Warrant Agent, without any further assurance, conveyance, act or deed; but if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the resigning or removed Warrant Agent. Not later than the effective date of any such appointment the Company shall file notice thereof with the resigning or removed Warrant Agent and shall forthwith cause at copy of such notice to be mailed (by first class mail, postage prepaid) to each registered holder of a Warrant at such holder's last address as shown on the register of the Company. Failure to give any notice provided for in this Section 16.11, or any defect in any such notice, shall not affect the legality or validity of the resignation of the Warrant Agent or the appointment of a new warrant agent, as the case may be. 16.12 CHANGE OF WARRANT AGENT. If at any time the name of the Warrant Agent shall be changed and at such time any of the -21- Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver Warrant Certificates so countersigned; and if at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and this Agreement. 16.13 SUCCESSOR WARRANT AGENT. Any corporation into which the Warrant Agent or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party or any corporation succeeding to all or substantially all the agency business of the Warrant Agent or any new warrant agent shall be a successor Warrant Agent under this Agreement without any further act, PROVIDED that such corporation would be eligible for appointment as a new warrant agent under the provisions of Section 16.11 of this Article 16. The Company shall promptly cause notice of the succession as Warrant Agent of any such successor Warrant Agent to be mailed (by first class mail, postage prepaid) to each registered holder of a Warrant at his last address as shown on the register of the Company. ARTICLE 17 REMEDIES, ETC. 17.1 REMEDIES. The Company stipulates that the remedies at law of each holder of a Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant Agreement are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 17.2 WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Prior to the exercise of the Warrants represented thereby no holder of a Warrant Certificate, as such, shall be entitled to any rights of a stockholder of the Company, including, but not limited to, the right to vote, to receive dividends or other distributions, to exercise any preemptive right or, except as otherwise provided herein, to receive any notice of meetings of stockholders, and no such holder shall be entitled to receive notice of any proceedings of the Company except as provided in this Agreement. Nothing contained in this Agreement shall be construed as imposing any liabilities on such holder to purchase any securities or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or otherwise. -22- 17.3 RIGHT OF ACTION. All rights of action in respect of this Agreement are vested in the registered holders of the Warrants. Any registered holder of any Warrant, without the consent of the Warrant Agent or the registered holder of any other Warrant, may in such holder's own behalf and for such holder's own benefit enforce, and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, such holder's right to exercise such holder's Warrants in the manner provided in the Warrant Certificate representing such Warrants and the Company's obligations under this Agreement and the Warrants. ARTICLE 18 MISCELLANEOUS 18.1 NOTICES. Any notice, demand or delivery authorized by this Agreement shall be sufficiently given or made if sent by first class mail, postage prepaid, addressed to any registered holder of a Warrant at such holder's last known address appearing on the register of the Company, and to the Company or the Warrant Agent as follows: If to the Company: The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470 Attn: Mr. Kenneth Baum Telephone: (201) 890-6000 Facsimile: (201) 890-6012 If to the Warrant Agent: American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005 Attn: Ms. Susan Silber Telephone: (718) 921-8217 Facsimile: (718) 236-4588 or such other address as shall have been furnished in writing, in accordance with this Section 18.1, to the party giving or making such notice, demand or delivery. 18.2 GOVERNING LAW AND CONSENT TO FORUM. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY AND THE PARTIES EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, -23- GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PERSON TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. 18.3 BENEFITS OF THIS AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Company and the Warrant Agent and their respective successors and assigns, and the registered and beneficial holders from time to time of the Warrants and of holders of the Common Stock, where applicable. Nothing in this Agreement is intended or shall be construed to confer upon any other person, any right, remedy or claim under or by reason of this Agreement or any part hereof. 18.4 AGREEMENT OF HOLDERS OF WARRANT CERTIFICATES. Every holder of a Warrant Certificate, by accepting the same, covenants and agrees with the Company, the Warrant Agent and with every other holder of a Warrant Certificate that the Warrant Certificates are transferable on the registry books of the Warrant Agent only upon the terms and conditions set forth in this Agreement, and the Company and the Warrant Agent may deem and treat the person in whose name the Warrant Certificate is registered as the absolute owner for all purposes whatsoever and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. 18.5 COUNTERPARTS. This Agreement may be executed in any number of counterparts and each such counterpart shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 18.6 AMENDMENTS. The Warrant Agent may, without the consent or concurrence of the holders of the Warrants, by supplemental agreement or other writing, join with the Company in making any amendments or modifications of this Agreement that they shall have been advised by counsel (a) are required to cure any ambiguity or to correct any defective or inconsistent provision or clerical omission or mistake or manifest error herein contained and which do not accurately reflect the understanding of the parties hereto, (b) add to the covenants and agreements of the Company in this Agreement further covenants and agreements of the Company thereafter to be observed, or surrender any rights or power reserved to or conferred upon the Company in this Agreement or (c) do not and will not adversely affect, alter or change the rights, privileges or immunities of the registered holders of Warrants or of any person entitled to the benefits of this Agreement who has not assented to such change, in writing. Any other amendment to this Agreement may be effected only with the consent of all of the parties entitled to benefit hereunder who would be affected by such change. 18.7 CONSENT TO JURISDICTION. The parties hereby expressly acknowledge and agree that, to the extent permitted by applicable law, the Bankruptcy Court shall have exclusive jurisdiction to -24- hear and determine any and all disputes concerning the distribution of Warrants hereunder to holders of Zero Coupon Notes pursuant to the Plan. The Warrant Agent hereby assents to the jurisdiction of the Bankruptcy Court with respect to any such disputes and waives any argument of lack of such jurisdiction. 18.8 HEADINGS. The table of contents hereto and the descriptive headings of the several sections hereof are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. THE GRAND UNION COMPANY By:/s/ Frances E. Nicastro ----------------------- Name: Francis E. Nicastro Title: Corporate Vice President and Treasurer AMERICAN STOCK TRANSFER & TRUST COMPANY By:/s/ Herbert J Lemmer -------------------- Name: Herbert J Lemmer Title: Vice President -25- EXHIBIT A FORMS OF WARRANT CERTIFICATE EXHIBIT A-1 FORM OF SERIES 1 WARRANT CERTIFICATE [FORM OF FACE OF SERIES 1 WARRANT CERTIFICATE] Series 1 Warrant Number of Series 1 Warrant(s): No. ______ ______ Exercisable During the Period Commencing June ___, 1995 and Terminating at 5:00 p.m. June ___, 2000 except as provided below SERIES 1 WARRANT TO PURCHASE COMMON STOCK OF THE GRAND UNION COMPANY This Certifies that __________ or registered assigns, is the owner of the number of SERIES 1 WARRANTS set forth above, each of which represents the right, at any time after June ___, 1995 and on or before 5:00 p.m., New York City time, on June ___, 2000, subject to acceleration as provided below, to purchase from The Grand Union Company, a Delaware corporation (the "Company"), at the price of $30.00 (the "Exercise Price"), one share of Common Stock, $1.00 par value, of the Company as such stock was constituted as of June ___, 1995, subject to adjustment as provided in the Warrant Agreement hereinafter referred to, upon surrender hereof, with the subscription form on the reverse hereof duly executed, by hand or by mail to American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005, or to any successor thereto, as the warrant agent under the Warrant Agreement, at the office of such successor maintained for such purpose (any such warrant agent being herein called the "Warrant Agent") (or, if such exercise shall be in connection with an underwritten Public Offering of shares of such Common Stock (or Other Securities) (as such term and other capitalized terms used herein are defined in the Warrant Agreement) subject to the Warrant Agreement, at the location at which the Company shall have agreed to deliver such securities), and simultaneous payment in full (by certified or official bank or bank cashier's check payable to the order of the Company) of the Exercise Price in respect of each Warrant represented by this Warrant Certificate that is so exercised, all subject to the terms and conditions hereof and of the Warrant Agreement. Upon any partial exercise of the Warrants represented by this Warrant Certificate, there shall be issued to the holder hereof a new Warrant Certificate representing the Warrants that were not exercised. No fractional shares may be issued upon the exercise of rights to purchase hereunder, and as to any fraction of a share otherwise issuable, the Company will make a cash adjustment in lieu of such issuance, as provided in the Warrant Agreement.. This Warrant Certificate is issued under and in accordance with a Warrant Agreement, dated as of June ___, 1995 (the "Warrant Agreement"), between the Company and American Stock Transfer & Trust Company, as Warrant Agent, and is subject to the terms and provisions contained therein, all of which terms and provisions the holder of this Warrant Certificate consents to by acceptance hereof. Copies of the Warrant Agreement are on file at the above-mentioned office of the Warrant Agent and may be obtained by writing to the Warrant Agent. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS WARRANT SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. Dated: THE GRAND UNION COMPANY By:_________________________ Title: Countersigned: American Stock Transfer & Trust Company, as Warrant Agent By:_________________________ Authorized Signatory -2- [FORM OF REVERSE OF WARRANT CERTIFICATE] THE GRAND UNION COMPANY The transfer of this Warrant Certificate and all rights hereunder is registrable by the registered holder hereof, in whole or in part, on the register of the Company upon surrender of this Warrant Certificate at the office or agency of the Company or the office of the Warrant Agent maintained for such purpose at American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005, attention: _________________, duly endorsed or accompanied by a written instrument of transfer duly executed and in form satisfactory to the Company and the Warrant Agent, by the registered holder hereof or his attorney duly authorized in writing and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer or registration thereof. Upon any partial transfer the Company will cause to be delivered to such holder a new Warrant Certificate or Certificates with respect to any portion not so transferred. This Warrant Certificate may be exchanged at the office or agency of the Company or the office of the Warrant Agent maintained for such purpose at American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005, attention: _________________, for Warrant Certificates representing the same aggregate number of Warrants, each new Warrant Certificate to represent such number of Warrants as the holder hereof shall designate at the time of such exchange. Prior to the exercise of the Warrants represented hereby, the holder of this Warrant Certificate, as such, shall not be entitled to any rights of a stockholder of the Company, including, but not limited to, the right to vote, to receive dividends or other distributions, to exercise any preemptive right or, except as provided in the Warrant Agreement, to receive any notice of meetings of stockholders, and shall not be entitled to receive notice of any proceedings of the Company except as provided in the Warrant Agreement. Nothing contained herein shall be construed as imposing any liabilities upon the holder of this Warrant Certificate to purchase any securities or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or otherwise. This Warrant Certificate shall be void and all rights represented hereby shall cease unless exercised on or before the close of business on June ___, 2000. PRIOR TO THE EXPIRATION OF THE EXERCISE PERIOD, THE COMPANY MAY ENGAGE IN A CONSOLIDATION OR MERGER AS TO WHICH IT IS NOT THE SURVIVING COMPANY AND IN CERTAIN SUCH EVENTS ANY WARRANTS WHICH ARE NOT EXERCISED PRIOR TO THE CONSUMMATION OF SUCH TRANSACTION WILL BE CANCELED. WARRANTHOLDERS WILL RECEIVE PRIOR NOTICE OF ANY SUCH TRANSACTION, AND WILL HAVE THE OPPORTUNITY TO EXERCISE THEIR WARRANTS AND, UPON SUCH EXERCISE, EXERCISE THEIR RIGHTS AS HOLDERS OF COMMON STOCK, PRIOR TO ITS CONSUMMATION. This Warrant Certificate shall not be valid for any purpose until it shall have been manually countersigned by an authorized signatory of the Warrant Agent. Witness the facsimile seal of the Company and the signature of its duly authorized officer. -2- SUBSCRIPTION FORM (TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT) TO THE GRAND UNION COMPANY American Stock Transfer & Trust Company, as Warrant Agent Attention: _________________ The undersigned (i) irrevocably exercises the Warrants represented by the within Warrant Certificate, (ii) purchases one share of Common Stock of The Grand Union Company (before giving effect to the adjustments provided in the Warrant Agreement referred to in the within Warrant Certificate) for each Warrant so exercised and herewith makes payment in full of the purchase price of $30.00 in respect of each Warrant so exercised as provided in the Warrant Agreement (such payment being by certified or official bank or bank cashier's check payable to the order of The Grand Union Company, all on the terms and conditions specified in the within Warrant Certificate and the Warrant Agreement, (iii) surrenders this Warrant Certificate and all right, title and interest therein to The Grand Union Company and (iv) directs that the securities or other property deliverable upon the exercise of such Warrants be registered or placed in the name and at the address specified below and delivered thereto. Dated: ____________, 19__ _________________________ (Owner)* _________________________ (Signature of Authorized Representative) _________________________ (Street Address) _________________________ (City) (State) (Zip Code) Securities or property to be issued and delivered to: __________________________ Signature Guaranteed** Please insert social security or other identifying number ______________ Name ______________________________________________________________________ Street Address ____________________________________________________________ City, State and Zip Code __________________________________________________ -2- FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant Certificate hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant Certificate, with respect to the number of warrants set forth below: Name of No. of ASSIGNEE ADDRESS WARRANTS ------- ------- --------
Please insert social security or other identifying number of Assignee ___________ and does hereby irrevocably constitute and appoint __________ attorney to make such transfer on the books of The Grand Union Company maintained for the purpose, with full power of substitution in the premises. Dated: __________, 19__ Name _________________________* Signature of Authorized Representative ________________ Signature Guaranteed ________** _______________ * The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. ** The signature must be guaranteed by a securities transfer agents medallion program ("stamp") participant or an institution receiving prior approval from the Warrant Agent. EXHIBIT A-2 FORM OF SERIES 2 WARRANT CERTIFICATE [FORM OF FACE OF SERIES 2 WARRANT CERTIFICATE] Series 2 Warrant Number of Series 2 Warrant(s): No. ______ ______ Exercisable During the Period Commencing June ___, 1995 and Terminating at 5:00 p.m. June ___, 2000 except as provided below SERIES 2 WARRANT TO PURCHASE COMMON STOCK OF THE GRAND UNION COMPANY This Certifies that __________ or registered assigns, is the owner of the number of SERIES 2 WARRANTS set forth above, each of which represents the right, at any time after June ___, 1995 and on or before 5:00 p.m., New York City time, on June ___, 2000 subject to acceleration as provided below, to purchase from The Grand Union Company, a Delaware Corporation (the "Company"), at the price of $42.00 (the "Exercise Price"), one share of Common Stock, $1.00 par value, of the Company as such stock was constituted as of June ___, 1995, subject to adjustment as provided in the Warrant Agreement hereinafter referred to, upon surrender hereof, with the subscription form on the reverse hereof duly executed, by hand or by mail to American Stock Transfer & Trust Company, as Warrant Agent under the Warrant Agreement, at 40 Wall Street, New York, New York 10005, attention: _________________, or to any successor thereto, as the warrant agent under the Warrant Agreement, at the office of such successor maintained for such purpose (any such warrant agent being herein called the "Warrant Agent") (or, if such exercise shall be in connection with an underwritten Public Offering of shares of such Common Stock (or Other Securities) (as such term and other capitalized terms used herein are defined in the Warrant Agreement) subject to the Warrant Agreement, at the location at which the Company shall have agreed to deliver such securities), and simultaneous payment in full (by certified or official bank or bank cashier's check payable to the order of the Company) of the Exercise Price in respect of each Warrant represented by this Warrant Certificate that is so exercised, all subject to the terms and conditions hereof and of the Warrant Agreement. Upon any partial exercise of the Warrants represented by this Warrant Certificate, there shall be issued to the holder hereof a new Warrant Certificate representing the Warrants that were not exercised. No fractional shares may be issued upon the exercise of rights to purchase hereunder, and as to any fraction of a share otherwise issuable, the Company will make a cash adjustment in lieu of such issuance, as provided in the Warrant Agreement. This Warrant Certificate is issued under and in accordance with a Warrant Agreement, dated as of June ___, 1995 (the "Warrant Agreement"), between the Company and American Stock Transfer & Trust Company, as Warrant Agent, and is subject to the terms and provisions contained therein, all of which terms and provisions the holder of this Warrant Certificate consents to by acceptance hereof. Copies of the Warrant Agreement are on file at the above-mentioned office of the Warrant Agent and may be obtained by writing to the Warrant Agent. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS WARRANT SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. Dated: THE GRAND UNION COMPANY By:_________________________ Title: Countersigned: American Stock Transfer & Trust Company, as Warrant Agent By:_________________________ Authorized Signatory [FORM OF REVERSE OF WARRANT CERTIFICATE] THE GRAND UNION COMPANY The transfer of this Warrant Certificate and all rights hereunder is registrable by the registered holder hereof, in whole or in part, on the register of the Company upon surrender of this Warrant Certificate at the office or agency of the Company or the office of the Warrant Agent maintained for such purpose at American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005, duly endorsed or accompanied by a written instrument of transfer duly executed and in form satisfactory to the Company and the Warrant Agent, by the registered holder hereof or his attorney duly authorized in writing and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer or registration thereof. Upon any partial transfer the Company will cause to be delivered to such holder a new Warrant Certificate or Certificates with respect to any portion not so transferred. This Warrant Certificate may be exchanged at the office or agency of the Company or the office of the Warrant Agent maintained for such purpose at American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005, for Warrant Certificates representing the same aggregate number of Warrants, each new Warrant Certificate to represent such number of Warrants as the holder hereof shall designate at the time of such exchange. Prior to the exercise of the Warrants represented hereby, the holder of this Warrant Certificate, as such, shall not be entitled to any rights of a stockholder of the Company, including, but not limited to, the right to vote, to receive dividends or other distributions, to exercise any preemptive right or, except as provided in the Warrant Agreement, to receive any notice of meetings of stockholders, and shall not be entitled to receive notice of any proceedings of the Company except as provided in the Warrant Agreement. Nothing contained herein shall be construed as imposing any liabilities upon the holder of this Warrant Certificate to purchase any securities or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or otherwise. This Warrant Certificate shall be void and all rights represented hereby shall cease unless exercised on or before the close of business on June ___, 2000. PRIOR TO THE EXPIRATION OF THE EXERCISE PERIOD, THE COMPANY MAY ENGAGE IN A CONSOLIDATION OR MERGER AS TO WHICH IT IS NOT THE SURVIVING COMPANY AND IN CERTAIN SUCH EVENTS ANY WARRANTS WHICH ARE NOT EXERCISED PRIOR TO THE CONSUMMATION OF SUCH TRANSACTION WILL BE CANCELED. WARRANT HOLDERS WILL RECEIVE PRIOR NOTICE OF ANY SUCH TRANSACTION, AND WILL HAVE THE OPPORTUNITY TO EXERCISE THEIR WARRANTS AND, UPON SUCH EXERCISE, EXERCISE THEIR RIGHTS AS HOLDERS OF COMMON STOCK, PRIOR TO ITS CONSUMMATION. This Warrant Certificate shall not be valid for any purpose until it shall have been manually countersigned by an authorized signatory of the Warrant Agent. Witness the facsimile seal of the Company and the signature of its duly authorized officer. SUBSCRIPTION FORM (TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT) TO THE GRAND UNION COMPANY American Stock Transfer & Trust Company, as Warrant Agent The undersigned (i) irrevocably exercises the Warrants represented by the within Warrant Certificate, (ii) purchases one share of Common Stock of The Grand Union Company (before giving effect to the adjustments provided in the Warrant Agreement referred to in the within Warrant Certificate) for each Warrant so exercised and herewith makes payment in full of the purchase price of $42.00 in respect of each Warrant so exercised as provided in the Warrant Agreement (such payment being by certified or official bank or bank cashier's check payable to the order of The Grand Union Company), all on the terms and conditions specified in the within Warrant Certificate and the Warrant Agreement, (iii) surrenders this Warrant Certificate and all right, title and interest therein to The Grand Union Company and (iv) directs that the securities or other property deliverable upon the exercise of such Warrants be registered or placed in the name and at the address specified below and delivered thereto. Dated: ____________, 19__ _________________________ (Owner)* _________________________ (Signature of Authorized Representative) _________________________ (Street Address) _________________________ (City) (State) (Zip Code) Securities or property to be issued and delivered to: _________________________ Signature Guaranteed** Please insert social security or other identifying number ____________ Name ____________________________________________________________________ Street Address __________________________________________________________ City, State and Zip Code ________________________________________________ FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant Certificate hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the within Warrant Certificate, with respect to the number of warrants set forth below: Name of No. of ASSIGNEE ADDRESS WARRANTS -------- ------- --------
Please insert social security or other identifying number of Assignee ___________ and does hereby irrevocably constitute and appoint __________ attorney to make such transfer on the books of The Grand Union Company maintained for the purpose, with full power of substitution in the premises. Dated: __________, 19__ Name _________________________* Signature of Authorized Representative ________________ Signature Guaranteed ________** _______________ * The signature must correspond with the name as written upon the face of the within Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. ** The signature must be guaranteed by a securities transfer agents medallion program ("stamp") participant or an institution receiving prior approval from the Warrant Agent. EXHIBIT B RELEASE RELEASE For good and valuable consideration, the receipt of which is hereby acknowledged, including, without limitation, the issuance of warrants to purchase common stock of Reorganized Grand Union pursuant to the Plan, the undersigned hereby unconditionally and irrevocably releases the following persons, subject to the Warrants having been released for distribution: the Company, Capital, and Holdings, the respective affiliates of the Company, Capital, and Holdings, present and former stockholders, directors, and officers of the Company, Capital, and Holdings, including Miller Tabak Hirsch & Co. ("MTH") and its present and former partners, directors, officers, employees, advisors, attorneys, consultants, agents, and representatives including, without limitation, Messrs. Martin A. Fox, Glenn L. Goldberg, Claude Incaudo and James A. Lash, and any person or entity that directly or indirectly controls MTH, including Gary Hirsch, Jeffrey Miller and Jeffrey Tabak, the members of each of the Official Committee and the Informal Committees, each of the Post-Confirmation Banks, BT Securities Corporation, Goldman, Sachs & Co., and each of the foregoing entity's and/or person's respective attorneys, advisors, financial advisors, investment bankers, employees, successors, agents, and assigns, and any other person and/or entity against whom the undersigned may have a Released Claim, as defined below (collectively, the "Released Persons"), from any and all claims, demands, actions, causes of action, suits, costs, dues, sums of money, accounts, bills, bonds, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, expenses, and liability whatsoever, known or unknown, at law or in equity, irrespective of whether such claims arise out of contract, tort, violation of laws or other regulations or otherwise, which the undersigned ever had or now has against the Released Persons or any of them, for, or by reason of, any matter, cause or thing whatsoever from the beginning of the world to and including the date hereof arising out of or in connection with, or related in any manner to, the issuance, ownership, purchase, and/or sale of the Zero Coupon Notes including, without limitation, any claim for substantive consolidation of the Company's Bankruptcy Case and Capital's Bankruptcy Case, any claims arising under any state or federal securities law and/or any claims arising under Sections 544, 548 and 550 of the Bankruptcy Code or under similar state laws, including fraudulent conveyance claims (the "Released Claims"); provided, however, that the undersigned is not hereby releasing the right to receive Warrants pursuant to the Plan or any Allowed Claim in Classes 1, 2, 3, 4 or 8 of the Plan held by the undersigned. ____________________________ /s/ EX-4.6 11 EXHIBIT 4.6 Exhibit 4.6 ________________________________________________________________________________ ________________________________________________________________________________ REGISTRATION RIGHTS AGREEMENT among THE GRAND UNION COMPANY and EACH OF THE PERSONS NAMED IN SCHEDULE A HERETO dated as of June 15, 1995 ________________________________________________________________________________ ________________________________________________________________________________ NEW COMMON STOCK TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 SHELF REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . 4 2.1 Initial Shelf Registration. . . . . . . . . . . . . . . . . . . . . 4 2.2 Subsequent Shelf Registrations.. . . . . . . . . . . . . . . . . . . 4 2.3 Amendments or Subsequent Shelf Registrations.. . . . . . . . . . . . 4 2.4 Effectiveness Period.. . . . . . . . . . . . . . . . . . . . . . . . 4 2.5 Option to Extend Initial Shelf Registration. . . . . . . . . . . . . 5 2.6 Blackout Periods.. . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.7 Supplements and Amendments.. . . . . . . . . . . . . . . . . . . . . 6 2.8 Inclusion of Other Securities. . . . . . . . . . . . . . . . . . . . 6 ARTICLE 3 PIGGYBACK REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . 6 3.1 Incidental Registration. . . . . . . . . . . . . . . . . . . . . . . 6 3.2 Cut-Backs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 4 HOLDBACK AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 7 4.1 Restrictions on Sales by Holders . . . . . . . . . . . . . . . . . . 7 4.2 Restrictions on Sales by the Company . . . . . . . . . . . . . . . . 7 ARTICLE 5 REGISTRATION PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . 8 5.1 Company Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.2 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . .11 5.3 Holder Procedures. . . . . . . . . . . . . . . . . . . . . . . . . .11 ARTICLE 6 REGISTRATION EXPENSES. . . . . . . . . . . . . . . . . . . . . . . .12 6.1 Registration Expenses. . . . . . . . . . . . . . . . . . . . . . . .12 ARTICLE 7 CONFIDENTIALITY; INDEMNIFICATION; CONTRIBUTION . . . . . . . . . . .12 7.1 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .12 7.2 Indemnification by the Company . . . . . . . . . . . . . . . . . . .13 -i- PAGE 7.3 Indemnification by Holders . . . . . . . . . . . . . . . . . . . . .13 7.4 Conduct of Indemnification Proceedings . . . . . . . . . . . . . . .14 7.5 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 ARTICLE 8 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. . . . . . . . . . . . .15 8.1 Participation in Underwritten Registrations. . . . . . . . . . . . .15 ARTICLE 9 COOPERATION WITH THE COMPANY . . . . . . . . . . . . . . . . . . . .16 9.1 Cooperation with the Company . . . . . . . . . . . . . . . . . . . .16 ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .16 10.1 No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . .16 10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 10.3 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . .16 10.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 10.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . .17 10.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 10.7 Headings; Construction . . . . . . . . . . . . . . . . . . . . . . .17 10.8 Governing Law; Choice of Forum; Captions . . . . . . . . . . . . . .18 10.9 Agreement; Severability. . . . . . . . . . . . . . . . . . . . . . .18 Schedule A: Certain Securities Holders -ii- REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT dated as of June 15, 1995 (this "Agreement") is made and entered into by and among The Grand Union Company, a Delaware corporation (the "Company"), and each of the holders of the Common Stock (as defined herein) listed on Schedule A attached hereto (the "Initial Holders"). WHEREAS, pursuant to a Disclosure Statement, dated as of April 19, 1995, the Company has solicited from the holders of the Old Notes (as defined herein), which holders included the Initial Holders, acceptances of a plan of reorganization (the "Plan") of the Company; and WHEREAS, pursuant to the Plan, the holders of the Old Notes are to receive, in exchange for their Old Notes, shares of Common Stock, par value $1.00 per share, of the Company (the "Common Stock"), constituting in the aggregate one hundred percent (100%) of the Common Stock outstanding upon consummation of the Restructuring; and WHEREAS, it is the intent of the parties that the Common Stock shall be freely tradable; and WHEREAS, in order to induce the Initial Holders to agree to the restructuring of their claims against the Company represented by the Old Notes, the Company has agreed to grant them certain registration rights with respect to the Common Stock. NOW, THEREFORE, in consideration of the aforesaid and the mutual promises hereinafter made, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS 1.1 DEFINITIONS. In addition to the other terms defined elsewhere herein, the following terms have the meanings set forth below. "AFFILIATE" means, with respect to any Person, a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such Person. "AGREEMENT" means this Registration Rights Agreement, as the same may be amended from time to time. "BUSINESS DAY" means any day, excluding Saturday or Sunday or any day on which banking institutions located in New York, New York are authorized or compelled by law or other governmental action to be closed. "COMMISSION" means the Securities and Exchange Commission or any other federal agency at the time administering the Exchange Act or the Securities Act. "COMMON STOCK" means the Common Stock, par value $1.00 per share, of the Company issued to the holders of the Old Notes pursuant to the Plan. "COMPANY" means The Grand Union Company, a Delaware corporation, and its successors and assigns. "EFFECTIVE DATE" means the effective date of the Plan pursuant to the terms thereof. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended (or any similar successor federal statute), and the rules and regulations thereunder, as in effect from time to time. "HOLDER" means (i) the Initial Holders and (ii) any transferees of the Registrable Securities, directly or indirectly, from such Person whose securities continue to be Registrable Securities and to which the transferor assigns its rights hereunder. For purposes of this Agreement, the Company may deem and treat the registered holder of a Registrable Security as the Holder and absolute owner thereof. "MAJORITY REGISTERED HOLDERS" means, in the case of any Registration Statement, the Holders of a majority of the Registrable Securities covered thereby. "OLD NOTES" means, collectively, (i) the 12 1/4% Senior Subordinated Notes due 2002 of the Company, (ii) the 12 1/4% Subordinated Notes due 2002, Series A, of the Company and (iii) the 13% Senior Subordinated Notes due 1998 of the Company, each to be exchanged pursuant to the Plan for the Common Stock. "PERSON" means any individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, or other entity, or a government or any political subdivision or agency. "PIGGYBACK REGISTRATION" means any Registration of Registrable Securities effected pursuant to ARTICLE 3 hereof. "PUBLIC OFFERING" means a public offering and sale of securities pursuant to an effective registration statement under the Securities Act. -2- "REGISTRABLE SECURITIES" means the Common Stock held by the Initial Holders and any securities issued or exchanged for such Common Stock by way of a stock dividend or other distribution on such securities, stock split or combination of shares, recapitalization, reclassification, merger, consolidation or exchange offer. For purposes of this Agreement, a Registrable Security ceases to be a Registrable Security when (1) it has been effectively registered under the Securities Act and sold or distributed to any Person pursuant to an effective registration statement covering it, (2) it has been sold or distributed to any Person pursuant to Rule 144, or (3) it has been sold or distributed pursuant to an exemption from the registration requirements of the Securities Act to any Person other than an Affiliate of any Holder or other than pursuant to Section 3(a) of the Securities Act or Section 1145 of the Bankruptcy Code; PROVIDED THAT Registrable Securities shall cease to be Registrable Securities upon the delivery to the Holder of such Registrable Securities of an opinion, reasonably satisfactory in form and substance to such Holder, by legal counsel reasonably acceptable to such Holder, to the effect that the public sale of such securities without restriction under the Securities Act or state securities law does not require registration under the Securities Act or state securities laws. "REGISTRATION" means any Shelf Registration or Piggyback Registration hereunder. "REGISTRATION STATEMENT" means any registration statement of the Company that covers any of the Registrable Securities pursuant to this Agreement, including the prospectus, amendments and supplements to such registration statement or prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference. "RULE 10B-6" means Rule 10b-6 promulgated by the Commission under the Exchange Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission. "RULE 144", RULE 145", "RULE 415" and "RULE 424" mean, respectively, Rule 144, Rule 145, Rule 415 and Rule 424, each promulgated by the Commission under the Securities Act, in each case as amended from time to time, or any similar successor rule thereto that may be promulgated by the Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended (or any similar successor federal statute), and the rules and regulations thereunder, as the same are in effect from time to time. "SHELF REGISTRATION" means any registration of Registrable Securities effected pursuant to ARTICLE 2 hereof. -3- ARTICLE 2 SHELF REGISTRATION RIGHTS 2.1 INITIAL SHELF REGISTRATION. The Company shall prepare, as promptly as reasonably practicable, a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act covering all of the Registrable Securities (the "Initial Shelf Registration"). Subject to the limitations set forth in SECTION 2.6 below, the Company shall file the Initial Shelf Registration within 90 days after the Effective Date, and shall use its best efforts to cause the same to be declared effective by the Commission as promptly thereafter as reasonably practicable, and in any event within 135 days of the Effective Date. 2.2 SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration terminates prior to the end of the Effectiveness Period (as defined in SECTION 2.4 hereof), then prior to the termination of the effectiveness of the Initial Shelf Registration the Company shall file, and, subject to the limitations set forth in SECTION 2.6 below, shall use its best efforts to cause the Commission to declare effective, a subsequent Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act covering all of the Registrable Securities which remain outstanding (the "Subsequent Shelf Registration"). The Subsequent Shelf Registration shall be filed by the Company at such time prior to the termination of the effectiveness of the Initial Shelf Registration which is reasonably calculated to cause the Subsequent Shelf Registration to become effective on or before the date on which the effectiveness of the Initial Shelf Registration terminates, and shall, in any event, be filed on or before 180 days prior to the termination of such effectiveness of the Initial Shelf Registration. 2.3 AMENDMENTS OR SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration (except as provided in SECTION 2.2) or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (as defined in SECTION 2.4 hereof) for a reason other than because of the sale of all of the Registrable Securities covered thereby, subject to SECTION 2.6, the Company shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall, within 60 days of such cessation of effectiveness, amend such Initial Shelf Registration or Subsequent Shelf Registration in a manner reasonably calculated to obtain the withdrawal of the order suspending the effectiveness thereof, or shall file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of such Registrable Securities which remain unsold. "Subsequent Shelf Registration" means any Shelf Registration after the Initial Shelf Registration, pursuant to SECTION 2.2 or this Section 2.3. 2.4 EFFECTIVENESS PERIOD. The Company shall use its best efforts to keep the Shelf Registration (including the Initial Shelf Registration and any Subsequent Shelf Registration) continuously effective under the Securities Act for a period of four (4) years following the date on which the Initial Shelf Registration became effective (the "Effectiveness Period"), or such shorter period ending when all Registrable Securities covered by the Initial Shelf Registration -4- have been sold. If a Subsequent Shelf Registration is filed, pursuant to SECTION 2.2 or 2.3 hereof, the Company shall use its best efforts to cause the Subsequent Shelf Registration to be declared effective as soon as practicable after such filing and to keep such Registration Statement continuously effective for a period after such effectiveness equal to the Effectiveness Period, less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously in effect. The intent of this provision is that the Shelf Registration (including the Initial Shelf Registration and any Subsequent Shelf Registrations) shall be in effect for a number of days, in aggregate, equal to four (4) years; PROVIDED THAT a Shelf Registration shall not be required to be maintained in effect after all of the Registrable Securities have been sold through a Public Offering or are otherwise distributed such that they are no longer deemed to be Registrable Securities hereunder. 2.5 OPTION TO EXTEND INITIAL SHELF REGISTRATION. In lieu of filing the Subsequent Shelf Registration, required under SECTION 2.2 hereof, the Company may, in its sole discretion and if permitted by applicable law, keep the Initial Shelf Registration continuously effective for the remainder of the Effectiveness Period or, if earlier, until all of the Registrable Securities eligible to be included in the Subsequent Required Registration have been sold such that they are no longer Registrable Securities hereunder. 2.6 BLACKOUT PERIODS. With respect to a Shelf Registration filed or to be filed pursuant to this Article 2, if the Board of Directors of the Company shall determine, in its good faith reasonable judgment, that to maintain the effectiveness of such Registration Statement or to permit such Registration Statement to become effective (or if no Registration Statement has yet been filed, to file such Registration Statement) would be significantly disadvantageous to the Company's financial condition, business or prospects (a "Disadvantageous Condition") in light of the existence, or in anticipation, of (i) any acquisition or financing activity involving the Company, or any subsidiary of the Company, including a proposed public offering, (ii) an undisclosed material event, the public disclosure of which would have a material adverse effect on the Company, (iii) a proposed material transaction involving the Company or a substantial amount of its assets, or (iv) any other circumstance or condition the disclosure of which would materially disadvantage the Company, and the existence of which renders any to be filed, then filed or effective Registration Statement inadequate as failing to include material information, then the Company may, until such Disadvantageous Condition no longer exists (but not with respect to more than four occasions in excess of 120 days in the aggregate nor involving more than 45 days in the aggregate during any continuous 12-month period) cause such Registration Statement to be withdrawn and the effectiveness of such Registration Statement to be terminated or, if no Registration Statement has yet been filed, elect not to file such Registration Statement. If the Company determines to take any action pursuant to the preceding sentence, the Company shall deliver a notice to any Holder of Registrable Securities covered or to be covered under such withdrawn or not to be filed Registration Statement, which indicates that the Registration Statement is no longer effective or will not be filed. Upon the receipt of any such notice, such Persons shall forthwith discontinue use of the prospectus contained in such Registration Statement. If any Disadvantageous Condition shall cease to exist, the Company shall promptly notify any Holders who shall have ceased selling Registrable Securities pursuant -5- to an effective Registration Statement as a result of such Disadvantageous Condition indicating such cessation and disclosing in reasonable detail the nature and outcome of such Disadvantageous Condition. The Company shall, if any Registration Statement required to be filed or maintained under this Agreement has been withdrawn or not filed, file promptly, at such time as it in good faith deems appropriate, a new Registration Statement covering the Registrable Securities that were covered by such withdrawn Registration Statement or to be covered by such unfiled Registration Statement. 2.7 SUPPLEMENTS AND AMENDMENTS. The Company shall supplement and amend the Shelf Registration Statement if and to the extent (i) required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, (ii) otherwise required by the Securities Act or other applicable law, or (iii) reasonably requested by (a) the Holders of a majority of the Registrable Securities covered thereby or (b) any underwriter of the registration. 2.8 INCLUSION OF OTHER SECURITIES. The Company may include in a Shelf Registration securities held by other Persons who have piggyback registration rights pursuant to written agreements with the Company. If any securities other than Registrable Securities are included, Registrable Securities shall have absolute priority over securities included by the Company at the request of such other Persons. The parties hereby acknowledge and recognize that if any Registrable Securities are included in a registration statement filed by the Company pursuant to demand registration rights granted by the Company to Persons other than the Holders, the Company may provide in the appropriate agreement that such other Persons' securities shall have absolute priority over Registrable Securities requested by Holders to be included, pursuant to ARTICLE 3 hereof, in such other Persons' demand registration. ARTICLE 3 PIGGYBACK REGISTRATION RIGHTS 3.1 INCIDENTAL REGISTRATION. If, but without any obligation to do so, the Company proposes to file a registration statement under the Securities Act with respect to any class of equity securities (other than in connection with the registration of securities issued or issuable pursuant to an employee stock option, stock purchase, stock bonus or similar plan or dividend reinvestment plan or pursuant to a merger, exchange offer or transaction of the type specified in Rule 145(a) under the Securities Act), including, but not limited to, a registration statement pursuant to demand registration rights granted by the Company to Persons other than the Holders, so long as there remain Registrable Securities outstanding, and during or with respect to any period within which no Registration Statement covering such Registrable Securities is in effect, then the Company shall give written notice of such proposed filing to the Holders at least 15 days before the anticipated filing date, and such notice shall offer the Holders the opportunity to register such amount of Registrable Securities as each such Holder may request. The Company shall use its reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the inclusion therein of any Registrable Securities -6- the Holders of which request, within 10 days after receiving written notice of the proposed filing from the Company, such inclusion, on the same terms and conditions as any similar securities of the Company so included. Any Holder's request for such inclusion may be withdrawn, in whole or in part, at any time prior to five days prior to the effective date of the registration statement for such offering. The Company shall be under no obligation to the Holders to complete any offering of its securities it proposes to make under this SECTION 3.1 and shall incur no liability to any Holder for its failure to do so. 3.2 CUT-BACKS. Notwithstanding the provisions of SECTION 3.1 hereof, if the managing underwriter or underwriters of a proposed underwritten offering as described in such SECTION 3.1 advise in writing the Holders requesting inclusion of their Registrable Securities that the total amount or kind of securities that they and any other Persons seek to include in such offering would materially and adversely affect the success of such offering, then the amount or kind of securities, including Registrable Securities, to be offered for the accounts of Holders and of Persons exercising piggyback registration rights pursuant to written agreements with the Company shall be reduced PRO RATA to the extent necessary to reduce the total amount of securities, including Registrable Securities, to be included in such offering to that recommended by such managing underwriter or underwriters (which amount may be zero). ARTICLE 4 HOLDBACK AGREEMENTS 4.1 RESTRICTIONS ON SALES BY HOLDERS. To the extent not inconsistent with applicable law, each Holder of Registrable Securities that is timely notified in writing by the managing underwriter or underwriters of any securities being registered in an underwritten offering (other than pursuant to an employee stock option, stock purchase, stock bonus or similar plan, or dividend reinvestment plan or pursuant to a merger, exchange offer or a transaction of the type specified in Rule 145(a) under the Securities Act), shall not effect any sale or distribution (including a sale pursuant to Rule 144) of any Registrable Securities that are of the same type as any securities which are to be the subject of such an offering or any Registrable Securities convertible into or exchangeable or exercisable for any such securities, during the 10-day period prior to, and during the 90-day period beginning on, the effective date of the applicable Registration Statement, except as part of such registration, without the prior written consent of such underwriters. 4.2 RESTRICTIONS ON SALES BY THE COMPANY. The Company shall not effect any sale of any securities of the Company of the same type as any Registrable Securities covered under a Registration Statement filed pursuant to ARTICLE 2 hereof or any securities of the Company convertible into or exchangeable or exercisable for any such Registrable Securities, during the 10-day period prior to, and during the 90-day period beginning on, the effective date of such a Registration Statement, except pursuant to an employee stock option, stock purchase, stock bonus or similar plan or dividend reinvestment plan or pursuant to a merger, exchange offer or a transaction specified in Rule 145(a) under the Securities Act. -7- ARTICLE 5 REGISTRATION PROCEDURES 5.1 COMPANY PROCEDURES. Whenever the Company is required by this Agreement to effect the Registration of any Registrable Securities under the Securities Act pursuant to a Registration Statement, the Company shall use its best efforts to effect each such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall, as soon as practicable: (1) prepare and file with the Commission the requisite Registration Statement to effect such Registration and thereafter use its best efforts to cause such Registration Statement to be declared effective as soon as practicable and to remain continuously effective for the time period required by this Agreement to the extent permitted under the Securities Act; PROVIDED that prior to the filing of any Registration Statement required to be filed hereunder or any related prospectus or any amendment or supplement thereto, other than any amendment or supplement made solely as a result of incorporation by reference of documents filed with the Commission subsequent to the filing of such Registration Statement, the Company shall furnish to the Holders of the Registrable Securities covered by such Registration Statement copies of all such documents proposed to be filed no later than five (5) Business Days prior to the initial filing of a Registration Statement and no later than three (3) Business Days prior to the filing of an amendment or supplement thereto. The Company shall not file any Registration Statement or amendment thereto or any prospectus or any supplement thereto (other than any amendment or supplement made solely as a result of incorporation by reference of documents filed with the Commission subsequent to the filing of such Registration Statement) to which the Majority Registered Holders shall have reasonably objected in writing within two (2) Business Days after receipt of such documents to the effect that such Registration Statement or amendment thereto or prospectus or supplement thereto does not comply in all material respects with the requirements of the Securities Act (PROVIDED that the foregoing shall not limit the right of any Holder whose Registrable Securities are covered by a Registration Statement to reasonably object within two (2) Business Days after receipt of such documents, to any particular information that is to be contained in such Registration Statement, amendment, prospectus or supplement and relates specifically to such Holder, including, without limitation, any information describing the manner in which such Holder acquired such Registrable Securities and the intended method or methods of distribution of such Registrable Securities), and if the Company is unable to file any such document due to the objections of such Holders, the Company shall use its best efforts to cooperate with such Holders to prepare, as soon as practicable, a document that is responsive in all material respects to the reasonable objections of such Holders; (2) prepare and file with the Commission such amendments and post- effective amendments to such Registration Statement as may be necessary to keep such Registration Statement continuously effective and current for the period required by this Agreement to the extent permitted under the Securities Act; and cause each related prospectus to be supplemented -8- by any prospectus supplement as may be required, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and otherwise comply with the provisions of the Securities Act as may be necessary to facilitate the offering of all Registrable Securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of disposition by the selling Holders thereof set forth in such Registration Statement or such prospectus or prospectus supplement; (3) in the case of a registration under Section 3.1 hereof, notify the Holders of the applicable offering (providing, if requested by any such Persons, confirmation in writing) as soon as practicable after becoming aware of: (A) the filing of any prospectus or prospectus supplement or the filing or effectiveness (or anticipated date of effectiveness) of such Registration Statement or any post-effective amendment thereto; (B) any request by the Commission for amendments or supplements to such Registration Statement or the related prospectus or for additional information; (C) the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement or the initiation of any proceedings for that purpose; (D) the receipt by the Company of any notification with respect to the suspension of the qualification or registration (or exemption therefrom) of any Registrable Securities for sale in any jurisdiction in the United States or the initiation or threatening of any proceeding for such purposes; or (E) the happening of any event that makes any statement made in such Registration Statement or in any related prospectus, prospectus supplement, amendment or document incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registration Statement or in any such prospectus, supplement, amendment or other such document so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus in the light of the circumstances under which they were made) not misleading; (4) except to the extent that such suspension shall have been for reasons related to a Holder of Registrable Securities and not to an act or omission by the Company, make every reasonable effort to obtain the withdrawal of any order or other action suspending the effectiveness of any such Registration Statement or suspending the qualification or registration (or exemption therefrom) of the Registrable Securities for sale in any jurisdiction; (5) as soon as practicable after filing such documents with the Commission, furnish to the Holders and each of the underwriters, if any, without charge, at least one manually signed or conformed copy of such Registration Statement and any post-effective amendment thereto, including financial statements and schedules; and as soon as practicable after the request of any Holder or underwriter, furnish to such Holder or underwriter, as the case may be, at least one copy of any document incorporated by reference in such Registration Statement or in any related prospectus, prospectus supplement or amendment, together with all exhibits thereto (including those previously furnished or incorporated by reference); (6) deliver to the Holders and to each of the underwriters, if any, without charge, as many copies of the prospectus or prospectuses (including each preliminary -9- prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Company consents to the lawful use of any such prospectus or any amendment or supplement thereto by the Holders and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by any such prospectus or any amendment or supplement thereto; (7) use its best efforts to register or qualify the Registrable Securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdiction or to subject itself to taxation in any such jurisdiction or to consent to any material condition which is not reasonable in the judgment of the Board of Directors of the Company; (8) If any event described in SECTION 5.1(3) hereof occurs, use its best efforts to cooperate with the Commission to prepare, as soon as practicable, any amendment or supplement to such registration statement or such related prospectus and any other additional information, or to take other action that may have been requested by the Commission; (9) use its best efforts to cause all Common Stock constituting Registrable Securities covered by such registration statement to be listed on each securities exchange (or quotation system operated by a national securities association) on which the Common Stock of the Company is then listed (or included), if so requested by the Holders of a majority of the shares of Common Stock which are then Registrable Securities, if any, and enter into customary agreements including, if necessary, a listing application in customary form, and provide a transfer agent for such Registrable Securities no later than the effective date of such registration statement; use its best efforts to cause any other Registrable Securities covered by such registration statement to be listed (or included) on each securities exchange (or quotation system operated by a national securities association) on which securities of the same class and series, if any, are then listed (or included) (or on any exchange or quotation system on which any Person other than a Holder shall have the right to have securities of the same class and series, if any, listed or included), if so requested by such Holders and enter into customary agreements including, if necessary, a listing application in customary form, and, if necessary, provide a transfer agent for such securities no later than the effective date of such registration statement; (10) provide a CUSIP number for the Registrable Securities no later than the effective date of such Registration Statement; (11) enter into customary agreements and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Registrable Securities included in such registration statement. -10- (12) make available, for inspection by the Holders of the Registrable Securities included in such registration and any attorney, accountant or other representative retained by such selling Holders, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Holder, attorney, accountant or other representative in connection with such registration, subject to such Person's entry into such confidentiality agreements as the Company may reasonably request; (13) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission relating to such registration and the distribution of the securities being offered (including, without limitation, Rule 10b-6 and make generally available to its security holders earning statements satisfying the provisions of SECTION 11(A) of the Securities Act beginning with the first month of the Company's first fiscal quarter commencing after the effective date of such registration statement, which earning statements shall cover the 12-month periods thereafter; (14) cooperate and assist in any filings required to be made with the National Association of Securities Dealers, Inc.; and (15) use its best efforts to take all other reasonable steps necessary and appropriate to effect such registration in the manner contemplated by this Agreement. 5.2 FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement that the selling Holders shall furnish to the Company such information regarding themselves or the Registrable Securities held by them, and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. 5.3 HOLDER PROCEDURES. Each Holder agrees that upon receipt of any notice from the Company of the happening of any event described in SECTION 5.1(3)(B), (C), (D), OR (E), such Holder shall forthwith discontinue disposition of any Registrable Securities (but, in the case of an event described in SECTION 5.1(3)(D), in the affected jurisdiction or jurisdictions only) covered by the affected registration statement or prospectus until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by SECTION 5.1(3) OR 5.1(11) hereof or until such Holder is (it being agreed by the Company that the underwriters, if any, shall also be) advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. If the Company shall have given any such notice during a period when a Shelf Registration is in effect, the period described in ARTICLES 2 for the effectiveness of such Registration shall be extended by the number of days from and including the date of the giving of such notice to and including the date when each Holder of Registrable Securities included in such Registration shall have received the copies of the supplemented or amended prospectus contemplated by SECTION 5.1(3) OR 5.1(11) hereof or the Advice, as the case may be. -11- ARTICLE 6 REGISTRATION EXPENSES 6.1 REGISTRATION EXPENSES. All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications or registrations (or the obtaining of exemptions therefrom) of the Registrable Securities), printing expenses (including expenses of printing prospectuses), messenger and delivery expenses, internal expenses (including, without limitation, all salaries and expenses of its officers and employees of the Company performing legal or accounting duties), fees and disbursements of its counsel and its independent certified public accountants (including the expenses of any special audit or "comfort" letters required by or incident to such performance or compliance), securities acts liability insurance (if the Company elects to obtain such insurance), fees and expenses of any special experts retained by the Company in connection with any registration hereunder, fees and expenses of other Persons retained by the Company, reasonable fees and expenses of one counsel for the Holders, selected by the Majority Registered Holders, incurred in connection with each registration hereunder (all such expenses being herein referred to as "Registration Expenses"), shall be borne by the Company; PROVIDED that Registration Expenses shall not include any underwriting discounts, commissions or fees attributable to the sale of the Registrable Securities. ARTICLE 7 CONFIDENTIALITY; INDEMNIFICATION; CONTRIBUTION 7.1 CONFIDENTIALITY. Each Holder of Registrable Securities shall maintain the confidentiality of any confidential information received from or otherwise made available by the Company to such Holder of Registrable Securities pursuant to this Agreement and identified in writing by the Company as confidential and shall enter into such confidentiality agreements as the Company shall reasonably request in connection with its receipt of such information. Information that (i) is or becomes available to a Holder of Registrable Securities from a public source, (ii) is disclosed to a Holder of Registrable Securities by a third-party source whom the Holder of Registrable Securities reasonably believes has the right to disclose such information or (iii) is or becomes required to be disclosed by a Holder of Registrable Securities by law, including, but not limited to, administrative or court orders, shall not be deemed to be confidential information for purposes of this Agreement; PROVIDED, HOWEVER, that to the extent sufficient time is available prior to such disclosure being required to be made pursuant to clause (iii) hereof, the Holders of Registrable Securities shall promptly notify the Company of any request for disclosure and any proposed disclosure pursuant to such clause (iii). The Holders of Registrable Securities shall not grant access, and the Company shall not be required to grant access, to information to any Person who will not agree to maintain the confidentiality (to the same extent a Holder is required to maintain the confidentiality) of any confidential information -12- received from or otherwise made available to it by the Company or the Holders of Registrable Securities under this Agreement and identified in writing by the Company as confidential. 7.2 INDEMNIFICATION BY THE COMPANY. In the event any Registrable Securities are included in a Registration Statement under this Agreement, the Company shall indemnify, to the full extent permitted by law, each Holder of Registrable Securities, its officers, directors, employees and agents, each Person who controls such Holder (within the meaning of the Securities Act) and any investment adviser thereof or agent therefor, against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal expenses) arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement covering any Registrable Securities, any related prospectus or preliminary prospectus, or any amendment or supplement thereto, or any omission or alleged omission to state in any thereof a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or prospectus supplement, in light of the circumstances under which they were made) not misleading unless such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus and the seller failed to deliver a copy of the final or amended prospects at or prior to the confirmation of the sale of the Registrable Securities to the Persons asserting any such loss, claim, damage or liability in the case where such delivery by the selling Holder is required by the Securities Act, except in each case insofar, but only insofar, as the same arises out of or is based upon an untrue statement or alleged untrue statement of a material fact or an omission or alleged omission to state a material fact in such registration statement, prospectus, preliminary prospectus, amendment or supplement, as the case may be, made or omitted, as the case may be, in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use therein. This indemnity is in addition to any liability that the Company may otherwise have. The Company shall also indemnify any underwriters of the Registrable Securities, selling brokers, dealer managers and similar securities industry professionals participating in the distribution and their officers and directors and each Person who controls such underwriters or other Persons (within the meaning of the Securities Act) to the extent provided in the applicable underwriting agreement. 7.3 INDEMNIFICATION BY HOLDERS. In connection with any registration statement covering Registrable Securities, each Holder any of whose Registrable Securities are covered thereby shall furnish to the Company in writing such information and affidavits with respect to such Holder as the Company reasonably requests for use in connection with such registration statement, any related prospectus or preliminary prospectus, or any amendment or supplement thereto, and shall indemnify, to the full extent permitted by law, the Company, the Company's directors, officers, employees and agents, each Person who controls the Company (within the meaning of the Securities Act) and any investment adviser thereof or agent therefor, against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal expenses) arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any registration statement covering any Registrable Securities, any related prospectus or preliminary prospectus, or any amendment or supplement thereto, or any -13- omission or alleged omission to state in any thereof a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus or prospectus supplement, in light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that the same arises out of or is based upon an untrue statement or alleged untrue statement of a material fact or an omission or alleged omission to state a material fact in such registration statement or in such related prospectus, preliminary prospectus, amendment or supplement, as the case may be, made or omitted, as the case may be, in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use therein; PROVIDED, HOWEVER, that in no event shall the liability of any Holder for indemnification under this SECTION 7.2 exceed the proceeds received by such Holder from the sale of Registrable Securities under the applicable registration statement. This indemnity is in addition to any liability that a Holder may otherwise have. Each Holder participating in an offering of Registrable Securities shall, if requested by the managing underwriter or underwriters of such offering, also indemnify any underwriters of such Registrable Securities, selling brokers, dealer managers and similar securities industry professionals participating in the distribution of such Registrable Securities and their officers and directors and each Person who controls such underwriters or other Persons (within the meaning of the Securities Act) to the extent provided in the applicable underwriting agreement. 7.4 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to indemnification under this ARTICLE 7 agrees to give prompt written notice to the indemnifying party after the receipt by such Person of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which such Person will claim indemnification or contribution pursuant to this Agreement and the indemnifying party shall have the right to participate in, and, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and the indemnifying party with respect to such claim, permit the indemnifying party to assume the defense of such claim with counsel reasonably and mutually satisfactory to the parties. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it shall not be obligated to pay the reasonable fees and expenses of more than one counsel with respect to such claim, unless in the reasonable judgment of counsel to such indemnified party, expressed in a writing delivered to the indemnifying party, a conflict of interest may exist between such indemnified party and any other indemnified party with respect to such claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel or counsels (which shall be limited to one counsel per indemnified party). The indemnifying party shall not be subject to any liability for any settlement made without its consent, which consent shall not be unreasonably withheld. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this ARTICLE 7 to the extent of such prejudice. 7.5 CONTRIBUTION. If the indemnification provided for in this ARTICLE 7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu -14- of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations; PROVIDED, HOWEVER, that in no event shall the liability of any Holder for contribution under this SECTION 7.4 exceed the proceeds received by such Holder from the sale of Registrable Securities under the applicable registration statement. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in SECTION 7.3 hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this SECTION 7.4 were determined by PRO RATA allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this ARTICLE 7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in SECTION 7.1 and SECTION 7.2 hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this SECTION 7.4. ARTICLE 8 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. 8.1 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate in any underwritten registration under ARTICLE 3 HEREOF unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements, (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and (c) agrees to pay such Person's PRO RATA portion of all underwriting discounts and commissions. -15- ARTICLE 9 COOPERATION WITH THE COMPANY 9.1 COOPERATION WITH THE COMPANY. Each Holder by the acceptance of Registrable Securities agrees to use its best efforts to cooperate with the Company in all reasonable respects in connection with the preparation and filing of Registration Statements hereunder in which such Registrable Securities are included or requested to be included. ARTICLE 10 MISCELLANEOUS 10.1 NO INCONSISTENT AGREEMENTS. The Company shall not hereafter enter into any agreement with respect to any of its securities that contains provisions that conflict with the provisions hereof in any material respect. The parties hereby acknowledge and agree, however, that the Company may grant to other Persons registration rights, and that if such registration rights are granted, except as otherwise specifically provided herein, the registration rights granted to such Persons shall be PARI PASSU with the registration rights of the Holders as provided herein. 10.2 REMEDIES. Each Holder of Registrable Securities, in addition to being entitled to exercise all rights in an action at law, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 10.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the company shall have obtained the prior written consent of (i) the Holders of a majority of shares of the Common Stock then constituting Registrable Securities and (ii) each such Holder materially and adversely affected by such amendment, modification, supplement, waiver or departure. 10.4 NOTICES. All notices, requests, waivers, releases, consents, and other communications required or permitted by this Agreement (collectively, "Notices") shall be in writing. Notices shall be deemed sufficiently given for all purposes under this Agreement when delivered in person, when dispatched by telegram or (upon written confirmation of receipt) by electronic facsimile transmission or (upon written confirmation of receipt), when dispatched by a nationally recognized overnight courier service, or five (5) Business Days after being deposited in the mail, postage prepaid, if mailed. All Notices shall be delivered as follows: -16- (i) if to Putnam Investment Management, and the funds advised by it, to them at Putnam Investment Management One Post Office Square Boston, Massachusetts 02109 Attn: Mr. Steven Asher, Esq. Assistant General Counsel (ii) if to other Holders, at the address indicated on Schedule A; (iii) if to the Company, to it at The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470 Attn: Mr. Kenneth Baum Telephone: (201) 890-6000 Facsimile: (201) 890-6012 10.5 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, including any successors by merger to the Company. 10.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 10.7 HEADINGS; CONSTRUCTION. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Unless the context otherwise requires, all references to Articles or Sections are to Articles or Sections of this Agreement, "or" is inclusively disjunctive, and words in the singular include the plural and VICE VERSA. In computing any period of time specified in this Agreement, the date of the act or event from which such period of time is to be measured shall be included, any such period shall expire at 5:00 p.m., New York City time, on the last day of such period, and any such period denominated in months shall expire on the date in the last month of such period that has the same numerical designation as the date of the act or event from which such period is to be measured; PROVIDED, HOWEVER, that if there is no date in the last month of such period that has the same numerical designation as the date of such act or event, such period shall expire on the last day of the last month of such period. -17- 10.8 GOVERNING LAW; CHOICE OF FORUM; CAPTIONS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY AND THE PARTIES EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. 10.9 AGREEMENT; SEVERABILITY. This Agreement is intended by the Company and the Holders to be a final expression thereof and is intended to be a complete and exclusive statement of the agreement and understanding of the Company and the Holders in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the Company and any Holders with respect to such subject matter. If one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect, for any reason, the validity, legality and enforceability of the remaining provisions contained herein shall not be in any way affected or impaired thereby, and the provision held to be invalid, illegal or unenforceable shall be reformed to the minimum extent necessary, and in a manner as consistent with the purposes thereof as is practicable, so as to render it valid, legal and enforceable, it being intended that all of the rights and privileges of the Holders hereunder shall be enforceable to the fullest extent permitted by law. -18- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by themselves or by their respective representatives thereunto duly authorized as of the date first above set forth. THE GRAND UNION COMPANY By: /s/ Francis E. Nicastro ------------------------------- Name: Francis E. Nicastro ------------------------ Title: Corporate Vice President ------------------------ and Treasurer -19- IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed by themselves or by their respective representatives thereunto duly authorized as of the date first above set forth. PUTNAM FUNDS EACH OF PUTNAM DIVERSIFIED INCOME TRUST, PUTNAM HIGH INCOME CONVERTIBLE AND BOND FUND, PUTNAM MANAGED HIGH YIELD TRUST, PUTNAM CAPITAL MANAGER TRUST -- PCM HIGH YIELD FUND, PUTNAM MASTER INCOME TRUST, PUTNAM PREMIER INCOME TRUST, PUTNAM MASTER INTERMEDIATE INCOME TRUST, PUTNAM CAPITAL MANAGER TRUST - - - - PCM DIVERSIFIED INCOME, PUTNAM ASSET ALLOCATION FUNDS - - -- BALANCED PORTFOLIO, PUTNAM ASSET ALLOCATION FUNDS -- CONSERVATIVE PORTFOLIO, PUTNAM ASSET ALLOCATION FUNDS -- GROWTH PORTFOLIO, PUTNAM HIGH YIELD MUNICIPAL TRUST, PUTNAM GLOBAL GOVERNMENTAL INCOME TRUST, PUTNAM HIGH YIELD ADVANTAGE FUND, PUTNAM HIGH YIELD TRUST AND PUTNAM MANAGED HIGH YIELD TRUST By: /s/ ------------------------- Senior Vice President PUTNAM DIVERSIFIED INCOME PORTFOLIO / SMITH BARNEY TRAVELERS SERIES FUND BY PUTNAM INVESTMENT MANAGEMENT, INC. By: /s/ ------------------------- Senior Vice President EACH OF SOUTHERN FARM BUREAU ANNUITY INSURANCE COMPANY, AMERITECH PENSION TRUST, US BOND TRUST 93, US BOND TRUST 91, US BOND TRUST 92, US BOND TRUST 94-03, US BOND TRUST 93- 11, CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, US BOND TRUST 91-12, US BOND TRUST 90, MARSH & McLENNAN COMPANIES, INC. U.S. RETIREMENT PLAN AND PUTNAM EMBASSY FUNDS LTD. DIVERSIFIED INCOME FUND BY THE PUTNAM ADVISORY COMPANY, INC. By: /s/ ------------------------- Senior Vice President -20- SCHEDULE A TO REGISTRATION RIGHTS AGREEMENT INITIAL HOLDERS OF REGISTRABLE SECURITIES EACH OF PUTNAM DIVERSIFIED INCOME TRUST, PUTNAM HIGH INCOME CONVERTIBLE AND BOND FUND, PUTNAM MANAGED HIGH YIELD TRUST, PUTNAM CAPITAL MANAGER TRUST -- PCM HIGH YIELD FUND, PUTNAM MASTER INCOME TRUST, PUTNAM PREMIER INCOME TRUST, PUTNAM MASTER INTERMEDIATE INCOME TRUST, PUTNAM CAPITAL MANAGER TRUST -- PCM DIVERSIFIED INCOME, PUTNAM ASSET ALLOCATION FUNDS -- BALANCED PORTFOLIO, PUTNAM ASSET ALLOCATION FUNDS -- CONSERVATIVE PORTFOLIO, PUTNAM ASSET ALLOCATION FUNDS - - -- GROWTH PORTFOLIO, PUTNAM HIGH YIELD MUNICIPAL TRUST, PUTNAM GLOBAL GOVERNMENTAL INCOME TRUST, PUTNAM HIGH YIELD ADVANTAGE FUND, PUTNAM HIGH YIELD TRUST AND PUTNAM MANAGED HIGH YIELD TRUST PUTNAM DIVERSIFIED INCOME PORTFOLIO / SMITH BARNEY TRAVELERS SERIES FUND BY PUTNAM INVESTMENT MANAGEMENT, INC. EACH OF SOUTHERN FARM BUREAU ANNUITY INSURANCE COMPANY, AMERITECH PENSION TRUST, US BOND TRUST 93, US BOND TRUST 91, US BOND TRUST 92, US BOND TRUST 94-03, US BOND TRUST 93-11, CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, US BOND TRUST 91-12, US BOND TRUST 90, MARSH & McLENNAN COMPANIES, INC. U.S. RETIREMENT PLAN AND PUTNAM EMBASSY FUNDS LTD. DIVERSIFIED INCOME FUND BY THE PUTNAM ADVISORY COMPANY, INC. -21- EX-4.7 12 EXHIBIT 4.7 EXHIBIT 4.7 ================================================================================ REGISTRATION RIGHTS AGREEMENT BY AND AMONG THE GRAND UNION COMPANY AND THE HOLDERS NAMED HEREIN ________________________ DATED AS OF JUNE 15, 1995 ________________________ ================================================================================ TABLE OF CONTENTS PAGE 1. DEFINITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. INITIAL REGISTRATION UNDER THE SECURITIES ACT.. . . . . . . . . . . . . 3 (a) INITIAL SHELF REGISTRATION.. . . . . . . . . . . . . . . . . . . . 3 (b) SUBSEQUENT SHELF REGISTRATIONS.. . . . . . . . . . . . . . . . . . 4 (c) AMENDMENTS OR SUBSEQUENT SHELF REGISTRATIONS . . . . . . . . . . . 4 (d) EFFECTIVENESS PERIOD . . . . . . . . . . . . . . . . . . . . . . . 4 (e) OPTION TO EXTEND INITIAL SHELF REGISTRATION. . . . . . . . . . . . 5 (f) SELECTION OF UNDERWRITERS. . . . . . . . . . . . . . . . . . . . . 5 3. PIGGYBACK REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . 5 4. BLACKOUT PERIODS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6. REGISTRATION PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . 8 7. UNDERWRITTEN OFFERINGS. . . . . . . . . . . . . . . . . . . . . . . . . 12 (a) REQUESTED UNDERWRITTEN OFFERINGS . . . . . . . . . . . . . . . . . 12 (b) PIGGYBACK UNDERWRITTEN OFFERINGS; PRIORITY . . . . . . . . . . . . 12 (c) HOLDERS OF REGISTRABLE NOTES TO BE PARTIES TO UNDERWRITING AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (d) SELECTION OF UNDERWRITERS FOR PIGGYBACK UNDERWRITTEN OFFERING. . . 13 8. PREPARATION; REASONABLE INVESTIGATION . . . . . . . . . . . . . . . . . 14 (a) REGISTRATION STATEMENTS. . . . . . . . . . . . . . . . . . . . . . 14 (b) CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . 14 9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (a) INDEMNIFICATION BY THE COMPANY . . . . . . . . . . . . . . . . . . 15 (b) INDEMNIFICATION BY THE OFFERORS AND SELLERS. . . . . . . . . . . . 16 (c) NOTICES OF LOSSES, ETC.. . . . . . . . . . . . . . . . . . . . . . 16 (d) CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (e) OTHER INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 18 (f) INDEMNIFICATION PAYMENTS . . . . . . . . . . . . . . . . . . . . . 18 10. REGISTRATION RIGHTS TO OTHERS . . . . . . . . . . . . . . . . . . . . . 18 11. ADJUSTMENTS AFFECTING REGISTRABLE NOTES . . . . . . . . . . . . . . . . 18 12. RULE 144 AND RULE 144A. . . . . . . . . . . . . . . . . . . . . . . . . 19 13. AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 19 -i- 14. NOMINEES FOR BENEFICIAL OWNERS. . . . . . . . . . . . . . . . . . . . . 19 15. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 16. CALCULATION OF PERCENTAGE OF PRINCIPAL AMOUNT OF REGISTRABLE NOTES. . . 20 17. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 (a) FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . 20 (b) HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 (c) NO INCONSISTENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . 20 (d) REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 (e) ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 21 (f) NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 (g) GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 (h) SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 (i) COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Schedules: Schedule A -- Holders of Registrable Notes Schedule B -- Notices -ii- REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of June 15, 1995 (this "Agreement"), by and among The Grand Union Company, a Delaware corporation (the "Company"), and the holders of Registrable Notes (as hereinafter defined) who are signatories to this Agreement (the "Holders"). This Agreement is being entered into in accordance with the Plan in connection with the acquisition of Notes (as hereinafter defined) by certain holders (the "Original Holders") pursuant to the Plan (as hereinafter defined). Each Original Holder owns the aggregate principal amount of Notes specified with respect to such Original Holder in Schedule A hereto as such Schedule A may be amended from time to time in accordance with the Plan and the order confirming the Plan. To induce the holders of Registrable Notes (as hereinafter defined) to vote in favor of the Plan and to accept the issuance of the Notes by the Company under the Plan, the Company has undertaken to register Registrable Notes under the Securities Act (as hereinafter defined) and to take certain other actions with respect to the Registrable Notes. This Agreement sets forth the terms and conditions of such undertaking. In consideration of the premises and the mutual agreements set forth herein, the parties hereto hereby agree as follows: 1. DEFINITIONS. Unless otherwise defined herein, capitalized terms used herein and in the recitals above shall have the following meanings: "AFFILIATE" of a Person means any Person that controls, is under common control with, or is controlled by, such other Person. For purposes of this definition, "control" means the ability of one Person to direct the management and policies of another Person. "BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to be closed. "COMMISSION" means the United States Securities and Exchange Commission. "EFFECTIVE DATE" means the effective date of the Plan pursuant to the terms thereof. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any similar or successor statute. "EXPENSES" means all expenses incident to the Company's performance of or compliance with its obligations under this Agreement, including, without limitation, all registration, filing, listing, stock exchange and NASD fees, all fees and expenses of complying with state securities or blue sky laws (including fees, disbursements and other charges of counsel for the underwriters in connection with blue sky filings), all word processing, duplicating and printing expenses, messenger and delivery expenses, all rating agency fees, the fees, disbursements and other charges of counsel for the Company and of its independent public accountants, including the expenses incurred in connection with "comfort" letters required by or incident to such performance and compliance, any fees and disbursements of underwriters customarily paid by issuers and sellers of securities and the reasonable fees, disbursements and other charges of one firm of counsel (per registration prepared) chosen by the Holders of a majority of the aggregate principal amount of Registrable Notes, but excluding underwriting discounts and commissions and applicable transfer taxes, if any, which discounts, commissions and transfer taxes shall be borne by the seller or sellers of Registrable Notes in all cases. "Holder" means (i) the Original Holders and (ii) any transferees of the Registrable Notes (a) whose Notes continue to be Registrable Notes and (b) who have been assigned the Transferor's rights under Section 15 hereof. "INDENTURE" means the Indenture between the Company and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), dated as of June 15, 1995, as amended from time to time, relating to the Notes. "INITIAL SHELF REGISTRATION" has the meaning set forth in Section 2 hereof. "NASD" means the National Association of Securities Dealers, Inc. "NASDAQ" means the National Association of Securities Dealers, Inc. Automated Quotation System. "NOTES" means up to $595,475,922 in aggregate principal amount of 12% Senior Notes due September 1, 2004 to be issued pursuant to the Plan, and includes any securities of the Company issued or issuable with respect to such securities by way of a recapitalization, merger, consolidation or other reorganization or otherwise. "PERSON" means any individual, corporation, partnership, firm, joint venture, association, joint stock company, trust, unincorporated organization, governmental or regulatory body or subdivision thereof or other entity. -2- "PLAN" means the Second Amended Chapter 11 Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code for The Grand Union Company, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "PUBLIC OFFERING" means a public offering and sale of securities pursuant to an effective registration statement under the Securities Act. "REGISTRABLE NOTES" means the Notes held by the Initial Holders (and Transferees of such Registrable Notes which are "Holders" hereunder); PROVIDED, HOWEVER, that Registrable Notes shall cease to be Registrable Notes upon (i) any sale or distribution pursuant to a registration statement; (ii) any sale or distribution permitting the recipient thereof to sell such Notes without restriction under the Securities Act and any state securities laws; or (iii) the receipt by a Holder of Registrable Notes of an opinion, satisfactory in form and substance to such Holder, by legal counsel, reasonably acceptable to such Holder, to the effect that the public sale of such Notes without restriction under the Securities Act and any state securities laws does not require the registration of such Notes under the Securities Act and any state securities laws. "REQUESTING HOLDERS" has the meaning set forth in Section 3 hereof. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar or successor statute. "SUBSEQUENT SHELF REGISTRATION" has the meaning set forth in Section 2 hereof. "TRANSFER" means any transfer, sale, assignment, pledge, hypothecation or other disposition of any interest. "TRANSFEROR" and "TRANSFEREE" have correlative meanings. 2. INITIAL REGISTRATION UNDER THE SECURITIES ACT. (a) INITIAL SHELF REGISTRATION. The Company shall (i) cause to be filed as soon as practicable, but not later than 90 days after the Effective Date, a shelf registration statement pursuant to Rule 415 promulgated under the Securities Act (the "Initial Shelf Registration") providing for the sale by the Holders of all of the Registrable Notes and (ii) use its best efforts to have such Initial Shelf Registration thereafter declared effective by the Commission not later than 135 days after the Effective Date. -3- (b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration terminates prior to the end of the Effectiveness Period (as defined in Section 2(d) hereof), then prior to the termination of the effectiveness of the Initial Shelf Registration the Company shall file, and shall use its best efforts to cause the Commission to declare effective, a subsequent Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act covering all of the Registrable Notes which remain outstanding (the "Subsequent Shelf Registration"). The Subsequent Shelf Registration shall be filed by the Company at such time prior to the termination of the effectiveness of the Initial Shelf Registration which is reasonably calculated to cause the Subsequent Shelf Registration to become effective on or before the date on which the effectiveness of the Initial Shelf Registration terminates, and shall, in any event, be filed on or before 180 days prior to the termination of such effectiveness of the Initial Shelf Registration. (c) AMENDMENTS OR SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration (except as provided in Section 2(b)) or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (as defined in Section 2(d) hereof) for a reason other than because of the sale of all of the Registrable Notes covered thereby, subject to Section 2(b), the Company shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall, within 60 days of such cessation of effectiveness, amend such Initial Shelf Registration or Subsequent Shelf Registration in a manner reasonably calculated to obtain the withdrawal of the order suspending the effectiveness thereof, or shall file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of such Registrable Notes which remain unsold. "Subsequent Shelf Registration" means any Shelf Registration after the Initial Shelf Registration, pursuant to Section 2(b) or this Section 2(c). (Each of the Initial Shelf Registration and the Subsequent Shelf Registration are referred to individually herein as a "Shelf Registration" and collectively as the "Shelf Registrations"). (d) EFFECTIVENESS PERIOD. The Company shall use its best efforts to keep the Shelf Registration (including the Initial Shelf Registration and any Subsequent Shelf Registration) continuously effective under the Securities Act for a period of four (4) years following the date on which the Initial Shelf Registration became effective (the "Effectiveness Period"), or such shorter period ending when all Registrable Notes covered by the Initial Shelf -4- Registration have been sold; PROVIDED, HOWEVER, that the Effectiveness Period shall be extended by any period during which a Shelf Registration is not in effect or during which sales have been suspended, whether pursuant to Section 4, Section 6(g) hereof or otherwise. If a Subsequent Shelf Registration is filed, pursuant to Section 2(b) or 2(c) hereof, the Company shall use its best efforts to cause the Subsequent Shelf Registration to be declared effective as soon as practicable after such filing and to keep such Registration Statement continuously effective for a period after such effectiveness equal to the Effectiveness Period, less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously in effect. The intent of this provision is that the Shelf Registration (including the Initial Shelf Registration and any Subsequent Shelf Registration) shall be in effect for a number of days, in aggregate, equal to four (4) years; PROVIDED THAT a Shelf Registration shall not be required to be maintained in effect after all of the Registrable Notes have been sold or otherwise distributed such that they are no longer deemed to be Registrable Notes hereunder. (e) OPTION TO EXTEND INITIAL SHELF REGISTRATION. In lieu of filing the Subsequent Shelf Registration required under Section 2(b) hereof, the Company may, in its sole discretion and if permitted by applicable law, keep the Initial Shelf Registration continuously effective for the remainder of the Effectiveness Period or, if earlier, until all of the Registrable Notes eligible to be included in the Subsequent Required Registration have been sold such that they are no longer Registrable Notes hereunder. (f) SELECTION OF UNDERWRITERS. The underwriter or underwriters of each underwritten offering, if any, of the Registrable Notes to be registered pursuant to Section 2 hereof (i) shall be a nationally recognized underwriter (or underwriters), (ii) shall be selected by the Holders owning at least a majority of the aggregate outstanding principal amount of Registrable Notes being sold in any such underwritten offering and (iii) shall be reasonably acceptable to the Company. 3. PIGGYBACK REGISTRATION. If the Company, at any time prior to the expiration of the Effectiveness Period when there is not an effective Shelf Registration for the Registrable Notes, proposes to register any of its securities under the Securities Act by registration on any forms (other than in connection with the registration of securities issued or issuable pursuant to an employee stock option, stock purchase, stock bonus or similar plan or dividend reinvestment plan or pursuant to a merger, exchange offer or transaction of the type -5- specified in Rule 145(a) under the Securities Act), whether or not pursuant to registration rights granted to other holders of its securities and whether or not for sale for its own account, it shall give prompt written notice to all of the Holders of its intention to do so and of such Holders' rights (if any) under this Section 3, which notice, in any event, shall be given at least 30 days prior to such proposed registration. Upon the written request of any Holder receiving notice of such proposed registration (a "Requesting Holder") made within 20 days after the receipt of any such notice (10 days if the Company states in such written notice or gives telephonic notice to the relevant security holders, with written confirmation to follow promptly thereafter, stating that (i) such registration will be on Form S-3 and (ii) such shorter period of time is required because of a planned filing date), which request shall specify the Registrable Notes intended to be disposed of by such Requesting Holder and the minimum offering price per $1,000 principal amount of Note at which the Holder is willing to sell its Registrable Notes, the Company shall, subject to Section 6(b) hereof, effect the registration under the Securities Act of all Registrable Notes; PROVIDED, THAT, (A) with respect to a registration of Notes, prior to the effective date of the registration statement filed in connection with such registration, promptly following receipt of notification by the Company from the managing underwriter of the price at which such securities are to be sold, if applicable, the Company shall so advise each Requesting Holder of such price, and if such price is below the minimum price which any Requesting Holder shall have indicated to be acceptable to such Requesting Holder, such Requesting Holder shall then have the right irrevocably to withdraw its request to have its Registrable Notes included in such registration statement, by delivery of written notice of such withdrawal to the Company within five business days of its being advised of such price, without prejudice to the rights of any Holder or Holders of Registrable Notes to include Registrable Notes in any future registration (or registrations) pursuant to this Section 3; and (B) with respect to a registration of Notes, if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Requesting Holder and (i) in the -6- case of a determination not to register, shall be relieved of its obligation to register any Registrable Notes in connection with such registration (but not from any obligation of the Company to pay the Expenses in connection therewith), without prejudice, however, to the rights of any Holder to include Registrable Notes in any future registration (or registrations) pursuant to this Section 3 and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Notes, for the same period as the delay in registering such other securities. No registration effected under this Section 3 shall relieve the Company of its obligations under Section 2 hereof. 4. BLACKOUT PERIODS. With respect to a Shelf Registration filed or to be filed pursuant to Section 2 hereof, if the Board of Directors of the Company shall determine, in its good faith reasonable judgment, that to maintain the effectiveness of such Shelf Registration or to permit such Shelf Registration to become effective (or if no Shelf Registration has yet been filed, to file such Shelf Registration) would be significantly disadvantageous to the Company's financial condition, business or prospects (a "Disadvantageous Condition") in light of the existence, or in anticipation, of (i) any acquisition or financing activity involving the Company, or any subsidiary of the Company, including a proposed public offering, (ii) an undisclosed material event, the public disclosure of which would have a material adverse effect on the Company, (iii) a proposed material transaction involving the Company or a substantial amount of its assets, or (iv) any other circumstance or condition the disclosure of which would materially disadvantage the Company, and the existence of which renders any to be filed, then filed or effective Shelf Registration inadequate as failing to include material information, then the Company may, until such Disadvantageous Condition no longer exists (but not with respect to more than four occasions nor for more than 120 days in the aggregate nor involving more than 45 days in the aggregate during any continuous 12-month period) cause such Shelf Registration to be withdrawn and the effectiveness of such Shelf Registration to be terminated or, if no Shelf Registration has yet been filed, elect not to file such Shelf Registration. If the Company determines to take any action pursuant to the preceding sentence, the Company shall deliver a notice to any Holder of Registrable Notes covered or to be covered under such withdrawn or not to be filed Shelf Registration, which indicates that the Shelf Registration is no longer effective or will not be filed. Upon the receipt of any such notice, such Persons shall forthwith discontinue use of the prospectus contained in such Shelf Registration. If any Disadvantageous Condition shall cease to exist, the Company -7- shall promptly notify any Holders, who shall have ceased selling Registrable Notes pursuant to an effective Shelf Registration as a result of such Disadvantageous Condition, indicating such cessation and disclosing in reasonable detail the nature and outcome of such Disadvantageous Condition. The Company shall, if any Shelf Registration required to be filed or maintained under this Agreement has been withdrawn or not filed, file promptly, at such time as it in good faith deems appropriate, a new Shelf Registration covering the Registrable Notes that were covered by such withdrawn Shelf Registration or to be covered by such unfiled Shelf Registration. 5. EXPENSES. The Company shall pay all Expenses in connection with any registration initiated pursuant to Section 2 or 3 hereof, whether or not such registration shall become effective. 6. REGISTRATION PROCEDURES. If and whenever the Company is required to effect any registration under the Securities Act as provided in Sections 2 and 3 hereof, the Company shall, as expeditiously as possible: (a) promptly prepare and file with the Commission the requisite registration statement to effect such registration and thereafter use its reasonable best efforts to cause such registration statement to become effective; PROVIDED, HOWEVER, that the Company may discontinue any registration of its securities that are not Registrable Notes (and, under the circumstances specified in Sections 3 and 7(b) hereof, its securities that are Registrable Notes) at any time prior to the effective date of the registration statement relating thereto; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the offering of all Registrable Notes covered by such registration statement until such time as all of such Registrable Notes have been disposed of in accordance with the method of disposition set forth in such registration statement; (c) in the case of a registration pursuant to Section 2 or 3 hereof, furnish to each seller of Registrable Notes covered by such registration statement such number of copies of such drafts and final conformed versions of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits and any documents incorporated by reference), such number of copies of such drafts and final versions of the prospectus -8- contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in writing; (d) use its best efforts (i) to register or qualify all Registrable Notes and other securities covered by such registration statement under such other securities or blue sky laws of such states or other jurisdictions of the United States of America as the sellers of Registrable Notes covered by such registration statement shall reasonably request in writing, (ii) to keep such registration or qualification in effect for so long as such registration statement remains in effect and (iii) to take any other action that may be reasonably necessary or advisable to enable such sellers to consummate the disposition in such jurisdictions of the securities to be sold by such sellers, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subsection (d) be obligated to be so qualified, to subject itself to taxation in such jurisdiction or to consent to general service of process in any such jurisdiction; (e) use its best efforts to cause all Registrable Notes covered by such registration statement to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary in the opinion of counsel to the Company and counsel to the seller or sellers of Registrable Notes to enable the seller or sellers thereof to consummate the offering of such Registrable Notes; (f) use its best efforts to obtain and, if obtained, furnish a copy to each seller of Registrable Notes, and each such seller's underwriters, if any, of (i) an opinion of counsel for the Company, dated the effective date of such registration statement (and, if such registration involves an underwritten offering, dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to counsel to the Holders chosen by Holders of a majority of the aggregate principal amount of Registrable Notes being registered, and (ii) a "comfort" letter, dated the effective date of such registration statement (and, if such registration involves an underwritten offering, dated -9- the date of the closing under the underwriting agreement) and signed by the independent public accountants who have certified the Company's financial statements included or incorporated by reference in such registration statement, reasonably satisfactory in form and substance to counsel to the Holders chosen by Holders of a majority of the aggregate principal amount of Registrable Notes being registered, in each case, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' comfort letter, with respect to events subsequent to the date of such financial statements and matters contained in such registration statement, as are customarily covered in opinions of issuer's counsel and in accountants' comfort letters delivered to underwriters in underwritten Public Offerings of securities; (g) notify the sellers of Registrable Notes (providing, if requested by any such Persons, confirmation in writing) as soon as practicable after becoming aware of: (A) the filing of any prospectus or prospectus supplement or the filing or effectiveness (or anticipated date of effectiveness) of such registration statement or any post-effective amendment thereto; (B) any request by the Commission for amendments or supplements to such registration statement or the related prospectus or for additional information; (C) the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or the initiation of any proceedings for the purpose; (D) the receipt by the Company of any notification with respect to the suspension of the qualification or registration (or exemption therefrom) of any Registrable Securities for sale in any jurisdiction in the United States or the initiation or threatening of any proceeding for such purposes; or (E) the happening of any event that makes any statement made in such registration statement or in any related prospectus, prospectus supplement, amendment or document incorporated therein by reference untrue in any material respect or that requires the making of any changes in such registration statement or in any such prospectus, supplement, amendment or other such document so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus in the light of the circumstances under which they were made) not misleading; (h) otherwise comply with all applicable rules and regulations of the Commission and any other governmental -10- agency or authority having jurisdiction over the offering, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder, and furnish to each seller of Registrable Notes at least three (3) Business Days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus; (i) use its best efforts to cause, on or before the date which is one hundred twenty (120) days after the Effective Date, all such Registrable Notes covered by such registration statement (a) to be listed on a national securities exchange on which similar securities issued by the Company are then listed, if the listing of such Registrable Notes is then permitted under the rules of such exchange or (b) if the Company is not required pursuant to clause (a) above to list such securities covered by such registration statement on a national securities exchange, use its best efforts to secure designation of all Registrable Notes covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure NASDAQ authorization for such Registrable Notes and, without limiting the generality of the foregoing, to use reasonable efforts to arrange for at least two market makers to register with the NASD as such with respect to such Registrable Notes; (j) obtain a CUSIP number for all Registrable Notes; (k) enter into customary agreements and take all such other reasonable actions in connection therewith in order to expedite or facilitate the disposition of the Registrable Notes included in such registration statement; (l) make every reasonable effort to obtain the withdrawal of any order or other action suspending the effectiveness of any such registration statement or suspending the qualification or registration (or exemption therefrom) of the Registrable Securities for sale in any jurisdiction; and (m) if any event described in subsection (g) hereof occurs, use its best efforts to cooperate with the Commission to prepare, as soon as practicable, any amendment or supplement to such registration statement or such related prospectus and any other additional -11- information, or to take other action that may have been requested by the Commission. It shall be a condition precedent to the obligations of the Company to take action pursuant to this Agreement that the selling Holders shall furnish to the Company such information regarding themselves and the Registrable Notes held by them, and the intended method of disposition of such securities, as shall be required to effect the registration of their Registrable Notes. In the case of a registration pursuant to Section 2 or 3 hereof, each Holder agrees that as of the date that a final prospectus is made available to it for distribution to prospective purchasers of Registrable Notes it shall cease to distribute copies of any preliminary prospectus prepared in connection with the offer and sale of such Registrable Notes. Each Holder further agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in subsection (g) of this Section 5, such Holder shall forthwith discontinue such Holder's disposition of Registrable Notes pursuant to the registration statement relating to such Registrable Notes until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by subsection (m) of this Section 5 and, if so directed by the Company, shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the prospectus relating to such Registrable Notes current at the time of receipt of such notice. 7. UNDERWRITTEN OFFERINGS. (a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the underwriters (if any) in connection with registration under Section 2 hereof, the Company shall enter into a firm commitment underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company and a majority of the Holders whose Registrable Notes are included in such registration, and the underwriters and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnification and contribution to the effect and to the extent provided in Section 9 hereof. (b) PIGGYBACK UNDERWRITTEN OFFERINGS; PRIORITY. If the Company proposes to register any of its securities under the Securities Act and the Holders have piggyback rights pursuant to Section 3 hereof with respect to such registration and any such securities are to be distributed by or through one or more underwriters, the Company shall -12- use reasonable efforts to arrange for such underwriters to include all of the Registrable Notes to be offered and sold by the Holders thereof among the securities of the Company to be distributed by such underwriters; provided, that, notwithstanding any other provision herein contained, if the managing underwriter of such underwritten offering shall advise the Company in writing (with a copy to the Holders) that the inclusion of the Registrable Notes in such registration would materially and adversely affect the success of such offering, then the number of Registrable Notes to be included shall be reduced to the extent necessary to reduce the Registrable Notes to the number recommended by the underwriter (which amount may be zero); PROVIDED, HOWEVER, that any such reduction in the number of Registrable Notes to be included shall not take effect if the effect of such reduction would be to allow holders of piggyback rights relating to other debt securities of the Company to include any of their debt securities in any such offering. (c) HOLDERS OF REGISTRABLE NOTES TO BE PARTIES TO UNDERWRITING AGREEMENT. The Holders of Registrable Notes to be distributed by underwriters in an underwritten Offering contemplated by subsections (a) or (b) of this Section 6 shall be parties to the underwriting agreement between the Company and such underwriters and any such Holder, at its option, may require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holders. No such Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, such Holder's Registrable Notes and such Holder's intended method of distribution and indemnification and contribution customary in secondary offerings to the effect and to the extent provided in Section 9 hereof. (d) SELECTION OF UNDERWRITERS FOR PIGGYBACK UNDERWRITTEN OFFERING. The underwriter or underwriters of each piggyback underwritten offering pursuant to this Section 6 shall be a nationally recognized underwriter (or underwriters) selected by the Company. -13- 8. PREPARATION; REASONABLE INVESTIGATION. (a) REGISTRATION STATEMENTS. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Agreement, the Company shall give each holder of Registrable Notes registered under such registration statement, the underwriters, if any, and its respective counsel and accountants the reasonable opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and shall give each of them such reasonable access to its books and records and such reasonable opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the reasonable opinion of any such Holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. (b) CONFIDENTIALITY. Each Holder of Registrable Notes shall maintain the confidentiality of any confidential information received from or otherwise made available by the Company to such Holder of Registrable Notes pursuant to this Agreement and identified in writing by the Company as confidential and shall enter into such confidentiality agreements as the Company shall reasonably request. Information that (i) is or becomes available to a Holder of Registrable Notes from a public source, (ii) is disclosed to a Holder of Registrable Notes by a third-party source whom the Holder of Registrable Notes reasonably believes has the right to disclose such information or (iii) is or becomes required to be disclosed by a Holder of Registrable Notes by law, including, but not limited to, administrative or court orders, shall not be deemed to be confidential information for purposes of this Agreement; provided, however, that to the extent sufficient time is available prior to such disclosure being required to be made pursuant to clause (iii) hereof, the Holders of Registrable Notes shall promptly notify the Company of any request for disclosure and any proposed disclosure pursuant to such clause (iii). The Holders of Registrable Notes shall not grant access, and the Company shall not be required to grant access, to information under this Section 7 to any Person who will not agree to maintain the confidentiality (to the same extent a Holder is required to maintain the confidentiality) of any confidential information received from or otherwise made available to it by the Company or the holders of Registrable Notes under this Agreement and identified in writing by the Company as confidential. -14- 9. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In connection with any registration statement filed by the Company pursuant to Section 2 or 3 hereof, the Company shall, and hereby agrees to, indemnify and hold harmless, each Holder and seller of any Registrable Notes covered by such registration statement and each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such Holder or seller or any such underwriter, and their respective directors, officers, partners, agents and Affiliates (each, a "Company Indemnitee" for purposes of this Section 9(a)), against any losses, claims, damages, liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof and whether or not such Indemnified Party is a party thereto), joint or several, and expenses, including, without limitation, the reasonable fees, disbursements and other charges of legal counsel and reasonable out-of-pocket costs of investigation, to which such Company Indemnitee may become subject under the Securities Act or otherwise (collectively, a "Loss" or "Losses"), insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered pursuant to this Agreement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto (collectively, "Offering Documents"), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances in which they were made not misleading; PROVIDED, THAT, the Company shall not be liable in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Offering Documents in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by or on behalf of such Company Indemnitee specifically stating that it is expressly for use therein; and PROVIDED, FURTHER, that the Company shall not be liable to any Person who participates in the offering or sale of Registrable Notes or any other Person, if any, who controls such Person, in any such case to the extent that any such Loss arises out of such Person's failure to send or give a copy of the final prospectus (including any documents incorporated by reference therein), as the same may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Notes to such Person if such -15- statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Indemnitee and shall survive the transfer of such securities by such Company Indemnitee. (b) INDEMNIFICATION BY THE OFFERORS AND SELLERS. In connection with any registration statement filed by the Company pursuant to Section 2 or 3 hereof in which a Holder has registered for sale Registrable Notes, each such Holder or seller of Registrable Notes shall, and hereby agrees to, indemnify and hold harmless the Company and each of its directors, officers, employees and agents, each other Person who participates as an underwriter in the offering or sale of such securities, each other Person, if any, who controls the Company, any such underwriter and each other seller and such underwriter's or seller's directors, officers, stockholders, partners, employees, agents and affiliates (each a "Holder Indemnitee" for purposes of this Section 9(b)), against all Losses insofar as such Losses arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Offering Documents (or any document incorporated by reference therein) or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in the light of circumstances in which they were made not misleading, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such Holder or seller of Registrable Notes specifically stating that it is expressly for use therein; PROVIDED, HOWEVER, that the liability of such indemnifying party under this Section 9(b) shall be limited to the amount of the net proceeds received by such indemnifying party in the offering giving rise to such liability. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Holder Indemnitee and shall survive the transfer of such securities by such Holder. (c) NOTICES OF LOSSES, ETC. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a Loss referred to in the preceding subsections of this Section 9, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; PROVIDED, HOWEVER, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subsections of this Section 9, except to the extent that -16- the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such Loss, to assume and control the defense thereof, in each case at its own expense, jointly with any other indemnifying party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from such indemnifying party of its assumption of the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall be liable for any settlement of any such action or proceeding effected without its written consent, which shall not be unreasonably withheld. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such Loss or which requires action on the part of such indemnified party or otherwise subjects the indemnified party to any obligation or restriction to which it would not otherwise be subject. (d) CONTRIBUTION. If the indemnification provided for in this Section 9 shall for any reason be unavailable to an indemnified party under subsection (a) or (b) of this Section 9 in respect of any Loss, then, in lieu of the amount paid or payable under subsection (a) or (b) of this Section 9, the indemnified party and the indemnifying party under subsection (a) or (b) of this Section 9 shall contribute to the aggregate Losses (including legal or other expenses reasonably incurred in connection with investigating the same) (i) in such proportion as is appropriate to reflect the relative fault of the Company and the prospective sellers of Registrable Notes covered by the registration statement which resulted in such Loss or action in respect thereof, with respect to the statements, omissions or action which resulted in such Loss or action in respect thereof, as well as any other relevant equitable considerations, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and such prospective sellers, on the other hand, from their sale of Registrable Notes; PROVIDED, THAT, for purposes of -17- this clause (ii), the relative benefits received by the prospective sellers shall be deemed not to exceed the amount received by such sellers. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The obligations, if any, of the selling holders of Registrable Notes to contribute as provided in this subsection (d) are several in proportion to the relative value of their respective Registrable Notes covered by such registration statement and not joint. In addition, no Person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or Loss effected without such Person's consent. (e) OTHER INDEMNIFICATION. The Company and, in connection with any registration statement filed by the Company pursuant to Section 2, each Holder shall, and, in connection with any registration statement filed by the Company pursuant to Section 3, each Holder who has registered for sale Registrable Notes, shall, with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority other than the Securities Act, indemnify Holder Indemnitees and Company Indemnitees, respectively, against Losses, or, to the extent that indemnification shall be unavailable to a Holder Indemnitee or Company Indemnitee, contribute to the aggregate Losses of such Holder Indemnitee or Company Indemnitee in a manner similar to that specified in the preceding subsections of this Section 9 (with appropriate modifications). (f) INDEMNIFICATION PAYMENTS. The indemnification and contribution required by this Section 9 shall be made by periodic payments of the amount thereof during the course of any investigation or defense, as and when bills are received or any Loss is incurred. 10. REGISTRATION RIGHTS TO OTHERS. If the Company shall at any time hereafter provide to any holder of any securities of the Company rights with respect to the registration of such securities under the Securities Act or the Exchange Act, such rights shall not be in conflict with or adversely affect any of the rights provided in this Agreement to the holders of Registrable Notes. 11. ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall not effect or permit to occur any combination, subdivision or reclassification of Registrable Notes that would materially adversely affect the ability of the -18- Holders to include such Registrable Notes in any registration of its securities under the Securities Act contemplated by this Agreement or the marketability of such Registrable Notes under any such registration or other offering. 12. RULE 144 AND RULE 144A. Prior to the expiration of the Effectiveness Period, the Company shall take all actions reasonably necessary to enable Holders to sell Registrable Notes without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (b) Rule 144A under the Securities Act, as such Rule may be amended from time to time, or (c) any similar rules or regulations hereafter adopted by the Commission, including, without limiting the generality of the foregoing, filing on a timely basis all reports required to be filed under the Exchange Act. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. This paragraph is in addition to and not in derogation of any rights the Holders may have under the Indenture. 13. AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company shall have obtained the prior written consent of (i) the Holders of at least a majority of the aggregate principal amount of Registrable Notes affected by such amendment, modification or waiver and (ii) each such Holder materially and adversely affected by such amendment, modification, supplement, waiver or departure. 14. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable Note is held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election in writing delivered to the Company, be treated as the Holder of such Registrable Note for purposes of any request or other action by any Holder or Holders pursuant to this Agreement or any determination of the number or percentage of principal amount of Registrable Notes held by any Holder or Holders contemplated by this Agreement. If the beneficial owner of any Registrable Notes so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Notes. -19- 15. ASSIGNMENT. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns including any successor-by-merger of the Company. Any Holder may assign to any permitted Transferee of its Registrable Notes holding Registrable Notes its rights and obligations under this Agreement, provided that such Transferee shall agree in writing with the parties hereto prior to the assignment to be bound by this Agreement as if it were an original party hereto, whereupon such assignee shall for all purposes be deemed to be a Holder under this Agreement. 16. CALCULATION OF PERCENTAGE OF PRINCIPAL AMOUNT OF REGISTRABLE NOTES. For purposes of this Agreement, all references to an aggregate principal amount of Registrable Notes or a percentage thereof shall be calculated based upon the aggregate principal amount of Registrable Notes outstanding at the time such calculation is made and shall exclude any Registrable Notes or Notes, as the case may be, owned by the Company or any subsidiary of the Company. 17. MISCELLANEOUS. (a) FURTHER ASSURANCES. Each of the parties hereto shall execute such documents and other papers and perform such further acts as may be reasonably required or desirable to carry out the provisions of this Agreement and the transactions contemplated hereby. (b) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of any provisions hereof. (c) NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter into any agreement with respect to any of its securities that contain provisions that conflict with the provisions hereof in any material respect. (d) REMEDIES. Each Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and the Company hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. -20- (e) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, and there are no restrictions, promises, representations, warranties, covenants, or undertakings with respect to the subject matter hereof, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties hereto with respect to the subject matter hereof. (f) NOTICES. Any notices or other communications to be given hereunder by any party to another party shall be in writing, shall be delivered personally, by telecopy, by certified or registered mail, postage prepaid, return receipt requested, or by Federal Express or other comparable delivery service, to the address of the party set forth on Schedule B hereto or to such other address as the party to whom notice is to be given may provide in a written notice to the other parties hereto, a copy of which shall be on file with the Secretary of the Company. Notice shall be effective when delivered if given personally, when receipt is acknowledged if telecopied, three days after mailing if given by registered or certified mail as described above, and one business day after deposit if given by Federal Express or comparable delivery service. (g) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made to be performed entirely in such State, without regard to principles of conflicts of law. The Company and the parties each hereby irrevocably submit to the jurisdiction of any New York State court sitting in the City of New York or any Federal Court sitting in the City of New York in respect of any suit, action or proceeding arising out of or relating to this Agreement, and each irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Nothing herein shall affect the right of any party to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. (h) SEVERABILITY. If one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect, for any reason, the validity, legality and enforceability of the remaining provisions contained herein shall not be in any way affected or impaired thereby, and the provision held to be invalid, illegal or unenforceable shall be reformed to the minimum extent necessary, and in a manner as consistent with the purposes thereof as is -21- practicable, so as to render it valid, legal and enforceable, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. (i) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. THE GRAND UNION COMPANY By /s/ Francis E. Nicastro ------------------------ Name: Francis E. Nicastro Title: Corporate Vice President and Treasurer -22- HOLDERS: By signature of the Signature Page for New Senior Note Registration Rights Agreement contained in the Notice to Recipients of New Senior Notes: Registration Rights SCHEDULE A ---------- As specified on the Signature Page for New Senior Note Registration Rights Agreement contained in the Notice to Recipients of New Senior Notes: Registration Rights, subject to verification by the Company. SCHEDULE B ---------- To the Company: The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470 Attn: Kenneth Baum Telephone Number: (201) 890-6000 Facsimile Number: (201) 890-6540 To the Holders: To the address specified on the Signature Page for New Senior Note Registration Rights Agreement contained in the Notice to Recipients of New Senior Notes: Registration Rights EX-10.9 13 EXHIBIT 10.9 Exhibit 10.9 - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- $204,144,371 AMENDED AND RESTATED CREDIT AGREEMENT among THE GRAND UNION COMPANY, VARIOUS LENDING INSTITUTIONS, and BANKERS TRUST COMPANY, AS AGENT, ----------------------------------- Dated as of June 15, 1995 ----------------------------------- - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . 1 1.1 Original Loans. . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.3 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . 6 1.4 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . 7 1.5 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.6 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.7 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . 10 1.8 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.9 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . 11 1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . 12 1.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . 15 1.12 Change of Lending Office. . . . . . . . . . . . . . . . . . . . 16 SECTION 2. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . 16 2.1 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 16 2.2 Letter of Credit Participations . . . . . . . . . . . . . . . . 17 2.3 Letter of Credit Requests; Notices of Issuance. . . . . . . . . 20 2.4 Agreement to Repay Letter of Credit Drawings. . . . . . . . . . 20 2.5 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 3. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . . 22 3.1 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.2 Voluntary Reduction of Commitments. . . . . . . . . . . . . . . 23 3.3 Mandatory Adjustments of Commitments, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 4. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.1 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . 24 4.2 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . 25 4.3 Method and Place of Payment . . . . . . . . . . . . . . . . . . 29 4.4 Net Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 5. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . 30 5.1 Conditions Precedent to Effective Date. . . . . . . . . . . . . 30 5.2 Conditions Precedent to All Credit Events . . . . . . . . . . . 42 SECTION 6. Representations, Warranties and Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 43 6.1 Corporate Status. . . . . . . . . . . . . . . . . . . . . . . . 44 (-i-) Page ---- 6.2 Corporate Power and Authority . . . . . . . . . . . . . . . . . 44 6.3 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . 44 6.4 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 45 6.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 45 6.6 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . 45 6.7 Investment Company Act. . . . . . . . . . . . . . . . . . . . . 45 6.8 Public Utility Holding Company Act. . . . . . . . . . . . . . . 45 6.9 True and Complete Disclosure. . . . . . . . . . . . . . . . . . 46 6.10 Financial Condition; Financial Statements . . . . . . . . . . . 46 6.11 Security Interests. . . . . . . . . . . . . . . . . . . . . . . 48 6.12 Tax Returns and Payments. . . . . . . . . . . . . . . . . . . . 48 6.13 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 49 6.14 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 50 6.15 Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 50 6.16 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . 50 6.17 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 51 6.18 Labor Relations; Collective Bargaining Agreements . . . . . . . 52 6.19 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 52 6.20 Restrictions on Subsidiaries. . . . . . . . . . . . . . . . . . 53 6.21 Representations and Warranties in Other Agreements. . . . . . . 53 6.22 Senior Notes, etc . . . . . . . . . . . . . . . . . . . . . . . 53 6.23 Plan of Reorganization; Confirmation Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 53 7.1 Information Covenants . . . . . . . . . . . . . . . . . . . . . 54 7.2 Books, Records and Inspections. . . . . . . . . . . . . . . . . 58 7.3 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . 58 7.4 Corporate Franchises. . . . . . . . . . . . . . . . . . . . . . 58 7.5 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . 58 7.6 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 7.7 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . . 61 7.8 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . . . 61 7.9 Cash Concentration Requirements . . . . . . . . . . . . . . . . 61 7.10 Maintenance of Property; Insurance. . . . . . . . . . . . . . . 62 7.11 Additional Security; Further Assurances . . . . . . . . . . . . 62 7.12 Maintenance of Corporate Separateness . . . . . . . . . . . . . 64 7.13 Subsidiary Guaranty; Subsidiary Pledge Agreement and Subsidiary Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . 64 8.1 Consolidation, Merger, Sale or Purchase of Assets, etc. . . . . 65 (-ii-) Page ---- 8.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 8.3 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 68 8.4 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . 69 8.5 Advances, Investments and Loans . . . . . . . . . . . . . . . . 71 8.6 Dividends, etc. . . . . . . . . . . . . . . . . . . . . . . . . 73 8.7 Transactions with Affiliates. . . . . . . . . . . . . . . . . . 73 8.8 Changes in Business . . . . . . . . . . . . . . . . . . . . . . 74 8.9 EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 8.10 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . 75 8.11 EBITDA to Total Cash Interest Expense . . . . . . . . . . . . . 75 8.12 Cumulative EBITDA Minus Cumulative Adjusted Consolidated Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . 75 8.13 Limitation on Voluntary Payments; Preferred Stock; etc. . . . . 76 8.14 Issuance of Subsidiary Stock. . . . . . . . . . . . . . . . . . 76 8.15 Limitation on Restrictions Affecting Subsidiaries . . . . . . . 76 SECTION 9. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 77 9.1 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 9.2 Representations, etc. . . . . . . . . . . . . . . . . . . . . . 77 9.3 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 9.4 Default Under Other Agreements. . . . . . . . . . . . . . . . . 78 9.5 Bankruptcy, etc.. . . . . . . . . . . . . . . . . . . . . . . . 78 9.6 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 9.7 Security Documents. . . . . . . . . . . . . . . . . . . . . . . 79 9.8 Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . 79 9.9 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 9.10 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 9.11 Confirmation Orders . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 11. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 11.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . 110 11.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . 111 11.3 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . . 111 11.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . 112 11.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . 112 11.6 Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . 113 11.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 113 11.8 Agent in Its Individual Capacity. . . . . . . . . . . . . . . . 114 11.9 Resignation of Agent; Successor Agent . . . . . . . . . . . . . 114 (-iii-) SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 114 12.1 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . . . 114 12.2 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . 116 12.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 12.4 Benefit of Agreement. . . . . . . . . . . . . . . . . . . . . . 117 12.5 No Waiver; Remedies Cumulative. . . . . . . . . . . . . . . . . 119 12.6 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . 120 12.7 Calculations; Computations. . . . . . . . . . . . . . . . . . . 120 12.8 Governing Law; Submission to Jurisdiction; Venue. . . . . . . . 121 12.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 122 12.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . 122 12.11 Headings Descriptive. . . . . . . . . . . . . . . . . . . . . . 123 12.12 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . 123 12.13 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 12.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . 124 12.15 Permitted Dispositions. . . . . . . . . . . . . . . . . . . . . 124 SCHEDULE I - Commitments SCHEDULE II - Bank Addresses SCHEDULE III - Original Bank Commitments on the Effective Date SCHEDULE IV - Subsidiaries SCHEDULE V - Real Property SCHEDULE VI - Collective Bargaining Agreements SCHEDULE VII - Existing Indebtedness SCHEDULE VIII - Insurance SCHEDULE IX - Liens SCHEDULE X - Existing Investments SCHEDULE XI - Store Dispositions SCHEDULE XII - Fiscal Periods SCHEDULE XIII - Operational Adjustments SCHEDULE XIV - Confirmation Orders EXHIBIT A-1 - Term Note EXHIBIT A-2 - Revolving Note EXHIBIT A-3 - Swingline Note EXHIBIT B-1 - Opinion of Donovan Leisure Newton & Irvine EXHIBIT B-2 - Opinion of Willkie Farr & Gallagher EXHIBIT B-3 - Opinion of Young, Conaway, Stargatt & Taylor EXHIBIT C - Opinion of Skadden, Arps, Slate, Meagher & Flom EXHIBIT D - Borrower Pledge Agreement EXHIBIT E - Borrower Security Agreement EXHIBIT F - Subsidiary Security Agreement (-iv-) EXHIBIT G - Consent Letter EXHIBIT H - Officer's Certificate EXHIBIT I - Assignment Agreement EXHIBIT J - Subsidiary Guaranty EXHIBIT K - Monthly Report EXHIBIT L - Mortgage (-v-) AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 15, 1995, among THE GRAND UNION COMPANY, a Delaware corporation, as borrower (the "Borrower"), the lending institutions listed from time to time on Schedule I hereto (each a "Bank" and, collectively, the "Banks") and BANKERS TRUST COMPANY, as agent (the "Agent"). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 10 are used herein as so defined. W I T N E S S E T H : WHEREAS, certain of the parties hereto entered into the Original Credit Agreement; WHEREAS, the parties hereto have agreed, subject to the terms and conditions herein, to amend and restate the Original Credit Agreement on the terms set forth herein upon consummation of the Plan of Reorganization; and WHEREAS, on January 25, 1995, the Borrower filed a petition for relief under chapter 11 of the Bankruptcy Code (the "Chapter 11 Case") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") and on May 31, 1995 the Bankruptcy Court entered an order confirming the Plan of Reorganization (the "Confirmation Order"), which, among other things, approved the provisions of this Agreement and directed the parties hereto to execute and deliver this Agreement. NOW, THEREFORE, IT IS AGREED: SECTION 1. AMOUNT AND TERMS OF CREDIT. 1.1 ORIGINAL LOANS. (a) The Original Banks have advanced loans to, and issued, or have participated in, letters of credit for the account of, the Borrower under the Original Credit Agreement, the aggregate principal amount of which, together with the Original Letter of Credit Outstandings, at the date hereof is $134,790,020. Of such aggregate outstanding amount, $54,000,000 was advanced as Original Revolving Loans; $41,645,649 represented the aggregate amount of Original Letter of Credit Outstandings; and $39,144,371 was advanced as Original B Term Loans. All of such amounts continue to be Obligations secured by the Collateral. Pursuant to the -1- terms of the Original Credit Agreement, the Original RL Banks severally agreed to make loans to the Borrower under the Original Revolving Credit Facility in an aggregate amount of up to $100,000,000 (the "Original Revolving Commitment"). The amount set forth opposite each relevant Original Bank's name on Schedule III hereto directly under the headings "Original Revolving Commitment," "Original Revolving Loans," and "Original B Term Loans" are (A) the corresponding amounts of the Original Revolving Commitment, Original Revolving Loans and Original B Term Loans, respectively, for each such relevant Original Bank under the Original Credit Agreement as of the Effective Date and (B) for each such relevant Original Bank, amended and restated hereunder as the following: (i) the amount representing such Original Bank's Original Revolving Commitment is amended and restated hereby as the initial Revolving Commitment for such Original Bank (collectively, the "Initial Revolving Commitments"), (ii) amounts advanced under the Original Credit Agreement by such Original Bank as Original Revolving Loans are amended and restated hereby as the initial Revolving Loans of such Original Bank (collectively, the "Initial Revolving Loans"); and (iii) amounts advanced under the Original Credit Agreement by such Original Bank as Original B Term Loans are amended and restated hereby as the initial Term Loans of such Original Bank (collectively, the "Initial Term Loans"). Each of the Existing Letters of Credit shall be deemed to be Letters of Credit issued and outstanding hereunder. (b) On the Effective Date the amount of Initial Revolving Commitment set forth on Schedule III-A for each relevant Original Bank shall be converted into a corresponding amount of Term Loan Commitment for each such Original Bank. (c) On the Effective Date, after giving effect to the amendments and restatements contemplated in Section 1.1(a), the conversions contemplated by Section 1.1(b), and the additional Term Loan Commitments and Revolving Commitments contemplated hereunder and immediately prior to the making of any additional Loans hereunder, each Bank shall fund to the Agent the amount, if any, by which such Bank's Adjusted RL Percentage of the Total Initial Revolving Loans exceeds such Bank's Initial Revolving Loans at such time. The Agent shall allocate and pay any amounts received pursuant to the preceding sentence to each relevant Bank such that after such payment, if any, by the Agent each Bank's Revolving Loans shall equal such Bank's -2- Adjusted RL Percentage of the Total Initial Revolving Loans at such time. 1.2 COMMITMENTS. (A) As of the Effective Date, (x) after giving effect to (i) the amendments and restatements contemplated in Section 1.1(a), (ii) the conversions contemplated in Section 1.1(b), (iii) the payments contemplated in Section 1.1(c), and (iv) the additional Term Loan Commitments and Revolving Commitments contemplated hereunder and (y) prior to the making of any additional Loans hereunder, the amount of Term Loans, Term Loan Commitment, Revolving Loans and Revolving Commitment for each relevant Bank will be as set forth in Schedule I hereto. (B) Subject to and upon the terms and conditions herein set forth, each Bank severally agrees to make a loan or loans (together with the Existing Term Loans, Existing Revolving Loans and Swingline Loans, each individually a "Loan" and, collectively, the "Loans") to the Borrower, which Loans shall be drawn, to the extent such Bank has a commitment under such Facility, under the Term Loan Facility and the Revolving Credit Facility, as set forth below: (a) Each additional Loan under the Term Loan Facility (together with the Existing Term Loans, each individually a "Term Loan" and, collectively, the "Term Loans") (i) shall be made pursuant to one drawing, which shall be on the Effective Date, (ii) shall be made as Base Rate Loans and, except as hereinafter provided, may, at the option of the Borrower, be maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, PROVIDED that (x) all Term Loans made by all Banks pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of Loans of the same Type and (y) no conversion into Eurodollar Loans may be effected prior to the Syndication Date, and (iii) shall not exceed for any Bank at the time of incurrence thereof on the Effective Date that aggregate principal amount which equals the Available Term Loan Commitment, if any, of such Bank on such date. Once repaid, Term Loans may not be reborrowed. (b) Each of the Loans (including, without limitation, the Existing Revolving Loans) under the Revolving Credit Facility (together with the Existing Revolving Loans, each individually a "Revolving Loan" -3- and, collectively, the "Revolving Loans") (i) shall be made at any time and from time to time on and after the Effective Date and prior to the RL Expiry Date, (ii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, PROVIDED that (x) all Revolving Loans made by all Banks pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of Loans of the same Type and (y) no Eurodollar Loans may be incurred prior to the Syndication Date, (iii) may be repaid and reborrowed in accordance with the provisions hereof and (iv) shall not exceed for any Bank at any time outstanding that aggregate principal amount which, when combined with such Bank's Adjusted RL Percentage, if any, of the sum of (x) the Letter of Credit Outstandings plus (y) the outstanding principal amount of Swingline Loans, in each case at such time, equals the Available Revolving Commitment, if any, of such Bank at such time. (C) Subject to and upon the terms and conditions herein set forth, BTCo in its individual capacity agrees to make at any time and from time to time on or after the Effective Date and prior to the Swingline Termination Date, a loan or loans to the Borrower (each a "Swingline Loan," and collectively the "Swingline Loans"), which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) shall have the benefit of the provisions of Section 1.2(B)(b), (iii) may be repaid and reborrowed in accordance with the provisions hereof, (iv) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Revolving Loans made by Non-Defaulting Banks then outstanding and all Letter of Credit Outstandings at such time, the Adjusted Total Available Revolving Commitment then in effect and (v) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount. BTCo will not make a Swingline Loan after it has received written notice from the Borrower or the Required Banks that a Default or Event of Default exists and is continuing until such time as BTCo shall have received written notice of (x) rescission of all such notices from the party or parties originally delivering same or (y) the waiver of such Default or Event of Default by the Required Banks. -4- (D) On any Business Day, BTCo may, in its sole discretion, give notice to the RL Banks (with an information copy to the Borrower, PROVIDED that the failure to give such notice to the Borrower shall in no way affect the validity and effectiveness of such notice) that its outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans (provided that each such notice shall be deemed to have been automatically given upon the occurrence of an Event of Default under Section 9.5), in which case a Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day by all RL Banks PRO RATA based on each RL Bank's Adjusted RL Percentage, and the proceeds thereof shall be applied directly to repay BTCo for such outstanding Swingline Loans; PROVIDED that for the purposes solely of such Mandatory Borrowing the conditions precedent set forth in Section 5.2 shall not be applicable. Each RL Bank hereby irrevocably agrees to such Base Rate Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by BTCo notwithstanding (i) that the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 5 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v) any reduction in the Total Revolving Commitment after any such Swingline Loans were made. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Borrower), each RL Bank (other than BTCo) hereby agrees that it shall forthwith purchase from BTCo (without recourse or warranty) such assignment of the outstanding Swingline Loans as shall be necessary to cause the RL Banks to share in such Swingline Loans ratably based upon their respective Adjusted RL Percentages, PROVIDED that all interest payable on the Swingline Loans shall be for the account of BTCo until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the RL Bank purchasing same from and after such date of purchase. (E) The aggregate principal amount of each Borrowing under a Facility shall not be less than the Minimum Borrowing Amount for such Facility (except that Mandatory -5- Borrowings shall be made in the amounts required by Section 1.2(D)). More than one Borrowing may be incurred on any day, PROVIDED that at no time shall there be outstanding more than 10 Borrowings of Eurodollar Loans. 1.3 NOTICE OF BORROWING. (a) Whenever the Borrower desires to incur Loans under any Facility (excluding Borrowings of Swingline Loans and Mandatory Borrowings), it shall give the Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate Loans to be made hereunder. Each such notice (each, together with each notice of a Borrowing of Swingline Loans, a "Notice of Borrowing") shall be irrevocable and shall specify (i) the Facility pursuant to which such Borrowing is to be made, (ii) the aggregate principal amount of the Loans to be made pursuant to such Borrowing, (iii) the date of Borrowing (which shall be a Business Day) and (iv) whether the respective Borrowing shall consist of Base Rate Loans or, to the extent otherwise permitted, Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto. The Agent shall promptly give each Bank written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of such Bank's proportionate share thereof and of the other matters covered by the Notice of Borrowing. (b) Whenever the Borrower desires to make a Borrowing of Swingline Loans hereunder, it shall give BTCo not later than 12:00 Noon (New York time) on the day such Swingline Loan is to be made, written notice or telephonic notice promptly confirmed in writing of each Swingline Loan to be made hereunder. Each such notice shall be irrevocable and specify in each case (i) the date of Borrowing (which shall be a Business Day) and (ii) the aggregate principal amount of the Swingline Loans to be made pursuant to such Borrowing. (c) Mandatory Borrowings shall be made upon the notice specified in Section 1.2(D), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section. -6- (d) Without in any way limiting the obligation of the Borrower to confirm in writing any notice it may give hereunder by telephone, the Agent may act prior to receipt of written confirmation without liability upon the basis of such telephonic notice, believed by the Agent in good faith to be from an Authorized Officer of the Borrower as a person entitled to give telephonic notices under this Agreement on behalf of the Borrower. In each such case the Borrower hereby waives the right to dispute the Agent's record of the terms of any such telephonic notice. 1.4 DISBURSEMENT OF FUNDS. (a) No later than 1:00 P.M. (2:00 P.M. in the case of Swingline Loans) (New York time) on the date specified in each Notice of Borrowing, each Bank will make available its pro rata share, if any, of each Borrowing requested to be made on such date (or, in the case of Swingline Loans, BTCo shall make available the full amount thereof) in the manner provided below. All amounts shall be made available to the Agent in U.S. dollars and immediately available funds at the Payment Office and the Agent promptly will make available to the Borrower by depositing to its account at the Payment Office the aggregate of the amounts so made available in the type of funds received. Unless the Agent shall have been notified by any Bank prior to the date of Borrowing that such Bank does not intend to make available to the Agent its portion, if any, of the Borrowing or Borrowings to be made on such date, the Agent may assume that such Bank has made such amount available to the Agent on such date of Borrowing, and the Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Bank and the Agent has made available same to the Borrower, the Agent shall be entitled to recover such corresponding amount from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Borrower, and the Borrower shall within 2 Business Days of notice thereof pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from such Bank or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent, at a rate per annum equal to (x) if to be paid by such Bank, the overnight Federal Funds Rate or (y) if to be paid by the -7- Borrower, the then applicable rate of interest, calculated in accordance with Section 1.8, for the respective Loans. (b) Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any default by such Bank hereunder. 1.5 NOTES. (a) The Borrower's obligation to pay the principal of, and interest on, the Loans made by each Bank shall be evidenced (i) if Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit A-1 with blanks appropriately completed in conformity herewith (each a "Term Note" and collectively the "Term Notes"), (ii) if Revolving Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit A-2, with blanks appropriately completed in conformity herewith (each a "Revolving Note" and collectively the "Revolving Notes") and (iii) if Swingline Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit A-3 with blanks appropriately completed in conformity herewith (the "Swingline Note"). (b) The Term Note, if any, issued to each Bank shall (i) be payable to the order of such Bank and be dated the Effective Date, (ii) be in a stated principal amount equal to the aggregate amount, if any, of the Existing Term Loans and additional Term Loans made by such Bank and be payable in the principal amount of the Term Loans evidenced thereby, (iii) mature on the Final Maturity Date, (iv) bear interest as provided in the appropriate clause of Section 1.8 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (v) be subject to mandatory repayment as provided in Section 4.2 and (vi) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The Revolving Note, if any, issued to each Bank shall (i) be payable to the order of such Bank and be dated the Effective Date, (ii) be in a stated principal amount equal to the Revolving Commitment of such Bank and be payable in the principal amount of the Revolving Loans evidenced thereby, (iii) mature on the RL Expiry Date, (iv) bear interest as provided in the appropriate clause of Section 1.8 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (v) be subject to mandatory repayment as provided in -8- Section 4.2 and (vi) be entitled to the benefits of this Agreement and the other Credit Documents. (dO The Swingline Note shall (i) be payable to the order of BTCo and be dated the Effective Date, (ii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the principal amount of the Swingline Loans evidenced thereby, (iii) mature on the Swingline Termination Date, (iv) bear interest as provided in Section 1.8(a) and (v) be entitled to the benefits of this Agreement and the other Credit Documents. (e) Each Bank will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of any of its Notes endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby and the last date or dates on which interest has been paid in respect of the Loans evidenced thereby. Failure to make any such notation shall not affect the Borrower's obligations in respect of such Loans, or affect the validity of such transfer by any Bank of such Note. 1.6 CONVERSIONS. The Borrower shall have the option to convert on any Business Day occurring on and after the Syndication Date all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of the Loans (other than Swingline Loans, which at all times shall be maintained as Base Rate Loans) owing by the Borrower pursuant to a single Facility into a Borrowing or Borrowings pursuant to such Facility of another Type of Loan, PROVIDED that (i) except as provided in Section 1.10(b), Eurodollar Loans may be converted into Base Rate Loans only on the last day of an Interest Period applicable thereto and no partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar Loans pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may only be converted into Eurodollar Loans if no Default or Event of Default is in existence on the date of the conversion and (iii) Borrowings of Eurodollar Loans resulting from this Section 1.6 shall be limited in number as provided in Section 1.2(E). Each such conversion shall be effected by the Borrower by giving the Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days (or one Business Day in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each a -9- "Notice of Conversion") specifying the Loans to be so converted, the Type of Loans to be converted into and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Agent shall give each Bank prompt notice of any such proposed conversion affecting any of its Loans. 1.7 PRO RATA BORROWINGS. All Borrowings of Loans (other than Swingline Loans) under this Agreement shall be loaned by the Banks PRO RATA on the basis of their Available Term Loan Commitments or Revolving Commitments, as the case may be, PROVIDED that all Borrowings of Revolving Loans made pursuant to a Mandatory Borrowing shall be loaned by the RL Banks PRO RATA on the basis of their Adjusted RL Percentages. It is understood that no Bank shall be responsible for any default by any other Bank in its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Bank to fulfill its commitments hereunder. 1.8 INTEREST. (a) The unpaid principal amount of each Base Rate Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Base Rate Margin plus the Base Rate in effect from time to time. (b) The unpaid principal amount of each Eurodollar Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall bear interest at a rate per annum equal to the Base Rate in effect from time to time plus the sum of (i) 2% and (ii) the Applicable Base Rate Margin, PROVIDED that no Loan shall bear interest after maturity (whether by acceleration or otherwise) at a rate per annum less than 2% plus the rate of interest applicable thereto at maturity. (d) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last Business Day of each calendar quarter, (ii) in respect of each -10- Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period of six months, on the date occurring three months after the first day of such Interest Period and (iii) in respect of each Loan, on any prepayment (on the amount prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with Section 12.7(b). (f) The Agent, upon determining the interest rate for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower and the Banks thereof. 1.9 INTEREST PERIODS. At the time the Borrower gives a Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Agent written notice (or telephonic notice promptly confirmed in writing) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Borrower, be a one, two, three or six month period. Notwithstanding anything to the contrary contained above: (i) the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, PROVIDED that if any Interest Period would otherwise expire on a day which is not a -11- Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) no Interest Period may be elected if it would extend beyond the Final Maturity Date (in the case of Term Loans) or the RL Expiry Date (in the case of Revolving Loans); (v) no Interest Period may be elected at any time when a Default or Event of Default is then in existence; and (vi) no Interest Period with respect to any Borrowing of Term Loans may be elected that would extend beyond any date upon which a Scheduled Repayment is required to be made in respect of such Term Loans if, after giving effect to the selection of such Interest Period, the aggregate principal amount of such Term Loans maintained as Eurodollar Loans with Interest Periods ending after such date would exceed the aggregate principal amount of such Term Loans permitted to be outstanding after such Scheduled Repayment. If upon the expiration of any Interest Period, the Borrower has failed to elect a new Interest Period to be applicable to the respective Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Borrowing into a Borrowing of Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in the case of clause (i) below, the Agent or (y) in the case of clauses (ii) and (iii) below, any Bank shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the Eurodollar Rate for any Interest Period that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or -12- (ii) at any time, that such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges) because of (x) any change since the date of this Agreement in any applicable law, governmental rule, regulation, guideline, order or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate) and/or (y) other circumstances adversely affecting the interbank Eurodollar market or the position of such Bank in such market; or (iii) at any time, that the making or continuance of any Eurodollar Loan has become unlawful by compliance by such Bank in good faith with any law, governmental rule, regulation, guideline or order (or would conflict with any such governmental rule, regulation, guideline or order not having the force of law but with which such Bank customarily complies even though the failure to comply therewith would not be unlawful), or has become impracticable as a result of a contingency occurring after the date of this Agreement which adversely affects the interbank Eurodollar market; then, and in any such event, such Bank (or the Agent in the case of clause (i) above) shall (x) on such date and (y) within three Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Borrower and (except in the case of clause (i)) to the Agent of such determination (which notice the Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Agent notifies the Borrower and the Banks that the circumstances giving rise to such notice by the Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the -13- Borrower shall pay to such Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank in its sole discretion shall determine) as shall be required to compensate such Bank for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Bank, showing the basis for the calculation thereof, submitted to the Borrower by such Bank shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) shall) either (i) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic notice (confirmed promptly in writing) thereof on the same date that the Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii), or (ii) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' notice to the Agent, require the affected Bank to convert each such Eurodollar Loan into a Base Rate Loan, PROVIDED that if more than one Bank is affected at any time, then all affected Banks must be treated the same pursuant to this Section 1.10(b). (c) If any Bank determines at any time that the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or actual compliance by such Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of increasing the costs to such Bank to a level above that, or reducing the rate of return on such Bank's capital or assets as a consequence of its commitments or obligations hereunder to a level below that, which such Bank could have achieved but for such adoption, effectiveness, change or compliance (taking into considera- -14- tion such Bank's policies with respect to capital adequacy), then from time to time, upon written demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. Each Bank, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall set forth the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this Section 1.10(c) upon receipt of such notice. 1.11 COMPENSATION. The Borrower shall compensate each Bank, upon its written request (which request shall set forth the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Bank to fund its Eurodollar Loans) which such Bank may sustain: (i) if for any reason (other than a default by such Bank or the Agent) a Borrowing of Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Eurodollar Loans when required by the terms of this Agreement or (y) an election made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank under this Section 1.11 shall be made as though that Bank had actually funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Loan, having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Bank to a domestic office of that Bank in the United States of America (or if such Bank has no offshore office, from an offshore office of the Agent to the domestic office of the Agent); PROVIDED, HOWEVER, that each Bank may fund each of its Eurodollar Loans in any manner it sees fit and the foregoing assumption shall be utilized -15- only for the calculation of amounts payable under this Section 1.11. 1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.5 or 4.4 with respect to such Bank, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to designate another lending office of such Bank for any Loans affected by such event, PROVIDED that such designation is made on such terms that such Bank and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of any such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Bank provided in Section 1.10, 2.5 or 4.4. SECTION 2. LETTERS OF CREDIT. 2.1 LETTERS OF CREDIT. (a) Subject to and upon the terms and conditions herein set forth, the Borrower may request the Letter of Credit Issuer at any time and from time to time on or after the Effective Date and prior to the Expiry Date to issue, for the account of the Borrower and in support of insurance obligations, workers compensation, bonding obligations in respect of taxes, licenses and similar requirements, and other obligations (including (x) obligations of the Borrower supported by letters of credit outstanding on the Effective Date, (y) reimbursement obligations under letters of credit outstanding on the Effective Date and permitted to remain outstanding thereafter in accordance with this Agreement and (z) such other obligations as are acceptable to the Agent in its sole discretion) of the Borrower and/or any Subsidiary, and subject to and upon the terms and conditions herein set forth such Letter of Credit Issuer agrees to issue from time to time, irrevocable letters of credit so requested by the Borrower in such form as may be approved by such Letter of Credit Issuer and the Agent in their sole discretion (together with the Existing Letters of Credit, each a "Letter of Credit" and, collectively, the "Letters of Credit"). (b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings at such time -16- would exceed either (x) $60,000,000 or (y) when added to the aggregate principal amount of all Revolving Loans made by Non-Defaulting Banks and all Swingline Loans then outstanding, the Adjusted Total Available Revolving Commitment at such time (after giving effect to any reductions to the Total Revolving Commitment on such date); (ii) each Letter of Credit shall have an expiry date occurring not later than one year after such Letter of Credit's date of issuance (subject to extension provisions acceptable to the Agent and the Letter of Credit Issuer, it being understood that provisions which provide for automatic extensions unless the Letter of Credit Issuer has given a termination notice at least 30 to 60 days prior to the date of such automatic extension shall be permitted) and in no event occurring later than the third Business Day preceding the Expiry Date; (iii) each Letter of Credit shall be denominated in U.S. dollars; (iv) no Letter of Credit shall have a Stated Amount of less than $500,000 unless otherwise agreed to by the Letter of Credit Issuer; and (v) no Letter of Credit shall be issued by the Letter of Credit Issuer after it has received a written notice from the Borrower or the Required Banks stating that a Default or Event of Default has occurred and is continuing until such time as the Letter of Credit Issuer shall have received a written notice of (i) rescission of such notice from the party or parties originally delivering such notice or (ii) the waiver of such Default or Event of Default by the Required Banks. 2.2 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of Credit Issuer shall be deemed to have sold and transferred to each other RL Bank (each such other RL Bank, in its capacity under this Section 2.2, a "Participant"), and each such Participant shall be deemed irrevocably and unconditionally to have purchased and received from the Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation (each a "Participation"), to the extent of such Participant's Adjusted RL Percentage, in such Letter of Credit, each substitute letter of credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto, and any security therefor or guaranty pertaining thereto (although Letter of Credit Fees will be paid directly to the Agent for the ratable account of the Participants as provided in Section 3.1(b) and the Participants shall have no right to receive any portion of any Facing Fees). Upon any change in the Revolving Commitments of the Banks pursuant to Section -17- 12.4, or upon the occurrence of a Bank Default, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the Participations pursuant to this Section 2.2 to reflect the new Adjusted RL Percentages of the assignor and assignee Bank or of all Non-Defaulting Banks, as the case may be. (b) In determining whether to pay under any Letter of Credit, the Letter of Credit Issuer issuing same shall have no obligation relative to the Participants other than to confirm that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Letter of Credit Issuer under or in connection with any Letter of Credit issued by it if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Letter of Credit Issuer any resulting liability. (c) In the event that the Letter of Credit Issuer makes any payment under any Letter of Credit issued by it and the Borrower shall not have reimbursed such amount in full to the Letter of Credit Issuer pursuant to Section 2.4(a), such Letter of Credit Issuer shall promptly notify the Agent and after receipt of such notice, the Agent will notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Agent for the account of the Letter of Credit Issuer, the amount of such Participant's Adjusted RL Percentage of such unreimbursed payment in lawful money of the United States of America and in same day funds; PROVIDED, HOWEVER, that no Participant shall be obligated to pay to the Agent for the account of the Letter of Credit Issuer its Adjusted RL Percentage of such unreimbursed amount for any wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Letter of Credit Issuer. If the Letter of Credit Issuer so notifies, prior to 11:00 A.M. (New York time) on any Business Day, any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to the Agent for the account of the Letter of Credit Issuer such Participant's Adjusted RL Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Adjusted RL Percentage of the amount of such payment available to the Agent for the account of the -18- Letter of Credit Issuer, such Participant agrees to pay to the Agent for the account of the Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Agent for the account of such Letter of Credit Issuer at the overnight Federal Funds Rate. The failure of any Participant to make available to the Agent for the account of the Letter of Credit Issuer its Adjusted RL Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Agent for the account of the Letter of Credit Issuer its Adjusted RL Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Agent, such other Participant's Adjusted RL Percentage of any such payment. (d) Whenever the Letter of Credit Issuer receives a payment of a reimbursement obligation as to which the Agent has received for the account of the Letter of Credit Issuer any payments from the Participants pursuant to clause (c) above, the Letter of Credit Issuer shall pay to the Agent and the Agent shall promptly pay to each Participant which has paid its Adjusted RL Percentage thereof, in lawful money of the United States of America and in same day funds, an amount equal to such Participant's Adjusted RL Percentage of the principal amount of such reimbursement and of interest reimbursed thereon accruing from and after the date of the purchase of the respective Participations. (e) The obligations of the Participants to make payments to the Agent for the account of the Letter of Credit Issuer with respect to Letters of Credit shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any -19- Person for whom any such transferee may be acting), the Agent, the Letter of Credit Issuer, any Bank, or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. 2.3 LETTER OF CREDIT REQUESTS; NOTICES OF ISSUANCE. (a) Whenever it desires that a Letter of Credit be issued, the Borrower shall give the Agent and the Letter of Credit Issuer written notice (including by way of telecopier) thereof prior to 1:00 P.M. (New York time) at least five Business Days (or such shorter period as may be acceptable to the Letter of Credit Issuer) prior to the proposed date of issuance (which shall be a Business Day) (each a "Letter of Credit Request"), which Letter of Credit Request shall include an application for the Letter of Credit and any other documents that such Letter of Credit Issuer customarily requires in connection therewith. The Agent shall promptly notify each RL Bank of each Letter of Credit Request. (b) The delivery of each Letter of Credit Request shall be deemed a representation and warranty by the Borrower that the Letter of Credit may be issued in accordance with and will not violate the requirements of Section 2.1(b). The Letter of Credit Issuer shall, on the date of each issuance of a Letter of Credit by it, give the Agent, each Bank and the Borrower written notice of the issuance of such Letter of Credit, accompanied by a copy to the Agent of the Letter of Credit or Letters of Credit issued by it. 2.4 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower hereby agrees to reimburse the -20- Letter of Credit Issuer, by making payment to the Agent in U.S. dollars in immediately available funds at the Payment Office, for any payment or disbursement made by the Letter of Credit Issuer under any Letter of Credit issued by it (each such amount so paid or disbursed until reimbursed, an "Unpaid Drawing") immediately after, and in any event on the date of, notice from the Letter of Credit Issuer of such payment or disbursement with interest on the amount so paid or disbursed by the Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date the Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall be the Applicable Base Rate Margin plus the Base Rate as in effect from time to time (plus an additional 2% per annum if not reimbursed by the third Business Day after the date of notice of such payment or disbursement), such interest also to be payable on demand. (b) The Borrower's obligation under this Section 2.4 to reimburse the Letter of Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the Letter of Credit Issuer, the Agent or any Bank, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing; PROVIDED, HOWEVER, that the Borrower shall not be obligated to reimburse the Letter of Credit Issuer for any wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Letter of Credit Issuer. 2.5 INCREASED COSTS. If at any time after the date hereof, the adoption or effectiveness of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or actual compliance by the Letter of Credit Issuer or any Participant with any request or directive (whether or not having the force of law) by any such authority, central bank or comparable agency shall -21- either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by the Letter of Credit Issuer or such Participant's participation therein, or (ii) shall impose on the Letter of Credit Issuer or any Participant any other conditions affecting this Agreement, any Letter of Credit or such Participant's participation therein; and the result of any of the foregoing is to increase the cost to the Letter of Credit Issuer or such Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by the Letter of Credit Issuer or such Participant hereunder (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges), then, upon demand to the Borrower by the Letter of Credit Issuer or such Participant (a copy of which notice shall be sent by the Letter of Credit Issuer or such Participant to the Agent), the Borrower shall pay to the Letter of Credit Issuer or such Participant such additional amount or amounts as will compensate the Letter of Credit Issuer or such Participant for such increased cost or reduction. A certificate submitted to the Borrower by the Letter of Credit Issuer or such Participant, as the case may be (a copy of which certificate shall be sent by the Letter of Credit Issuer or such Participant to the Agent), setting forth the basis for the determination of such additional amount or amounts necessary to compensate the Letter of Credit Issuer or such Participant as aforesaid shall be conclusive and binding on the Borrower absent manifest error, although the failure to deliver any such certificate shall not release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this Section 2.5 upon receipt of such certificate. SECTION 3. FEES; COMMITMENTS. 3.1 FEES. (a) The Borrower agrees to pay to the Agent a commitment commission ("Commitment Commission") for the account of each RL Bank that is a Non-Defaulting Bank for the period from and including the Effective Date to but not including the date the Total Revolving Commitment has been terminated, computed at a rate for each day equal to 1/2 of 1% per annum on the daily average of such Bank's Unutilized Revolving Commitment. Such Commitment Commission shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter -22- and on the date upon which the Total Revolving Commitment is terminated. (b) The Borrower agrees to pay to the Agent for the account of the RL Banks pro rata on the basis of their respective Adjusted RL Percentages, a fee in respect of each Letter of Credit (the "Letter of Credit Fee") in an amount equal to 3% per annum on the average daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter and on the date upon which the Total Revolving Commitment shall be terminated. (c) The Borrower agrees to pay to the Agent for the account of the Letter of Credit Issuer a fee in respect of each Letter of Credit issued by it (the "Facing Fee") computed at the rate of 1/4 of 1% per annum on the average daily Stated Amount of such Letter of Credit. Accrued Facing Fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter and on the date upon which the Total Revolving Loan Commitment shall be terminated. (d) The Borrower hereby agrees to pay to the Letter of Credit Issuer upon each issuance of, drawing under and/or amendment of, a Letter of Credit such amount as shall at the time of such issuance, drawing and/or amendment the administrative charge which the Letter of Credit Issuer is customarily charging at such time for issuances of, drawings under and/or amendments of letters of credit issued by it. (e) The Borrower shall pay to the Agent (x) on the Effective Date for its own account and/or for distribution to the Banks such fees (including in respect of commitment commission for the period prior to the Effective Date) as heretofore agreed by the Borrower and the Agent and (y) for its own account, such other fees as may be agreed to from time to time in a separate letter agreement between the Borrower and the Agent, when and as due. (f) All computations of Fees shall be made in accordance with Section 12.7(b). 3.2 VOLUNTARY REDUCTION OF COMMITMENTS. Upon at least three Business Days' prior written notice (or telephonic notice confirmed in writing) to the Agent at its -23- Notice Office (which notice the Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, without premium or penalty, to terminate the Total Unutilized Revolving Commitment, in part or in whole, PROVIDED that (x) any such termination shall apply to proportionately and permanently reduce the Revolving Commitment of each of the RL Banks and (y) partial reduction pursuant to this Section 3.2 shall be in integral multiples of $2,000,000. 3.3 MANDATORY ADJUSTMENTS OF COMMITMENTS, ETC. (a) The Total Revolving Commitment shall terminate on the earlier of (x) the RL Expiry Date and (y) the date on which a Change of Control Event occurs. (b) The Total Term Loan Commitment shall be terminated on the Effective Date, after giving effect to the incurrence of additional Term Loans on such date. (c) The Total Revolving Commitment shall be reduced at the time any mandatory repayment of the Term Loans would be required pursuant to Section 4.2(A)(c), (d), and/or (f) if Term Loans were then outstanding in an amount, if any, by which the amount of such required repayment (determined as if an unlimited amount of Term Loans were then outstanding) exceeds the aggregate amount of Term Loans then outstanding. (d) Each reduction or adjustment of the Total Term Loan Commitment or the Total Revolving Commitment pursuant to this Section 3.3 shall apply proportionately to the Term Loan Commitment or the Revolving Commitment, as the case may be, of each RL Bank. SECTION 4. PAYMENTS. 4.1 VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay Loans in whole or in part, without penalty or fee except as otherwise provided in this Agreement, from time to time on the following terms and conditions: (i) the Borrower shall give the Agent at the Payment Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Loans, whether such Loans are Term Loans, Revolving Loans or Swingline Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice shall be given by the Borrower at least two Business Days prior to (or in the -24- case of Swingline Loans prior to 12:00 Noon (New York Time) on) the date of such prepayment, which notice shall promptly be transmitted by the Agent to each of the Banks (except in respect of Swingline Loans); (ii) each partial prepayment of any Borrowing shall be in an aggregate principal amount of at least $2,000,000 (or, in respect of a partial prepayment of any Borrowing of Swingline Loans, in such lesser principal amount as may be satisfactory to BTCo), PROVIDED that no partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate principal amount of the Loans outstanding pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto; (iii) each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans; (iv) Eurodollar Loans may be designated for prepayment pursuant to this Section 4.1 only on the last day of the Interest Period applicable thereto; and (v) each prepayment of Term Loans pursuant to this Section 4.1 shall be applied to reduce the remaining Scheduled Repayments of the Term Loans in inverse order of maturity; PROVIDED that notwithstanding the foregoing, the Borrower may elect to apply repayments of Term Loans pursuant to this Section 4.1 to the next two Scheduled Repayments which are scheduled (without giving effect to any prior reductions to Scheduled Repayments) to be made after the date of such prepayment. 4.2 MANDATORY PREPAYMENTS. (A) REQUIREMENTS: (a) If on any date the sum of the aggregate outstanding principal amount of Revolving Loans made by Non-Defaulting Banks and Swingline Loans and the aggregate amount of Letter of Credit Outstandings exceeds the Adjusted Total Available Revolving Commitment as then in effect (including a decrease therein as a result of an increase in the Blocked Amount), the Borrower shall repay on such date the principal of Swingline Loans (and, after Swingline Loans have been paid in full, Revolving Loans of Non-Defaulting Banks) in an aggregate amount equal to such excess. If, after giving effect to the prepayment of all outstanding Swingline Loans and Revolving Loans of Non-Defaulting Banks, the aggregate amount of Letter of Credit Outstandings exceeds the Adjusted Total Available Revolving Commitment then in effect, the Borrower shall pay to the Agent an amount in cash and/or Cash Equivalents equal to such excess and the Agent shall hold such payment as security for the obligations of the Borrower hereunder -25- pursuant to a cash collateral agreement to be entered into in form and substance satisfactory to the Agent (which shall permit certain investments in Cash Equivalents, until the proceeds are applied to the secured obligations). (b) On each date set forth below the Borrower shall be required to repay the principal amount of Term Loans as is set forth opposite such date (each such repayment, a "Scheduled Repayment"):
Repayment Date Amount -------------- ------ September 30, 2000 $13,018,046 December 31, 2000 $13,018,046 March 31, 2001 $13,018,046 June 30, 2001 $13,018,046 September 30, 2001 $13,018,046 December 31, 2001 $13,018,046 March 31, 2002 $13,018,046 June 15, 2002 $13,018,049
(c) On the Business Day after the date of receipt by the Borrower or any of its Subsidiaries of the Cash Proceeds of any Asset Sale, an amount equal to the Net Cash Proceeds of such Asset Sale shall be applied to the prepayment of the outstanding principal amount of the Term Loans, PROVIDED that a prepayment shall not be required to be made under this clause (c) with respect to (A) up to an aggregate $3,000,000 of Net Cash Proceeds from Asset Sales in any fiscal year or (B) Net Cash Proceeds constituting Additional Proceeds arising from a Permitted Sale-Leaseback Transaction, in either case, to the extent the Borrower elects, as hereinafter provided, to reinvest such Net Cash Proceeds in Reinvestment Assets (a "Reinvestment Election"); PROVIDED FURTHER that a prepayment shall not be required to be made under this clause (c) with respect to up to an aggregate of $8,500,000 of cash and non-cash proceeds arising from Permitted Dispositions. The Borrower may exercise its Reinvestment Election (within the parameters specified in the preceding sentence) with respect to an Asset Sale if (x) no Default or Event of Default exists on the date of delivering the Reinvestment Notice referred to in clause (z) below, (y) the Borrower effects any prepayment of Swingline Loans and/or Revolving Loans that may be required after giving effect to such Reinvestment Notice and (z) the Borrower delivers a Reinvestment Notice to the Agent on the Business Day following the date of the consummation of the respective Asset Sale, -26- with such Reinvestment Election being effective with respect to the Net Cash Proceeds of such Asset Sale to the extent of the Anticipated Reinvestment Amount specified in such Reinvestment Notice. (d) On the date (each, a "Debt Refinancing Prepayment Date") of the receipt thereof by the Borrower or any of its Subsidiaries of an amount equal to the Net Debt Issuance Proceeds of the incurrence after the Effective Date of Indebtedness (other than Indebtedness permitted by Section 8.3 as such Section is in effect on the Effective Date), such amount shall be applied to the prepayment of the outstanding principal amount of the Term Loans. (e) On each date (each, an "Equity Refinancing Prepayment Date") of the receipt thereof by the Borrower or any of its Subsidiaries of an amount equal to the Net Equity Issuance Proceeds of the sale consummated after the Effective Date of equity (other than (x) the issuance to employees of the Borrower and its Subsidiaries of Borrower Common Stock and the exercise of stock options issued to such employees, and (y) issuances of equity by Subsidiaries of the Borrower to the extent permitted by Section 8.14), such amount shall: (i) FIRST, be applied to the prepayment of the outstanding principal amount of the Term Loans; (ii) SECOND, to the extent Net Equity Issuance Proceeds remain after the application pursuant to the preceding clause (i), be applied to the repayment of the outstanding principal amount of Swingline Loans (and, after Swingline Loans have been paid in full, Revolving Loans of Non-Defaulting Banks); and (iii) third, to the extent Net Equity Proceeds remain after the application pursuant to the preceding clauses (i) and (ii), be paid to and held by the Agent, as security for the Letter of Credit Outstandings obligations of the Borrower hereunder, pursuant to a cash collateral agreement to be entered into in form and substance satisfactory to the Agent (which shall permit certain investments in Cash Equivalents until the proceeds are applied to the secured obligations); PROVIDED, HOWEVER, that the aggregate amount of such prepayments and repayments required to be made pursuant to this clause (e) shall not exceed $65,000,000. (f) On each date which is 90 days after the last day of a fiscal year of the Borrower (commencing on the date which is 90 days after the Borrower's fiscal year ending in March 1996), 50% of Excess Cash Flow for the Excess Cash Flow Period last ended (such amount the "ECF Prepayment Amount") shall be applied to the prepayment of -27- the outstanding Principal amount of the Term Loans, PROVIDED that in the event that Excess Cash Flow for any Excess Cash Flow Period exceeds $10,000,000 the ECF Prepayment Amount for such Excess Cash Flow in excess of $10,000,000 shall equal 75% of Excess Cash Flow in excess of such $10,000,000 for the Excess Cash Flow Period last ended. (g) On the date a Change of Control Event occurs, the outstanding principal amount of the Term Loans shall be due and payable in full. (h) If on any date the outstanding principal amount of Revolving Loans made by a Defaulting Bank exceeds the Revolving Commitment of such Defaulting Bank, the Borrower shall repay the Revolving Loans of such Defaulting Bank in an amount equal to such excess. (i) On August 31 of each year, commencing on August 31, 1996, if a Clean-Down Period shall not have occurred since July 15 of such year, the Borrower shall repay the principal amount of all outstanding Swingline Loans and all outstanding Revolving Loans of all Non-Defaulting Banks in excess of $40,000,000 and no Swingline Loans or Revolving Loans in aggregate principal amount in excess of $40,000,000 may thereafter be borrowed until the Clean-Down Period has ended. (j) On the Reinvestment Prepayment Date with respect to a Reinvestment Election, an amount equal to the Reinvestment Prepayment Amount, if any, for such Reinvestment Election shall be applied to the prepayment of the outstanding principal of the Term Loans. (B) APPLICATION: (a) All prepayments of Term Loans made pursuant to Section 4.2(A)(f) shall be applied to reduce the remaining Scheduled Repayments of Term Loans in inverse order of maturity. All prepayments of Term Loans made pursuant to Section 4.2(A)(c), (d), (e) and (j) shall be applied to reduce the Scheduled Repayments of Term Loans pro rata based on the then outstanding Scheduled Repayments of Term Loans. (b) With respect to each prepayment of Loans required by this Section 4.2, the Borrower may designate the Types of Loans which are to be prepaid and the specific Borrowing(s) under the affected Facility pursuant to which -28- made, PROVIDED that (i) Eurodollar Loans made pursuant to a specific Facility may be designated for prepayment pursuant to this Section 4.2 only on the last day of an Interest Period applicable thereto unless all Eurodollar Loans made pursuant to such Facility with Interest Periods ending on such date of required prepayment and all Base Rate Loans made pursuant to such Facility have been paid in full; (ii) each prepayment of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans; (iii) if any prepayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount for such Eurodollar Loans, such Borrowing shall be immediately converted into Base Rate Loans; and (iv) notwithstanding the provisions of the preceding clause (ii), no prepayment of Revolving Loans pursuant to Section 4.2(A)(a) shall be applied to the Revolving Loans of a Defaulting Bank. In the absence of a designation by the Borrower as described in the preceding sentence, the Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. 4.3 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Agent for the ratable account of the Banks entitled thereto, not later than 1:00 P.M. (New York time) on the date when due and shall be made in immediately available funds and in lawful money of the United States of America at the Payment Office. Any payments under this Agreement which are made later than 1:00 P.M. (New York time) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. 4.4 NET PAYMENTS. All payments made by the Borrower hereunder, under any Note or under any other Credit Document will be made without setoff, counterclaim or other defense. All such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein (but excluding, except -29- as provided below, any tax imposed on or measured by the net income of a Bank pursuant to the laws of the jurisdiction in which the principal office or applicable lending office of such Bank is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which the principal office or applicable lending office of such Bank is located) and all interest, penalties or similar liabilities with respect thereto (collectively, "Taxes"). The Borrower shall also reimburse each Bank, upon the written request of such Bank, for taxes imposed on or measured by the net income of such Bank pursuant to the laws of the United States of America, any State or political subdivision thereof, or the jurisdiction in which the principal office or applicable lending office of such Bank is located or of any political subdivision or taxing authority of any such jurisdiction as such Bank shall determine are payable by such Bank in respect of Taxes paid to or on behalf of such Bank pursuant to this or the preceding sentence. If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due hereunder, under any Note or under any other Credit Document, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. The Borrower will furnish to the Agent within five days after the date the payment of any Taxes, or any withholding or deduction on account thereof, is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower will indemnify and hold harmless the Agent and each Bank, and reimburse the Agent or such Bank upon its written request, for the amount of any Taxes so levied or imposed and paid or withheld by such Bank. SECTION 5. CONDITIONS PRECEDENT. 5.1 CONDITIONS PRECEDENT TO EFFECTIVE DATE. The effectiveness of the Agreement is subject to the satisfaction of the following conditions precedent prior to, on or contemporaneously with the Effective Date: (a) NOTES. There shall have been delivered to the Agent for the account of each Bank the appropriate Note or Notes executed by the Borrower, in each case, in the amount, maturity and as otherwise provided herein. -30- (b) OFFICER'S CERTIFICATE. The Agent shall have received a certificate dated the Effective Date signed on behalf of the Borrower by the President, any Executive Vice President or the Chief Financial Officer of the Borrower stating that all the conditions in Sections 5.1(x) and (y) and 5.2 have been satisfied on such date. (c) OPINIONS OF COUNSEL. The Agent shall have received an opinion, or opinions, addressed to each of the Banks and dated the Effective Date, from (i) Donovan Leisure Newton & Irvine, special corporate counsel to the Borrower in the form of Exhibit B-1 hereto, which opinion shall cover such other matters incident to the transactions contemplated herein as the Agent may reasonably request, (ii) Willkie Farr & Gallagher, bankruptcy counsel to the Borrower in the form of Exhibit B-2 hereto, which opinion shall cover such other matters incident to the transactions contemplated herein as the Agent may reasonably request, (iii) Young, Conaway, Stargatt & Taylor, bankruptcy counsel to the Borrower in the form of Exhibit B-3 hereto, which opinion shall cover such other matters incident to the transactions contemplated herein as the Agent may reasonably request, (iv) local counsel satisfactory to the Agent as the Agent may request, which opinions shall cover the perfection of the security interests granted pursuant to the Security Documents and such other matters incident to the transactions contemplated herein or therein as the Agent may reasonably request and shall be in form and substance satisfactory to the Agent and (v) Skadden, Arps, Slate, Meagher & Flom, special counsel to the Agent and the Banks, in the form of Exhibit C hereto. (d) PLEDGE AGREEMENT. The Borrower shall have duly authorized, executed and delivered an amended and restated Pledge Agreement substantially in the form of Exhibit D (as modified, supplemented or amended from time to time, the "Borrower Pledge Agreement") and amending and restating the pledge agreement delivered by the Borrower pursuant to the Original Credit Agreement. The Borrower shall have delivered to the Collateral Agent, as Pledgee, all Pledged Securities referred to therein and then owned by the Borrower, together with undated stock powers or instruments of assignment thereof duly executed in blank by the Borrower. -31- (e) SECURITY AGREEMENTS. (i) The Borrower shall have duly authorized, executed and delivered a security agreement substantially in the form of Exhibit E (as modified, supplemented or amended from time to time, the "Borrower Security Agreement") amending and restating the security agreement delivered by the Borrower pursuant to the Original Credit Agreement covering all of the Borrower's present and future Security Agreement Collateral together with: (A) executed copies of financing statements (Form UCC-1) and amendments to financing statements (Form UCC-3) in appropriate form for filing under the UCC of each jurisdiction as may be necessary to perfect the security interests purported to be created by the Borrower Security Agreement; (B) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, each of recent date listing all effective financing statements that name the Borrower as debtor and that are filed in the jurisdictions referred to in clause (A), together with copies of such financing statements (none of which shall cover the Collateral except (x) those with respect to which appropriate termination statements executed by the secured lender thereunder have been delivered to the Agent and (y) to the extent evidencing Permitted Liens); (C) evidence of the completion of all other recordings and filings of, or with respect to, the Borrower Security Agreement as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interests intended to be created by the Borrower Security Agreement; and (D) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by the Borrower Security Agreement have been taken. (ii) each Subsidiary of the Borrower shall have duly authorized, executed and delivered the security agreement substantially in the form of Exhibit F (as -32- modified, supplemented or amended from time to time, the "Subsidiary Security Agreement") covering all of each such Subsidiary's present and future Security Agreement Collateral together with: (A) executed copies of financing statements (Form UCC-1) in appropriate form for filing under the UCC of each jurisdiction as may be necessary to perfect the security interests purported to be created by the Subsidiary Security Agreement; (B) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, each of recent date listing all effective financing statements that name any such Subsidiary as debtor and that are filed in the jurisdictions referred to in clause (A), together with copies of such financing statements (none of which shall cover the Collateral except (x) those with respect to which appropriate termination statements executed by the secured lender thereunder have been delivered to the Agent and (y) to the extent evidencing Permitted Liens); (C) evidence of the completion of all other recordings and filings of, or with respect to, the Subsidiary Security Agreement as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interests intended to be created by the Subsidiary Security Agreement; and (D) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by the Subsidiary Security Agreement have been taken. (f) MORTGAGES; TITLE INSURANCE; SURVEYS. (i) The Agent shall have received fully executed counterparts of deeds of trust, leasehold deeds of trust, mortgages, leasehold mortgages and similar documents in each case substantially in the form of Exhibit L and with such changes which are in form and substance satisfactory to the Agent (each a "Mortgage" and collectively the "Mortgages") covering all the Mortgaged Properties, and arrangements reasonably satisfactory to the Agent shall be in place -33- to provide that counterparts of such Mortgages shall be recorded on the Effective Date in all places to the extent necessary or desirable, in the judgment of the Agent, effectively to create a valid and enforceable first priority Lien, subject only to Permitted Encumbrances, on each Mortgaged Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Parties. (ii) Except as agreed to by the Agent, the Agent shall have received ALTA Revised 1987 mortgagee title insurance policies or the equivalent thereof (or binding commitments to issue such title insurance policies) issued by title insurers satisfactory to the Agent (the "Mortgage Policies") in amounts satisfactory to the Agent and assuring the Agent that the Mortgages in respect of the Mortgaged Properties are valid and enforceable first priority mortgage Liens on the respective Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Encumbrances. Such Mortgage Policies shall be in form and substance reasonably satisfactory to the Agent and shall include an endorsement for future advances under this Agreement, the Notes and the Mortgages, for mechanics liens and for any other matter that the Agent in its discretion may reasonably request prior to the Effective Date, and shall provide for affirmative insurance and such reinsurance (including direct access agreements) as the Agent in its discretion may request prior to the Effective Date. (iii) The Agent shall have received a recent survey with respect to each Real Property owned by Borrower to the extent designated on Schedule V hereto dated and certified to Agent, it successors and assigns, within 60 days prior to the Effective Date prepared by a land surveyor licensed in each of the states where such Real Property is located pursuant to the then current ALTA/ACSM standards for title surveys and otherwise reasonably satisfactory to Agent and showing thereon the location of the perimeter of each such Real Property by courses and distances, the lines of the streets abutting each of such Real Property and the width thereof, the on site improvements to the extent constructed and the relation of the on site improvements by distance to the perimeter of each such Real Property, and the established building lines and the street lines, all encroachments and the extent -34- thereof upon each such Real Property and indicating that the on-site improvements to the extent constructed are within the lot and building lines of each such Real Property, indicating whether each such Real Property is in a flood plain and otherwise containing such items as are reasonably requested by Agent. (iv) The Agent shall have received a certificate dated the Effective Date signed on behalf of the Borrower by the President, any Executive Vice President or the Chief Financial Officer of the Borrower certifying that each parcel of Real Property owned in fee simple by Borrower or any of its Subsidiaries which is not a Mortgaged Property is unimproved, is vacant, is not used by the Borrower or any of its Subsidiaries in the operation of its or their business, and is of DE MINIMUS value. (g) SUBSIDIARY GUARANTY. Each Subsidiary shall have duly completed, executed and delivered to the Agent for the benefit of the Banks a guaranty (as modified, supplemented or amended from time to time, the "Subsidiary Guaranty") of the Obligations substantially in the form of Exhibit J, and the same shall be in full force and effect. (h) CERTIFICATE OF THE CLERK OF THE BANKRUPTCY COURT. The Agent shall have received a certificate dated the Effective Date from the Clerk of the Bankruptcy Court, if available, certifying that (i) there is no order amending, modifying, staying, vacating or rescinding the Confirmation Order entered on the docket of the Clerk of the Bankruptcy Court on May 31, 1995 or, except as set forth on Schedule XIV hereto, pending appeal or motion to vacate or rescind the same and (ii) there is no motion or other pleading on file seeking to amend, modify, stay, vacate or rescind the Plan of Reorganization. (i) CONFIRMATION ORDERS; PLAN OF REORGANIZATION, ETC. (i) All orders, including without limitation the Confirmation Order, of the Bankruptcy Court entered in connection with the Plan of Reorganization and set forth on Schedule XIV hereto (as amended or supplemented from time to time and approved by the Agent and the Required Banks (the "Confirmation Orders")) shall be satisfactory to Agent (which orders shall, except as agreed to by Agent, be final orders on the -35- Effective Date) and, as of the Effective Date and after giving effect to the initial Loans, such Plan of Reorganization shall have been substantially consummated in accordance with the terms thereof and the terms of the Confirmation Orders. (ii) The final documentation for the restructuring effected by the Confirmation Orders shall be in the form attached to the Plan of Reorganization or this Agreement and shall be otherwise in form and substance satisfactory to the Agent. (iii) The Plan of Reorganization shall not have been amended, supplemented, restated or otherwise modified, whether pursuant to Section 1127 of the Bankruptcy Code, court order, or otherwise, without the consent of the Agent and the Required Banks. (j) EQUITY OWNERSHIP; CORPORATE GOVERNANCE. All aspects of the equity ownership and corporate and operational governance (including the composition of the Board of Directors and the management of the Borrower) of the Borrower and its Subsidiaries, to the extent not expressly set forth in the Plan of Reorganization, shall be satisfactory to the Agent. Additionally, all agreements relating to, and the corporate and capital structure of, the Borrower and its Subsidiaries after giving effect to the transactions contemplated by the Credit Documents and the Plan of Reorganization, and all organizational documents of such entities, to the extent not expressly set forth in the Plan of Reorganization, shall be satisfactory to the Agent. (k) EXISTING INDEBTEDNESS. (i) The Existing Indebtedness of the Borrower and its Subsidiaries, including without limitation Capital Leases, shall be as described in the Plan of Reorganization (including, without limitation, the Borrower's proposed issuance of the Senior Notes in exchange for the cancellation of the Original Senior Notes and the conversion of the Subordinated Notes) and, to the extent not described in the Plan of Reorganization, all agreements evidencing or relating to the Existing Indebtedness (collectively, the "Existing Indebtedness Agreements") shall be satisfactory to the Agent, and the Borrower and its Subsidiaries shall have no outstanding Indebtedness other than as described in the Plan of Reorganization and the Post-Confirmation Projections -36- (with exceptions, if any, as may be acceptable to the Agent in its sole discretion). (ii) The Original Senior Notes and the Subordinated Notes and all obligations of the Company thereunder or in respect thereof shall have been released and discharged in full and all Liens securing the Original Senior Notes shall have been released to the satisfaction of the Agent. (l) POST-CONFIRMATION PROJECTIONS. There shall have been delivered to the Banks the monthly financial projections regarding the Borrower and its Subsidiaries through the fiscal year ended in the year 1996 and annual projections through the fiscal year ended in the year 2000 of the Borrower and its Subsidiaries (collectively, the "Post-Confirmation Projections"), and the Agent shall be satisfied with the accounting practices and procedures to be utilized by the Borrower and its Subsidiaries, and any changes to such Post-Confirmation Projections prior to the Effective Date shall be satisfactory to the Agent. (m) FINANCIAL CONDITION; ETC. The Agent shall be satisfied on the Effective Date (i) that the Borrower's cash-on-hand, trade support and other operations are as set forth in the Post-Confirmation Projections and (ii) with the results of operations set forth in the most recent financial statements delivered by the Borrower prior to such date. (n) CASH MANAGEMENT SYSTEM. To the extent not previously established, a cash management system, together with cash concentration accounts for the Borrower shall have been established to the satisfaction of the Agent. (o) AUDITED FINANCIAL STATEMENTS. The Agent shall have received audited financial statements for the most recent fiscal year of the Borrower; PROVIDED, HOWEVER, that should the audited financial statements not be available by the Effective Date, the Company shall have delivered to the Agent unaudited financial statements as of April 1, 1995 certified as to accuracy and completeness (subject to changes resulting from audit and normal year-end audit adjustments) by the Borrower's Chief Financial Officer and shall make Price Waterhouse LLP available to dis- -37- cuss its findings with the Agent and its financial advisors prior to the Effective Date. (p) CURRENT FINANCIAL STATEMENTS; INVENTORY ANALYSES. The Banks shall have received (i) financial statements for the most recent fiscal period ending no more than 30 days prior to the Effective Date certified by the chief financial officer of the Borrower, and (ii) such inventory analyses as Agent shall request, in each case satisfactory to Agent. (q) DIP DOCUMENTS. The commitments under the DIP Documents shall have been terminated, and all loans thereunder, together with interest thereon, and all other amounts owing pursuant to the DIP Documents, shall have been repaid in full, and with respect to letters of credit issued under the DIP Documents, provisions shall have been made for the payment of reimbursement obligations by cash collateralization or the issuance of replacement Letters of Credit in accordance with the terms thereof, and the DIP Documents shall have been terminated and be of no further force and effect. The Agent and the Banks shall have received evidence in form, scope and substance satisfactory to the Agent that the matters set forth in this Section 5.1(q) have been satisfied at such time. (r) ENVIRONMENTAL REPORTS. At the request of the Agent, the Borrower shall have provided to the Agent copies of environmental reports that are in form and substance satisfactory to the Agent and the Banks in respect of the Borrower's and its Subsidiaries' Real Property prepared at the cost and expense of the Borrower, by a Person designated by the Borrower that is acceptable to the Agent and the Required Banks. (s) INSURANCE POLICIES. The Agent shall have received evidence of insurance complying with the requirements of Section 7.10 for the business and properties of the Borrower and its Subsidiaries, in form and substance satisfactory to the Agent and, with respect to all casualty insurance, naming the Collateral Agent on behalf of the Secured Parties as an additional insured and loss payee. (t) CONSENT LETTER. The Agent shall have received a letter from CT Corporation System, presently located at 1633 Broadway, New York, NY -38- 10019, in the form of Exhibit G indicating its consent to its appointment by each Credit Party as their agent to receive service of process. (u) PLANS; ETC. There shall have been made available to the Agent (which copies may be made available to the Banks) copies, certified as true and correct by an Authorized Officer of the Borrower, of (a) any Plans, other than any Plans which have terminated prior to the Effective Date and any Plans in which none of the Borrower, any Subsidiary or any ERISA Affiliate participates as of the Effective Date, and for each such Plan (x) that is a "single-employer plan" (as defined in Section 4001(a)(15) of ERISA) the most recently completed actuarial valuation prepared therefor by such Plan's regular enrolled actuary and the Schedule B, "Actuarial Information" to the IRS Form 5500 (Annual Report) most recently filed with the Internal Revenue Service and (y) that is a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA), each of the documents referred to in clause (x) either in the possession of the Borrower or reasonably available thereto from the sponsor or trustees of such Plan, (b) any collective bargaining agreements or any other similar agreement or arrangements covering the employees of the Borrower or any of its Subsidiaries (collectively, the "Collective Bargaining Agreements"), (c) any material agreements (or the forms thereof) with members of, or with respect to, the management of the Borrower or any of its Subsidiaries (collectively, the "Management Agreements"), (d) any employment agreements entered into by the Borrower or any of its Subsidiaries (collectively, the "Employment Agreements"), and (e) all tax sharing, tax allocation and other similar agreements entered into by the Borrower, and/or any of its Subsidiaries (collectively, the "Tax Sharing Agreements"), all of which Plans, Collective Bargaining Agreements, Management Agreements, Employment Agreements, and Tax Sharing Agreements shall be in form and substance satisfactory to the Agent. (v) CORPORATE DOCUMENTS; PROCEEDINGS; OFFICERS' CERTIFICATES. (i) The Agent shall have received from each Credit Party a certificate, dated the Effective Date, signed and attested to by an Authorized Officer of such Person, in the form of Exhibit H with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws of such -39- Credit Party and the resolutions of such Credit Party referred to in such certificate and the foregoing shall be satisfactory to the Agent. (ii) All corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be satisfactory in form and substance to the Agent, and the Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates and any other records of corporate proceedings and governmental approvals, if any, which the Agent may have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. (w) PAYMENT OF FEES. (i) All costs, fees and expenses, and all other compensation contemplated by this Agreement, due to the Agent or the Banks (including, without limitation, legal fees and expenses of Skadden, Arps, Slate, Meagher & Flom, special counsel to the Agent and the Banks, and Policano & Manzo, L.L.C., financial advisors to such special counsel) shall have been paid by the Borrower to the extent due. (ii) All interest, fees, expenses and other charges that have accrued pursuant to the terms of the Original Credit Documents but have not been paid as of the Effective Date shall have been paid by the Borrower to the Agent for distribution to those parties entitled to receive such interest, fees, expenses and other charges pursuant to the Original Credit Documents. (x) APPROVALS. (i) All material franchises, licenses, permits, certifications, accreditations and other rights, consents and approvals which are necessary for the operations of the Borrower's and its Subsidiaries' respective properties and businesses after giving effect to the transactions contemplated by the Credit Documents and the Plan of Reorganization shall be in full force and effect. (ii) All necessary governmental and third party approvals and/or consents required to be obtained on or prior to the Effective Date in connec- -40- tion with the transactions contemplated by the Credit Documents and the Plan of Reorganization and otherwise referred to herein or therein shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents or imposes, in the judgment of the Required Banks or the Agent, materially adverse conditions upon the consummation of such transactions. No judgement, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon any Credit Document shall exist. (y) LITIGATION. No litigation, investigation or inquiry by any entity (private or governmental) shall be pending or threatened on the Effective Date (a) with respect to this Agreement or any other Credit Document, (b) with respect to the Plan of Reorganization or any Plan of Reorganization Document, (c) with respect to any material debt of the Borrower or any of its Subsidiaries which is to remain outstanding after the Effective Date or (d) with respect to which the Borrower or any of its Subsidiaries may be directly or indirectly liable (including, without limitation, any claim made by the PBGC with respect to any Plan in connection with the Chapter 11 Case or otherwise) which the Agent or the Required Banks shall determine could have a material adverse effect on the ability of the Borrower or any of its Subsidiaries to perform their respective obligations under this Agreement or any other Credit Document or which could have a Material Adverse Effect. (z) SECURITY INTERESTS. The Banks shall be satisfied that the Security Documents create or will create upon the completion of the filings of the Security Documents, financing statements and other instruments tendered for filing, as security for the Obligations a valid and enforceable perfected security interest in and Lien on all of the Collateral except as agreed to by the Agent in favor of the Collateral Agent for the benefit of the Secured Parties, superior and prior to the rights of all other Persons therein (as provided in the Uniform Commercial Code) and subject to no other Liens other than Liens permitted hereby. The Security Documents, or financing statements or other instruments with respect thereto, as may be necessary, shall have been duly filed or recorded (or tendered for filing or recording) in such -41- manner and in such places as are required by law to establish, perfect, preserve and protect the security interests and Liens in favor of the Collateral Agent for the benefit of the Secured Parties, granted pursuant to such Security Documents, and all taxes, fees and other charges payable in connection therewith due on or prior to the Effective Date shall have been paid in full. (aa) SYNDICATION MARKET. Since January 24, 1995, there shall have been no continuing material disruption of, or material adverse change in, the financial, banking or capital markets that in the sole discretion of the Agent has materially adversely impaired the syndication of loans or the placement of securities of generally the same type and size as any of the types of Loans contemplated under this Agreement in such markets. (bb) LEASES. Agent shall have received certified copies of all leases with respect to each Mortgaged Property, including, without limitation, any amendments, assignments or other agreements relating thereto. (cc) OTHER DOCUMENTS. The Agent shall have received such other documents as the Agent may reasonably request, including, without limitation, the certificate relating to Chalfont. 5.2 CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligation of each Bank to make any Loans and the obligation of the Letter of Credit Issuer to issue Letters of Credit is subject, at the time of each such Credit Event (including Credit Events occurring on the Effective Date) to the satisfaction of the following conditions at such time: (a) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in the other Credit Documents in effect at such time shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Credit Event (except to the extent any representation or warranty is expressly made as of a specific date, in which case -42- such representation and warranty shall be true and correct in all material respects as of such date). (b) ADVERSE CHANGE. Since April 1, 1995 (and the Lenders shall have become aware of no facts or conditions not previously known), nothing shall have occurred which the Required Banks or the Agent shall determine (i) could have a material adverse effect on the rights or remedies of the Banks, or the Agent, or on the ability of any Credit Party to perform its obligations to the Banks or the Agent or (ii) has had, or could have, a Material Adverse Effect. (c) NOTICE OF BORROWING; LETTER OF CREDIT REQUEST; ETC. The Agent shall have received a Notice of Borrowing with respect to such Borrowing of Loans meeting the requirements of Section 1.3 or a Letter of Credit Request for such issuance of a Letter of Credit meeting the requirements of Section 2.3, as the case may be, and such other documents or opinions as the Agent or any Bank may reasonably request. The acceptance of the benefits of each Credit Event shall constitute a representation and warranty by the Borrower to each of the Banks that all of the applicable conditions specified in this Section 5 are then satisfied. All of the certificates, legal opinions and other documents and papers referred to in this Section 5, unless otherwise specified, shall be delivered to the Agent at its Notice Office for the account of each of the Banks and, except for the Notes, in sufficient counterparts or copies for each of the Banks and shall be satisfactory in form and substance to the Agent. SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to induce the Banks to agree to the restructuring of the loans and other obligations outstanding under the Original Credit Agreement on the terms of this Agreement and to make the Loans and participate in Letters of Credit and the Letter of Credit Issuer to issue Letters of Credit as provided for herein, the Borrower makes the following representations and warranties to, and agreements with, the Banks and the Letter of Credit Issuer, all of which shall survive the execution and delivery of this Agreement and the making of the Loans (with the occurrence of each Credit Event being deemed to constitute a representation and warranty that the matters specified in this Section 6 are true and correct in -43- all material respects on and as of the date hereof and as of the date of each such Credit Event, except to the extent that any representation or warranty is expressly made as of a specific date, in which case such representation or warranty shall be true and correct in all material respects as of such specific date): 6.1 CORPORATE STATUS. Each of the Credit Parties and each of their Subsidiaries (i) is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization and has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (ii) has duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified and where the failure to be so qualified is reasonably likely to have a Material Adverse Effect. 6.2 CORPORATE POWER AND AUTHORITY. Each Credit Party has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Credit Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Credit Documents to which it is a party. Each Credit Party has duly executed and delivered each Credit Document to which it is a party and each such Credit Document constitutes the legal, valid and binding obligation of such Credit Party enforceable in accordance with its terms. 6.3 NO VIOLATION. Neither the execution, delivery and performance by any Credit Party of the Credit Documents to which it is a party nor compliance with the terms and provisions thereof, nor the consummation of the transactions contemplated therein (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or (other than pursuant to the Security Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Borrower or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, agreement or other instrument to which the Borrower or any of its Subsidiaries is a party or by which it or any of its property or assets are bound or -44- to which it may be subject, including without limitation the Existing Indebtedness Agreements or (iii) will violate any provision of the charter or By-Laws of any Credit Party or any of its Subsidiaries. 6.4 LITIGATION. There are no actions, suits or proceedings pending or threatened with respect to the Borrower or any of its Subsidiaries or in respect of which the Borrower or any of its Subsidiaries may be liable by contract, settlement agreement or otherwise (i) that are likely to have a Material Adverse Effect or (ii) that could have a material adverse effect on the rights or remedies of the Agent or the Banks or on the ability of any Credit Party to perform its obligations to them hereunder and under the other Credit Documents to which it is, or will be, a party. 6.5 USE OF PROCEEDS. (a) The proceeds of all Loans shall be utilized for general corporate purposes of the Borrower and its Subsidiaries. (b) No part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulations G, U or X. 6.6 GOVERNMENTAL APPROVALS. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, is required to authorize or is required in connection with (i) the execution, delivery and performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any Credit Document. 6.7 INVESTMENT COMPANY ACT. Neither the Company nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 6.8 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the -45- meaning of the Public Utility Holding Company Act of 1935, as amended. 6.9 TRUE AND COMPLETE DISCLOSURE. All factual information (taken as a whole) heretofore or contemporaneously furnished by or on behalf of the Borrower or its Subsidiaries in writing to the Agent or any Bank (including, without limitation, all information contained in the Documents) for purposes of or in connection with this Agreement or any transaction contemplated herein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of the Borrower or its Subsidiaries in writing to any Bank will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided. The projections and pro forma financial information contained in such materials are based on good faith estimates and assumptions believed by the Borrower to be reasonable at the time made, it being recognized by the Banks that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results in any material respect. There is no fact known to any Credit Party which has, or is reasonably likely to have, a Material Adverse Effect which has not been disclosed herein or in such other documents, certificates and statements furnished to the Banks for use in connection with the transactions contemplated hereby. 6.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and as of the Effective Date on a pro forma basis after giving effect to the Plan of Reorganization and all Indebtedness incurred, and to be incurred, and Liens created and to be created, by each Credit Party in connection therewith, with respect to the Borrower (x) the sum of its assets, at a fair valuation, will exceed its debts, (y) it will not have incurred nor intended to, or believes that it will not, incur debts beyond its ability to pay such debts as such debts mature and (z) it will have sufficient capital with which to conduct its business. For purposes of this Section 6.10(a), "debt" means any liability on a claim, and "claim" means (i) right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or -46- unsecured; or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. (b) The consolidated balance sheet of the Borrower and its Subsidiaries at April 1, 1995 and the related consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the fiscal year ended as of said date, which have been examined by Price Waterhouse LLP, independent certified public accountants, and the pro forma (after giving effect to the Plan of Reorganization and the transactions related thereto) consolidated balance sheet of the Borrower and its Subsidiaries as at April 1, 1995, copies of which have heretofore been furnished to each Bank, present fairly the financial position of the Borrower and its Subsidiaries at the dates of said statements and the results for the period covered thereby (or, in the case of the pro forma balance sheet, present a good faith estimate of the consolidated pro forma financial condition of the Borrower and its Subsidiaries at the date thereof); PROVIDED, HOWEVER, that should the audited financial statements not be available by the Effective Date, the Company shall have delivered to the Agent unaudited financial statements as of April 1, 1995 certified as to accuracy and completeness (subject to changes resulting from audit and normal year-end audit adjustments) by the Borrower's Chief Financial Officer and shall make Price Waterhouse LLP available to discuss its findings with the Agent and its financial advisors prior to the Effective Date. All such financial statements (other than the aforesaid pro forma balance sheet) have been prepared in accordance with GAAP and practices consistently applied except to the extent provided in the notes to said financial statements. (c) Since April 1, 1995, there has been no material adverse change in the business, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. (d) Except as fully reflected in the financial statements described in Section 6.10(b), there were as of the Effective Date (and after giving effect to any Loans made on such date), no liabilities or obligations (excluding current obligations incurred in the ordinary course of business) with respect to the Borrower or any of -47- its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due), and the Borrower does not know of any basis for the assertion against the Borrower or any of its Subsidiaries of any such liability or obligation which, either individually or in aggregate, are or would be reasonably likely to be material to the Borrower or the Borrower and its Subsidiaries taken as a whole. (e) The Post-Confirmation Projections dated as of April 13, 1995, prepared by the Borrower and delivered to the Banks prior to the Effective Date are based on good faith estimates and assumptions made by the management of the Borrower, and on the Effective Date such management believed that the Post- Confirmation Projections were reasonable and attainable, it being recognized by the Banks, however, that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by the Post-Confirmation Projections probably will differ from the projected results and that the differences may be material. 6.11 SECURITY INTERESTS. Except as agreed to by the Agent, on and after the Effective Date, each of the Security Documents creates, as security for the Obligations, a valid and enforceable perfected security interest in and Lien on all of the Collateral, superior to and prior to the rights of all third persons and subject to no other Liens (except (x) that the Security Agreement Collateral may be subject to the security interests evidenced by Permitted Liens relating thereto and (y) the Mortgaged Properties may be subject to Permitted Encumbrances relating thereto), in favor of the Collateral Agent for the benefit of the respective Secured Parties. No filings or recordings are required in order to perfect the security interests created under any Security Document except for filings or recordings required in connection with any such Security Document which shall have been made, or provided for as contemplated by Sections 5.1(e) and (f), on or prior to the Effective Date. 6.12 TAX RETURNS AND PAYMENTS. The Borrower and each of its Subsidiaries has filed all federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all material taxes and assessments payable by it which have become due, other than those not yet delinquent and except for those contested in good faith. The Borrower and each of its Subsidiaries has paid, or has provided adequate -48- reserves (in the good faith judgment of the management of such Person) for the payment of, all federal, state and foreign income taxes applicable for all prior fiscal years and for the current fiscal year to the date hereof. 6.13 COMPLIANCE WITH ERISA. Each Plan is in substantial compliance with ERISA and the Code; no Reportable Event has occurred with respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability in excess of $5 million and the aggregate Unfunded Current Liabilities for all Plans does not exceed $10 million; no Plan has an accumulated or waived funding deficiency, has permitted decreases in its funding standard account or has applied for an extension of any amortization period within the meaning of Section 412 of the Code; neither the Borrower nor any of its Subsidiaries (whether directly or by way of an ERISA Affiliate) has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code or expects to incur any liability under any of the foregoing Sections with respect to any Plan; no proceedings have been instituted to terminate any Plan (other than pursuant to Section 4041(b) of ERISA); using actuarial assumptions and computation methods which to the best knowledge of the Borrower are consistent with subpart 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower, its Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date hereof would not exceed $10 million; no lien imposed under the Code or ERISA on the assets of the Borrower or any of its Subsidiaries or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Borrower and its Subsidiaries do not maintain or contribute to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to retired employees (other than as required by applicable law or under the terms of an applicable collective bargaining agreement) or any employee pension benefit plan (as defined in Section 3(2) of ERISA) other than any such employee pension benefit plan intended to be qualified (within the meaning of Section 401(a) of the Code) the obligations with respect to which could reasonably be expected to have a Material Adverse Effect. Notwithstanding anything herein to the contrary, all representations made in this Section 6.13 with respect to a -49- Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) other than representations made with respect to withdrawal liability incurred pursuant to Section 4201 or 4204 of ERISA, shall be to the best knowledge of the Borrower. 6.14 SUBSIDIARIES. Schedule IV hereto lists each Subsidiary of the Borrower, and the respective direct and indirect ownership interest of the Borrower therein, in each case as of the Effective Date. 6.1O PATENTS, ETC. The Borrower and each of its Subsidiaries owns or holds a valid license to use all material patents, trademarks, servicemarks, trade names, copyrights, licenses and other rights, that are necessary for, and no restriction applicable to any such patent, trademark, servicemark, trade name, copyright, license or other right would interfere in any material respect with, the operation of their businesses taken as a whole as presently conducted and as proposed to be conducted. 6.16 COMPLIANCE WITH STATUTES, ETC. (a) The Borrower and each of its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls), except such noncompliance as is not likely to, in the aggregate, have a Material Adverse Effect. (b) The Borrower and each of its Subsidiaries is in compliance with all applicable Environmental Laws governing its business for which failure to comply is likely to have a Material Adverse Effect, and neither the Borrower nor any of its Subsidiaries is liable for any material penalties, fines or forfeitures for failure to comply with any of the foregoing in the manner set forth above. All licenses, permits, registrations or approvals required for the business of the Borrower and each of its Subsidiaries, as conducted as of the Effective Date, under any Environmental Law have been secured and the Borrower and each of its Subsidiaries is in substantial compliance therewith, except such licenses, permits, registrations or approvals the failure to secure or to comply therewith is not likely to have a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries is in any respect in noncompliance with, breach of or default under any applic- -50- able writ, order, judgment, injunction, or decree to which the Borrower or such Subsidiary is a party or which would affect the ability of the Borrower or such Subsidiary to operate any Real Property and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute noncompliance, breach of or default thereunder, except in each such case, such noncompliance, breaches or defaults as are not likely to, in the aggregate, have a Material Adverse Effect. There are as of the Effective Date no Environmental Claims pending or, to the best knowledge of the Borrower, threatened, which (a) question the validity, term or entitlement of the Borrower or any of its Subsidiaries for any permit, license, order or registration required for the operation of any facility which the Borrower or any of its Subsidiaries currently operates and (b) wherein an unfavorable decision, ruling or finding would be reasonably likely to have a material adverse effect on the financial viability of any facility thereof. There are no facts, circumstances, conditions or occurrences on any Real Property or, to the knowledge of the Borrower, on any property adjacent to any such Real Property that could reasonably be expected (i) to form the basis of an Environmental Claim against the Borrower, any of its Subsidiaries or any Real Property of the Borrower or any of its Subsidiaries, or (ii) to cause such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property under any Environmental Law, except in each such case, such Environmental Claims or restrictions that individually or in the aggregate are not reasonably likely to have a Material Adverse Effect. (c) Hazardous Materials have not at any time been (i) generated, used, treated or stored on, or transported to or from, any Real Property of the Borrower or any of its Subsidiaries or (ii) released on any Real Property, in each case where such occurrence or event is reasonably likely to have a Material Adverse Effect. 6.17 PROPERTIES. The Borrower and each of its Subsidiaries has good and marketable fee simple title to all properties owned by each of them, including all property reflected in the financial statements referred to in Section 6.10(b) (except as sold or otherwise disposed of since the date of the April 1, 1995 financial statements in the ordinary course of business) and valid leasehold interests in all Real Property leased by each of them, free and clear of all Liens, other than Liens permitted by -51- Section 8.2. Schedule V contains a true and complete list of each Real Property owned and each Real Property leased by the Borrower or any of its Subsidiaries on the Effective Date and the type of interest therein held by the Borrower or such Subsidiary. 6.18 LABOR RELATIONS; COLLECTIVE BARGAINING AGREEMENTS. (a) Set forth on Schedule VI hereto is a list and description (including dates of termination) of all collective bargaining or similar agreements between or applicable to the Borrower or any of its Subsidiaries and any union, labor organization or other bargaining agent in respect of the employees of the Borrower and/or any Subsidiary on the Effective Date. (b) Neither the Borrower nor any of its Subsidiaries is engaged in any unfair labor practice that is reasonably likely to have a Material Adverse Effect. There is (i) no significant unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against any of them, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is now pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against any of them, (ii) no significant strike, labor dispute, slowdown or stoppage is pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries and (iii) to the best knowledge of the Borrower, no union representation question exists with respect to the employees of the Borrower or any of its Subsidiaries, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as is not reasonably likely to have a Material Adverse Effect. 6.19 INDEBTEDNESS. Schedule VII sets forth a true and complete list of (x) all Indebtedness (other than intercompany indebtedness) of the Borrower and each of its Subsidiaries outstanding as of the Effective Date and which is to remain outstanding after the Effective Date and (y) all agreements existing on the Effective Date and which are to remain outstanding after the Effective Date pursuant to which the Borrower or any of its Subsidiaries is entitled to incur Indebtedness (other than intercompany indebtedness) (whether or not any condition to such incurrence could be met) (collectively, the "Existing Indebted- -52- ness"), in each case showing the aggregate principal amount thereof and the name of the respective borrower and any other entity which directly or indirectly guaranteed such debt. 6.20 RESTRICTIONS ON SUBSIDIARIES. Except for restrictions contained in the Credit Documents, as of the Effective Date there are no contractual or consensual restrictions on the Borrower or any of its Subsidiaries which prohibit or otherwise restrict (i) the transfer of cash or other assets (x) between the Borrower and any of its Subsidiaries or (y) between any Subsidiaries of the Borrower or (ii) the ability of the Borrower or any of its Subsidiaries to grant security interests to the Banks in their respective assets. 6.21 REPRESENTATIONS AND WARRANTIES IN OTHER AGREEMENTS. All representations and warranties made by any Credit Party and set forth in the Plan of Reorganization will be true and correct on the Effective Date in all material respects as though such representations and warranties were being made on and as of such date. 6.22 SENIOR NOTES, ETC. As of the Effective Date, the Senior Notes have been duly authorized, issued and delivered in accordance with applicable law. 6.23 PLAN OF REORGANIZATION; CONFIRMATION ORDERS. The Borrower has complied in all material respects with the Plan of Reorganization and neither the execution and delivery of this Agreement, the other Credit Documents, or any of the instruments and documents to be delivered pursuant hereto or thereto, nor the consummation of the transactions herein or therein contemplated are in violation of or in contravention of, in any respect, the Plan of Reorganization. The Confirmation Orders have been duly entered, are valid, subsisting and continuing and, except as set forth on Schedule XIV hereto, there are no appeals or motions to amend, vacate, stay or rescind the Confirmations Orders filed and the time to file such appeals or motions has expired. SECTION 7. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that on the Effective Date and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit are outstanding and the Loans together with interest, Fees and all other Obligations (other than any indemnities described -53- in Section 12.13 hereof which are not then due and payable) incurred hereunder are paid in full: 7.1 INFORMATION COVENANTS. The Borrower will furnish to each Bank: (a) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close of each fiscal year of the Borrower, the consolidated and Consolidating balance sheets of the Borrower and its Subsidiaries, as at the end of such fiscal year and the related statements of income and cash flows for such fiscal year, setting forth comparative figures for the preceding fiscal year, and in the case of such consolidated statements examined by Price Waterhouse LLP (or other independent certified public accountants of recognized national standing acceptable to the Required Banks) whose opinion shall not be qualified as to the scope of audit and as to the status of the Borrower or any of its Subsidiaries as a going concern, together, in each case, with a certificate of the accounting firm referred to above stating that in the course of its regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge of any Default or Event of Default which has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof. (b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any event within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Borrower, the consolidated and Consolidating balance sheets of the Borrower and its Subsidiaries, as at the end of such quarterly period and the related statements of income and cash flows for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and setting forth comparative figures for the related periods in the prior fiscal year, in each case, certified by an Authorized Officer of the Borrower, subject to changes resulting from audit and normal year-end audit adjustments. (c) MONTHLY REPORTS. (i) As soon as practicable, and in any event within 30 days, after the end of each monthly accounting period of each -54- fiscal year, a monthly report substantially in the form of Exhibit K hereto, with such changes in such form as the Agent in its reasonable judgment may approve, setting forth, without limitation, the consolidated balance sheets of the Borrower and its Subsidiaries, as at the end of such period, and the related statements of income and cash flows for such period, setting forth comparative figures for the corresponding period of the previous year, which shall be certified by an Authorized Officer of the Borrower subject to changes resulting from audit and normal year-end audit adjustments. (ii) As soon as practicable, and in any event within 30 days after the end of each monthly accounting period of each fiscal year of the Borrower, the "Management Accounts" of the Borrower, in the form prepared for management of the Borrower on the Effective Date. (d) BUDGETS; ETC. Not more than 45 days after the commencement of each fiscal year of the Borrower a budget in form satisfactory to the Agent prepared by the Borrower for each of the first two fiscal quarters and for the second half of such fiscal year, and, not more than 45 days from the commencement of the second fiscal quarter, a revised budget for the second half of such fiscal year, in each case setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based, which shall be accompanied by a statement of an Authorized Officer of the Borrower to the effect that, to the best of his knowledge, such budget is a reasonable estimate for the period covered thereby. Together with each delivery of consolidated financial statements of the Borrower pursuant to Section 7.1(a) and (b), a comparison of the current year to date financial results (other than in respect of the balance sheets included therein) against the budgets required to be submitted pursuant to this clause (d) shall be presented. (e) OFFICER'S CERTIFICATES. At the time of the delivery of the financial statements provided for in Section 7.1(a), (b) and (c), a certificate of an Authorized Officer of the Borrower to the effect that no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate, in the case of the certificate delivered pursuant to Section -55- 7.1(a) and (b), shall set forth the calculations required to establish whether the Borrower and its Subsidiaries were in compliance with the provisions of Section 8.4 and Sections 8.9 through and including 8.12, as at the end of such fiscal quarter or year, as the case may be. (f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event within three Business Days after an officer of the Borrower or any of its Subsidiaries obtains knowledge thereof, notice of (x) the occurrence of any event which constitutes a Default or Event of Default, which notice shall specify the nature thereof, the period of existence thereof and what action the Borrower proposes to take with respect thereto and (y) the commencement of or any significant development in any litigation or governmental proceeding pending against the Borrower or any of its Subsidiaries which is likely to have a Material Adverse Effect or a material adverse effect on the ability of any Credit Party to perform its obligations hereunder or under any other Credit Document. (g) AUDITORS' REPORTS. Promptly upon receipt thereof, a copy of each other report or "management letter" submitted to the Borrower or its Subsidiaries by its independent accountants in connection with any annual, interim or special audit made by it of the books of the Borrower or its Subsidiaries. (h) ENVIRONMENTAL MATTERS. Promptly upon obtaining knowledge thereof, notice of (i) any pending or threatened Environmental Claim against the Borrower or any of its Subsidiaries or any Real Property of the Borrower or any of its Subsidiaries unless such Environmental Claim could not, individually or when aggregated with all other such Environmental Claims, reasonably be expected to have a Material Adverse Effect; (ii) any condition or occurrence on any Real Property of the Borrower or any of its Subsidiaries that (a) results in material noncompliance by the Borrower or such Subsidiary with any applicable Environmental Law, or (b) could reasonably be anticipated to form the basis of an Environmental Claim against the Borrower, such Subsidiary or any Real Property of the Borrower or such Subsidiary, unless in each case such noncompliance or such Environmental Claim could not, individually or when aggregated with all other such non-compliance claims, reasonably be -56- expected to have a Material Adverse Effect; (iii) any condition or occurrence on any Real Property of the Borrower that could reasonably be anticipated to cause such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property under any Environmental Law unless such restrictions could not, individually or when aggregated with all other such restrictions, reasonably be expected to have a Material Adverse Effect; and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property of the Borrower or any of its Subsidiaries, unless the presence of such Hazardous Materials and the removal or remedial action in response thereto could not, individually or when aggregated with all such other occurrences or events, reasonably be expected to have a Material Adverse Effect. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the response thereto of the Borrower or of its applicable Subsidiary. In addition, the Borrower will provide the Banks with copies of all material written communications with any government or governmental agency relating to Environmental Laws, all communications with any government or governmental agency relating to Environmental Claims, and such detailed reports of any Environmental Claim, in each case as may reasonably be requested in writing from time to time by the Agent or the Required Banks. (i) BANKRUPTCY COURT FILINGS. Promptly upon preparation or receipt thereof from time to time by the Borrower copies of all pleadings, motions, applications and other documents filed after the Effective Date by or on behalf of the Borrower or by any third party with the Bankruptcy Court or distributed by or on behalf of the Borrower to any official committee appointed in the Chapter 11 Case. (j) OTHER INFORMATION. Promptly upon transmission thereof, copies of any filings and registrations with, and reports to, the SEC by the Borrower or any of its Subsidiaries, copies of all press releases and copies of all financial statements, notices and reports that the Borrower or any of its Subsidiaries shall send to analysts or the holders of the Borrower's common stock, the Senior Notes, or any other publicly issued debt of the Borrower or its Sub- -57- sidiaries (in each case, to the extent not theretofore delivered to the Banks pursuant to this Agreement) and, with reasonable promptness, such other information or documents (financial or otherwise) as the Agent on its own behalf or on behalf of the Required Banks may reasonably request from time to time. 7.2 BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will cause each of its Subsidiaries to, permit, upon notice to the Chief Financial Officer or any other Authorized Officer of the Borrower, officers and designated representatives of the Agent or the Banks to visit and inspect any of the properties or assets of the Borrower and any of its Subsidiaries in whomsoever's possession, and to examine the books of account of the Borrower and any of its Subsidiaries and discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with, and be advised as to the same by, the officers and independent accountants of the Borrower or such Subsidiary, all at such reasonable times and intervals and to such reasonable extent as the Agent or any Bank may request. 7.3 PAYMENT OF TAXES. The Borrower will, and will cause each of its Subsidiaries to, pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien or charge upon any properties of the Borrower or of any of its Subsidiaries, PROVIDED that neither the Borrower nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves (in the good faith judgment of the management of such Person) with respect thereto in accordance with GAAP. 7.4 CORPORATE FRANCHISES. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence, material rights and authority to do business, PROVIDED that any transaction permitted by Section 8.1 will not constitute a breach of this Section 7.4. 7.5 COMPLIANCE WITH STATUTES, ETC. (a) The Borrower will, and will cause each of its Subsidiaries to, -58- comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable Environmental Laws) other than those the non- compliance with which (individually or in the aggregate) would not have a Material Adverse Effect or a material adverse effect on the ability of any Credit Party to perform its obligations under any Credit Document to which it is party. Neither the Borrower nor any of its Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of Hazardous Materials on any of its Real Property, or transport or permit the transportation of Hazardous Materials to or from any such Real Property, except for quantities used or stored at such Real Properties in material compliance with all applicable Environmental Laws and required in connection with the normal operation, use and maintenance of such Real Property. If required to do so under any applicable Environmental Law, the Borrower agrees to undertake, and agrees to cause each of its Subsidiaries to undertake, any cleanup, removal, remedial or other action necessary to remove and clean up any Hazardous Materials from any Real Property in accordance with the requirements of all such applicable Environmental Laws and in accordance with orders and directives of all governmental authorities; PROVIDED that neither the Borrower nor any of its Subsidiaries shall be required to take any such action where same is being contested by appropriate legal proceedings in good faith by the Borrower or such Subsidiary. (b) At the request of the Agent or the Required Banks, at any time and from time to time, but in any event no more frequently than once a year, the Borrower will provide, at the Borrower's sole cost and expense, an environmental site assessment report concerning any Real Property of the Borrower or any Subsidiary, prepared by an environmental consulting firm approved by the Agent, indicating the presence or Release of Hazardous Materials and the potential cost of any removal or remedial action in connection with any Hazardous Materials on such Real Property, PROVIDED, HOWEVER, no such request may be made unless the Agent or the Required Banks reasonably believe that (i) the Borrower or any of its Subsidiaries is in material noncompliance with any Environmental Law with respect to such Real Property or (ii) a Default or Event of Default is in existence. If the Borrower fails to provide the same after sixty (60) days' written notice, the Agent -59- may order the same, and the Borrower shall grant and hereby grants to the Agent and the Banks and their agents access to such Real Property at all reasonable times and without unreasonably interfering with the Borrower's operations and specifically grants the Agent and the Banks an irrevocable nonexclusive license, subject to the rights of tenants, to undertake such an assessment all at the Borrower's sole expense. 7.6 ERISA. As soon as possible and, in any event, within 20 Business Days after the Borrower or any of its Subsidiaries or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following events relating to a Plan, the Borrower will deliver to each of the Banks a certificate of an Authorized Officer of the Borrower setting forth details as to such occurrence and the action, if any, which the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, such Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred which could reasonably be expected to result in material liability of the Borrower, any of its Subsidiaries or any ERISA Affiliate, that, with respect to a Plan which is not a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA), an accumulated funding deficiency has been incurred or an application is intended to be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to such a Plan, that a Plan has been or may be terminated (other than pursuant to Section 4041(b) of ERISA), reorganized, partitioned or declared insolvent under Title IV of ERISA, that a Plan has an Unfunded Current Liability giving rise to a lien under ERISA or the Code, that proceedings may be or have been instituted to terminate a Plan (other than pursuant to Section 4041(b) of ERISA), that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan, or that the Borrower, any of its Subsidiaries or any ERISA Affiliate will or may incur any material liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or with respect to a Plan under Section 4971 or 4975 of the Code or Section 409 or 502(i) or 502(l) of ERISA. The Borrower will deliver to each of -60- the Banks a complete copy of the Schedule B, "Actuarial Information" to the Internal Revenue Service Annual Report (Form 5500) of each Plan (other than each Plan which is a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)) required to be filed with the Internal Revenue Service. In addition to any certificates or notices delivered to the Banks pursuant to the first sentence hereof, copies of (i) annual reports filed by the Borrower or any of its Subsidiaries or any ERISA Affiliate with respect to any Plan and (ii) any material, nonroutine notice received by the Borrower or any of its Subsidiaries or any ERISA Affiliate from any governmental agency or court with respect to any Plan, shall in either case be delivered to the Banks no later than 20 Business Days after the date such report or notice has been filed with the Internal Revenue Service or received by the Borrower or such Subsidiary or the ERISA Affiliate, as applicable. 7.7 GOOD REPAIR. The Borrower will, and will cause each of its Subsidiaries to, use its best efforts to ensure that its properties and equipment used or useful in its business in whomsoever's possession they may be, are kept in good repair, working order and condition, normal wear and tear excepted and, subject to Section 8.4, that from time to time there are made in such properties and equipment all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, to the extent and in the manner customary for companies in similar businesses. 7.8 END OF FISCAL YEARS; FISCAL QUARTERS. The Borrower will, for financial reporting purposes, cause (i) each of its, and of each of its Subsidiaries' fiscal years to end on the Saturday closest to the last day of March of each year, (ii) each of its, and each of its Subsidiaries' fiscal quarters to end on dates determined in the same manner as that employed in fiscal year 1995 and (iii) each of its, and its Subsidiaries' fiscal periods through the Final Maturity Date to end on the dates set forth on Schedule XII hereto. 7.9 CASH CONCENTRATION REQUIREMENTS. (a) On or prior to the Effective Date, the Borrower shall have established, and after the Effective Date, the Borrower shall maintain, a cash concentration system satisfactory to the Agent whereby (x) one or more lockbox accounts or concentration accounts have been established by the Borrower at the offices, and under the control of and in the name of, one or more Banks or financial institutions -61- providing lockbox accounts or concentration accounts satisfactory to the Agent to which, together with the Concentration Account, the Borrower shall instruct all account debtors of the Borrower and its Subsidiaries to make payment in respect to all account receivables owing to the Borrower and (y) an account or accounts (collectively, the "Concentration Account") have been established by the Borrower at the Payment Office of, and under the control of, the Agent to which the cash (including lockbox accounts) at all other financial institutions are transferred on a daily basis, net of disbursements and minimum required balances satisfactory to the Agent, and retransferred back to the Borrower's existing concentration banks on the following Business Day. (b) Within three Business Days after any new account is opened by the Borrower, the Borrower shall bring such account into the cash concentration system described in clause (y) above. 7.10 MAINTENANCE OF PROPERTY; INSURANCE. The Borrower will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect insurance with carriers rated A- or better by A.M. Best in such amounts, covering such risks and liabilities and with such deductibles or self-insured retentions as are in accordance with normal industry practice, PROVIDED that in no event will any such deductible or self-insured retention in respect of liability claims or in respect of casualty damage exceed, in each such case, $500,000 per occurrence. At any time that insurance at the levels described in Schedule VIII is not being maintained by the Borrower and its Subsidiaries, the Borrower will notify the Banks in writing thereof and, if thereafter notified by the Agent to do so, the Borrower will obtain insurance at such levels at least equal to those set forth in Schedule VIII to the extent then generally available (but in any event within the deductible or self-insured retention limitations set forth in the preceding sentence) or otherwise as are acceptable to the Agent. The Borrower will furnish on the Effective Date and annually thereafter to the Agent a summary of the insurance carried in respect of it and its assets together with certificates of insurance and other evidence of such insurance, if any, naming the Collateral Agent as an additional insured and/or loss payee. 7.11 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) At the request of the Agent, the Borrower will, and will cause each of its Subsidiaries to, grant to the -62- Collateral Agent, for the benefit of the Secured Parties, security interests and mortgages (an "Additional Mortgage") in such assets and properties of the Borrower or its Subsidiaries as are not covered by original Security Documents (collectively, the "Additional Security Documents"). Such security interests and mortgages shall be granted pursuant to documentation satisfactory in form and substance to the Agent and shall constitute valid and enforceable perfected security interests superior to and prior to the rights of all third persons and subject to no other Liens except as are permitted by Section 8.2 at the time of perfection thereof. The Additional Security Documents or other instruments related thereto shall have been duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent for the benefit of the Secured Parties, required to be granted pursuant to the Additional Security Documents and all taxes, fees and other charges payable in connection therewith shall have been paid in full. In addition, to the extent that the Agent has temporarily waived compliance with Sections 5.1(f) and/or 5.1(z), the Borrower will, and will cause each of its Subsidiaries to, take such action as shall be necessary to carry out the intent and purposes of such sections. (b) The Borrower will, and will cause each of its Subsidiaries to, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, real property surveys, reports and other assurances or instruments and take such further steps relating to the Collateral covered by any of the Security Documents or Additional Security Documents as the Collateral Agent may reasonably require. Furthermore, the Borrower shall cause to be delivered to the Collateral Agent such opinions of counsel, title insurance and other related documents as may be requested by the Agent to assure themselves that this Section 7.11 has been complied with. (c) At the request of the Agent or the Required Banks, the Borrower shall provide to the Agent appraisals satisfying applicable requirements of the Real Estate Appraisal Reform Amendments of the Financial Institution Reform, Recovery and Enforcement Act of 1989 in respect of the Real Property of the Borrower and its Subsidiaries -63- constituting Collateral, in form and substance satisfactory to the Agent. (d) The Borrower agrees that each action required by this Section 7.11 shall be completed as soon as possible, but in no event later than 30 days (60 days in the case of clause (c) above) after such action is requested to be taken by the Agent or the Required Banks; PROVIDED that in no event shall the Borrower be required to take any action, other than using its best efforts, to obtain consents from third parties with respect to its compliance with this Section 7.11. 7.12 MAINTENANCE OF CORPORATE SEPARATENESS. The Borrower will, and will cause each of its Subsidiaries to, satisfy customary corporate formalities, including the holding of regular board of directors' and shareholders' meetings and the maintenance of corporate offices and records. 7.13 SUBSIDIARY GUARANTY; SUBSIDIARY PLEDGE AGREEMENT AND SUBSIDIARY SECURITY AGREEMENT. The Borrower shall with reasonable promptness, but only to the extent not prohibited by applicable law: (i) cause each of its Subsidiaries that becomes a Subsidiary after the Effective Date to execute the Subsidiary Guaranty and the Subsidiary Security Agreement; (ii) to the extent it has not already done so, pledge, and cause each of its Subsidiaries that is now or hereafter becomes a Subsidiary to pledge, all the shares of capital stock and other equity interests now or hereafter owned by the Borrower or such Subsidiary of any Person, and all notes now or hereafter payable to the Borrower or such Subsidiary by any Person, in each such case pursuant to the duly executed and delivered Borrower Pledge Agreement or the Subsidiary Pledge Agreement, as the case may be, granting the Collateral Agent a valid and enforceable, first priority perfected Lien in such assets as security for the Obligations. SECTION 8. NEGATIVE COVENANTS. The Borrower hereby covenants and agrees that on the Effective Date and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit are outstanding and the Loans, together with interest, Fees and all other Obligations (other than any indemnities described in Section 12.13 hereof which are not then due and payable) incurred hereunder, are paid in full: -64- 8.1 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs, or enter into any transaction of merger or consolidation, sell or otherwise dispose of all or any part of its property or assets (other than inventory, obsolete equipment, excess equipment no longer needed in the conduct of business or equipment being replaced with other equipment, in each case in the ordinary course of business) or purchase, lease or otherwise acquire (in one transaction or a series of related transactions) all or any part of the property or assets of any Person (other than purchases, leases or other acquisitions of inventory and equipment in the ordinary course of business) or agree to do any of the foregoing at any future time, except that the following shall be permitted: (a) capital expenditures to the extent within the limitations set forth in Section 8.4; (b) the investments, acquisitions and transfers or dispositions of properties permitted pursuant to Section 8.5; (c) any Subsidiary of the Borrower may be merged or consolidated with or into, or be liquidated into, the Borrower or a Subsidiary Guarantor (so long as the Borrower or such Subsidiary Guarantor is the surviving corporation), or all or any part of its business, properties and assets may be conveyed, leased, sold or transferred to the Borrower or a Subsidiary Guarantor and the business and franchises of Chalfont may be surrendered or abandoned; (d) the disposition of stores, and related equipment, fixtures, inventory and other assets, in any fiscal year of the Borrower in unrelated transactions effected in connection with the closing thereof in the ordinary course of business; PROVIDED that (i) no more than 5 stores in any fiscal year of the Borrower, and 24 stores in the aggregate, will be permitted to be closed under this clause (d) if such store is closed in connection with the replacement thereof by a Replacement Store and (ii) no more than 8 stores in any fiscal year of the Borrower, and 45 stores in the aggregate, will be permitted to be closed under this clause (d) in addition to those permitted under clause (i) above; -65- (e) the acquisition of Reinvestment Assets in accordance with Section 4.2(A); (f) Permitted Sale-Leaseback Transactions; (g) Permitted Dispositions; and (h) the disposition of the property and assets located at White River Junction, Vermont for cash in an amount equal to the fair market value thereof (as determined by the management of the Borrower) shall be permitted. To the extent the Required Banks waive the provisions of this Section 8.1 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 8.1 (and such Collateral is released (or permitted to be released) from the Liens created by the respective Security Document), such Collateral in each case shall be sold free and clear of the Liens in favor of the Secured Parties created by the Security Documents and the Agent shall take such actions (including, without limitation, directing the Collateral Agent to take such actions) as the Agent deems appropriate in connection therewith. 8.2 LIENS. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable or notes with recourse to the Borrower or any of its Subsidiaries) or assign any right to receive income, or file or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute, except: (a) Liens for taxes not yet due and payable or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Borrower) have been established; (b) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law which were incurred in the ordinary course of -66- business, such as carriers', warehousemen's and mechanics' Liens, statutory landlord's Liens, Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods, and other similar Liens arising in the ordinary course of business, and (x) which, if any such property or asset is material, do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrower or such Subsidiary or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; (c) Liens created by or pursuant to this Agreement or the other Credit Documents; (d) Permitted Liens; (e) Liens (other than any Lien imposed by ERISA and other than obligations (i) in respect of borrowed money or (ii) in respect of which a Letter of Credit has been issued) incurred or deposits made in the ordinary course of business in connection with (x) liability insurance, workers' compensation, unemployment insurance and other types of social security, or (y) to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return- of-money bonds and other similar obligations incurred in the ordinary course of business, in an aggregate amount not to exceed $5,000,000; (f) leases or subleases granted to third Persons not interfering with the ordinary course of business of Borrower or any of its Subsidiaries; (g) Capital Leases to the extent permitted under Section 8.3 hereof; (h) Permitted Encumbrances; (i) Liens (x) arising pursuant to purchase money mortgages securing Indebtedness representing the purchase price (or financing of the purchase price within 270 days after the respective purchase) of property or other assets acquired by the Borrower, PROVIDED that -67- (i) any such Liens attach only to the assets so purchased, (ii) the Indebtedness secured by any such Lien does not exceed 100%, nor is less than 70%, of the purchase price of the assets being purchased and (iii) the Indebtedness secured thereby is permitted by Section 8.3(b); or (y) existing on specific tangible assets at the time acquired by the Borrower or on assets of a Person at the time such Person first becomes a Subsidiary, PROVIDED that (i) any such Liens were not created at the time of or in contemplation of the acquisition of such assets or Person by the Borrower, (ii) in the case of any such acquisition of a Person, any such Lien attaches only to specific tangible assets of such Person and not assets of such Person generally, (iii) the Indebtedness secured by any such Lien does not exceed 100% of the fair market value of the asset to which such Lien attaches, determined at the time of the acquisition of such asset or the time at which such Person becomes a Subsidiary, as the case may be and (iv) the Indebtedness secured thereby is permitted by Section 8.3(b); and (j) Liens securing Indebtedness representing the construction and/or improvement costs of stores and other facilities constructed or improved by the Borrower, and related land acquisition costs (or the financing of such construction, improvements or acquisitions within 270 days of the acquisition thereof or substantial completion of such construction or improvements), PROVIDED that (i) any such Liens attach only to the assets so constructed or improved, including the land on which situated, (ii) the Indebtedness secured by any such Lien does not exceed 100% of the lesser of (x) the construction costs and the acquisition costs of the related land so acquired or (y) the fair market value of the property being constructed or the improvements being made thereon and the related land and (iii) the Indebtedness secured thereby is permitted by Section 8.3(b). 8.3 INDEBTEDNESS. The Borrower will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; -68- (b) Capitalized Lease Obligations (Equipment) and Indebtedness of the Borrower secured by Liens permitted by Sections 8.2(i) and (j) in an aggregate amount incurred in any fiscal year not to exceed $15,000,000 for such fiscal year; (c) Existing Indebtedness; (d) Indebtedness of the Borrower evidenced by the Senior Notes in an aggregate principal amount not to exceed $595,475,922 reduced from time to time to the extent of any repayments, prepayments, amortizations, redemptions or otherwise; (e) Indebtedness of the Borrower owing to any Subsidiary Guarantor and of any Subsidiary Guarantor owing to the Borrower or another Subsidiary Guarantor not to exceed $500,000 in outstanding aggregate amount at any time; ONS Indebtedness resulting from unsecured reimbursement obligations of the Borrower under letters of credit issued prior to the Effective Date and listed on Schedule VII hereto; (g) Capitalized Lease Obligations (Other) of the Borrower; and (h) Indebtedness resulting from the Borrower's indemnification obligations pursuant to Section 14.06 of the Plan of Reorganization. 8.4 CAPITAL EXPENDITURES. (a) The Borrower will not, and will not permit any of its Subsidiaries to, incur Consolidated Capital Expenditures except Consolidated Capital Expenditures made in compliance with this Section 8.4. During each period indicated below, Consolidated Capital Expenditures shall be permitted to be made by the Borrower in an aggregate amount not in excess of the corresponding amount set forth below opposite such period: -69-
Period Amount ------ ------ Fiscal Year ending 1996 $53,500,000 Fiscal Year ending 1997 $49,500,000 Fiscal Year ending 1998 $59,500,000 Fiscal Year ending 1999 $54,500,000 Fiscal Year ending 2000 $56,500,000 Fiscal Year ending 2001 $57,000,000 Fiscal Year ending 2002 $58,000,000 Thereafter to and including the Final Maturity Date $10,000,000
; PROVIDED that in no event may the Consolidated Capital Expenditures permitted above and effected through the incurrence of (x) Indebtedness secured by Liens permitted pursuant to Sections 8.2(i) and (j) or (y) Capitalized Lease Obligations (Equipment) exceed $15,000,000 in any fiscal year of the Borrower. (b) In addition to the amounts permitted above, the Borrower may make Consolidated Capital Expenditures in any fiscal year of the Borrower in an aggregate amount not to exceed $10,000,000, PROVIDED that such Consolidated Capital Expenditures are financed through Indebtedness secured by Liens permitted pursuant to Section 8.2(i) or (j) or Capitalized Lease Obligations. (c) To the extent Consolidated Capital Expenditures in any fiscal year are less than the amount set forth for such fiscal year in clause (a) above (each a "Maximum Capital Expenditures Amount"), the amount of such difference (not to exceed 25% of the Maximum Capital Expenditures Amount for such fiscal year) may be carried forward and used by the Borrower to make Consolidated Capital Expenditures pursuant to clause (a) in the immediately succeeding fiscal year of the Borrower. (d) In addition to the amounts permitted above, the Borrower may make Consolidated Capital Expenditures to acquire property and assets, other than stores and related land, in any fiscal year of the Borrower in an amount not to exceed the Additional Proceeds received by the Borrower during such fiscal year. -70- (e) In addition to the amounts permitted above, the Borrower may make Consolidated Capital Expenditures to acquire Reinvestment Assets pursuant to a Reinvestment Election, other than a Reinvestment Election relating to a Permitted Sale-Leaseback Transaction. (f) In addition to all other prohibitions contained in this Section 8.4, the Borrower will not acquire and/or complete construction of more than 10 new stores in any fiscal year of the Borrower, PROVIDED that if the number of new stores acquired and/or so constructed by the Borrower in any fiscal year is less than 10 (the excess of 10 over such number of stores actually acquired and/or so constructed, the "Differential"), the Borrower may acquire and/or complete construction of additional new stores in subsequent fiscal years in an aggregate number equal to the Differential, PROVIDED, HOWEVER, that the Borrower in any event may not acquire and/or complete construction of more than 15 new stores in any fiscal year. (g) In addition to the amounts permitted above, to the extent that Consolidated Capital Expenditures in any fiscal year of the Borrower are financed through Indebtedness which is secured by Liens permitted pursuant to Section 8.2(i) and incurred in the immediately succeeding fiscal year of the Borrower, the amount of such Indebtedness may be used by the Borrower to make Consolidated Capital Expenditures in such immediately succeeding fiscal year of the Borrower. 8.5 ADVANCES, INVESTMENTS AND LOANS. The Borrower will not, and will not permit any of its Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to any Person, except: (a) the Borrower and its Subsidiaries may invest in cash and Cash Equivalents, PROVIDED that at any time Swingline Loans or Revolving Loans are outstanding, the amount of cash (net of uncollected funds and amounts retained at stores in the ordinary course of business in accordance with past practices) and Cash Equivalents permitted hereunder shall not exceed $5,000,000 for any five consecutive Business Days; (b) the Borrower or any of its Subsidiaries may acquire and hold receivables owing to it, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with the -71- customary trade terms of the Borrower or its applicable Subsidiary, as the case may be; (c) loans and advances to employees in the ordinary course of business in an aggregate principal amount not to exceed $500,000 at any time outstanding shall be permitted; (d) the deposit in escrow of $3,000,000 made by the Borrower pursuant to paragraph 3(e) of the MTH Settlement Agreement (as defined in the Plan of Reorganization) on the Effective Date to the Escrow Agent pursuant to the Escrow Agreement, until such time as the amounts so held are released pursuant to the terms of the Escrow Agreement as in effect on the Effective Date; (e) advances, investments and loans existing on the Effective Date and listed on Schedule X hereto, without giving effect to any additions thereto or replacements thereof shall be permitted; (f) the intercompany Indebtedness permitted by Section 8.3(e) shall be permitted; (g) the Borrower may make advances to developers in connection with the construction of new store locations not exceeding $10,000,000 at any time outstanding; (h) the Borrower may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers in the ordinary course of business; (i) the Borrower may accept and hold notes payable from purchasers of stores permitted pursuant to Section 8.1(d), so long as (x) the amount of any such note with respect to any store shall not exceed $500,000 and (y) the aggregate amounts of all such notes hereunder shall not exceed $4,000,000; (j) the Borrower may make additional loans, advances and investments of a nature not contemplated by the foregoing clauses (a) through (i), PROVIDED that (x) all loans, advances and investments made pursuant to this clause (j) shall not exceed $1,000,000 at any time outstanding and (y) no such Loan, advance or investment shall be made in or to a -72- Subsidiary that is not, or which upon receipt thereof does not become, a Subsidiary Guarantor; (k) transfers of cash, purchases and dispositions of securities (including, without limitation, insurance contracts) or interests in a trust for the purpose of funding or securing supplemental retirement benefits for employees, PROVIDED that the aggregate amount expended for such purpose in any fiscal year (exclusive of payment of such benefits in the ordinary course) shall not exceed $1,000,000; (l) with the consent of the Agent, the Borrower may make deposits with utilities in the ordinary course of business; PROVIDED, HOWEVER, that (x) the Borrower shall use its best efforts not to make any deposits with utilities, (y) the Borrower shall use its best efforts to terminate all such deposit arrangements and (z) the aggregate amount of such deposits at any time shall not exceed $4,000,000; and (m) the Interest Rate Protection Agreement identified on Schedule VII hereto shall be permitted. 8.6 DIVIDENDS, ETC. The Borrower will not, and will not permit any Subsidiary to, declare or pay any dividends (other than dividends payable solely in capital stock of the Borrower) or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or set aside any funds for any of the foregoing purposes and the Borrower will not permit any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock of the Borrower now or hereafter outstanding (or any warrants for or options or stock appreciation rights issued by such Person in respect of any such shares) (all of the foregoing "Dividends"), except that any Subsidiary of the Borrower may pay dividends to the Borrower or to a Subsidiary Guarantor. 8.7 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any Affiliate other than on terms and conditions substantially as favorable (or more favorable) to the Borrower or such -73- Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate. 8.8 CHANGES IN BUSINESS. Except as otherwise permitted by Section 8.1, the Borrower will not alter the character of the business of the Borrower and its Subsidiaries from that conducted by the Borrower and its Subsidiaries on the Effective Date. 8.9 EBITDA. The Borrower will not permit EBITDA (i) for the fiscal quarter ended in July 1995 (taken as one accounting period) to be less than $18,000,000, (ii) for the two consecutive fiscal quarters ending in October 1995 (taken as one accounting period) to be less than $40,000,000, (iii) for the period of three consecutive fiscal quarters ending in January 1996 (taken as one accounting period) to be less than $80,000,000 and (iv) for any period of four consecutive fiscal quarters (taken as one accounting period) ending on the last day of any fiscal quarter set forth below to be less than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Amount -------------- ------ March 1996 $ 140,000,000 July 1996 140,000,000 October 1996 140,000,000 January 1997 140,000,000 March 1997 150,000,000 July 1997 150,000,000 October 1997 150,000,000 January 1998 150,000,000 March 1998 160,000,000 July 1998 160,000,000 October 1998 160,000,000 January 1999 160,000,000 March 1999 165,000,000 July 1999 165,000,000 October 1999 165,000,000 January 2000 165,000,000 March 2000 165,000,000 July 2000 165,000,000 October 2000 165,000,000 January 2001 165,000,000 March 2001 165,000,000 July 2001 165,000,000 October 2001 165,000,000 January 2002 165,000,000 March 2002 165,000,000
-74- 8.10 FIXED CHARGE COVERAGE RATIO. The Borrower will not permit the Fixed Charge Coverage Ratio for any fiscal year of the Borrower to be less than 1.0:1. 8.11 EBITDA TO TOTAL CASH INTEREST EXPENSE. The Borrower will not permit the ratio of (i) EBITDA to (ii) Total Cash Interest Expense (w) for the fiscal quarter ended in July 1995 (taken as one accounting period) to be less than 1.4:1, (x) for the two consecutive fiscal quarters ending in October 1995 (taken as one accounting period) to be less than 1.4:1, (y) the period of three consecutive fiscal quarters (taken as one accounting period) ending in January, 1996 to be less than 1.4:1 and (z) for any period of four consecutive fiscal quarters (taken as one accounting period) ending during the period set forth below to be less than the amount set forth opposite such period below:
Period Ratio ------ ----- Fiscal Quarter ending in March 1.4:1 1996 to and including Fiscal Quarter ending in January 1997 Fiscal Quarter ending in March 1.4:1 1997 to and including Fiscal Quarter ending in January 1998 Fiscal Quarter ending in March 1.5:1 1998 to and including Fiscal Quarter ending in January 1999 Fiscal Quarter ending in March 1.6:1 1999 to and including Fiscal Quarter ending in January 2000 Fiscal Quarter ending in March 2000 1.7:1 to and including Fiscal Quarter ending in January 2001 Fiscal Quarter ending in March 2001 1.7:1 to and including Fiscal Quarter ending in January 2002 Thereafter 1.7:1
8.12 CUMULATIVE EBITDA MINUS CUMULATIVE ADJUSTED CONSOLIDATED CAPITAL EXPENDITURES. The Borrower will not permit for any period the Cumulative EBITDA Minus Cumulative Adjusted Consolidated Capital Expenditures for any period beginning on April 1, 1995 and ending on any -75- date set forth below to be less than the amounts set forth opposite such dates below:
Fiscal Year Amount ----------- ------ Fiscal Year Ending in 1996 $ 86,500,000 Fiscal Year Ending in 1997 187,000,000 Fiscal Year Ending in 1998 287,500,000 Fiscal Year Ending in 1999 398,000,000 Fiscal Year Ending in 2000 506,500,000 Fiscal Year Ending in 2001 615,000,000 Fiscal Year Ending in 2002 722,000,000
8.13 LIMITATION ON VOLUNTARY PAYMENTS; PREFERRED STOCK; ETC. The Borrower will not, and will not permit any of its Subsidiaries to: (i) make (or give any notice in respect of) any voluntary or optional payment or prepayment of principal on or voluntary or optional redemption of or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due), the Indebtedness described in Sections 8.3(d), (ii) amend or modify, or permit the amendment or modification of any provision of any such Indebtedness, (iii) amend or modify, or permit the amendment or modification of any provision of its Certificate of Incorporation or By Laws in any way which may have an effect on the Banks, or upon the Obligations of the Borrower or any of its Subsidiaries hereunder or (iv) issue any preferred or preference stock. 8.14 ISSUANCE OF SUBSIDIARY STOCK. The Borrower will not permit any of its Subsidiaries directly or indirectly to issue, sell, assign, pledge or otherwise encumber or dispose of any shares of its capital stock or other securities (or warrants, rights or options to acquire shares or other equity securities) of such Subsidiary, except, to the extent permitted by Section 8.5, to the Borrower or Subsidiary Guarantor. 8.15 LIMITATION ON RESTRICTIONS AFFECTING SUBSIDIARIES. The Borrower will not, and will not permit any Subsidiary to, directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction -76- which prohibits or limits the ability of any Subsidiary of the Borrower to (a) pay dividends or make other distributions or pay any Indebtedness owed to the Borrower or any Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any Subsidiary of the Borrower, (c) transfer any of its properties or assets to the Borrower or any Subsidiary of the Borrower or (d) create, incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than encumbrances and restrictions arising under (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) Indebtedness permitted pursuant to Sections 8.3(b), (c) and (d), (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any of its Subsidiaries and (v) customary restrictions on dispositions of real property interests found in reciprocal easement agreements of the Borrower or any of its Subsidiaries. SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of the following specified events (each an "Event of Default"): 9.1 PAYMENTS. The Borrower shall (i) default in the payment when due of any principal of the Loans or (ii) default, and such default shall continue for two or more days, in the payment when due of any Unpaid Drawing, any interest on the Loans or any Fees or any other amounts owing hereunder or under any other Credit Document; or 9.2 REPRESENTATIONS, ETC. Any representation, warranty or statement made by any Credit Party herein or in any other Credit Document or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 9.3 COVENANTS. The Borrower or any of its Subsidiaries shall (a) default in the due performance or observance by it of any term, covenant or agreement contained in Sections 7.11, 7.13 or 8, or (b) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in Sections 9.1, 9.2 or clause (a) of this Section 9.3) contained in this Agreement or any document delivered pursuant hereto and such default shall continue unremedied for a period of at least 30 days after notice to the defaulting party by the Agent or the Required Banks; or -77- 9.4 DEFAULT UNDER OTHER AGREEMENTS. (a) The Borrower or any of its Subsidiaries shall (i) default in any payment in respect of any Indebtedness (other than the Obligations) in excess of $5,000,000 individually or $10,000,000 in the aggregate of the Borrower and its Subsidiaries or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, any such Indebtedness to become due prior to its stated maturity; or (b) any such Indebtedness of the Borrower or any such Subsidiary shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or 9.5 BANKRUPTCY, ETC. The Borrower or any of its Subsidiaries shall commence a voluntary case concerning itself under the Bankruptcy Code; or an involuntary case is commenced against the Borrower or any of its Subsidiaries and the petition is not controverted within 10 Business Days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower or any of its Subsidiaries; or the Borrower or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower or such Subsidiary; or there is commenced against the Borrower or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Borrower or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Borrower or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by the Borrower or any of its Subsidiaries for the purpose of effecting any of the foregoing; or 9.6 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof or a waiver of such standard or extension of -78- any amortization period is sought or granted under Section 412 of the Code, any Plan is, shall have been or is likely to be terminated or the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, the Borrower or any of its Subsidiaries or any ERISA Affiliate has incurred or is likely to incur a liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code, or the Borrower or any of its Subsidiaries has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to retired employees (other than as required by applicable law or under the terms of an applicable collective bargaining agreement) or employee pension benefit plans (as defined in Section 3(2) of ERISA) other than any such employee pension benefit plan intended to be qualified (within the meaning of Section 401(a) of the Code); (b) there shall result from any event or events described in clause (a) of this Section 9.6, the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; (c) which lien, security interest or liability referred to in clause (b) of this Section 9.6, in the reasonable opinion of the Required Banks, will have a Material Adverse Effect; or 9.7 SECURITY DOCUMENTS. Any Security Document shall cease to be in full force and effect, or shall cease to give the Collateral Agent on behalf of the Secured Parties the material Liens, rights, powers and privileges purported to be created thereby in favor of the Collateral Agent, or any Credit Party shall default in any material respect in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any such Security Document; or 9.8 SUBSIDIARY GUARANTY. The Subsidiary Guaranty or any provision thereof shall cease to be in full force and effect, or any Subsidiary Guarantor thereunder or any Person acting by or on behalf of such Subsidiary Guarantor shall deny or disaffirm such Subsidiary Guarantor's obligations under any Subsidiary Guaranty or any Subsidiary Guarantor shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant to any Subsidiary Guaranty; or 9.9 JUDGMENTS. One or more judgments or decrees shall be entered against the Borrower and/or any of its Subsidiaries involving a liability (not paid or fully covered by insurance) of $5,000,000 or more in the case of -79- any one such judgment or decree or $10,000,000 or more in the aggregate for all such judgments and decrees for the Borrower and all its Subsidiaries and all such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 30 days from the entry thereof or the Borrower and/or any of its Subsidiaries shall become liable in respect of any such judgment or claims made as to which no judgment is taken, by contract, settlement agreement or otherwise; or 9.10 OWNERSHIP. (i) The sale, lease, transfer or other disposition in one or more related transactions of all or substantially all of the Borrower's assets, or the sale of substantially all of the Borrower's stock or assets of the Borrower's Subsidiaries that constitute a sale of substantially all of the Borrower's assets, to any person or group (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the merger or consolidation of the Borrower with or into another corporation, or the merger of another corporation into the Borrower or any other transaction, with the effect, in any such case, that the stockholders of the Borrower immediately prior to such transaction hold less than 50% of the total voting power entitled to vote in the election of directors, managers or trustees of the surviving corporation or, in the case of a triangular merger in which the Borrower becomes a wholly-owned Subsidiary of another corporation, the parent corporation of the surviving corporation resulting from such merger, consolidation or such other transaction, (iii) any person (except for the parent corporation of the surviving corporation in a triangular merger) or group acquires beneficial ownership of a majority in interest of the voting power or voting stock of the Borrower or, in the case of a triangular merger, the parent corporation of the surviving corporation of such merger, or (iv) the liquidation or dissolution of the Borrower; or 9.11 CONFIRMATION ORDERS. Any Confirmation Order shall be revoked, remanded, vacated, supplemented, reversed, stayed, rescinded, modified or amended in any way or the Borrower shall apply to the Bankruptcy Court for the authority to do so; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Agent shall, upon the written request of the Required Banks, by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Agent or any Bank to enforce its claims against the Borrower, except as otherwise specifically provided for in this Agreement (PROVIDED that, if an Event of Default specified in Section 9.5 shall occur with respect to the -80- Borrower, the result which would occur upon the giving of written notice by the Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon the Commitment of each Bank shall forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and all obligations owing hereunder (including Unpaid Drawings) to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) direct the Collateral Agent to enforce any or all of the Liens and security interests created pursuant to the Security Documents; (iv) terminate any Letter of Credit which may be terminated in accordance with its terms; and (v) direct the Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 9.5 in respect of the Borrower, it will pay) to the Agent at the Payment Office such additional amounts of cash, to be held as security for the Borrower's reimbursement obligations in respect of Letters of Credit then outstanding equal to the aggregate Stated Amount of all Letters of Credit then outstanding. SECTION 10. DEFINITIONS. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "Additional Mortgage" shall have the meaning provided in Section 7.11. "Additional Proceeds" shall mean (i) the proceeds of Indebtedness secured by Liens permitted pursuant to Section 8.2(j) and encumbering new stores and related land acquired or constructed after the Effective Date but only to the extent of such proceeds equal to the amount theretofore expended by the Borrower after the Effective Date in connection with the acquisition and construction of such store and related land and included after the Effective Date in Consolidated Capital Expenditures and (ii) the Net Cash Proceeds of Permitted Sale-Leaseback Transactions but only to the extent of such Net Cash Proceeds equal to the amount theretofore expended by the Borrower after the Effective Date in connection with the acquisition and construction of the properties the subject of such Permitted Sale-Leaseback Transactions and -81- included after the Effective Date in Consolidated Capital Expenditures, in a maximum aggregate amount for clauses (i) and (ii) during any fiscal year of the Borrower not to exceed $10,000,000. "Additional Security Documents" shall have the meaning provided in Section 7.11. "Adjusted Capitalized Lease Obligations (Other)" shall mean all Capitalized Lease Obligations (Other) incurred in any fiscal year up to an aggregate amount equal to (i) $8,000,000 for each of the fiscal years ending in 1996 and 1997 and (ii) $10,000,000 for each of the fiscal years ending thereafter. "Adjusted Cash Flow" for any Excess Cash Flow Period shall mean Consolidated Net Income for such period (after provision for taxes) plus the amount of all non-cash charges (including, without limitation, amortization, depreciation, deferred tax expense and non-cash interest expense) minus any non- cash credits (including in respect of deferred taxes) in each case that were deducted in arriving at Consolidated Net Income for such fiscal year less the amount of all net non-cash gains and gains from sales of assets (other than sales of inventory and equipment in the ordinary course of business) that were added in arriving at Consolidated Net Income for such fiscal year. "Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x) the most recent weekly average dealer offering rate for negotiable certificates of deposit with a three-month maturity in the secondary market as published in the most recent Federal Reserve System publication entitled "Select Interest Rates," published weekly on Form H.15 as of the date hereof, or if such publication or a substitute containing the foregoing rate information shall not be published by the Federal Reserve System for any week, the weekly average offering rate determined by the Agent on the basis of quotations for such certificates received by it from three certificate of deposit dealers in New York of recognized standing or, if such quotations are unavailable, then on the basis of other sources reasonably selected by the Agent, by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D applicable on such day to a three-month certificate of deposit of a member bank of the Federal Reserve System in excess of $100,000 (including, without limitation, any marginal, emergency, supplemental, special or other reserves), plus (2) the then daily net annual -82- assessment rate as estimated by the Agent for determining the current annual assessment payable by the Agent to the Federal Deposit Insurance Corporation for insuring three month certificates of deposit. "Adjusted Consolidated Capital Expenditures" shall mean all Consolidated Capital Expenditures other than Consolidated Capital Expenditures made pursuant to (x) Section 8.4(a) to the extent financed by Indebtedness as permitted by the proviso contained in said Section or (y) Section 8.4(b), (d), (e) or (g). "Adjusted RL Percentage" shall mean (x) at a time when no Bank Default exists, for each RL Bank such Bank's RL Percentage and (y) at a time when a Bank Default exists (i) for each RL Bank that is a Defaulting Bank, zero and (ii) for each RL Bank that is a Non-Defaulting Bank, the percentage determined by dividing such Bank's Revolving Commitment at such time by the Adjusted Total Revolving Commitment at such time, it being understood that all references herein to Revolving Commitments at a time when the Total Commitment has been terminated shall be references to the Commitments in effect immediately prior to such termination, PROVIDED that (A) no Bank's Adjusted RL Percentage shall change upon the occurrence of a Bank Default from that in effect immediately prior to such Bank Default if after giving effect to such Bank Default, and any repayment of Loans at such time pursuant to Section 4.2(A)(a) or otherwise, the sum of (i) the aggregate outstanding principal amount of Revolving Loans and Swingline Loans plus (ii) the Letter of Credit Outstandings exceed the Adjusted Total Revolving Loan Commitment and (B) the changes to the Adjusted RL Percentage that would have become effective upon the occurrence of a Bank Default but that did not become effective as a result of the preceding clause (A) shall become effective on the first date after the occurrence of the relevant Bank Default on which the sum of (i) the aggregate outstanding principal amount of Revolving Loans and Swingline Loans plus (ii) the Letter of Credit Outstandings is equal to or less than the Adjusted Total Revolving Loan Commitment. "Adjusted Total Available Revolving Commitment" shall mean at any time the Adjusted Total Revolving Commitment less the Blocked Amount, at such time. "Adjusted Total Revolving Commitment" shall mean at any time the Total Revolving Commitment less the aggregate Revolving Commitments of all Defaulting Banks. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling -83- (including, but not limited to, all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Agent appointed pursuant to Section 11.9. "Agreement" shall mean this Amended and Restated Credit Agreement, as the same may be from time to time modified, amended and/or supplemented. "Anticipated Reinvestment Amount" shall mean, with respect to any Reinvestment Election, the amount specified in the Reinvestment Notice delivered by the Borrower in connection therewith as the amount of the Net Cash Proceeds from the related Asset Sale or Permitted Sale-Leaseback Transaction that the Borrower intends to use to purchase, construct or otherwise acquire Reinvestment Assets. "Applicable Base Rate Margin" shall mean in the case of (i) Term Loans, 2% and (ii) Revolving Loans, 1-1/2%. "Applicable Eurodollar Margin" shall mean in the case of (i) Term Loans, 3-1/2% and (ii) Revolving Loans, 3%. "Asset Sale" shall mean and include the sale, transfer or other disposition (including, without limitations, any sale-leaseback transactions) by the Borrower or any of its Subsidiaries to any Person (other than the Borrower or any Wholly-Owned Subsidiary of the Borrower) of any asset of the Borrower or any of its Subsidiaries (other than (x) sales, transfers or other dispositions in the ordinary course of business of inventory and/or obsolete or excess equipment or (y) other sales generating proceeds in the aggregate for all such sales not in excess of $1,000,000 in any fiscal year. "Assignment Agreement" shall have the meaning provided in Section 12.4(b). -84- "Authorized Officer" shall mean any senior officer of any Person designated as such in writing to the Agent by the Chief Financial Officer of such Person. "Available Revolving Commitment" shall mean for each RL Bank at any time an amount equal to such RL Bank's Adjusted RL Percentage times the Adjusted Total Available Revolving Commitment, in each case at such time. "Available Term Loan Commitment" shall mean, with respect to each Bank, the amount, if any, of such Bank's Term Loan Commitment less the amount, if any, of such Bank's Existing Term Loans. "Bank" shall have the meaning provided in the first paragraph of this Agreement, and shall include any Bank which becomes a party to this Agreement in accordance with Section 12.4(b). "Bank Default" shall mean (i) the refusal (which has not been retracted) of an RL Bank to make available its portion of any Borrowing or to fund its portion of any unreimbursed drawing under Section 2.2(c) or (ii) an RL Bank having notified the Agent and/or the Borrower that it does not intend to comply with the obligations under Section 1.2(B) or 1.2(D) or under Section 2.2(c), in either case as a result of the appointment of a receiver or conservator with respect to such Bank at the direction or request of any regulatory agency or authority. "Bankruptcy Code" shall mean the United States Bankruptcy Code, being Title 11 of the United States Code, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto. "Bankruptcy Court" shall have the meaning provided in the recitals hereto. "Base Rate" shall mean the highest of (i) the Prime Lending Rate, (ii) the Adjusted Certificate of Deposit Rate plus 1/2 of 1% and (iii) the Federal Funds Rate plus 1/4 of 1%. "Base Rate Loan" shall mean each Loan bearing interest at the rates provided in Section 1.8(a). "Blocked Amount" shall mean an amount which initially shall be zero and which shall be (i) increased on the date of each Reinvestment Election by the amount specified in the Reinvestment Notice delivered in -85- connection therewith as the Anticipated Reinvestment Amount, (ii) decreased with respect to each Reinvestment Election (x) on each date after the occurrence of such Reinvestment Election and prior to the Reinvestment Prepayment Date with respect thereto on which the Borrower delivers to the Agent a certificate signed by an Authorized Officer of the Borrower stating that all or a specified portion of the Anticipated Reinvestment Amount relating to such Reinvestment Election has been, or contemporaneously with the delivery of such certificate is being, expended by the Borrower in furtherance of the purchase, construction or other acquisition of Reinvestment Assets, by the amount so expended or being expended and (y) on the Reinvestment Prepayment Date in respect thereof by the principal amount of the Loans actually repaid on such date pursuant to Section 4.2(A)(j). "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrower Common Stock" shall mean the common stock of the Borrower. "Borrower Pledge Agreement" shall have the meaning provided in Section 5.1(d). "Borrower Security Agreement" shall have the meaning provided in Section 5.1(e)(i). "Borrowing" shall mean the incurrence pursuant to a single Facility of one Type of Loan by the Borrower from all of the Banks having Commitments with respect to such Facility on a given date (or resulting from conversions on a given date), having in the case of Eurodollar Loans the same Interest Period, PROVIDED that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans. "BTCo" shall mean Bankers Trust Company. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in U.S. dollar deposits in the New York interbank Eurodollar market. -86- "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of the Borrower and its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Capitalized Lease Obligations (Equipment)" shall mean all obligations of the Borrower under Capitalized Leases (Equipment) in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Capitalized Lease Obligations (Other)" shall mean all Capitalized Lease Obligations other than Capitalized Lease Obligations (Equipment). "Capital Lease", as applied to any Person, shall mean any lease of any property (whether real, personal or mixed) by that Person or any of its Subsidiaries as lessee which, in conformity with GAAP, is accounted for as a capital lease on the consolidated balance sheet of that Person. "Capital Leases (Equipment)" shall mean all Capital Leases of the Borrower other than any such Capital Lease relating to a store or other facility, and in each case the related land. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers acceptances of (x) any Bank that is a domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (y) any bank whose short-term commercial paper rating from Standard & Poor's Corporation ("S&P") is at least A-1 or the equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in each case with maturities of not more than six months from the date of acquisition, (iii) commercial paper issued by any Bank or Approved Bank or by the parent company of any Bank or Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's (any such company, an "Approved Company"), or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the -87- case may be, and in each case maturing within six months after the date of acquisition, (iv) tax-exempt commercial paper of United States municipal, state or local governments rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's and maturing within six months after the date of acquisition and (v) any fund or funds investing solely in investments of the type described in clauses (i) through (iv) above. "Cash Proceeds" shall mean, with respect to any Asset Sale, the aggregate cash payments (including any cash received by way of deferred payment pursuant to a note receivable issued in connection with such Asset Sale, other than the portion of such deferred payment constituting interest, but only as and when so received) received by the Borrower or any of its Subsidiaries from such Asset Sale. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 ET SEQ. "Chalfont" shall mean Chalfont Company Limited, a Bermuda Corporation. "Change of Control Event" shall mean (i) the direct or indirect acquisition by any Person or group (as such term is defined in Section 13(d)(3) of the Exchange Act), beneficial ownership (as such term is defined in Rule 13d- 3 promulgated under the Exchange Act) of 36% or more of the outstanding shares of Voting Stock of the Borrower or (ii) any "change of control" or similar event shall occur under the Senior Note Documents. "Chapter 11 Case" shall have the meaning provided in the recitals hereto. "Class" shall mean each class of Banks; the Banks which are lenders with respect to the Term Loans, Revolving Loans and Swingline Loans, as the case may be. "Clean-Down Period" shall mean a thirty consecutive day period selected by the Borrower which shall commence on or after July 15 of each calendar year (commencing July 15, 1996) and terminate on or before August 31 of such calendar year, at all times during which the outstanding principal amount of Swingline Loans and Revolving Loans of Non-Defaulting Banks does not exceed $40,000,000. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations -88- promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all of the Collateral as defined in each of the Security Documents. "Collateral Agent" shall mean BTCo acting as collateral agent for the Secured Parties under the Security Documents. "Collective Bargaining Agreement" shall have the meaning provided in Section 5.1(u). "Commitment" shall mean, with respect to each Bank, such Bank's Term Loan Commitment and Revolving Loan Commitment. "Commitment Commission" shall have the meaning provided in Section 3.1(a). "Concentration Account" shall have the meaning provided in Section 7.9. "Confirmation Order" shall have the meaning provided in the recitals hereto. "Confirmation Orders" shall have the meaning provided in Section 5.1(i). "Consolidated Capital Expenditures" shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities (including Capitalized Lease Obligations (Equipment)) but excluding in all events Capitalized Lease Obligations (Other)) by the Borrower and its Subsidiaries during that period that, in conformity with GAAP, are or are required to be included in the property, plant or equipment reflected in the balance sheet of the Borrower and its Subsidiaries, PROVIDED that Consolidated Capital Expenditures shall in any event include the purchase price paid in connection with the acquisition of any Person (including through the purchase of all of the capital stock or other ownership interests of such Person or through merger or consolidation) to the extent allocable to property, plant and equipment; PROVIDED FURTHER that in no event shall the expenditure of amounts relating to cash and non-cash proceeds arising from Permitted Dispositions be deemed Adjusted Consolidated Capital Expenditures. -89- "Consolidated Indebtedness" shall mean the principal amount of all indebtedness of the Borrower and its Subsidiaries required to be accounted for as debt in accordance with GAAP (other than any such indebtedness in respect of all Capitalized Lease Obligations (Other) that do not constitute Adjusted Capitalized Lease Obligations (Other)). "Consolidated Net Income" shall mean for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries for such period taken as a single accounting period determined in conformity with GAAP, as modified in accordance with Section 12.7(a), PROVIDED that there shall be excluded the income (or loss) of any Person in which any other Person (other than the Borrower or a Wholly-Owned Subsidiary of the Borrower) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower by such Person during such period. "Consolidating" shall mean the consolidating balance sheet or statement of income and cash flows of the Borrower and its Subsidiaries taken as one entity. "Contingent Obligations" shall mean as to any Person any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any CONTINGENT OBLIGATION shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof -90- (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Credit Documents" shall mean this Agreement, the Notes, the Security Documents and the Subsidiary Guaranty. "Credit Event" shall mean and include the making of a Loan and the issuance of a Letter of Credit. "Credit Party" shall mean each Subsidiary Guarantor and the Borrower. "Cumulative EBITDA Minus Adjusted Cumulative Consolidated Capital Expenditures" shall mean for any period (i) EBITDA for any such period of the Borrower minus (ii) Adjusted Consolidated Capital Expenditures made during such period. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Bank" shall mean any Bank with respect to which a Bank Default is in effect. "Differential" shall have the meaning provided in Section 8.4(f). "DIP Documents" shall mean the Credit Agreement dated as of January 30, 1995 between the Borrower, the lenders party thereto, and Bankers Trust Company, as Agent, and the agreements, instruments and other documents entered into pursuant thereto. "Dividends" shall have the meaning provided in Section 8.6. "Documents" shall mean and include the Credit Documents and the Plan of Reorganization Documents. "EBIT" shall mean, for any period, the Consolidated Net Income of the Borrower and its Subsidiaries, before interest income, interest expense and provision for taxes and without giving effect to any extraordinary gains in excess of extraordinary losses or gains from sales of assets (other than (i) sales of inventory in the ordinary course of business and (ii) dispositions of stores (and related assets) permitted by Section 8.1(d), (PROVIDED that for any fiscal period for which EBIT is being determined such gains may be included in EBIT only up to an amount equal to (x) $750,000 times (y) the number of fiscal -91- quarters included in such period)), the establishment of LIFO reserves. "EBITDA" for any period shall mean EBIT, adjusted by adding thereto the amount of all amortization of intangibles and depreciation plus all non-cash charges in respect of deferred profit sharing plans, deferred compensation plans, pension plans and employee health plans plus, in each case that were deducted in arriving at EBIT for such period PROVIDED that one-time gains and up to $1,000,000 of one-time non-cash net charges relating to Permitted Dispositions shall not be included in determining EBITDA, and one-time cash charges relating to Permitted Dispositions and the ongoing cash costs of any stores closed in connection with the Permitted Dispositions shall be included in determining EBITDA. "Effective Date" shall have the meaning provided in Section 12.10. "Eligible Assignee" shall have the meaning provided in Section 12.4(b). "Employment Agreements" shall have the meaning provided in Section 5.1(u). "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than internal reports prepared by the Borrower or any of its Subsidiaries solely in the ordinary course of such Person's business and not in response to any third party action or request of any kind) or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereafter, "Claims"), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" means any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, guide, policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent -92- decree or judgment, relating to the environment, health, safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.; the Toxic Substances Control Act, 15 U.S.C. Section 7401 ET SEQ.; the Clean Air Act, 42 U.S.C. Section 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. Section 3808 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ. and any applicable state and local or foreign counterparts or equivalents. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower or any Subsidiary of the Borrower would be deemed to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Escrow Agreement" shall mean the escrow agreement dated as of June 15, 1995 between the Escrow Agent, the Borrower and Miller Tabak Hirsch & Co. pursuant to which the Borrower shall deposit $3,000,000 pursuant to paragraph 3(e) of the MTH Settlement Agreement (as defined in the Plan of Reorganization). "Escrow Agent" shall mean United States Trust Company of New York. "Eurodollar Loans" shall mean each Loan bearing interest at the rates provided in Section 1.8(b). "Eurodollar Rate" shall mean with respect to each Interest Period for a Eurodollar Loan, (i) the offered quotation to first-class banks in the interbank Eurodollar market by the Agent for Dollar deposits of amounts in same day funds comparable to the outstanding principal amount of the Eurodollar Loan of the Agent for which an interest rate is then being determined with maturities comparable to the Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period, divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other re- -93- serves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "Event of Default" shall have the meaning provided in Section 9. "Excess Cash Flow" shall mean, for any Excess Cash Flow Period, the remainder of (A) the sum of (i) Adjusted Cash Flow for such period, and (ii) to the extent not included in (A)(i) above, any amounts (net of reasonable fees, expenses and other costs incurred in connection therewith) received by the Borrower or any of its Subsidiaries in settlement of, or in payment of any judgments resulting from, actions, suits or proceedings with respect to the Borrower or such Subsidiary from the first day to the last day of such period, minus (B) the sum of (i) cash disbursements made in respect of liabilities to the extent reserved against on the financial statements of the Borrower and its Subsidiaries on the Effective Date and not otherwise deducted in determining Adjusted Cash Flow, (ii) any increase (or plus any decrease) in the aggregate amount of loans, advances and deposits permitted by Sections 8.2(e), 8.5(c) and/or 8.5(g) from the first day to the last day of such period, (iii) the increase (or plus any decrease) in LIFO reserves established by the Borrower and its Subsidiaries from the first day to the last day of such period, (iv) the sum of (x) the excess of the amount of Consolidated Capital Expenditures made during such period pursuant to Section 8.4(a), without giving effect to any Consolidated Capital Expenditures made pursuant to Section 8.4(c), overall Consolidated Capital Expenditures made during such period pursuant to said Section 8.4(a) (as so modified) that are financed by Indebtedness (other than the Loans hereunder) plus (y) the amount, if any, of Consolidated Capital Expenditures that the Borrower may make pursuant to Section 8.4(a) in the next following fiscal year in excess of the amount of Consolidated Capital Expenditures set forth in said Section as a result of the operation of Section 8.4(c), (v) all Third Party Debt Repayments made during such period during such period except prepayments of the principal amount of Term Loans made pursuant to Sections 4.2(A)(c), (d), (e) and/or (f), and (vi) any Net Debt Issuance Proceeds and Net Equity Issuance Proceeds to the extent included in Adjusted Cash Flow for such period; PROVIDED that proceeds from the dispositions of the Permitted Disposition Stores shall be excluded from the determination of Excess Cash Flow. "Excess Cash Flow Period" shall mean (i) the period commencing on the Effective Date and ending on the -94- last day of the Borrower's fiscal year ending April 1996 and (ii) each subsequent fiscal year of the Borrower. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended and the regulations promulgated thereunder. "Existing Indebtedness" shall have the meaning provided in Section 6.19. "Existing Indebtedness Agreements" shall have the meaning provided in Section 5.1(k). "Existing Letter of Credit" shall mean each outstanding letter of credit issued for the account of the Borrower pursuant to the Original Credit Agreement which are identified on Schedule VII hereto. "Existing Revolving Loans" shall mean, with respect to each Bank, the amount, if any, of the Revolving Loans existing on the Effective Date after giving effect to the amendments and restatements contemplated in Section 1.1(a), the conversions contemplated in Section 1.1(b), the payments contemplated in Section 1.1(c), and prior to the making of any additional Loans hereunder, set forth opposite such Bank's name on Schedule I hereto directly below the column entitled "Revolving Loans". "Existing Term Loans" shall mean, with respect to each Bank, the amount, if any, of the Term Loans existing on the Effective Date after giving effect to the amendments and restatements contemplated in Section 1.1(a), and prior to the making of any additional Loans hereunder, set forth opposite such Bank's name on Schedule I hereto directly below the column entitled "Term Loans". "Expiry Date" shall mean June 15, 1999. "Facility" shall mean any of the three Facilities established under this Agreement, I.E., the Term Loan Facility, the Revolving Credit Facility and the Swingline Facility. "Facing Fee" shall have the meaning provided in Section 3.1(c). "Federal Funds Rate" shall mean for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, -95- for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal Funds brokers of recognized standing selected by the Agent. "Fees" shall mean all amounts payable pursuant to, or referred to in, Section 3.1. "Final Maturity Date" shall mean June 15, 2002. "Fixed Charge Coverage Ratio" for any period shall mean the ratio of (i) EBITDA for such period to (ii) Fixed Charges for such period. "Fixed Charges" for any period shall mean the sum of (i) Total Cash Interest Expense of the Borrower and its Subsidiaries for such period and (ii) all scheduled principal amortizations of Consolidated Indebtedness for such period (giving effect to any reductions to scheduled amortizations of the Term Loans effected prior to or during such period pursuant to Section 4.2(B)(a) or otherwise) and (iii) Adjusted Consolidated Capital Expenditures for such period, PROVIDED that Consolidated Capital Expenditures permitted to be made pursuant to Section 8.4(c) for such period shall be subtracted from the Fixed Charges for such period to the extent that, if the amount which was made available pursuant to Section 8.4(c) during the previous fiscal year were added to the Fixed Charges for such previous year, the Borrower would still have been in compliance with Section 8.10 during such previous year. "Fresh Start Accounting" shall mean Fresh Start Accounting as described in "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code", Statement of Position 90-7 of the American Institute of Certified Public Accountants. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect on the date of this Agreement (without taking into effect any application of Financial Accounting Standards Bulletins Nos. 96 or 106); it being understood and agreed that determinations in accordance with GAAP for purposes of Section 8, including defined terms as used therein, are subject (to the extent provided therein) to Section 12.7(a). "GU Capital" shall mean Grand Union Capital Corporation, a Delaware corporation. -96- "Hazardous Materials" means (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contained, electric fluid containing levels of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous waste," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants," or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. "Holdings" shall mean Grand Union Holdings Corporation, a Delaware corporation. "Indebtedness" of any Person shall mean without duplication (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services which in accordance with generally accepted accounting principles would be shown on the liability side of the balance sheet of such Person, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such indebtedness has been assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, I.E., take-or-pay and similar obligations, (vii) all obligations of such Person under Interest Rate Protection Agreements, (viii) all reimbursement or other monetary obligations with respect to surety, performance and bid bonds, and (ix) all Contingent Obligations of such Person, PROVIDED that Indebtedness shall not include trade payables and accrued expenses, in each case arising in the ordinary course of business. "Initial Revolving Commitments" shall have the meaning provided in Section 1.1(a). "Initial Revolving Loans" shall have the meaning provided in Section 1.1(a). "Initial Term Loans" shall have the meaning provided in Section 1.1(a). -97- "Interest Period", with respect to any Loan, shall mean the interest period applicable thereto, as determined pursuant to Section 1.9. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, any interest rate cap agreement, any interest rate collar agreement or other similar agreement or arrangement designed to protect the Borrower against fluctuations in interest rates. "Leasehold" of any Person means all of the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Letter of Credit" shall have the meaning provided in Section 2.1(a). "Letter of Credit Fee" shall have the meaning provided in Section 3.1(b). "Letter of Credit Issuer" shall mean BTCo. "Letter of Credit Outstandings" shall mean, at any time, the sum of, without duplication, (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all unpaid drawings in respect of all Letters of Credit. "Letter of Credit Request" shall have the meaning provided in Section 2.3(a). "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof). "Loan" shall mean each and every Loan made by any Bank hereunder, including Term Loans, Revolving Loans and Swingline Loans. "Management Agreements" shall have the meaning provided in Section 5.1(u). "Mandatory Borrowing" shall have the meaning provided in Section 1.2(D). "Margin Stock" shall have the meaning provided in Regulation U. -98- "Material Adverse Effect" shall mean a material adverse effect on the business, properties, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. "Maximum Swingline Amount" shall mean $15,000,000. "Minimum Assignment Amount" shall mean, with respect to any assignment by any Bank of its Loans or Commitments hereunder, $5,000,000. "Minimum Borrowing Amount" shall mean (i) for Term Loans, $18,000,000, (ii) for Revolving Loans, $5,000,000 and (iii) for Swingline Loans, $1,000,000. "Mortgage" shall have the meaning provided in Section 5.1(f). "Mortgage Policies" shall have the meaning provided in Section 5.1(f). "Mortgaged Properties" shall mean and include all Real Properties owned or leased by the Borrower or any of its Subsidiaries to the extent designated as such on Schedule V hereto. "Net Cash Proceeds" shall mean, with respect to any Asset Sale, the Cash Proceeds resulting therefrom net of reasonable costs and expenses of sale and related cash settlements (including payment of severance and other termination costs, other current liabilities attaching to the assets sold and retained by the seller and principal, premium and interest of Indebtedness other than the Loans, required to be, and which is, repaid under the terms thereof as a result of such Asset Sale) and incremental taxes paid or payable as a result thereof. "Net Debt Issuance Proceeds" shall mean the proceeds (net of reasonable costs associated therewith) received from the incurrence of Indebtedness. "Net Equity Issuance Proceeds" shall mean the cash or cash equivalents proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) received from the sale of equity. "Non-Defaulting Bank" shall mean and include each Bank other than a Defaulting Bank. -99- "Note" shall mean each Term Note, Revolving Note and the Swingline Note. "Notice of Borrowing" shall have the meaning provided in Section 1.3. "Notice of Conversion" shall have the meaning provided in Section 1.6. "Notice Office" shall mean the office of the Agent at 280 Park Avenue, New York, New York or such other office as the Agent may designate to the Borrower and the Banks from time to time. "Obligations" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document. "Original B Term Loans" shall mean the "B Term Loans" as defined in the Original Credit Agreement. "Original Banks" shall mean the lending institutions designated as "Banks" under the Original Credit Agreement as of the Effective Date. "Original Credit Agreement" shall mean the Credit Agreement dated as of July 14, 1992, among Holdings, GU Capital, the Borrower, the lending institutions party thereto, the Agent and Midlantic Bank, N.A., as co-agent, as amended, modified and supplemented or the provisions thereof waived through the date hereof. "Original Credit Documents" shall mean the "Credit Documents" as defined in the Original Credit Agreement. "Original Letter of Credit Outstandings" shall mean the "Letter of Credit Outstandings" as defined in the Original Credit Agreement. "Original Revolving Commitment" shall have the meaning provided in Section 1.1(a). "Original Revolving Credit Facility" shall mean the "Revolving Credit Facility" as defined in the Original Credit Agreement. "Original Revolving Loans" shall mean the "Revolving Loans" as defined in the Original Credit Agreement. -100- "Original RL Banks" shall mean the "RL Banks" as defined in the Original Credit Agreement. "Original Senior Notes" shall mean (i) the 11-1/4% Senior Notes Due July 15, 2000 issued by the Borrower pursuant to an indenture dated as of July 22, 1992 among the Borrower, as issuer, Holdings and GU Capital, as guarantors, and First Trust National Association as trustee, and (ii) the 11- 3/8% Senior Notes Due February 15, 1999 issued by the Borrower pursuant to an indenture dated as of January 28, 1993 among the Borrower, as issuer, Holdings and GU Capital, as guarantors, and First Trust of California, National Association, as trustee. "Participant" shall have the meaning provided in Section 2.2(a). "Participation" shall have the meaning provided in Section 2.2(a). "Payment Office" shall mean the office of the Agent at 280 Park Avenue, New York, New York or such other office as the Agent may designate to the Borrower and the Banks from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Dispositions" shall mean the sale or closure by the Borrower of real and personal property connected with the Company's stores identified on Schedule XI hereto. Notwithstanding anything to the contrary contained in the immediately preceding sentence, the disposition of such property shall constitute a Permitted Disposition only if all requirements of Section 12.15 applicable to the Permitted Dispositions are met with respect thereto. "Permitted Encumbrances" shall mean (i) as to any Mortgaged Property owned by Borrower or any of its Subsidiaries, those liens, encumbrances and other matters affecting title to any Mortgaged Property listed in the Mortgage Policies in respect thereof and found reasonably acceptable by the Agent, (ii) as to any particular Mortgaged Property at any time, such easements, encroachments, covenants, rights of way, minor defects, irregularities or encumbrances on title which are not unusual with respect to property similar in character to any such Mortgaged Property and which do not, in the reasonable opinion of the Agent, materially impair such Mortgaged Property for the purpose for which it is held by -101- the mortgagor thereof, or the lien held by the Collateral Agent, (iii) municipal and zoning ordinances, which are not violated by the existing improvements and the present use made by the mortgagor thereof of the Premises (as defined in the respective Mortgage), (iv) general real estate taxes and assessments not yet delinquent, and (v) such other items as the Agent may consent to. "Permitted Liens" shall mean (i) the Liens existing on the Effective Date to the extent described on Schedule IX hereto and deemed acceptable by the Agent, without giving effect to any replacements thereof, and then only to the extent (x) encumbering the assets of the Borrower described in such Schedule IX on the Effective Date and (y) of the Indebtedness or obligations secured thereby on the Effective Date and (ii) interests of consignors in goods shipped to the Borrower on consignment not to exceed $1,300,000. "Permitted Sale-Leaseback Transaction" shall mean any sale by the Borrower or any of its Subsidiaries of (x) the Company's stores located at New Fairfield, Connecticut; Dumont, New Jersey; Valatie, New York; Morrisville, Vermont; Corinth, New York; Tannersville, New York and Manchester Center, Vermont each as substantially renovated after the Effective Date, (y) a store or facility, and in each case related land, to the extent acquired or constructed after the Effective Date or (z) equipment acquired or constructed after the Effective Date, in each case within 270 days of such acquisition or the substantial completion of such construction, which is then leased back to the respective seller (pursuant to, in the case of any such equipment, a Capital Lease (Equipment)) PROVIDED that the proceeds of the respective sale shall be entirely cash and shall not be less than 95% of the fair market value of the respective asset being sold (as determined by the Borrower in good faith), and the respective lease shall provide for substantially equal annual payments (except that a balloon payment shall be permitted at the end of the lease term) (i) based upon an amortization schedule of at least 15 years and with a minimum term of at least 15 years in the case of real property and (ii) with a minimum term of at least five years in the case of personal property, PROVIDED that a transaction shall constitute a Permitted Sale-Leaseback Transaction only if the anticipated lease payments are such that, when aggregated with the existing lease obligations of the Borrower and its Subsidiaries, are not projected to cause a violation of any other provision of this Agreement. "Person" shall mean any individual, partnership, joint venture, firm, corporation, association, trust or -102- other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any multiemployer or single-employer plan as defined in Section 4001 of ERISA and covered by Title IV thereof, which is maintained or contributed to by (or to which there is an obligation to contribute of), or at any time during the five calendar years preceding the date of this Agreement was maintained or contributed to by (or to which there was an obligation to contribute of) the Borrower, any of its Subsidiaries or an ERISA Affiliate with respect to which any material liability exists currently or could reasonably be expected to exist at any time while this Agreement is in effect. "Plan of Reorganization" shall mean the Second Amended Chapter 11 Plan of Reorganization (including all exhibits thereto) of the Borrower confirmed by the Bankruptcy Court in the Chapter 11 Case. "Plan of Reorganization Documents" shall mean the Plan of Reorganization and each document and agreement executed or delivered in connection with or relating to the restructuring effected by the Confirmation Orders which are attached to Exhibit H hereto. "Pledge Agreements" shall mean and include the Borrower Pledge Agreement and the Subsidiary Pledge Agreement. "Pledged Securities" shall mean and include the Pledged Securities as defined in each of the Pledge Agreements. "Post-Confirmation Projections" shall have the meaning provided in Section 5.1(l). "Prime Lending Rate" shall mean the rate which the Agent announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Agent may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ., as the same may be amended from time to time. -103- "Real Property" of any Person shall mean all of the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Regulation D", "Regulation G", "Regulation U" and "Regulation X" shall mean, respectively, Regulation D, Regulation G, Regulation U and Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect. "Reinvestment Assets" shall mean assets to be employed in the business of the Borrower as it is conducted on the Effective Date. "Reinvestment Election" shall have the meaning provided in Section 4.2(A)(c). "Reinvestment Notice" shall mean a written notice signed by an Authorized Officer of the Borrower stating that the Borrower, in good faith, intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or a Permitted Sale-Leaseback Transaction to purchase, construct or otherwise acquire Reinvestment Assets. "Reinvestment Prepayment Amount" shall mean, with respect to any Reinvestment Election, the amount, if any, on the Reinvestment Prepayment Date relating thereto by which (a) the Anticipated Reinvestment Amount in respect of such Reinvestment Election exceeds (b) the aggregate amount by which the Blocked Amount has been reduced pursuant to clause (ii)(x) of the definition thereof as a result of the expenditure of such Anticipated Reinvestment Amount. "Reinvestment Prepayment Date" shall mean, with respect to any Reinvestment Election, the earliest of (i) the date, if any, upon which the Agent, on behalf of the Required Banks, shall have delivered a written termination notice to the Borrower, PROVIDED that such notice may only be given while an Event of Default exists, (ii) the date occurring one year after such Reinvestment Election and (iii) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, proceed with the purchase, construction or other acquisition of Reinvestment Assets with the related Anticipated Reinvestment Amount. "Release" shall mean disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and the like, into or upon any land or water or air, or otherwise entering into the environment. -104- "Reorganization Expenses" shall mean and include all expenses net of any revenues which, in each case, are classified as "reorganization items" as defined in "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code", Statement of Position 90-7 of the American Institute of Certified Public Accountants. "Replacement Store" shall mean, with respect to any store of the Borrower which is being closed, a store which is newly acquired or constructed by the Borrower within 12 months of the closing of the store to be closed and is located within five miles of such store to be closed. "Reportable Event" shall mean an event described in Section 4043(b) of ERISA with respect to a Plan as to which the 30-day notice requirement has not been waived by the PBGC. "Required Banks" shall mean, at any time, Banks whose outstanding Term Loans and Revolving Commitments exceed 50% of the total outstanding Term Loans and Total Revolving Commitment. "Required Class Creditors" shall mean, at any time, (i) with respect to Term Loans, Banks whose Term Loans exceed 50% of the total outstanding Term Loans at such time, (ii) with respect to Revolving Loans and Letters of Credit, Banks whose Revolving Commitments exceed 50% of the Total Revolving Commitment and (iii) with respect to Swingline Loans, BTCo. "Revolving Commitment" shall mean, with respect to each Bank, the amount, if any, set forth opposite such Bank's name in Schedule I hereto directly below the column entitled "Revolving Commitment", as the same may be reduced from time to time pursuant to Section 3.2, 3.3 and/or 9. "Revolving Credit Facility" shall mean the Facility evidenced by the Total Revolving Commitment. "Revolving Loan" shall have the meaning provided in Section 1.2(B)(b). "Revolving Note" shall have the meaning provided in Section 1.5(a). "RL Bank" shall mean at any time each Bank with a Revolving Commitment. "RL Expiry Date" shall mean June 15, 2000. -105- "RL Percentage" shall mean at any time for each RL Bank, the percentage obtained by dividing such RL Bank's Revolving Commitment by the Total Revolving Commitment. "Scheduled Repayment" shall have the meaning provided in Section 4.2(A)(b). "SEC" shall mean the Securities and Exchange Commission or any successor thereto. "Secured Parties" shall mean (i) the Banks, the Agent and the Collateral Agent and (ii) the Interest Rate Protection Creditors (as defined in any Security Document). "Security Agreements" shall mean and include (i) the Borrower Security Agreement and (ii) the Subsidiary Security Agreement. "Security Agreement Collateral" shall mean all "Collateral" as defined in the Security Agreements. "Security Documents" shall mean and include each Security Agreement, each Pledge Agreement, each Mortgage, each Additional Security Document and each Additional Mortgage. "Senior Note Documents" shall mean and include each of the Senior Notes and all securities purchase agreements, indentures and other documents and agreements related thereto. "Senior Notes" shall mean the 12% Senior Notes due September 1, 2004 issued by the Borrower pursuant to an indenture dated as of June 15, 1995 between the Borrower, as issuer, and IBJ Schroder Bank & Trust Company, as trustee. "Stated Amount" of each Letter of Credit shall mean the maximum available to be drawn thereunder (regardless of whether any conditions for drawing could then be met). "Subordinated Notes" shall mean (i) the 13% Senior Subordinated Notes Due 1998 issued by the Borrower (as successor to GU Acquisition Corporation) pursuant to an indenture dated as of March 2, 1988 among the Borrower, as issuer, and Chemical Bank (as successor to Manufacturers Hanover Trust Company), as trustee, (ii) the 12-1/4% Senior Subordinated Notes Due July 15, 2002 issued by the Borrower pursuant to an indenture dated as of July 22, 1992 among the Borrower, as issuer, Holdings and GU Capital, as guarantors, and United States Trust Company of New York, as -106- trustee, and (iii) the 12-1/4% Senior Subordinated Notes Due July 15, 2002, Series A issued by the Borrower pursuant to an indenture dated as of October 18, 1993 among the Borrower, as issuer, GU Capital, as guarantor, and United States Trust Company of New York, as trustee. "Subsidiary" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time; PROVIDED, HOWEVER, that Chalfont shall not be deemed to be a "Subsidiary" of the Borrower. Unless otherwise expressly provided, all references herein to "Subsidiary" shall mean a Subsidiary of the Borrower. "Subsidiary Guarantor" shall mean (i) each Subsidiary of the Borrower which is a party to the Subsidiary Guaranty on the Effective Date and (ii) any Subsidiary of the Borrower that becomes a party to the Subsidiary Guaranty after the Effective Date pursuant to Section 7.13. "Subsidiary Guaranty" shall have the meaning provided in Section 5.1(g). "Subsidiary Pledge Agreement" shall mean the pledge agreement duly authorized, executed and delivered after the Effective Date by each Subsidiary of the Borrower required to become a party thereto pursuant to Section 7.13, which pledge agreement shall be in form and substance satisfactory to the Agent (as the same may be modified, supplemented or amended from time to time). "Subsidiary Security Agreement" shall have the meaning provided in Section 5.1(e)(ii). "Swingline Commitment" shall mean the commitment of BTCo to make Swingline Loans up to the Maximum Swingline Amount. "Swingline Facility" shall mean the Facility evidenced by the Swingline Commitment. -107- "Swingline Loan" shall have the meaning provided in Section 1.2(C). "Swingline Note" shall have the meaning provided in Section 1.5(a). "Swingline Termination Date" shall mean the date which is three Business Days prior to the Expiry Date. "Syndication Date" shall mean the earlier of (x) the date which is 90 days after the Effective Date and (y) the date upon which the Agent determines in its sole discretion (and notifies the Borrower) that the primary syndication (and the resulting addition of institutions as Banks pursuant to Section 12.4) has been completed. "Taxes" shall have the meaning provided in Section 4.4. "Tax Sharing Agreements" shall have the meaning provided in Section 5.1(u). "Term Loan" shall have the meaning provided in Section 1.2(B)(a). "Term Loan Commitment" shall mean, with respect to each Bank, the amount, if any, set forth opposite such Bank's name on Schedule I hereto directly below the column entitled "Term Loan Commitment" as the same may be reduced or terminated pursuant to Section 3.3. "Term Loan Facility" shall mean the Facility evidenced by the Total Term Loan Commitment. "Term Note" shall have the meaning provided in Section 1.5(a). "Third Party Debt Repayments" shall mean any repayment by the Borrower or any Subsidiary of principal on Indebtedness of the Borrower or any Subsidiary PROVIDED that Third Party Debt Repayments shall not include (i) any repayment on the Revolving Loans except to the extent the Total Revolving Commitment has been permanently reduced in connection with such repayment, (ii) any repayment on any other revolving loans of the Borrower or any Subsidiary other than any such repayment at the final maturity thereof but then only to the extent such revolving loans have not been replaced or refinanced through a new loan or credit facility, (iii) any repayment financed through the incurrence of new Indebtedness excluding any repayment financed through the incurrence of Revolving Loans), (iv) any repayment of Indebtedness with proceeds of the sale of -108- assets or issuance of equity and (v) any repayments of Capital Lease Obligations and/or other Indebtedness, to the extent in each case described in this clause (v) deducted in computing Adjusted Consolidated Cash Flow for the applicable Excess Cash Flow Period. "Total Cash Interest Expense" shall mean for any period total interest expense of the Borrower and its Subsidiaries on a consolidated basis (including, without limitation, the interest expense associated with Capitalized Lease Obligations (Equipment) and Adjusted Capitalized Lease Obligations (Other) but excluding (y) interest expense associated with Capitalized Lease Obligations (Other) (but only to the extent not constituting Adjusted Capitalized Lease Obligations (Other)) and (z) expense for interest not payable in cash during such period. "Total Commitment" shall mean the sum of the Total Term Loan Commitment and the Total Revolving Commitment. "Total Initial Revolving Loans" shall mean the sum of the Initial Revolving Loans of each of the Banks. "Total Revolving Commitment" shall mean the sum of the Revolving Commitments of each of the Banks. "Total Term Loan Commitment" shall mean the sum of the Term Loan Commitments of each of the Banks. "Total Unutilized Revolving Commitment" shall mean, at any time, the excess, if any, of (i) the Total Revolving Commitment over (ii) the sum of (x) the outstanding principal amount of all Revolving Loans and Swingline Loans plus (y) the Letter of Credit Outstandings, in each case at such time. "Type" shall mean any type of Loan determined with respect to the interest option applicable thereto, I.E., a Base Rate Loan or Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the present value of the accrued benefits under the Plan as of the close of its most recent plan year, determined in accordance with Statement of Financial Accounting Standards No. 87, based upon the actuarial assumptions used by the Plan's actuary in the most recent annual valuation of the Plan, exceeds the fair market value of the assets allocable thereto, determined in accordance with Section 412 of the Code. -109- "Unpaid Drawing" shall have the meaning provided in Section 2.4(a). "Unutilized Revolving Commitment" for any RL Bank at any time shall mean the excess of (x) the Revolving Commitment of such RL Bank over (y) the sum of (i) the aggregate outstanding Revolving Loans of such Bank plus (ii) such RL Bank's Adjusted RL Percentage of the Letter of Credit Outstandings. "Voting Stock" shall mean the shares of capital stock and any other securities of any Person entitled to vote generally for the election of directors of such Person or any other securities (including, without limitation, rights and options), convertible into, exchangeable into or exercisable for, any of the foregoing (whether or not presently exercisable, convertible or exchangeable). "Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of such Person to the extent all of the capital stock or other ownership interests in such Subsidiary, other than directors' qualifying shares, is owned directly or indirectly by such Person. "Written" or "in writing" shall mean any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. SECTION 11. THE AGENT. 11.1 APPOINTMENT. Each Bank hereby irrevocably designates and appoints BTCo as Agent (such term as used in this Section 11 to include BTCo in its capacity as Collateral Agent) of such Bank to act as specified herein and in the other Credit Documents, and each such Bank hereby irrevocably authorizes BTCo as the Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Credit Documents, together with such other powers which in the opinion of the Agent are reasonably incidental thereto. The Agent agrees to act as such upon the express conditions contained in this Section 11. Notwithstanding any provision to the contrary elsewhere in this Agreement, neither the Agent shall have any duties or responsibilities, except those expressly set forth herein or in the other Credit Documents, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise -110- exist against the Agent. The provisions of this Section 11 are solely for the benefit of the Agent and the Banks, and no Credit Party shall have any rights as a third party beneficiary of any of the provisions hereof. In performing their functions and duties under this Agreement, the Agent shall act solely as agent of the Banks and the Agent does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for any Credit Party. 11.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care except to the extent otherwise required by Section 11.3. 11.3 EXCULPATORY PROVISIONS. The Agent, or any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall not be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by any Credit Party or any of their respective officers contained in this Agreement, any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Credit Document or for any failure of any Credit Party or any of their respective officers to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of any Credit Party. The Agent shall not be responsible to any Bank for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Banks or by or on behalf of any Credit Party to the Agent or any Bank or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or -111- agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 11.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Credit Parties), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks. 11.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Bank or the Borrower or any other Credit Party referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks, PROVIDED that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 11.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute -112- any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Credit Parties and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Credit Parties. The Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, assets, property, financial and other conditions, prospects or creditworthiness of any Credit Party which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 11.7 INDEMNIFICATION. The Banks agree to indemnify the Agent in its capacity as such ratably according to the Banks' aggregate Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Agent in its capacity as such in any way relating to or arising out of this Agreement or any other Credit Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Borrower, PROVIDED that no Bank shall be liable to the Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is -113- furnished. The agreements in this Section 11.7 shall survive the payment of all Obligations. 11.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its and their respective affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower and its Subsidiaries as though the Agent were not the Agent hereunder. With respect to the Loans made by it and all Obligations owing to it, the Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Agent and the terms "Bank" and "Banks" shall include the Agent in its individual capacity. 11.9 RESIGNATION OF AGENT; SUCCESSOR AGENT. The Agent may resign as the Agent upon 20 days' notice to the Banks. Upon the resignation of the Agent, the Required Banks shall appoint from among the Banks a successor Agent for the Banks subject to prior approval by the Borrower (such approval not to be unreasonably withheld), whereupon such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall include such successor agent effective upon its appointment, and the resigning Agent's rights, powers and duties as the Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After the retiring Agent's resignation hereunder as the Agent, the provisions of this Section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 12. MISCELLANEOUS. 12.1 PAYMENT OF EXPENSES, ETC. The Borrower agrees to: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Agent in connection with the negotiation, preparation, execution, delivery and performance of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees and disbursements of Skadden, Arps, Slate, Meagher and Flom, special counsel, Policano & Manzo, L.L.C., financial advisors to such special counsel, and any local counsel and other professionals) and of the Agent and each of the Banks in connection with the enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and disbursements of counsel and other professionals for the Agent and for each of the Banks); (ii) pay and hold -114- each of the Banks harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (iii) indemnify the Agent and each Bank, their respective officers, directors, employees, representatives and agents (each, an "indemnified person") from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not any Bank is a party thereto) related to the entering into and/or performance of any Credit Document or the use of the proceeds of any Loans hereunder or the Plan of Reorganization or the consummation of any other transactions contemplated in any Credit Document, (b) any settlement entered into in connection with the foregoing to the extent such settlement has been consented to by the Borrower, which consent shall not be unreasonably withheld or (c) the actual or alleged presence of Hazardous Materials on, or released from, any Real Property of the Borrower or any Environmental Claim with respect to the Borrower, in each case including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation, Environmental Claim or any of the Borrower's acts, omissions, business, operations or Real Property, or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). Each indemnified person shall promptly notify the Borrower of each event of which it has knowledge which may give rise to a claim under the indemnification provisions of this Section 12.1 and the Borrower shall assume the defense thereof on behalf of such indemnified person including the employment of counsel (reasonably satisfactory to such indemnified person). Any indemnified person shall have the right to employ separate counsel in any such proceeding and participate in the defense thereof, but the fees and expenses of such separate counsel shall be at the expense of such indemnified person unless (i) the employment of such separate counsel has been specifically authorized by the Borrower or (ii) the named parties to any such action (including any impleaded parties) include such indemnified person and the Borrower, and such indemnified person shall have been advised by its counsel that there may be one or more material legal defenses available to such indemnified person which are materially different from or additional to those available -115- to the Borrower (it being understood, however, that the Borrower shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees or expenses of more than one separate firm of attorneys for all such indemnified persons). To the extent that the undertaking to indemnify and hold harmless set forth in this Section 12.1 may be unenforceable because it is violative of any law or public policy as determined by a final judgment of a court of competent jurisdiction, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the liabilities giving rise to claims under the indemnification provisions of this 12.1 which is permissible under applicable law. 12.2 RIGHT OF SETOFF. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Bank (including without limitation by branches and agencies of such Bank wherever located) to or for the credit or the account of the Borrower against and on account of the Obligations and liabilities of the Borrower to such Bank under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of the Borrower (but excluding any amounts held by such Bank in a trustee capacity) purchased by such Bank pursuant to Section 12.6(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Bank shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 12.3 NOTICES. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing and mailed, telegraphed, telexed, telecopied, cabled or delivered, if to the Borrower, at the address specified opposite its signature below; if to any Bank, at its address specified for such Bank on Schedule II hereto; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, telegraphed, telexed, -116- telecopied, or cabled or sent by overnight courier, and shall be effective when received. 12.4 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; PROVIDED that the Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of the Banks. Each Bank may at any time grant participations in any of its rights hereunder or under any of the Notes to a commercial bank, other financial institution, mutual fund or "Accredited Investor" as such term is defined in Regulation D of the Securities Act of 1933, as amended, PROVIDED that in the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Bank had not sold such participation, except that the participant shall be entitled to the benefits of Sections 1.10, 1.11 and 4.4 of this Agreement to the extent that such Bank would be entitled to such benefits if the participation had not been entered into or sold, and PROVIDED FURTHER that no Bank shall transfer, grant or assign any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan or Note in which such participant is participating (it being understood that any waiver of an installment on, the application of any prepayment or the method of any application of any prepayment to, the amortization of the Term Loans shall not constitute an extension of the final maturity date) or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of the applicability of any post-default increase in interest rates), or reduce the principal amount thereof, or increase such participant's participating interest in any Commitment over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment, or a mandatory prepayment, shall not constitute a change in the terms of any Commitment), (ii) release all or substantially all of the Collateral or (iii) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement. -117- (b) Notwithstanding the foregoing, (x) any Bank may assign all or a portion of its Loans and/or Commitments and its rights and obligations hereunder to its parent company and/or any affiliate of such Bank which is at least 50% owned by such Bank or its parent company or to one or more Banks and (y) any Bank may assign a portion, in an amount equal to at least the Minimum Assignment Amount (or the remaining balance thereof if less) of its Loans and/or Commitments and its rights and obligations hereunder to any other commercial banks, other financial institutions, mutual funds or "Accredited Investors" as such term is defined in Regulation D of the Securities Act of 1933, as amended (each an "Eligible Assignee") each of which assignees to become a party to this Agreement as a Bank prior to or after the Effective Date by executing an assignment agreement in the form of Exhibit I hereto (with such changes as the Agent in the exercise of its reasonable judgment may approve in order to carry out the intent and purposes of this Agreement) appropriately completed (an "Assignment Agreement") with the assigning Bank, PROVIDED that, in each case, (i) at such time Schedule I shall be deemed to have been modified to reflect the Loans and/or Commitments of such new Bank and of the existing Banks, (ii) if requested by such new Bank or the assigning Bank, the Borrower shall issue new Notes to such new Bank and to the assigning Bank in conformity with the requirements of Section 1.5 to the extent needed to reflect the revised Loans and/or Commitments, (iii) the consent of the Agent shall be required in connection with any such assignment and (iv) the Agent shall have received at the time of each such assignment from either the assigning or assignee Bank the payment of a nonrefundable assignment fee of $3,500 ($1,500 in the case of assignments among parties who are Banks at the time thereof). Assignments pursuant to this Section 12.4(b) shall not be required to be PRO RATA between the Term Loans (or each Facility thereof) and the Revolving Commitments. To the extent of any assignment pursuant to this Section 12.4(b), the assigning Bank shall be relieved of its obligations hereunder with respect to its assigned Loans and/or Commitment and no Bank may assign all or a portion of its Revolving Commitment to an Eligible Assignee not already a RL Bank hereunder unless the Letter of Credit Issuer shall have consented in writing to such assignment. (c) Notwithstanding any other provisions of this Section 12.4, no transfer or assignment of the interests or obligations of any Bank hereunder or any grant of participations therein shall be permitted if such transfer, assignment or grant would require the Borrower to file a registration statement or qualify an indenture with the SEC -118- or to qualify the Loans under the "Blue Sky" laws of any State. (d) Each Bank initially party to this Agreement hereby represents, and each Person that becomes a Bank pursuant to an assignment permitted by this Section 12.4 will, upon its becoming party to this Agreement, represent that it is a commercial lender, other financial institution or other "Accredited Investor" which makes and/or invests in loans in the ordinary course of its business and that it will make or acquire Loans for its own account in the ordinary course of such business, PROVIDED that, subject to the preceding clauses (a) and (b), the disposition of any promissory notes or other evidences of or interests in Indebtedness held by such Bank shall at all times be within its exclusive control. (e) Notwithstanding any other provisions of this Section 12.4, any transfer or assignment of the interests or obligations of any Bank hereunder shall be subject to such reasonable limitations as may be imposed by the Agent in its sole discretion. (f) In addition to the assignments and participations permitted under the foregoing provisions of this Section 12.4, any Bank may assign and pledge all or any portion of its Loans, the other Obligations owed to such Bank and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any operating circular issued by such Federal Reserve Bank. No Bank shall, as between the Borrower and such Bank, be relieved of any of its obligations hereunder as a result of any such assignment and pledge. 12.5 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of the Agent or any Bank in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between any Credit Party and the Agent or any Bank shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Agent or any Bank would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Banks to any other or further action in any circumstances without notice or demand. -119- 12.6 PAYMENTS PRO RATA. (a) The Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations, it shall, except as otherwise provided in this Agreement, distribute such payment to the Banks (other than any Bank that has consented in writing to waive its PRO RATA share of such payment) PRO RATA based upon their respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans or Fees, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations in such amount as shall result in a proportional participation by all of the Banks in such amount, PROVIDED that if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 12.7 CALCULATIONS; COMPUTATIONS. (a) The financial statements to be furnished to the Banks pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Banks), PROVIDED that, except as otherwise specifically provided herein, all computations determining compliance with Sections 4.2 and 8, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the historical financial statements delivered to the Banks pursuant to Section 6.10(b) (including, without limitation, the exclusion of the effects, if any, of Fresh Start Accounting); PROVIDED FURTHER that notwithstanding any requirement of GAAP to the contrary, except as expressly provided elsewhere in this Agreement, any lease entered into by the Borrower after the Effective Date with respect to a store or facility, and in each case related land, shall be treated for all purposes of Section 8, and the definitions used therein, as an -120- operating lease and not a Capital Lease except that any such lease to the extent creating Adjusted Capitalized Lease Obligations (Other) shall be treated as a Capital Lease; PROVIDED FURTHER that with respect to the calculation of EBITDA for the fiscal quarters ending in July 1995, October 1995, January 1996, and March 1996, such calculations shall be made without including (i) the Reorganization Expenses incurred prior to the Effective Date or within 180 days thereafter in connection with the Chapter 11 Case, (ii) the costs and expenses incurred in connection with the Borrower's SVRIP Plan in so far as the same do not exceed $4,500,000 and (iii) costs and expenses incurred in connection with the operational adjustment described in Schedule XIII hereto in so far as the same do not exceed $11,500,000. At any time the computations determining compliance with Section 8 utilize accounting principles or treatments different from those utilized in the financial statements then being furnished to the Banks pursuant to Section 7.1, such financial statements shall be accompanied by reconciliation work-sheets. (b) All computations of interest and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days. 12.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Borrower hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 1633 Broadway, New York, NY 10019 as their designee, appointee and agent to receive, accept and acknowledge for and on their behalf, and in respect of their property, service of any and all legal process, summons, notices and documents which may be served in any such action or proceeding. The Agent agrees to use reasonable good faith efforts to mail, by registered or certified mail, to the Borrower at its address set forth opposite its signatures below, copies of any and all legal process, summons, notices and documents mailed or delivered to CT Corporation System in connection with the immediately preceding sentence; PROVIDED that the failure of the -121- Borrower to receive, for any reason, copies of such correspondence shall not in any way affect the effectiveness of the delivery of any legal process, summons, notice or documents delivered to CT Corporation System. If for any reason such designee, appointee and agent shall cease to be available to act as such, the Borrower agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Agent. The Borrower further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Borrower at its address set forth opposite its signatures below, such service to become effective thirty days after such mailing. Nothing herein shall affect the right of the Agent, any Bank or the holder of any Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction. (b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. The Borrower further waives any right it may have to trial by jury in any court or jurisdiction, including without limitation those referred to in clause (a) above, in respect of any matter arising out of or relating to this Agreement and the other Credit Documents. 12.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Agent. 12.10 EFFECTIVENESS. This Agreement shall become effective on the date (the "Effective Date") on which the Borrower and each of the Banks shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Agent at the Payment Office of the Agent or, in the case of the Banks, shall have given to the Agent telephonic (confirmed in writing), written, telex or telecopy notice (actually received) at -122- such office that the same has been signed and mailed to it. The Agent will give the Borrower and each Bank prompt written notice of the occurrence of the Effective Date. 12.11 HEADINGS DESCRIPTIVE. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 12.12 AMENDMENT OR WAIVER. Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the Borrower and the Required Banks, PROVIDED that no such change, waiver, discharge or termination shall, without the consent of each Bank affected thereby, (i) extend the final scheduled maturity of any Loan or Note (it being understood that any waiver of an installment on, the application of any prepayment or the method of application of any prepayment to the amortization of the Term Loans shall not constitute an extension of the final maturity date), or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) or Fees thereon, or reduce the amount thereof, or increase the Commitments of any Bank over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment, or mandatory prepayment, shall not constitute a change in the terms of any Commitment of any Bank), (ii) release or make any modification (the reasonable likely outcome of which would be a material adverse effect on the Collateral position of the Banks) with respect to all or substantially all of the Collateral (except as expressly provided in the Credit Documents), (iii) amend, modify or waive any provision of this Section, or Section 9.1, 11.7, 12.1, 12.2, 12.4, 12.6 or 12.7(b), (iv) reduce the percentage specified in the definition of Required Banks or (v) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under any Credit Document. No provision of Section 2 or 11 may be amended without the consent of the Letter of Credit Issuer or the Agent, respectively. In addition, notwithstanding anything to the contrary contained above, no such change, waiver, discharge or termination shall modify any provision of Section 3.3 or Section 4.2 without the consent of the Required Class Creditors of a Class of Banks which was to share in such payment or Commitment reduction if the effect of such change, waiver, discharge or termination is to reduce the aggregate payments or Commitment reductions applicable to -123- such Class in a manner disproportionate to the reduction in the aggregate payments or Commitment reductions applicable to any other Class. 12.13 SURVIVAL. All indemnities set forth herein including, without limitation, in Section 1.10, 1.11, 4.4, 11.7 or 12.1 shall survive the execution and delivery of this Agreement and the making and repayment of the Loans and the satisfaction of all other Obligations. 12.14 DOMICILE OF LOANS. Each Bank may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Bank, PROVIDED that the Borrower shall not be responsible for costs arising under Section 1.10, 1.11, 2.5 or 4.4 resulting from any such transfer to the extent not otherwise applicable to such Bank prior to such transfer. 12.15 PERMITTED DISPOSITIONS. (a) Subject to the provisions of this Section 12.15 and the requirements contained in the definition of Permitted Dispositions, the Borrower may effect one or more Permitted Dispositions, so long as (i) cash and non-cash proceeds received in connection with all such Permitted Dispositions in excess of $8,500,000 are used to repay Term Loans, Swingline Loans and Revolving Loans pursuant to Sections 4.1 and 4.2; (ii) no Event of Default is in existence at the time of the consummation of a Permitted Disposition or would exist after giving effect thereto; (iii) each Permitted Disposition shall be an arm's-length transaction for fair market value (as determined by the management of the Borrower in good faith) and shall involve a purchaser who is not an Affiliate of the Borrower; (iv) the Borrower shall have given the Agent and the Banks at least three Business Days prior written notice of a Permitted Disposition; (v) the Borrower shall have delivered to the Agent an officer's certificate executed by the chief financial officer of the Borrower, certifying as to compliance with the requirements of preceding clauses (i), (ii) and (iii); and (vi) such sale or closure complies with the other requirements of this Section 12.15. Notwithstanding anything to the contrary in Section 8.9, the Borrower will not permit the total annual EBITDA of all Permitted Disposition Stores to exceed $1 million. For purpose of the foregoing, each Permitted Disposition Store's EBITDA shall be computed by annualizing the store's EBITDA for the fiscal quarter immediately preceding its disposition. The consummation of a Permitted Disposition shall be deemed to be a -124- representation and warranty by the Borrower that all conditions thereto have been satisfied and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 6 and 9. (b) The Borrower confirms that, at the time of each Permitted Disposition and upon the terms covered and set forth in the Borrower Security Agreement, Subsidiary Security Agreement and the Mortgages, security interests are created and are granted to the Collateral Agent, for the benefit of the Secured Parties, in the proceeds from such Permitted Disposition. The Borrower shall at its own expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record in an appropriate governmental office, any document or instrument reasonably deemed by the Agent to be necessary or desirable for the perfection of the foregoing security interests including, without limitation, the filing of UCC-1's. -125- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. 201 Willowbrook Boulevard THE GRAND UNION COMPANY Wayne, New Jersey 07470-6799 Attention: Kenneth Baum Telephone: (201) 890-6000 By: /s/ Kenneth Baum Facsimile: (201) 890-6540 ------------------------------- Title: Vice President and Treasurer One Bankers Trust Plaza BANKERS TRUST COMPANY, New York, New York 10006 Individually and as Attention: Mary Kay Coyle Agent Telephone: (212) 250-2500 Facsimile: (212) 250-7200 By: /s/ Mary Kay Coyle -------------------------------- Title: Vice President 333 South Beaudry Avenue BANK OF AMERICA NATIONAL Ninth Floor TRUST & SAVINGS ASSOCIATION Los Angeles, California 90017 Attention: Nancy Moore Telephone: (213) 345-4999 By: /s/ Nancy A. Moore Facsimile: (213) 345-5004 -------------------------------- Title: Vice President 470 Park Avenue South BANK POLSKA KASA OPIEKI, SA New York, New York 10016 Attention: William Shea Telephone: (212) 251-1203 By: /s/ William A. Shea Facsimile: (212) 213-2971 -------------------------------- Title: Vice President and Senior Lending Officer 520 Madison Avenue COMPAGNIE FINANCIERE DE CIC 37th Floor ET DE L'UNION EUROPEENNE New York, New York 10022 Attention: Sean Mounier Telephone: (212) 715-4413 By: /s/ Sean Mounier Facsimile: (212) 715-4535 -------------------------------- Title: First Vice President By: /s/ Brian O'Leary -------------------------------- Title: Vice President -126- 133 East 57th Street INTERNATIONALE NEDERLANDEN New York, New York 10022 (U.S.) CAPITAL CORPORATION Attention: Joan M. Chiappe Telephone: (212) 446-1500 Facsimile: (212) 644-0428 By: /s/ Joan M. Chiappe -------------------------------- Title: Vice President 250 Vesey Street MERRILL LYNCH, PIERCE, 7th Floor, Bank Loan Trading FENNER & SMITH INCORPORATED New York, New York 10281 Attention: Thomas Hudson Telephone: (212) 449-4980 By: /s/ Victor Khosla Facsimile: (212) 449-2763 -------------------------------- Title: Director 60 Wall Street MORGAN GUARANTY TRUST COMPANY 26th Floor OF NEW YORK New York, New York 10260 Attention: Eileen Urban Telephone: (212) 648-3850 By: /s/ Eileen Urban Facsimile: (212) 648-5038 -------------------------------- Title: Associate 175 Water Street NATWEST BANK N.A. New York, New York 10038 Attention:George Triebenbacher Telephone: (212) 602-3501 By: /s/ George Triebenbacher Facsimile: (212) 602-3393 -------------------------------- Title: Vice President c/o Soros Fund Management QUANTUM PARTNERS LDC 888 Seventh Avenue New York, New York 10106 Attention: Mark Sonnino By: /s/ Mark D. Sonnino Telephone: (212) 262-6300 -------------------------------- Facsimile: (212) 586-4537 Title: Attorney-in-Fact -127- c/o Boston Management and SENIOR DEBT PORTFOLIO Research 24 Federal Street By: Boston Management and Research, 6th Floor as Investment Advisor Boston, Massachusetts 02110 Attention: Michael J. Cannon Telephone: (617) 348-0115 Facsimile: (617) 695-9594 By: /s/ Barbara Campbell -------------------------------- Title: Assistant Treasurer Schedule I Page 1 SCHEDULE I TO CREDIT AGREEMENT Commitments
TOTAL BANK TERM LOAN TERM REVOLVING REVOLVING LOAN % OF COMMITMENT LOANS COMMITMENT LOANS COMMITMENT TOTAL Bankers Trust Company $18,044,926.66 $ 0.00 $ 9,772,138.84 $ 5,276,954.98 $ 27,817,065.50 13.63% Bank of America National Trust & Savings 7,021,871.51 4,786,092.75 0.00 0.00 7,021,871.51 3.44% Association Bank Polska Kasa Opieki, SA 0.00 0.00 7,335,703.54 3,961,279.91 7,335,703.54 3.59% Compagnie Financiere De CIC Et De L'Union 4,107,993.98 0.00 10,563,413.10 5,704,243.07 14,671,407.08 7.19% Europeenne Internationale Nederlanden (U.S.) Capital 7,769,342.81 0.00 14,971,341.16 8,084,524.23 22,740,683.97 11.14% Corporation Merrill Lynch, Pierce, Fenner & Smith, Inc. 19,071,425.89 3,262,030.91 27,527,939.64 14,865,087.41 46,599,365.53 22.83% Morgan Guaranty Trust Company of New York 7,292,098.16 3,262,030.92 4,829,463.73 2,607,910.41 12,121,561.89 5.94% NatWest Bank N.A. 0.00 0.00 25,000,000.00 13,500,000.00 25,000,000.00 12.25% Quantum Partners LDC 24,207,821.68 16,500,000.00 0.00 0.00 24,207,821.68 11.86% Senior Debt Portfolio 16,628,890.30 11,334,216.42 0.00 0.00 16,628,890.30 8.15% Total $104,144,371.00 $39,144,371.00 $100,000,000.00 $54,000,000.00 $204,144,371.00 100%
SCHEDULE II TO CREDIT AGREEMENT BANK ADDRESSES Bankers Trust Company 280 Park Avenue New York, New York 10017 Attention: Mary Kay Coyle Bank of America National Trust & Savings Association 333 South Beaudrey Avenue Ninth Floor Los Angeles, California 90017 Attention: Nancy Moore Bank Polska Kasa Opieki, SA 470 Park Avenue South New York, New York 10016 Attention: William Shea Compagnie Financiere De CIC Et De L'Union Europeenne 520 Madison Avenue 37th Floor New York, New York 10022 Attention: Eric Longuet Internationale Nederlanden (U.S.) Capital Corporation 133 East 57th Street New York, New York 10022 Attention: Joan M. Chiappe Merrill Lynch, Pierce, Fenner & Smith, Inc. 250 Vesey Street 7th Floor, Bank Loan Trading New York, New York 10281 Attention: Thomas Hudson Morgan Guaranty Trust Company of New York 60 Wall Street 26th Floor New York, New York 10260 Attention: Ilene Urban NatWest Bank N.A. 175 Water Street New York, New York 10038 Attention: George Triebenbacher 1 Quantum Partners LDC c/o Soros Fund Management 888 Seventh Avenue New York, New York 10106 Attention: Mark Sonnino Senior Debt Portfolio c/o Boston Management and Research 24 Federal Street, 6th Floor Boston, Massachusetts 02110 Attention: Michael J. Cannon 2 SCHEDULE III TO CREDIT AGREEMENT COMMITMENTS AND AMOUNTS OUTSTANDING UNDER THE ORIGINAL CREDIT AGREEMENT ON THE EFFECTIVE DATE
ORIGINAL ORIGINAL ORIGINAL B REVOLVING REVOLVING BANK TERM LOANS COMMITMENT LOANS Bankers Trust Company $0.00 $36,000,000.00 $19,440,000.00 Bank of America National Trust & Savings Association 4,786,092.75 0.00 0.00 Bank Polska Kasa Opieki, SA 0.00 5,000,000.00 2,700,000.00 Compagnie Financiere De CIC Et De L'Union Europeenne 0.00 10,000,000.00 5,400,000.00 Internationale Nederlanden (U.S.) Capital Corporation 0.00 15,500,000.00 8,370,000.00 Merrill Lynch, Pierce, Fenner & Smith, Inc. 3,262,030.91 28,500,000.00 15,390,000.00 Morgan Guaranty Trust Company of New York 3,262,030.92 5,000,000.00 2,700,000.00 Quantum Partners LDC 16,500,000.00 0.00 0.00 Senior Debt Portfolio 11,334,216.42 0.00 0.00 Total $39,144,371.00 $100,000,000.00 $54,000,000.00
1 SCHEDULE III-A TO CREDIT AGREEMENT INITIAL REVOLVING COMMITMENT CONVERTED INTO TERM LOAN COMMITMENT ON THE EFFECTIVE DATE
INITIAL REVOLVING BANK COMMITMENT Bankers Trust Company $1,227,861.16 Bank of America National Trust & Savings Association 0.00 Bank Polska Kasa Opieki, SA 0.00 Compagnie Financiere De CIC Et De L'Union Europeenne 0.00 Internationale Nederlanden (U.S.) Capital Corporation 528,658.84 Merrill Lynch, Pierce, Fenner & Smith, Inc. 972,060.36 Morgan Guaranty Trust Company of New York 170,536.27 Quantum Partners LDC 0.00 Senior Debt Portfolio 0.00 Total $2,899,116.63
SCHEDULE IV TO CREDIT AGREEMENT LIST OF SUBSIDIARIES
NUMBER OF JURISDICTION OF SHARES NAME OF DIRECT OWNER AND NAME OF SUBSIDIARY INCORPORATION OUTSTANDING % OWNED Merchandising Services, Inc. Georgia 500 The Grand Union Company - 100% Grand Union Stores, Inc. of Vermont Vermont 50 The Grand Union Company - 100%* Grand Union Stores of New Hampshire, Inc. New Hampshire 200 The Grand Union Company - 100% * All issued and outstanding shares, except for Director's qualifying shares, are held directly by The Grand Union Company.
1 SCHEDULE V Page 1 SCHEDULE V TO CREDIT AGREEMENT REAL PROPERTY See Attached SCHEDULE V Page 1 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION NORTHERN OPERATING STORES 1103 Johnson VT Leased* 1106 Fort Edward NY Leased 1107 Rouses Point NY Leased S,T 1113 Poultney VT Company Owned* 1114 Corinth NY Leased 1134 Burlington VT Leased* 1135 Keesville NY Leased* 1139 Woodstock NY Leased 1147 La Grange NY Leased 1153 Port Henry NY Leased T 1160 Manchester Center VT Company Owned* 1161 Enosburg Falls VT Leased S,T 1166 Stowe VT Company Owned* 1167 South Burlington VT Leased* 1169 Rutland VT Leased* S,T 1171 Saranac Lake NY Company Owned* 1175 Whitehall NY Leased* 1183 Plattsburgh-Airbase NY Leased R 1186 Saratoga Spring NY Leased 1195 Schroon Lake NY Leased 1197 St. Albans NY Leased 1198 Northville NY Leased 1370 Tupper Lake NY Leased* _____________ * Denotes those sites designated as "Mortgaged Proper- ties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 1 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 1802 Fort Plain NY Leased 1803 Stamford NY Leased 1804 Indian Lake NY Leased* 1805 Saranac Lake NY Leased 1810 Ludlow VT Leased 1811 Windsor VT Leased* 1812 Brunswick-Troy NY Leased 1814 South Burlington VT Leased 1815 Granville NY Leased 1816 Pleasant Valley NY Leased 1817 Morrisville VT Leased 1818 Waitsfield VT Leased* 1819 Essex Center VT Leased 1820 Newport VT Leased* 1821 Essex Junction VT Leased 1823 Burnt Hills NY Leased* 1824 Rhinebeck NY Leased* 1825 Elizabethtown NY Leased 1826 Chestertown NY Leased 1828 Northfield VT Leased* 1836 Bennington VT Leased 1844 Ballston Spa NY Leased 1845 Champlain NY Leased* 1852 Hoosick Falls NY Leased 1855 Elsmere NY Leased* 1859 Peru NY Leased 1861 Brattleboro VT Leased _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 2 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 1867 Greenwich NY Leased* 1870 Barre VT Leased* 1872 Palantine Bridge NY Leased* 1873 Ticonderoga NY Leased* 1874 Hyde Park NY Leased* 1876 Milton VT Leased* 1878 Dover Plains NY Leased* 1879 Loudonville NY Leased* 1884 Bristol VT Leased* 1885 Hardwick VT Leased* 1888 Ellenville NY Leased* 1892 Malta NY Leased* 1893 Winooski VT Leased* 1895 Amenia NY Leased* 1897 Hudson Falls NY Leased* 1899 Ravena NY Leased* 1900 Middleburg NY Leased* 1902 Lake Placid NY Leased* 1903 Coxsackie NY Leased* 1905 Watervliet NY Leased 1906 Glenmont NY Leased* 1907 Highland NY Leased* 1908 Fair Haven VT Leased* 1909 North Creek NY Leased* 1914 Hanover NH Leased 1915 West Lebanon NH Leased 1922 Morrisville VT Leased* _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 3 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 1925 Kingston NY Leased* 1928 Springfield VT Leased 1930 Guilderland NY Leased 1933 Montpelier VT Leased 1935 Schenectady NY Leased* 1937 Ausable Forks NY Leased 1938 Lincoln NH Leased 1939 Bradford VT Leased 1940 Niskayuna NY Leased* 1941 Bolton Landing NY Leased 1942 Willsboro NY Leased 1943 Hopewell Junction NY Leased* 1946 Waterford NY Leased* 1947 Scotia NY Leased 1950 Saugerties NY Leased* 1951 Wilmington VT Leased* 1953 Schodack NY Leased* 1954 Warrensburg NY Leased* 1955 Cambridge NY Leased 1957 Mechanicville NY Leased 1958 Swanton VT Leased* 1960 East Greenbush NY Leased* 1962 Broadalbin NY Leased 1963 Kingston NY Leased 1966 Colchester VT Leased 1967 Randolph VT Leased 1968 Waterbury VT Leased _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 4 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 1969 White River VT Leased 1973 Tannersville NY Leased* 1974 Rotterdam NY Leased 1975 Clifton Park NY Leased 1977 Valatie NY Leased* 1979 Wappingers Falls NY Leased 1981 Woodstock VT Leased 1983 St. Johnsbury VT Leased 1985 North Clarendon VT Leased 1988 Chatham NY Leased* 1989 Schaghticoke NY Leased 1992 Brandon VT Leased* 1993 Middlebury VT Leased* 1994 South Glens Falls NY Leased* 1996 Plattsburg NY Leased* 1997 W. Saratoga NY Leased* 2101 Sidney NY Leased* 2110 Binghamton NY Leased* R 2130 Endicott NY Leased 2133 Vestal NY Leased 2150 Hamilton NY Company Owned* 2312 Vestal Plaza NY Leased 2356 Hancock NY Leased* 2359 Norwich NY Leased 2362 Oneonta NY Leased 2370 Binghamton NY Leased R 2371 Endwell NY Leased _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 5 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 2373 Delhi NY Leased* NORTHERN CLOSED LOCATIONS 1808 Red Oak Mill NY Vacant R 1851 Queensbury NY Vacant 1917 Littleton NH Vacant P&C Sublease- Overlease - expires 8/95 1980 East Greenbush NY Sublet 1984 Delmar NY Sublet 2375 Sidney NY Vacant NEW YORK OPERATING LOCATIONS 1 Port Jefferson NY Leased* S,T 6 Little Neck NY Company Owned* 7 Herricks NY Leased* 8 North Port Washington NY Leased* 36 Massapequa NY Leased* 38 Smithtown NY Leased 39 West Hempstead NY Leased 52 Garden City NY Leased S,T 64 North Bellmore NY Leased* 65 West Babylon NY Leased 68 Deer Park NY Leased* 82 Sayville NY Leased _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 6 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 84 Commack NY Leased 95 North Port NY Leased 98 West Islip NY Leased 107 Mahopac NY Leased* 114 Peekskill NY Leased* 130 Tarrytown NY Leased* 137 Larchmont NY Leased 155 Darien CT Leased 203 Pleasantville NY Leased 207 New Canaan CT Leased 212 Ridgefield CT Leased 213 Norwalk CT Leased 227 Croton-On-Hudson NY Leased 231 Newtown CT Leased 239 Dobbs Ferry NY Leased* 241 Stratford CT Leased 242 Trumbull CT Leased 247 Mt. Kisco NY Leased* 248 Chappaqua NY Leased S,T 416 Bleeker St. NY Company Owned* 422 Cold Spring NY Leased 434 Bronx-Tremont NY Leased 437 Glenville CT Leased* 801 Beacon NY Leased* S,T 805 Eastchester NY Company Owned* 810 Westport CT Leased S,T 811 Greenwich CT Company Owned* _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 7 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 812 Glenbrook/Stamford CT Leased* 820 Fishkill NY Leased 823 Carmel NY Leased* 825 Monroe CT Leased* S,T 827 New Fairfield CT Company Owned* 828 Southbury CT Leased* 829 Pawling NY Leased 3100 Elmwood Park NJ Leased 3101 Dover Township NJ Leased* 3103 Tallman NY Leased 3109 Hackensack NJ Leased* 3110 Matamoras PA Leased* 3112 Woodridge NJ Leased 3114 Monroe NY Leased* 3116 Washingtonville NY Leased* 3120 Manalapan NJ Leased 3122 Livingston NJ Leased 3150 Goshen NY Leased* 3151 Fairlawn-Radburn NJ Leased* S,T 3180 Ridgewood NJ Company Owned* 3197 Sommerville NJ Leased 3250 Berkeley Heights NJ Leased* 3253 North Brunswick NJ Leased 3262 Asbury Park NJ Leased 3269 Corwall NY Leased 3273 Denville NJ Leased* 3277 Highland Falls NJ Leased _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 8 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 3281 Tenafly NJ Leased 3282 Clifton-Lexington NJ Leased 3286 Closter NJ Leased 3291 Teaneck NJ Leased* 3400 Milford PA Leased 3451 Clifton-Broad NJ Leased 3457 Waldwick NJ Leased* 3463 Monsey NY Leased 3472 Montvale-Chestnut NJ Leased S,T 3477 Dumont NJ Company Owned* 3480 Lake Hiawatha NJ Leased 3481 Greenwood Lake NJ Leased* 3486 Butler NJ Leased 3489 Basking Ridge NJ Leased 3491 Mt. Ivy NY Leased 3492 Point Pleasant NJ Leased 3498 Montvale-Kinderkamack NJ Leased 3499 Stony Point NY Leased 3545 South Brunswick NJ Leased 3551 Warwick NY Leased 3552 Okland NJ Leased S,T 3553 Paramus NJ Company Owned* 3554 Sparta NJ Leased 3556 Landing NJ Leased 3558 Howell Township NJ Leased 3562 Bricktownship NJ Leased 3563 Flemington NJ Leased _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 9 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 3564 Princeton-Rocky Hill NJ Leased* 3565 Ramsey NJ Leased 3568 Matawan NJ Leased* 3570 Westwood NJ Leased* 3571 Ringwood NJ Leased* 3572 Toms River NJ Leased* 3573 Belleville NJ Leased* 3574 Wyckoff NJ Leased* 3575 West Nyack NY Leased* 3576 Fort Lee NJ Leased 3580 Middletown NJ Leased NEW YORK CLOSED LOCATIONS 66 Bohemia NY Vacant 448 G01 Bronx NY Sublet 833 G01 Waterbury CT Sublet 3293 G01 Port Jervis NY Vacant 3467 B01 Franklin Lakes NJ Vacant 3469 G01 Wycoff NJ Sublet R 3497 G01 Freehold NJ Sublet 3559 G01 Ewing Township NJ Sublet 3560 G01 Hamilton Township NJ Sublet 3566 G01 Morrisville PA Sublet 90564 Saratoga Springs NY Vacant ADMINISTRATIVE _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 10 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 66847 C01 Wayne Headquarters NJ Leased 66847 C02 Wayne Storage NJ Leased 66847 C03 Wayne Headquarters NJ Sublet 67000 C01 Newburgh Commissary NY Leased 69111 C01 Orlando FL Leased 69130 C01 Fresno CA Leased 74071 C01 Hawthorne Maint. Shop NJ Leased 79173 W01 Clifton Park Maint. Whse. NY Leased 79182 C01 Mechanicville Maint. NY Vacant (Former) 79189 C01 Barre Area Office VT Leased 90611 E01 Memphis Shopping Ctr. TN Sublet 91070 W01 Mt. Kisco Dist. Ctr. NY Leased 92170 W01 Waverly Dist. Ctr. NY Leased* 94070 W03 Carlstadt Annex NJ Leased 94070 W01 Carlstadt Dist. Ctr. NJ Leased* 94501 C02 Carlstadt Truck Service NJ Leased 94501 P02 Carlstadt Truck Parking NJ Leased 94501 P01 Carlstadt Truck Parking NJ Leased 97270 W01 Montgomery S&G Dist. Ctr. NY Leased 97470 W01 Newburgh Reclaim Ctr. NY Leased 95096 W01 Miami Warehouse FL Sublet 95097 W01 Miami Warehouse FL Sublet* S,T 95500 W01 White River Jct. Whse. VT Company Owned- Sublet* S,T 92170 W02 Waverly Dist. Ctr. NY Company Owned* S,T 94070 W02 Carlstadt Dist. Ctr. NJ Company Owned* _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 11 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION LAND-VACANT T 8085 L01 La Marque Land TX Company Owned* S,T 79200 L01 Lincoln Park Land NJ Company Owned* S,T 79700 L06 Eatonton Land GA Company Owned* T 97870 Houston TX Company Owned* S,T 064 North Bellmore NY Company Owned* T 1135 Keesville-Parking Lot NY Company Owned* LAND-VACANT-MINIMAL VALUE T 8031 Houston Land TX Company Owned* T 8030 Beaumont TX Company Owned* T 8024 Port Arthur TX Company Owned* T 90625 Hallitsville TX Company Owned* T 79700 Atlanta GA Company Owned* 90616 Memphis TN Company Owned T 1242 Exmore VA Company Owned* T 733 Miami FL Company Owned* SOUTHERN R 5203 G01 Cumming GA Sublet 5218 G01 Hartwell GA Sublet 5720 G01 Atlanta GA Sublet 5742 B01 Norcross GA Sublet R 5746 G01 Alpharetta GA Sublet _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 12 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION R 5778 G01 Stone Mountain GA Sublet 5783 B01 Acworth GA Sublet 5796 B01 Marietta GA Sublet 8730 G01 Albany GA Sublet 8734 G01 Columbus GA Sublet CAROLINA 2747 G01 Anderson SC Sublet 2748 G01 Anderson SC Sublet 4745 A01 Fayetteville NC Sublet EASTERN 602 G01 Overlea MD Sublet 606 G01 Glen Burnie MD Sublet 686 G01 Annandale VA Sublet S,T 1005 A01 Richmond VA Company Owned- Sublet* 1215 G01 Salisbury MD Sublet 1715 G01 Virginia Beach VA Sublet 1718 A01 Richmond VA Sublet WEINGARTEN 8188 G01 Houston TX Sublet 8189 G01 Houston TX Sublet _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 13 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 8190 G01 Houston TX Sublet 8191 G01 Houston TX Sublet FLORIDA 500 A01 N. Miami FL Sublet 790 A01 Davie FL Sublet 793 G01 Clearwater FL Sublet 798 G01 Tampa FL Sublet GRAND DIST. 4019 G01 Binghamton NY Sublet MID-WEST 8912 G01 Reading OH Sublet 8918 G01 Cincinnati OH Sublet E-Z-SHOPS 8301 G01 Newburgh NY Sublet 8303 G01 Newburgh NY Sublet 8304 G01 Spring Valley NY Sublet 8310 G01 Saddle Brook NJ Sublet 8312 G01 Pequannock NJ Sublet 8317 G01 Franklin Lakes NJ Sublet _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 14 ALL GRAND UNION LOCATIONS STORE LOCATION TYPE OF OPERATION 8329 G01 Nyack NY Sublet 8503 G01 Kingston NY Sublet 8504 G01 Lake Katherine NY Sublet 8505 G01 Hyde Park NY Sublet 8506 G01 Lagrange NY Sublet 8508 G01 Wappinger Falls NY Sublet 8513 G01 Guilderland NY Sublet 8522 G01 Colonie NY Sublet 8523 G01 Hughsonville NY Sublet _____________ * Denotes those sites designated as "Mortgaged Properties." "R" Denotes Leases which are to be ASSIGNED, TERMINATED, or REJECTED. "T" Denotes those Mortgaged Properties for which a Mortgage Policy was delivered. "S" Denotes those Mortgaged Properties for which a survey was delivered. 15 SCHEDULE VI TO CREDIT AGREEMENT COLLECTIVE BARGAINING AGREEMENTS
REGION GEOGRAPHIC # OF BARGAINING APPROXIMATE CONTRACT AREA FAC. UNIT # EMPLOYEES EXPIRATION F/T P/T TOTAL DATE New York Bronx & Manhattan 3 UFCW 174 8 13 21 extended Meat & Deli indefi- nitely from 12/17/94 New York Brooklyn, 15 UFCW 342 137 142 279 10/21/95 Queens, Nassau Meat & Deli & Suffolk Coun- ties in NY New York NYC, L.I., 40 UFCW 1262 462 1,411 1,873 6/3/95 Westchester, Grocery, Pro- Putnam & Dutch- duce, & ess Counties in Front-end NY Clerks New York Westchester, 16 UFCW 464A 83 80 163 3/7/98 Putnam & Dutch- (formerly ess Counties in 489) Meat & NY Deli New York New Jersey & 61 UFCW 464A 522 460 982 12/19/98 Orange & Rockland Meat & Deli Counties in NY New York Connecticut 15 UFCW 371 236 564 900 6/28/97 All Store Departments New York Mt. Kisco, NY 1 Teamsters 124 20 144 7/26/97 Distrib. Center 456, Whse. Employees New York Mt. Kisco, NY 1 Teamsters 90 20 110 9/5/98 Distrib. Center 456, Drivers & Loaders New York New Jersey, 61 UFCW 1262 941 2,396 3,337 4/12/97 Orange & Rockland Grocery, Pro- Counties in duce, Front- NY end Clerks New York Carlstadt, NJ 1 Teamsters 87 18 105 10/10/98 Distrib. Center 863, Whse. Employees New York Carlstadt, NJ 1 Teamsters 560 84 15 99 3/31/98 Distrib. Center Drivers & Loaders Northern Waterford, NY 1 ITEA, Driv- 159 29 188 11/1/97 Distrib. Ctr. ers, Loaders & Mechanics 1 SCHEDULE VI Page 2 REGION GEOGRAPHIC # OF BARGAINING APPROXIMATE CONTRACT AREA FAC. UNIT # EMPLOYEES EXPIRATION F/T P/T TOTAL DATE Northern Waterford, NY 1 IWEA Warehouse 201 51 252 5/2/98 Distrib. Ctr. use Employees New York L.I., NY 5 Bakery 3, 39 3 42 1/31/96 Bakers New York Montgomery, NY 1 Teamsters 195 1 196 4/04/98 445, Whse. Employees Northern Elizabethtown, 1 UFCW 1 2 21 23 9/13/97 NY Whole Store New York L.I., NY 2 Local 1199 6 -- 6 10/19/96 Pharmacists
2 SCHEDULE VII TO CREDIT AGREEMENT EXISTING INDEBTEDNESS
OUTSTANDING LOANS AMOUNT (DOLLARS IN THOUSANDS) Credit Agreement Term Loans $ 39,144.0 Credit Agreement Revolving Credit Facility 54,000.0 12.00% Senior Notes 595,475.9 Capital Leases 147,147.0 Equipment Mortgage Notes 2,842.0 ----------- Total 838,608.9 ----------- ----------- EXISTING LETTERS OF CREDIT AMOUNT BENEFICIARY ISSUER (DOLLARS IN THOUSANDS) New York State Bankers Trust Company $23,423.0 National Union Fire Company Bankers Trust Company 14,555.6 Utica Mutual (various workers' compensation bonds) Bankers Trust Company 1,750.0 American Casualty (miscellaneous bonds) Bankers Trust Company 1,917.0 --------- Total $41,645.6 --------- ---------
INTEREST RATE PROTECTION AGREEMENT Interest Rate and Currency Exchange Agreement, dated as of July 29, 1992, between The Grand Union Company and Bankers Trust Company, including the related Swap Transaction dated February 11, 1993 as amended by the Amendment dated as of March 25, 1993. 1 SCHEDULE VIII TO CREDIT AGREEMENT INSURANCE THE GRAND UNION COMPANY Property (All Risk) Pages 1 - 3 Casualty (G.L., Auto, Workers' Comp.) Page 4 Crime (Theft, Robbery, Burglary) Page 5 1 SCHEDULE OF INSURANCE As of June 15, 1995
THE GRAND UNION COMPANY ACCT. MANAGER - B.N. WILLIAMS COVERAGE LIMITS DEDUCTIBLES INSURANCE EFF. DATE ESTIMATED COMPANY, EXP. DATE ANNUAL POLICY NO. % OF PREMIUM PARTICIPATION PROPERTY All Risk PROTECTION MUTUAL INS CO 3/31/94 750,000.00 732501 3/31/97 COVERAGES: Best's Rating All Real And Personal Property A++ XV Business Interruption Extra Expense Rental Value Service Interruption Accounts Receivable Leasehold Interest Property In Transit PERILS INSURED: (Including Boiler & Machinery) "All Risk" Including Flood/Earthquake LIMIT(S) OF LIABILITY: Per Blanket 1,300,000,000 EXCEPT: Flood (Annual Aggregate) 100,000,000 Earthquake (Annual Aggregate) 100,000,000 California Earthquake (Annual 250,000 Aggregate) Extra/Expediting Expense 10,000,000 Automatic Coverage 2,000,000 1 SCHEDULE OF INSURANCE As of June 15, 1995 THE GRAND UNION COMPANY ACCT. MANAGER - B.N. WILLIAMS COVERAGE LIMITS DEDUCTIBLES INSURANCE EFF. DATE ESTIMATED COMPANY, EXP. DATE ANNUAL POLICY NO. % OF PREMIUM PARTICIPATION LIMIT(S) OF LIABILITY (continued): Per Blanket EXCEPT: Errors & Omissions 2,000,000 Service Interruption PD 5,000,000 Service Interruption BI 5,000,000 Control of Damaged Merchan- dise 2,000,000 Valuable Papers & Records 1,000,000 Leasehold Interest 500,000 Accounts Receivable 1,000,000 Transit 250,000 DEDUCTIBLES: Per Occurrence in store and other property locations 100,000 In Transit 25,000 One Day equivalent as respects time element for Boiler & Machinery 5% separate PD/TE with respect earth movement at locations in Alaska, California, Hawaii, and Puerto Rico. Subject to a $250,000 minimum. 5% separate PD/TE with respect to direct action of Wind including any substance driven by Wind and/or Flood at locations in Florida subject to a $100,000 minimum. VALUATION: All Real and Personal Property- Replacement Cost Stock-Net Selling Price Time Element - Actual Loss Sustained 2 SCHEDULE OF INSURANCE As of June 15, 1995 THE GRAND UNION COMPANY ACCT. MANAGER - B.N. WILLIAMS COVERAGE LIMITS DEDUCTIBLES INSURANCE EFF. DATE ESTIMATED COMPANY, EXP. DATE ANNUAL POLICY NO. % OF PREMIUM PARTICIPATION COINSURANCE: NIL FORM: FM3000 Form and Endorsements TERRITORY: United States, Canada and Puerto Rico CONDITIONS: - Loss is payable to insured or their order. - 60 days cancellation by com- pany except 10 days cancella- tion for non payment of pre- mium. PREMIUM: Subject to adjustment
3 SCHEDULE OF INSURANCE As of June 15, 1995
CASUALTY COMPANY POLICY NO. COVERAGE AMOUNT ATTACH EXPIRE PREMIUM National Union GL3197024 Commercial Gener- $1,750,000/ 3/1/94 3/1/96 $554,560 Best's Rating al Liability $10,000,000 A+XV XS $250,000 Deductible XS $250,000 SIR National Union CA1431746 Automobile Lia- $2,000,000 CSL 3/1/94 3/1/96 $2,191,450 Best's Rating bility A+XV National Union WC3171374 Workers' Compen- $2,000,000 3/1/94 3/1/96 Included above Best's Rating (CA) sation/Employers' E.L. in Auto Lia- A+XV WC3171372 Liability bility (All States) National Union GL3197025 Employers Liabil- $2,000,000 3/1/94 3/1/96 Included above Best's Rating ity-Stop Gap Lia- E.L. in Auto Lia- A+XV bility bility Ins. Co. of WC3171373 Workers' Compen- $2,000,000 3/1/94 3/1/96 Included above State of PA sation/Employers' E.L. in Auto Lia- Best's Rating Liability bility A+XV PRIMARY COVER- AGE FEES Westchester 524-215427-4 Lead Umbrella $20,000,000 3/1/94 3/1/96 $212,500 Fire Ins. Co. Liability XS Primary Best's Rating A-XIV $30,000,000 XS $20,000,000 Royal Best's Rating RHA007586 Excess Umbrella $5,000,000 3/1/94 3/1/96 $13,750 A-XI Liability part of Chubb Ins. Co. 7906-34-01 Excess Umbrella $25,000,000 3/1/94 3/1/96 $68,750 of NJ Liability part of Best's Rating A+XIII
4 SCHEDULE OF INSURANCE AS OF JUNE 15, 1995 THE GRAND UNION COMPANY CRIME Federal Insurance Company Policy No. 80589213-H Best's Rating A+ POLICY PERIOD 8/1/94 - 8/1/95 PREMIUM $97,000 COVERAGES Employee Theft Premises Robbery and Burglary Transit Theft Forgery Computer Theft and Funds Transfer Computer Theft and Merchandise Credit Card Forgery Money Order and Counterfeit Currency LIMITS Per occurrence $10,000,000 Except Credit Card Forgery $ 1,000,000 DEDUCTIBLES Money and Securities $ 250,000 Other Property 250,000 Credit Card Forgery Nil Money Order, Counterfeit Currency 100 Employee Benefit Plan Nil TERMINATION 60 Day Notice 5 SCHEDULE IX TO CREDIT AGREEMENT LIENS Liens evidenced by filings permitted by Annex A to the Borrower Security Agreement and Annex A to the Subsidiary Security Agreement. SCHEDULE X TO CREDIT AGREEMENT EXISTING INVESTMENTS (1)
MISCELLANEOUS DEPOSITS AMOUNT Security Deposit #1971 $ 27,666.66 McDonald-Douglas (MDFC) Peekskill $ 100,000.00 GKG Pharmacy $ 250,000.00 McDonald-Douglas (MDFC) All Holding GU w/Peekskill $ 47,424.00 Bartlett, Pontiff, Stewart and Rhodes, Trust Account $ 35,000.00 Paid Prescriptions $ 80,137.55 Department of Agriculture (PACA License)(2) $ 750,000.00 ------------- Total $1,290,228.21 ------------- ------------- ____________________ 1 As of April 29, 1995. To be updated as of the Effective Date by the Borrower. 2 As of May 30, 1995.
1 SCHEDULE X Page 2
MORTGAGES AND NOTES RECEIVABLE(1) AMOUNT Myron Hunt $ 150,000.00 Burlington Coat $ 604,999.82 Hillside K (PSK) $ 144,220.60 Bonfeld Inc. $ 43,372.56 Wchster (SME) $ 269,608.31 DiCicco of NYC $ 263,388.00 Hansfood $ 83,416.97 Westfall Town Ctr. $ 503,723.38 289 Corp. $ 175,965.23 Bhagyalaxmi N. Arlington $ 93,434.60 Friends of Elmendorph $ 11,433.57 Village Market $ 84,139.12 James Holmes and Myra Holmes $ 19,500.00 ------------- $2,447,202.16 ------------- ------------- ADVANCES, LOANS AND CONTRIBUTIONS TO SUBSIDIARIES Merchandising Services, Inc. 0.00 Total 0.00 ____________________ 1 As of May 27, 1995.
2 SCHEDULE XI TO CREDIT AGREEMENT STORE DISPOSITIONS Farmingville, New York Fairfield, Connecticut Ossining, New York College Point, New York SCHEDULE XII TO CREDIT AGREEMENT FISCAL PERIODS 1st Period April 29, 1995 2nd Period May 27, 1995 3rd Period June 24, 1995 4th Period July 22, 1995 5th Period August 19, 1995 6th Period September 16, 1995 7th Period October 14, 1995 8th Period November 11, 1995 9th Period December 9, 1995 10th Period January 6, 1996 11th Period February 3, 1996 12th Period March 2, 1996 13th Period March 30, 1996 1st Period April 27, 1996 2nd Period May 25, 1996 3rd Period June 22, 1996 4th Period July 20, 1996 5th Period August 17, 1996 6th Period September 14, 1996 7th Period October 12, 1996 8th Period November 9, 1996 9th Period December 7, 1996 10th Period January 4, 1997 11th Period February 1, 1997 12th Period March 1, 1997 13th Period March 29, 1997 1st Period April 26, 1997 2nd Period May 24, 1997 3rd Period June 21, 1997 4th Period July 19, 1997 5th Period August 16, 1997 6th Period September 13, 1997 7th Period October 11, 1997 8th Period November 8, 1997 9th Period December 6, 1997 10th Period January 3, 1998 11th Period January 31, 1998 12th Period February 28, 1998 13th Period March 28, 1998 1st Period April 25, 1998 2nd Period May 23, 1998 3rd Period June 20, 1998 4th Period July 18, 1998 5th Period August 15, 1998 6th Period September 12, 1998 7th Period October 10, 1998 8th Period November 7, 1998 9th Period December 5, 1998 10th Period January 2, 1999 11th Period January 30, 1999 12th Period February 27, 1999 13th Period April 3, 1999 1st Period May 1, 1999 2nd Period May 29, 1999 3rd Period June 26, 1999 4th Period July 24, 1999 5th Period August 21, 1999 6th Period September 18, 1999 7th Period October 16, 1999 8th Period November 13, 1999 9th Period December 11, 1999 10th Period January 8, 2000 11th Period February 5, 2000 12th Period March 4, 2000 13th Period April 1, 2000 1st Period April 29, 2000 2nd Period May 27, 2000 3rd Period June 24, 2000 4th Period July 22, 2000 5th Period August 19, 2000 6th Period September 16, 2000 7th Period October 14, 2000 8th Period November 11, 2000 9th Period December 9, 2000 10th Period January 6, 2001 11th Period February 3, 2001 12th Period March 3, 2001 13th Period March 31, 2001 1st Period April 28, 2001 2nd Period May 26, 2001 3rd Period June 23, 2001 4th Period July 21, 2001 5th Period August 18, 2001 6th Period September 15, 2001 7th Period October 13, 2001 8th Period November 10, 2001 9th Period December 8, 2001 10th Period January 5, 2002 11th Period February 2, 2002 2 12th Period March 2, 2002 13th Period March 30, 2002 1st Period April 27, 2002 2nd Period May 25, 2002 3rd Period June 22, 2002 4th Period July 20, 2002 3 SCHEDULE XIII TO CREDIT AGREEMENT OPERATIONAL ADJUSTMENTS 1. Closing of the Waterford Distribution Center. SCHEDULE XIV TO CREDIT AGREEMENT CONFIRMATION ORDERS Findings of Fact, Conclusions of Law and Order Under 11 U.S.C. Section 1129 Confirming Second Amended Plan of Reorganiza- tion Proposed by The Grand Union Company, dated May 31, 1995. Minute Order Clarifying Findings of Fact, Conclusions of Law and Order Under 11 U.S.C. Section 1129 Confirming Second Amended Plan of Reorganization Proposed by The Grand Union Company, dated June 14, 1995. PENDING CONFIRMATION ORDER APPEALS/MOTIONS Appeal of the Order of the Bankruptcy Court entered on or about May 31, 1995, filed by William Kuntz, III, on June 9, 1995. Motion of Michelle Powell to Vacate Confirmation Order, to Vacate Bar Order, and to Permit Late Filing of Proof of Claim or Alternatively, Motion to Determine Whether the Claim Has Not Been Discharged, filed June 12, 1995. EXHIBIT A-1 TERM NOTE $________________ New York, New York June __, 1995 FOR VALUE RECEIVED, THE GRAND UNION COMPANY, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of _____________________________ (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Final Maturity Date (as defined in the Agreement referred to below) the principal sum of _____________ DOLLARS or, if less, the then unpaid principal amount of all Term Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.8 of the Agreement. This Note is one of the Term Notes referred to in the Amended and Restated Credit Agreement, dated as of June 15, 1995, among the Borrower, the various lending institutions from time to time party thereto (the "Banks") and Bankers Trust Company, as Agent (as from time to time in effect, the "Agreement") and is entitled to the benefits thereof. This Note is secured by the Security Documents (as defined in the Agreement) and is entitled to the benefits thereof and of the Agreement and the Subsidiary Guaranty (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Final Maturity Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. EXHIBIT A-1 Page 2 The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. THE GRAND UNION COMPANY By ________________________________ Title: EXHIBIT A-2 REVOLVING NOTE $ ---------------------- New York, New York June________, 1995 FOR VALUE RECEIVED, THE GRAND UNION COMPANY, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of _______________ (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the RL Expiry Date (as defined in the Agreement referred to below) the principal sum of _____________________ DOLLARS or, if less, the then unpaid principal amount of all Revolving Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.8 of the Agreement referred to below This note is one of the Revolving Notes referred to in the Amended and Restated Credit Agreement, dated as of June 15, 1995, among the Borrowed, the various lending institutions from time to time party thereto (including the Bank) and Bankers Trust Company, as Agent (as from time to time effect, the "Agreement") and is entitled to the benefits thereof. This Note is secured by the Security Documents (as defined in the Agreement) and is entitled to the benefits thereof and of the Agreement and the Subsidiary Guaranty (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the RL Expiry Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to EXHIBIT A-2 Page 2 be due and payable in the manner and with the effect provided in the Agreement. The Borrower hereby waives presentment on demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. THE GRAND UNION COMPANY By_____________________ Title: EXHIBIT A-3 SWINGLINE NOTE $__________ New York, New York June __, 1995 FOR VALUE RECEIVED, THE GRAND UNION COMPANY, a Delaware corporation (the "Borrower"), hereby promises to pay to the order of BANKERS TRUST COMPANY (the "Bank"), in lawful money of the United States of America in immediately available funds, at the office of Bankers Trust Company (the "Agent") located at One Bankers Trust Plaza, New York, New York 10006 on the Swingline Termination Date (as defined in the Agreement referred to below) the principal sum of ________________ or, if less, the then unpaid principal amount of all Swingline Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement. The Borrower promises also to pay interest on the unpaid principal amount hereof in like money at said office from the date hereof until paid at the rates and at the times provided in Section 1.8 of the Agreement. This Note is the Swingline Note referred to in the Amended and Restated Credit Agreement, dated as of June 15, 1995, among the Borrower, the various lending institutions from time to time party thereto (including the Bank) and Bankers Trust Company, as Agent (as from time to time in effect, the "Agreement") and is entitled to the benefits thereof. This Note is secured by the Security Documents (as defined in the Agreement) and is entitled to the benefits thereof and of the Agreement and the Subsidiary Guaranty (as defined in the Agreement). As provided in the Agreement, this Note is subject to voluntary prepayment and mandatory repayment prior to the Swingline Termination Date, in whole or in part. In case an Event of Default (as defined in the Agreement) shall occur and be continuing, the principal of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided in the Agreement. EXHIBIT A-3 Page 2 The Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. THE GRAND UNION COMPANY By _________________________________ Title: EX-10.12 14 EXHIBIT 10.12 Exhibit 10.12 SUBSIDIARY SECURITY AGREEMENT Dated as of June 15, 1995 TABLE OF CONTENTS Page ARTICLE I SECURITY INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . 3 1.1. GRANT OF SECURITY INTERESTS . . . . . . . . . . . . . . . . . . . 3 1.2. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.1. NECESSARY FILINGS . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2. NO LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.3. OTHER FINANCING STATEMENTS. . . . . . . . . . . . . . . . . . . . 6 2.4. CHIEF EXECUTIVE OFFICE; RECORDS . . . . . . . . . . . . . . . . . 6 2.5. LOCATION OF INVENTORY AND EQUIPMENT . . . . . . . . . . . . . . . 7 2.6. LOCATION OF VEHICLES. . . . . . . . . . . . . . . . . . . . . . . 8 2.7. RECOURSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.8. TRADE NAMES; CHANGE OF NAME . . . . . . . . . . . . . . . . . . . 9 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 10 3.2. MAINTENANCE OF RECORDS. . . . . . . . . . . . . . . . . . . . . . 11 3.3. DIRECTION TO ACCOUNT DEBTORS; CONTRACTING PARTIES; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.4. MODIFICATION OF TERMS; ETC. . . . . . . . . . . . . . . . . . . . 12 3.5. COLLECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.6. INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.7. FURTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS . . . . . . . . . . . . . . . 14 4.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 14 4.2. LICENSES AND ASSIGNMENTS. . . . . . . . . . . . . . . . . . . . . 15 4.3. INFRINGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 15 4.4. PRESERVATION OF MARKS . . . . . . . . . . . . . . . . . . . . . . 15 4.5. MAINTENANCE OF REGISTRATION . . . . . . . . . . . . . . . . . . . 16 4.6. FUTURE REGISTERED MARKS . . . . . . . . . . . . . . . . . . . . . 16 4.7. REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS. . . . . . . . . . . . . . . . . . . . . . 17 5.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 17 5.2. LICENSES AND ASSIGNMENTS. . . . . . . . . . . . . . . . . . . . . 18 5.3. INFRINGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 18 5.4. MAINTENANCE OF PATENTS AND COPYRIGHTS . . . . . . . . . . . . . . 19 5.5. PROSECUTION OF PATENT APPLICATION . . . . . . . . . . . . . . . . 19 5.6. OTHER PATENTS AND COPYRIGHTS. . . . . . . . . . . . . . . . . . . 19 5.7. REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL. . . . . . . . . . . . . . . 20 6.1. PROTECTION OF COLLATERAL AGENT'S SECURITY . . . . . . . . . . . . 20 6.2. WAREHOUSE RECEIPTS NON-NEGOTIABLE . . . . . . . . . . . . . . . . 21 6.3. FURTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 21 6.4. FINANCING STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE VII REMEDIES UPON OCCURRENCE OF SPECIFIED EVENTS. . . . . . . . . . 22 7.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 7.2. REMEDIES; DISPOSITION OF THE COLLATERAL . . . . . . . . . . . . . 24 7.3. WAIVER OF CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . 25 7.4. APPLICATION OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . 26 7.5. REMEDIES CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . . 29 7.6. DISCONTINUANCE OF PROCEEDINGS . . . . . . . . . . . . . . . . . . 30 ARTICLE VIII INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8.1. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 8.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE IX DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE X THE COLLATERAL AGENT. . . . . . . . . . . . . . . . . . . . . . . 40 10.1. APPOINTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 40 10.2. NATURE OF DUTIES . . . . . . . . . . . . . . . . . . . . . . . . 41 10.3. LACK OF RELIANCE ON THE COLLATERAL AGENT . . . . . . . . . . . . 42 10.4. CERTAIN RIGHTS OF THE COLLATERAL AGENT . . . . . . . . . . . . . 42 10.5. RELIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 10.6. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 43 10.7. THE COLLATERAL AGENT IN ITS INDIVIDUAL CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 10.8. HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 10.9. RESIGNATION BY THE COLLATERAL AGENT. . . . . . . . . . . . . . . 45 10.10. FEES AND EXPENSES OF COLLATERAL AGENT. . . . . . . . . . . . . . 46 (ii) ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 46 11.1. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 11.2. WAIVER; AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 47 11.3. OBLIGATIONS ABSOLUTE . . . . . . . . . . . . . . . . . . . . . . 48 11.4. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . 48 11.5. HEADINGS DESCRIPTIVE . . . . . . . . . . . . . . . . . . . . . . 49 11.6. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 49 11.7. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 49 11.8. ASSIGNORS' DUTIES. . . . . . . . . . . . . . . . . . . . . . . . 49 11.9. TERMINATION; RELEASE . . . . . . . . . . . . . . . . . . . . . . 49 11.10. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SCHEDULE A Assignors ANNEX A Schedule of Permitted Filings ANNEX B Schedule of Record Locations ANNEX C Schedule of Inventory and Equipment Locations ANNEX D Schedule of Vehicles Locations ANNEX E Schedule of Trade, Fictitious and Other Names ANNEX F Schedule of Marks ANNEX G Schedule of License Agreements and Assignments ANNEX H Schedule of Patents and Applications ANNEX I Schedule of Copyrights and Applications EXHIBIT 1 U.S. Trademark Security Agreement EXHIBIT 2 U.S. Patent Security Agreement EXHIBIT 3 U.S. Copyright Security Agreement (iii) SUBSIDIARY SECURITY AGREEMENT SUBSIDIARY SECURITY AGREEMENT (this "Agreement"), dated as of June 15, 1995, among the corporations listed on Schedule 1 hereto (individually, an "Assignor" and collectively, the "Assignors"), and BANKERS TRUST COMPANY, as Collateral Agent (the "Collateral Agent") for the benefit of (x) the Banks and the Agent from time to time party to the Credit Agreement hereinafter referred to (such Banks and the Agent the "Bank Creditors") and (y) any Bank that enters into an interest rate protection agreement (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements, collectively, the "Interest Rate Protection Agreements") guaranteed by the Assignors, even if any such Bank subsequently ceases to be a Bank under the Credit Agreement for any reason and for so long as any such Bank participates in the extension of any such Interest Rate Protection Agreements, and any subsequent assignee, (collectively, the "Interest Rate Protection Creditors" and, together with the Bank Creditors, the "Secured Creditors"). All capitalized terms used herein shall have the meanings provided in Article IX of this Agreement and, if not so defined herein, capitalized terms used herein and defined in the Credit Agreement shall be used herein as so defined. The schedules, annexes and exhibits hereto are incorporated herein by reference and this Agreement together with all schedules, annexes and exhibits hereto and any future filings of any of the exhibits hereto shall constitute the "Subsidiary Security Agreement" referred to in the Credit Agreement. W I T N E S S E T H : WHEREAS, The Grand Union Company (the "Company"), a Delaware corporation, and certain of the parties hereto entered into the Original Credit Agreement; WHEREAS, the Company, the various Banks from time to time party thereto, and Bankers Trust Company, as Agent (the "Agent") have agreed to amend and restate the Original Credit Agreement and have entered into the Amended and Page 2 Restated Credit Agreement, dated as of June 15, 1995, providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contemplated therein (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph, as the same may be amended, modified, extended, renewed, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring (including, but not limited to, any increase in the amount borrowed) all or any portion of the Indebtedness under such agreement or any successor agreements; WHEREAS, the Assignors may guarantee Interest Rate Protection Agreements entered into by the Company with one or more Interest Rate Protection Creditors in compliance with the provisions of the Credit Agreement; WHEREAS, the Assignors have guaranteed the obligations of the Company under the Credit Agreement and under one or more Interest Rate Protection Agreements (the "Subsidiary Guaranty"); WHEREAS, the obligations of the Company under the Credit Agreement and under one or more Interest Rate Protection Agreements and the obligations of the Assignors in respect of the Subsidiary Guaranty referred to above shall be secured hereunder as provided herein; WHEREAS, the Company and the Assignors share an identity of interests as members of a consolidated group of companies engaged in substantially similar businesses, the Company provides centralized financial, accounting and management services to each of the Assignors and the making of the loans and the issuance of the letters of credit under the Credit Agreement will facilitate expansion of, and enhance the overall financial strength and stability of the Company's corporate group; WHEREAS, it is a condition precedent to each of the above-described extensions of credit to the Company that the Assignors shall have executed and delivered to the Collateral Agent this Agreement; WHEREAS, the Assignors desire to execute and deliver this Agreement to satisfy the conditions described in the preceding paragraph; Page 3 NOW, THEREFORE, in consideration of the extensions of credit made and to be made to the Company and other benefits accruing to the Assignors, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties to the Collateral Agent for the benefit of the Secured Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditors as follows: ARTICLE I SECURITY INTERESTS 1.1. GRANT OF SECURITY INTERESTS. (a) As security for the full and prompt payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all of the Obligations, each Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest of first priority (subject to Liens evidenced by Permitted Filings and other Liens permitted under Section 8.2 of the Credit Agreement and existing on the Effective Date) in, all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired (collectively, the "Collateral"): (i) each and every Receivable, (ii) all Contracts, together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) the Cash Collateral Account established for the Assignors and all monies, securities and instruments deposited or required to be deposited in such Cash Collateral Account, (v) all Equipment, including, without limitation, all of the Vehicles (and the certificates of title and other registrations relating thereto), (vi) all Marks and the goodwill of the business of such Assignor symbolized by the Marks, (vii) all Patents and Copyrights, (viii) all computer programs of such Assignor and all intellectual property rights therein and all other proprietary information of such Assignor, including, but not limited to, trade secrets, (ix) all other Goods, General Intangibles, Chattel Paper, Documents and Instruments, (x) any and all books and records relating to any of the property described in the foregoing clauses (i) through (ix) and (xi) all Proceeds and products of any and all Collateral Page 4 referred to in clauses (i) through (x) above and this clause (xi); PROVIDED, HOWEVER, that to the extent that any Contract may be terminated (in accordance with the terms thereof after giving effect to any applicable laws) in the event of granting of a security interest therein, or in the event the granting of a security interest in any Contract shall violate applicable law, then the security interest granted hereby shall be limited to the extent necessary so that such Contract may not be so terminated or no such violation of law shall exist, as the case may be; PROVIDED, FURTHER, that upon the termination or expiration of such prohibition or restriction, such Contract shall become subject to the security deemed to be Collateral. (b) The security interests of the Collateral Agent under this Agreement extend to all Collateral now existing or hereafter acquired, of the kind which is the subject of this Agreement which any Assignor may acquire at any time during the continuation of this Agreement. (c) If (i) a Bankruptcy Default or Notified Acceleration Event has occurred and is continuing or (ii) any other Event of Default or Acceleration Event has occurred and is continuing, but in the case of this clause (ii) only if, and to the extent that, the Collateral Agent (acting at the direction of the Required Banks) has given notice to the Assignors to take the actions specified below in this sentence, then in either such case all cash Proceeds of, and cash payments received in respect of, Collateral shall be paid by the Assignors (or the respective payor) directly to the Cash Collateral Account or as otherwise directed by the Collateral Agent. At any time while the circumstances described in the immediately preceding sentence do not exist, all cash payments received in respect of the Collateral (including, without limitation, all payments received in respect of Receivables and Contracts, or in payment for sales of Inventory, but excluding cash Proceeds of sales of other Collateral unless the respective sale and release of Collateral is permitted pursuant to this Agreement and the Credit Agreement) shall be paid to the Assignors for application in accordance with (and to the extent provided by) the Credit Agreement. 1.2. POWER OF ATTORNEY. Each Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Page 5 Default (in the name of such Assignor or otherwise), in the Collateral Agent's discretion, to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1. NECESSARY FILINGS. All filings, registrations and recordings, including filings in the United States Patent and Trademark Office or the United States Copyright Office or similar agencies in any State thereof or political subdivision thereof necessary or appropriate to create, preserve, protect and perfect the security interest granted by each Assignor to the Collateral Agent hereby in respect of the Collateral have been or shall have been accomplished in a timely manner and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral constitutes or shall constitute a perfected security interest therein (as provided in the Uniform Commercial Code), which is superior and prior to the rights of all other Persons therein and subject to no other Liens (except that the Collateral may be subject to the security interests evidenced by the financing statements disclosed on Annex A hereto, but only to the respective date, if any, set forth on Annex A (the "Permitted Filings") and to any other Liens permitted under Section 8.2 of the Credit Agreement and existing on the Effective Date) and is or shall be entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests. 2.2. NO LIENS. Each Assignor is, and as to Collateral acquired by it from time to time after the date hereof, each Assignor will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Liens created hereby, Liens permitted under Section 8.2 of the Page 6 Credit Agreement or evidenced by the Permitted Filings), and such Assignor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3. OTHER FINANCING STATEMENTS. As of the date hereof, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) on file or of record in any relevant jurisdiction covering or purporting to cover any interest of any kind in the Collateral except as disclosed in Annex A hereto and so long as the Termination Date has not occurred or any of the Credit Agreement Obligations remain unpaid, no Assignor will execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by such Assignor and to the extent permitted to be granted by such Assignor pursuant to Section 8.2 of the Credit Agreement. 2.4. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of each Assignor is located at 201 Willowbrook Boulevard, Wayne, New Jersey 07470- 6799. No Assignor will move its chief executive office except to such new location as such Assignor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights of each Assignor and the only original books of account and records of such Assignor relating thereto are, and will continue to be, kept at such chief executive office, at such other locations shown on Annex B hereto or at such new locations as such Assignor may establish in accordance with the last sentence of this Section 2.4, PROVIDED that, so long as (x) true and correct copies of all documents evidencing such Receivables and Contract Rights and copies of such books and records are kept at such chief executive office or at such other locations shown on Annex B hereto, and (y) the failure to maintain any original copies of the foregoing at such locations could not have an adverse effect upon the validity, perfection or priority of any security interest granted hereunder, each Assignor shall be permitted to keep original copies of the foregoing at other locations to be Page 7 determined in a manner consistent with its past practices. All Receivables and Contract Rights of each Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above. No Assignor shall establish new locations for such offices until (i) it shall have given to the Collateral Agent not less than 45 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. 2.5. LOCATION OF INVENTORY AND EQUIPMENT. All Inventory and Equipment (other than Vehicles) held on the date hereof by each Assignor is located at the address shown for such Assignor on Annex C hereto. Each Assignor agrees that all Inventory and all Equipment (other than Vehicles) now held or subsequently acquired by it shall be kept at (or shall be in transport to) the location shown on Annex C hereto, or such new location as such Assignor may establish in accordance with the last sentence of this Section 2.5. Each Assignor may establish a new location for Inventory and Equipment (other than Vehicles) only if (i) it shall give to the Collateral Agent written notice of such new location as promptly as practicable and in no event later than 60 days after the establishment thereof, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, as promptly as practicable and in no event later than 75 days after the establishment thereof, it shall have taken all action to maintain the security interest of the Page 8 Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. 2.6. LOCATION OF VEHICLES. (a) All vehicles owned on the date hereof by each Assignor are of the type and quantity, bear the certificate of title numbers and are registered in the jurisdictions listed for such Assignor on Annex D hereto (the "Vehicles"). Each Assignor agrees that after acquiring any Vehicle subsequent to the date hereof, it shall (i) give the Collateral Agent written notice of such acquisition in accordance with Section 11.9(c) hereof and provide the type(s), quantity, certificate of title number(s) and jurisdiction(s) of registration of each such Vehicle and provide such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to each such subsequently acquired Vehicle, take such action reasonably satisfactory to the Collateral Agent as is necessary or appropriate to create, preserve, protect and perfect the security interest of the Collateral Agent in such Vehicle intended to be granted hereby. Each Assignor further agrees (except as otherwise provided in Section 11.9(c) hereof) that it shall (i) not remove any Vehicle now owned or hereafter acquired from (x) with respect to Vehicles held on the date hereof, the jurisdiction in which such Vehicle is registered on the date hereof or (y) with respect to Vehicles acquired after the date hereof, the jurisdiction in which such Vehicle is registered at the time of its acquisition, in each case, to the extent the removal of such Vehicle from such jurisdiction would require the Collateral Agent to take any action whatsoever with respect to such Vehicle in order to maintain the security interest of the Collateral Agent in the Vehicle so removed at all times fully perfected and in full force and effect, unless such Assignor shall have given not less than 30 days' prior written notice to the Collateral Agent of the requirement to take any such action Page 9 and (ii) take such action reasonably satisfactory to the Collateral Agent as is necessary or appropriate to maintain the security interest of the Collateral Agent in the Vehicle so removed at all times fully perfected and in full force and effect. 2.7. RECOURSE. This Agreement is made with full recourse to each Assignor and pursuant to and upon all the warranties, representations, covenants, and agreements on the part of each Assignor contained herein, in the other Credit Documents, in the Interest Rate Protection Agreements and otherwise in writing in connection herewith or therewith. 2.8. TRADE NAMES; CHANGE OF NAME. No Assignor has or operates in any jurisdiction under, or in the preceding 12 months has not had or has not operated in any jurisdiction under, any trade names, fictitious names or other names (including, without limitation, any names of divisions or operations) except its legal name and such other trade, fictitious or other names as are listed for such Assignor on Annex E hereto. No Assignor shall change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed for such Assignor on Annex E hereto and new names (including, without limitation, any names of divisions or operations) established in accordance with the last sentence of this Section 2.8. No Assignor shall assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new name, it shall have taken all action to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions (including, without limitation, the payment of all filing fees and taxes, if any, payable in connection with such filings) have been Page 10 taken, in order to perfect (and maintain the perfection and priority of) the security interest granted hereby. ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS 3.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. As of the time when each of its Receivables arises, each Assignor shall be deemed to have represented and warranted that (x) such Receivable, and all records, papers and documents relating thereto (if any) are genuine and in all respects what they purport to be, and that all papers and documents (if any) relating thereto (i) will represent the obligation of the account debtor evidencing indebtedness unpaid and owed by the respective account debtor arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes), and (iii) will be in compliance and will conform in all material respects with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction and (y) there is no fact or circumstance known to such Assignor which would suggest that any such Receivable (i) will not represent the genuine, legal, valid and binding obligation of such account debtor or (ii) will not evidence true and valid obligations, enforceable in accordance with their respective terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 3.2. MAINTENANCE OF RECORDS. Each Assignor will keep and maintain at its own cost and expense satisfactory and complete records of its Receivables and Contracts, including, but not limited to, the originals of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and each Assignor will make the same available on such Assignor's premises to the Collateral Page 11 Agent for inspection, at such Assignor's own cost and expense, at any and all reasonable times upon demand. Upon the occurrence and during the continuance of any of the conditions specified in the first sentence of Section 1.1(c) of this Agreement, and upon the request of the Collateral Agent, each Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor). If the Collateral Agent so directs, each Assignor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, the Receivables and the Contracts, as well as books, records and documents of such Assignor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 3.3. DIRECTION TO ACCOUNT DEBTORS; CONTRACTING PARTIES; ETC. Upon the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c) of this Agreement, and if the Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account established for such Assignor, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in preceding clause (x) and (z) that the Collateral Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent that such Assignor might have done. Without notice to or assent by such Assignor, the Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses (including attorneys' fees) of collection, whether incurred by such Assignor or the Collateral Agent, shall be borne by such Assignor. 3.4. MODIFICATION OF TERMS; ETC. Each Assignor shall not rescind or cancel any indebtedness evidenced by Page 12 any Receivable or under any Contract, or modify any term thereof or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent, except as permitted by Section 3.5 and except, so long as none of the conditions described in the first sentence of Section 1.1(c) shall occur and be continuing, such modifications, adjustments and sales effected by each Assignor in the ordinary course of business consistent with past practice. Each Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.5. COLLECTION. Each Assignor shall endeavor to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, at any time when payments in respect of Receivables and Contracts may be made to such Assignor in accordance with the second sentence of Section 1.1(c) of this Agreement, such Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Assignor finds appropriate in accordance with sound business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services. The reasonable costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by such Assignor or the Collateral Agent, shall be borne by such Assignor. 3.6. INSTRUMENTS. If any Assignor owns or acquires any Instrument constituting Collateral in an amount equal to or greater than $1,000,000, such Assignor will within ten days notify the Collateral Agent thereof, and Page 13 upon request by the Collateral Agent will promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. Upon the occurrence and during the continuance of any of the conditions described in the first sentence of Section 1.1(c) of this Agreement, if any of the Receivables becomes evidenced by an Instrument, such Assignor will within 10 days notify the Collateral Agent thereof, and upon written request by the Collateral Agent promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. 3.7. FURTHER ACTIONS. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS 4.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor represents and warrants that it is the true and lawful exclusive owner of the Marks listed for such Assignor on Annex F hereto and that Annex F includes all the Marks that are registered or applied for and all material unregistered Marks that such Assignor now owns in connection with its business. Each Assignor represents and warrants that it is the sole and exclusive beneficial owner of each Mark. Each Assignor represents and warrants that it owns or is licensed to use all Marks that it uses. Each Assignor represents and warrants that it is the owner of record of all registrations and applications listed for such Assignor on Annex E hereto and that said registrations are valid, subsisting, have not been cancelled and that such Assignor is not aware of any third-party claim pending, threatened, or supportable that any of said registrations is invalid or unenforceable. Each Assignor Page 14 represents and warrants that all registration and maintenance fees that have become due and payable in respect of any Mark have been paid and, to the best knowledge of such Assignor, no act has been done or omitted to be done by such Assignor to entitle any governmental authority to cancel, forfeit, modify or hold abandoned any of the Marks. Each Assignor represents and warrants that there are no pending or threatened suits, claims, oppositions, or other challenges by any person against the ownership by such Assignor of any of the Marks, and the conduct of the business of such Assignor and its use of any Mark in connection therewith does not infringe upon or otherwise violate any right of any third party. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. 4.2. LICENSES AND ASSIGNMENTS. Each Assignor represents and warrants that Annex G sets forth a complete and accurate list of all license agreements and other agreements pursuant to which such Assignor has granted to any third party any right in and to any of the Marks. Other than the license agreements listed for each Assignor on Annex G hereto and any extensions or renewals thereof, such Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent. 4.3. INFRINGEMENTS. Each Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who, in any material respect, may be infringing or otherwise violating any of such Assignor's rights in and to any Mark, or with respect to any party claiming that such Assignor's use of any Mark violates or infringes upon in any material respect any right of that party. Each Assignor further agrees, unless otherwise agreed by the Collateral Agent, diligently to prosecute any Page 15 Person infringing, in any material respect, any material Mark. 4.4. PRESERVATION OF MARKS. Each Assignor agrees to use each of its material Marks in interstate or foreign commerce in each and every trademark class of goods and/or services in which such Mark is currently used during the time in which this Agreement is in effect, sufficiently to preserve such Marks as trademarks or service marks under the laws of the United States, any State thereof or any political subdivision thereof. Each Assignor agrees that (i) it shall maintain at a level at least in accordance with past practice the quality of products and services offered under the Marks, (ii) it shall employ such Marks as are registered with the notice of Federal or other registration as the case may be, (iii) it shall not use any Mark or otherwise operate its business in violation of any third party's rights, and (iv) it shall not (and shall not permit any licensee or sublicensee to) do any act or omit to do any act that could result in cancellation, forfeiture, modification or abandonment of any Mark. 4.5. MAINTENANCE OF REGISTRATION. Each Assignor shall, at its own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. Sections 1051 ET SEQ. to maintain trademark registration (or, with respect to applications, to make best efforts to have a registration issue therefrom), including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its material Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith and shall not abandon any registration or application for any Mark prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent. Each Assignor agrees to notify the Collateral Agent six (6) months prior to the dates on which the affidavits of use or the applications for renewal registration are due with respect to any material Mark, that the affidavits of use or the renewal has been filed with the appropriate agency and is being processed thereby. 4.6. FUTURE REGISTERED MARKS. If any Mark registration issues hereafter to any Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office or any similar Page 16 office or agency of any jurisdiction, or if any Assignor acquires any Marks within thirty (30) days of receipt of such certificate or the effectiveness of the acquisition thereof, as appropriate, such Assignor shall deliver a copy of such certificate or sufficient documents to evidence such acquisition, and a grant of security in such mark to the Collateral Agent, confirming the grant thereof hereunder substantially in the form of Exhibit 1 hereto or, for registrations and applications for registration of any Mark in any foreign jurisdiction, such form as is acceptable to the Collateral Agent for use in such jurisdiction. 4.7. REMEDIES. If there shall occur and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, the Collateral Agent may, by written notice to any Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of such Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of such Assignor in connection with which the Marks have been used; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, change such Assignor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. Page 17 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS AND COPYRIGHTS 5.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor represents and warrants that it is the true and lawful exclusive owner of all rights in the Patents listed for such Assignor on Annex H hereto and in the Copyrights listed for such Assignor on Annex I hereto, that said Patents include all the Patents that such Assignor now owns and that said Copyrights constitute all the Copyrights registered with the United States Copyright Office or any similar office or agency of any jurisdiction and applications for copyright registration that such Assignor now owns and all material unregistered copyrights, including without limitation copyrights in computer software, that such Assignor now owns. Each Assignor represents and warrants that it owns or is licensed to practice under all Patents and Copyrights that it now uses or practices under. Each Assignor represents and warrants that all registration and maintenance fees that have become due and payable in respect of any Patent or Copyright have been paid and no act has been done or omitted to be done by such Assignor to impair or dedicate to the public, or to otherwise entitle any governmental authority to cancel, forfeit, modify or hold abandoned any of the Patents or Copyrights. Each Assignor represents and warrants that there are no pending or threatened suits, claims, oppositions, or other challenges by any person against the ownership by such Assignor of any of the Patents or Copyrights, and the conduct of the present or contemplated business of such Assignor and its use of any Patent or Copyright in connection therewith does not infringe upon or otherwise violate any right of any third party. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, any document which may be required by the United States Patent and Trademark Office or the United States Copyright Office in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and record the same. Page 18 5.2. LICENSES AND ASSIGNMENTS. Each Assignor represents and warrants that Annex G sets forth a complete and accurate list of all license agreements and other agreements pursuant to which such Assignor has granted to any third party any right in and to any of the Patents or Copyrights. Other than the license agreements listed for each Assignor on Annex G hereto and any extensions or renewals thereof, such Assignor hereby agrees not to divest itself of any right under any Patent or Copyright absent prior written approval of the Collateral Agent. 5.3. INFRINGEMENTS. Each Assignor agrees that it shall not use its Patents or Copyrights or otherwise operate its business in violation of any third party's rights. Each Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to such Assignor with respect to any material infringement or other material violation of such Assignor's rights in any Patent or Copyright, or with respect to any claim that practice of any Patent or Copyright materially violates any right of any party. Each Assignor further agrees, absent direction of the Collateral Agent to the contrary, diligently to prosecute any Person infringing, in any material respect, any Patent or Copyright. 5.4. MAINTENANCE OF PATENTS AND COPYRIGHTS. At its own expense, each Assignor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. Section 41 to maintain in force rights under each Patent. Each Assignor agrees that it shall not (and shall not permit any licensee or sublicensee to) do or omit any act that could result in the impairment, cancellation, forfeiture, modification, abandonment, or dedication to the public of any Patent or Copyright. 5.5. PROSECUTION OF PATENT APPLICATION. At its own expense, each Assignor shall diligently prosecute all applications for Patents listed for such Assignor on Annex H hereto and all applications for Copyrights registrations listed in Annex I hereto and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent. 5.6. OTHER PATENTS AND COPYRIGHTS. Within 30 days of acquisition, issuance or registration of a Patent Page 19 or Copyright, or of filing of an application for a United States Patent or Copyright, such Assignor shall deliver to the Collateral Agent a copy of said Patent or Copyright or such application, as the case may be, with a grant of security as to such Patent or Copyright, as the case may be, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially in the form of Exhibit 2 hereto (for Patents) or Exhibit 3 hereto (for Copyrights), as appropriate, or, for any Patents and Copyright registrations and applications for the foregoing in any foreign jurisdiction, such form as is acceptable to the Collateral Agent for use in such jurisdiction. 5.7. REMEDIES. If there shall occur and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, the Collateral Agent may by written notice to any Assignor, take any or all of the following actions: (i) declare the entire right, title, and interest of such Assignor in each of the Patents and Copyrights vested, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from practicing the Patents and Copyrights directly or indirectly, and such Assignor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1. PROTECTION OF COLLATERAL AGENT'S SECURITY. Each Assignor will do nothing to impair the rights of the Collateral Agent in the Collateral. Each Assignor will at all times keep its Inventory and Equipment (including, without limitation, the Vehicles) insured in favor of the Page 20 Collateral Agent, at such Assignor's own expense to the extent and in the manner provided in the Credit Agreement; all policies or certificates (or certified copies thereof) with respect to such insurance (and any other insurance maintained by such Assignor) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee), (ii) shall state that such insurance policies shall not be cancelled or revised without 30 days' prior written notice thereof by the insurer to the Collateral Agent (but only 10 days' prior written notice of cancellation for failure to make payments under such policies), (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors and (iv) shall be deposited with the Collateral Agent. If any Assignor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if any Assignor shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and such Assignor agrees to reimburse the Collateral Agent for all costs and expenses of procuring such insurance. The Collateral Agent may apply any proceeds of such insurance in accordance with Section 7.4. Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor. 6.2. WAREHOUSE RECEIPTS NON-NEGOTIABLE. Each Assignor agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law). 6.3. FURTHER ACTIONS. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of Page 21 warehouse receipts, bills of lading, documents of title (including, without limitation, original certificates of title, and other registration with respect to the Vehicles), vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 6.4. FINANCING STATEMENTS. Each Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. Each Assignor will pay any applicable filing fees, recordation taxes and related expenses. Each Assignor authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor where permitted by law. ARTICLE VII REMEDIES UPON OCCURRENCE OF SPECIFIED EVENTS 7.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT. Each Assignor agrees that, if there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event of Default or Acceleration Event, but in the case of this clause (ii) only to the extent the Required Banks have so directed, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and may also: Page 22 (a) personally, or by agents or attorneys, immediately retake possession of the Collateral or any part thereof, from each Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Assignor's premises or, to the extent that any Assignor has a right to consent thereto, such other Person's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; and (b) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent and may exercise any and all remedies of such Assignor in respect of such Collateral; and (c) withdraw all monies, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4; and (d) sell, assign or otherwise liquidate, or direct each Assignor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; and (e) take possession of the Collateral or any part thereof, by directing each Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense: (i) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, and (ii) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2, and Page 23 (iii) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and (f) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine; it being understood that each Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by such Assignor of said obligation. 7.2. REMEDIES; DISPOSITION OF THE COLLATERAL. Any Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' Page 24 written notice to such Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of such Assignor or any nominee of such Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to such Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the City of New York. To the extent permitted by any such requirement of law, the Collateral Agent and the Secured Creditors may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to such Assignor. In the payment of the purchase price of the Collateral, the purchaser shall be entitled to have credit on account of the purchase price thereof of amounts owing to such purchaser on account of any of the Obligations which would be payable to it in accordance with the terms and provisions of the Credit Agreement, and any such purchaser may deliver notes, claims for interest, or claims for other payment with respect to such Obligations in lieu of cash up to the amount which would, upon distribution of the net proceeds of such sale, be payable thereon. Such notes, if the amount payable hereunder shall be less than the amount due thereon, shall be returned to the holder thereof after being appropriately stamped to show partial payment. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to such Assignor as hereinabove specified, the Collateral Agent need give such Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. Such Assignor agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make such sale or sales of all or any portion of the Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at such Assignor's expense. 7.3. WAIVER OF CLAIMS. Except as otherwise provided in this Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL Page 25 PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each Assignor hereby further waives, to the extent permitted by law: (a) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (b) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (c) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of each Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against each Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Assignor. 7.4. APPLICATION OF PROCEEDS. (a) All moneys collected by the Collateral Agent (or, to the extent a Mortgage to which the Borrower is a party requires proceeds of Collateral under such agreement to be applied in accordance with the provisions of this Agreement, the Mortgagee under such other agreement) upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied, subject to the following clause (b), as follows: Page 26 (i) first, to the payment of all amounts owing the Collateral Agent of the type described in clauses (iv) and (v) of the definition of "Obligations"; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations (as defined below) shall be paid to the Secured Creditors as provided in Section 7.4(f), with each Secured Creditor receiving an amount equal to such outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share (as defined below) of the amount remaining to be distributed; (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations (as defined below) shall be paid to the Secured Creditors as provided in Section 7.4(f), with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), inclusive, and following the termination of this Agreement pursuant to Section 11.9(a) hereof, to the Assignors or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement (w) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (x) "Primary Obligations" shall mean (i) in the case of the Credit Agreement Obligations, all principal of, and interest on, all Loans under the Credit Agreement, all Unpaid Drawings theretofore made (together with all interest accrued thereon), and the aggregate Stated Amounts Page 27 of all Letters of Credit issued (or deemed issued) under the Credit Agreement, and all regularly accruing fees owing by the Assignor under the Credit Agreement, (ii) in the case of the Guaranty Obligations, all amounts due under the Subsidiary Guaranty (other than indemnities, fees (including, without limitation, attorneys' fees) and similar obligations and liabilities) and (iii) in the case of the Interest Rate Protection Obligations, all amounts due under the Interest Rate Protection Agreements (other than indemnities, fees (including, without limitation, attorneys' fees) and similar obligations and liabilities) and (y) "Secondary Obligations" shall mean all Obligations other than Primary Obligations. (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall be applied (for purposes of making determinations under this Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) Each of the Secured Creditors agrees and acknowledges that if the Bank Creditors are to receive a distribution on account of undrawn amounts with respect to Letters of Credit issued (or deemed issued) under the Credit Agreement (which shall only occur after all outstanding Loans and Unpaid Drawings with respect to such Letters of Credit have been paid in full), such amounts shall be paid to the Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Bank Creditors, as cash security for the repayment of Obligations owing to the Bank Creditors as such. If any amounts are held as cash security pursuant to the Page 28 immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Bank Creditors after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be returned by the Agent to the Collateral Agent for distribution in accordance with Section 7.4(a) hereof. (e) All payments required to be made hereunder shall be made to the respective Representative of the Secured Creditors entitled to such payments. (f) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon the respective Representatives for a determination (which each Representative for any Secured Creditors and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Bank Creditors or the Interest Rate Protection Creditors, as the case may be. Unless it has actual knowledge (including by way of written notice from a Bank Creditor or an Interest Rate Protection Creditor) to the contrary, each Representative, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no Secondary Obligations are outstanding. Unless it has actual knowledge (including by way of written notice from an Interest Rate Protection Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection Agreements are in existence. (g) It is understood and agreed that the Assignors shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the sums referred to in clauses (i) through (iii), inclusive, of Section 7.4(a). 7.5. REMEDIES CUMULATIVE. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, the Interest Rate Protection Agreements or the other Credit Page 29 Documents or now or hereafter existing at law or in equity, or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on any Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6. DISCONTINUANCE OF PROCEEDINGS. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the Assignors, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. ARTICLE VIII INDEMNITY 8.1. INDEMNITY. (a) Each Assignor agrees to indemnify, reimburse and hold the Collateral Agent, each Secured Creditor and their respective successors, assigns, Page 30 employees, agents and servants (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any Interest Rate Protection Agreement, any other Credit Document or any other document executed in connection herewith and therewith or in any other way connected with the administration of the transactions contemplated hereby and thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), any contract claim or, to the maximum extent permitted under applicable law, the violation of the laws of any country, state or other governmental body or unit, or any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage); provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for expenses to the extent caused by the gross negligence or willful misconduct of such Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, such Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify such Assignor of any such assertion to which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a), each Assignor agrees to pay, or reimburse the Collateral Agent for (if the Collateral Agent shall have incurred fees, costs or expenses because such Assignor shall have failed to comply with its obligations under this Agreement or any other Credit Document, any and all fees, Page 31 costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) Without limiting the application of Section 8.1(a) or (b), each Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any misrepresentation by such Assignor in this Agreement, any other Credit Document, or in any writing contemplated by or made or delivered pursuant to or in connection with this Agreement or any other Credit Document. (d) If and to the extent that the obligations of any Assignor under this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of the Assignors contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all the Notes issued under the Credit Agreement, the termination of all Interest Rate Protection Agreements and the payment of all other Obligations and notwithstanding the discharge thereof. Page 32 ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. Except as otherwise defined herein, including in the recital paragraphs, capitalized terms used herein and defined in the Credit Agreement shall be used herein as so defined. "Acceleration Event" shall mean the acceleration prior to the stated final maturity, or the failure to pay at the stated final maturity, of Obligations representing principal of, or interest on, extensions of credit (including without limitation all Letter of Credit Outstandings) pursuant to the Credit Agreement or any Interest Rate Protection Agreement, PROVIDED that in each case, any such Acceleration Event shall cease to exist upon payment in full of the Obligations so accelerated or not paid. "Agent" shall have the meaning provided in the second WHEREAS clause of this Agreement. "Agreement" shall mean this Subsidiary Security Agreement including all schedules, annexes and exhibits hereto and any future filings of any of the exhibits hereto, in each case as the same may be modified, supplemented or amended from time to time in accordance with its terms (it being understood that the foregoing collectively constitute the "Subsidiary Security Agreement" referred to in the Credit Agreement). "Assignor" shall have the meaning provided in the first paragraph of this Agreement. "Bank Creditor" shall have the meaning provided in the first paragraph of this Agreement. "Bankruptcy Default" shall mean any Default or Event of Default with respect to the Company pursuant to Section 9.5 of the Credit Agreement. "Banks" shall have the meaning provided in the second WHEREAS clause of this Agreement. Page 33 "Cash Collateral Account" shall mean a non-interest bearing cash collateral account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditors. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Class" shall have the meaning provided in Section 11.2 of this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of any Assignor (including, without limitation, all rights to payment) under each Contract. "Contracts" shall mean all contracts, licenses and other agreements between any Assignor and one or more additional parties as such Contract may be amended, modified or supplemented from time to time. "Copyrights" shall mean any copyright now held or hereafter acquired by any Assignor and all registrations and applications to register the same in the United States Copyright Office or any similar office or agency of any other jurisdiction, and all renewals thereof, now held or hereafter acquired or made by such Assignor. "Credit Agreement" shall have the meaning provided in the second WHEREAS clause of this Agreement. "Credit Agreement Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. Page 34 "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, the Vehicles, all machinery, all manufacturing, distributing, selling, data processing and office equipment, all computers, all furniture, furnishings, movable trade fixtures and vehicles now or hereafter owned by any Assignor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Event of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement and shall in any event, without limitation, include any payment default on any of the Obligations after the expiration of any applicable grace period. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York and shall in any event include all of the Assignors' claims, rights, powers, privileges, authority, options, security interests, liens and remedies under any partnership agreement to which any Assignor is a party or with respect to any partnership of which any Assignor is a partner. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Indemnitee" shall have the meaning provided in Section 8.1 of this Agreement. "Instruments" shall mean all notes, drafts, stocks, bonds and debt and equity securities, whether or not certificated, and warrants, options, puts and other rights to acquire or otherwise relating to the same and all other writings which evidence a right to payment for money, including, in any event, and without limitation, all "instruments," "certificated securities" or "uncertificated Page 35 securities" each as defined the Uniform Commercial Code as in effect on the date hereof in the State of New York and all payments thereunder and instruments and other property from time to time delivered in respect thereof or in exchange therefor, together with all security pledged, assigned, hypothecated, granted or held to secure the foregoing. "Interest Rate Protection Agreements" shall have the meaning provided in the first paragraph of this Agreement. "Interest Rate Protection Creditors" shall have the meaning provided in the first paragraph of this Agreement. "Interest Rate Protection Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production -- from raw materials through work- in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor. "Marks" shall mean any trademarks and service marks now held or hereafter acquired by any Assignor, which are registered in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any foreign jurisdiction or any political subdivision thereof and any renewal or application for such trademarks and service marks now held or hereafter acquired or made by any Assignor, as well as any unregistered trademarks, service marks, logos, designs, trade names, trade dress, company names, business names, fictitious business names and other business identifiers or Page 36 similar indications of source or origin now held or hereafter acquired by any Assignor. "Notified Acceleration Event" shall mean any Acceleration Event with respect to which the Required Banks have given written notice to the Collateral Agent that a "Notified Acceleration Event" exists, PROVIDED that such written notice may only be given if such Acceleration Event is continuing and, PROVIDED FURTHER that any such Notified Acceleration Event shall cease to exist once there is no longer any Acceleration Event in existence. "Obligations" shall mean (i) (x) the principal of and interest on the Notes issued, and Loans made, under the Credit Agreement, and all reimbursement obligations and Unpaid Drawings with respect to the Letters of Credit under the Credit Agreement and (y) all other obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Company to the Bank Creditors now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the due performance and compliance by the Company with all of the terms, conditions and agreements contained in the Credit Agreement (all such principal, interest, obligations and liabilities, the "Credit Agreement Obligations"); (ii) all obligations and liabilities owing by the Company to the Interest Rate Protection Creditors under, or with respect to, any Interest Rate Protection Agreement, whether such Interest Rate Protection Agreement is now in existence or hereafter arising, and the due performance and compliance by the Company with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (ii), the "Interest Rate Protection Obligations"); (iii) all indebtedness, obligations, and liabilities of each Assignor to the Collateral Agent, the Agent and any Bank, arising under or in connection with the Subsidiary Guaranty (the "Guaranty Obligations"); (iv) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral; (v) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Assignors referred to in clauses (i), (ii), (iii) and (iv) after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or Page 37 of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (vi) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement. "Patents" shall mean any United States or foreign patent and all reissues, divisions, continuations, continuations-in-part, renewals and extensions thereof, now held or hereafter made or acquired by any Assignor, as well as any application for a United States patent now held or hereafter made or acquired by any Assignor, and all inventions and improvements described and claimed in any of the foregoing. "Permitted Filings" shall have the meaning provided in Section 2.1 of this Agreement. "Primary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this Agreement. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or any Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof, now or hereafter owned by each Assignor and, in any event, shall include, but shall not be limited to, all of such Assignor's rights to payment for goods sold or leased or services performed by such Assignor, whether Page 38 now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by each Assignor to secure the foregoing, (b) all of each Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto, and (h) all other writings related in any way to the foregoing. "Representative" shall mean (x) for the Bank Creditors, the Agent under the Credit Agreement and (y) for the Interest Rate Protection Creditors, the Representative for the Interest Rate Protection Creditors or, in the absence of such a Representative, the Interest Rate Protection Creditors. "Required Creditors" shall mean the requisite percentage of Secured Creditors which are needed to take actions with respect to a given Class of Obligations, I.E., whether the Required Banks or the Required Interest Rate Protection Creditors. "Required Interest Rate Protection Creditors" shall mean the holders of 51% of all Obligations outstanding from time to time under the Interest Rate Protection Agreements, determined in such reasonable fashion as is acceptable to the Collateral Agent. "Secondary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Secured Creditors" shall have the meaning provided in the first paragraph of this Agreement. Page 39 "Termination Date" shall have the meaning provided in Section 11.9 of this Agreement. "Vehicles" shall have the meaning provided in Section 2.6 of this Agreement. ARTICLE X THE COLLATERAL AGENT 10.1. APPOINTMENT. The Secured Creditors, by their acceptance of the benefits of this Agreement hereby irrevocably designate Bankers Trust Company, as Collateral Agent, to act as specified herein. Each Secured Creditor hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note, and by the acceptance of the benefits of this Agreement shall be deemed irrevocably to authorize, the Collateral Agent to take such action on its behalf under the provisions of this Agreement and any other instruments and agreements referred to herein and to exercise such powers and to perform such duties hereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder or thereunder by or through its authorized agents or employees. 10.2. NATURE OF DUTIES. (a) The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have by reason of this Agreement, any other Credit Document or any Interest Rate Protection Agreement a fiduciary relationship in respect of any Secured Creditor; and nothing in this Agreement, any other Credit Document or any Interest Rate Protection Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement except as expressly set forth herein. (b) The Collateral Agent shall not be responsible for insuring the Collateral or for the payment of taxes, charges or assessments or discharging of liens upon the Collateral or otherwise as to the maintenance of the Collateral. Page 40 (c) The Collateral Agent shall not be required to ascertain or inquire as to the performance by the Assignors of any of the covenants or agreements contained in this Agreement or any other Credit Document. (d) The Collateral Agent shall be under no obligation or duty to take any action under this Agreement or any Credit Document if taking such action (i) would subject the Collateral Agent to a tax in any jurisdiction where it is not then subject to a tax or (ii) would require the Collateral Agent to qualify to do business in any jurisdiction where it is not then so qualified, unless the Collateral Agent receives security or indemnity satisfactory to it against such tax (or equivalent liability), or any liability resulting from such qualification, in each case as results from the taking of such action under this Agreement or (iii) would subject the Collateral Agent to IN PERSONAM jurisdiction in any locations where it is not then so subject. (e) Notwithstanding any other provision of this Agreement, neither the Collateral Agent nor any of its officers, directors, employees, affiliates or agents shall, in its individual capacity, be personally liable for any action taken or omitted to be taken by it in accordance with this Agreement except for its own gross negligence or willful misconduct. 10.3. LACK OF RELIANCE ON THE COLLATERAL AGENT. Independently and without reliance upon the Collateral Agent, each Secured Creditor, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Company and the Assignors in connection with the making and the continuance of the Obligations and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Company and the Assignors, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the extension of any Obligations or the purchase of any Notes or at any time or times thereafter. The Collateral Agent shall not be responsible in any manner whatsoever to any Secured Creditor for the correctness of any recitals, statements, information, representations or warranties Page 41 herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or the security interests granted hereunder or the financial condition of the Company or the Assignors or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, or the financial condition of the Company or the Assignors, or the existence or possible existence of any Default or Event of Default. The Collateral Agent makes no representations as to the value or condition of the Collateral or any part thereof, or as to the title of any Assignor thereto or as to the security afforded by this Agreement. 10.4. CERTAIN RIGHTS OF THE COLLATERAL AGENT. (a) No Secured Creditor shall have the right to cause the Collateral Agent to take any action with respect to the Collateral, with only the Required Banks having the right to direct the Collateral Agent to take any such action. If the Collateral Agent shall request instructions from the Required Banks, with respect to any act or action (including failure to act) in connection with this Agreement, the Collateral Agent shall be entitled to refrain from such act or taking such action unless and until it shall have received instructions from the Required Banks and to the extent requested, appropriate indemnification in respect of actions to be taken, and the Collateral Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Banks. (b) The Collateral Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Secured Creditors, unless such Secured Creditors shall have offered to the Collateral Agent reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. 10.5. RELIANCE. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, Page 42 upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by the proper Person or entity, and, with respect to all legal matters pertaining to this Agreement and the other Security Documents and its duties thereunder and hereunder, upon advice of counsel selected by it. 10.6. INDEMNIFICATION. To the extent the Collateral Agent is not reimbursed and indemnified by the Assignors under this Agreement, the Secured Creditors will reimburse and indemnify the Collateral Agent, in proportion to their respective outstanding principal amounts (including, for this purpose, the stated amount of outstanding letters of credit and any unreimbursed drawings in respect of letters of credit, as well as any unpaid Primary Obligations in respect of Interest Rate Protection Agreements, as outstanding principal) of Obligations, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in performing its duties hereunder, or in any way relating to or arising out of its actions as Collateral Agent in respect of this Agreement except for those resulting solely from the Collateral Agent's own gross negligence or willful misconduct. The indemnities set forth in this Article X shall survive the repayment of all Obligations, with the respective indemnification at such time to be based upon the outstanding principal amounts (determined as described above) of Obligations at the time of the respective occurrence upon which the claim against the Collateral Agent is based or, if same is not reasonably determinable, based upon the outstanding principal amounts (determined as described above) of Obligations as in effect immediately prior to the termination of this Agreement. The indemnities set forth in this Article X are in addition to any indemnities provided by the Banks to the Collateral Agent pursuant to the Credit Agreement, with the effect being that the Banks shall be responsible for indemnifying the Collateral Agent to the extent the Collateral Agent does not receive payments pursuant to this Section 10.6 from the Secured Creditors (although in such event, and upon the payment in full of all such amounts owing to the Collateral Agent, the respective Banks who paid same shall be subrogated to the Page 43 rights of the Collateral Agent to receive payment from the Secured Creditors). 10.7. THE COLLATERAL AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its obligations as a lender under the Credit Agreement and any other Credit Documents to which the Collateral Agent is a party, and to act as agent under one or more of such Credit Documents, the Collateral Agent shall have the rights and powers specified therein and herein for a "Bank" or an "Agent", and may exercise the same rights and powers as though it were not performing the duties specified herein; and the terms "Banks," "holders of Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Collateral Agent in its individual capacity. The Collateral Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Assignors or any Affiliate or Subsidiary of any of the Assignors as if it were not performing the duties specified herein or in the other Credit Documents, and may accept fees and other consideration from the Assignors for services in connection with the other Credit Documents and otherwise without having to account for the same to the Secured Creditors. 10.8. HOLDERS. The Collateral Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Collateral Agent. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be final and conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or Note issued in exchange therefor. 10.9. RESIGNATION BY THE COLLATERAL AGENT. (a) The Collateral Agent may resign from the performance of all of its functions and duties under this Agreement at any time by giving 20 Business Days' prior written notice to the Assignors and the Secured Creditors. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clause (b), (c) or (d) below. (b) If a successor Collateral Agent shall not have been appointed within said 20 Business Day period by Page 44 the Required Banks, the Collateral Agent, with the consent of the Assignors, which consent shall not be unreasonably withheld, shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder or thereunder until such time, if any, as the Required Banks appoint a successor Collateral Agent as provided above. (c) If no successor Collateral Agent has been appointed pursuant to clause (b) above by the 20th Business Day after the date of such notice of resignation was given by the Collateral Agent, as a result of a failure by the Assignors to consent to the appointment of such a successor Collateral Agent, the Required Banks shall then appoint a successor Collateral Agent who shall serve as Collateral Agent hereunder or thereunder until such time, if any, as the Required Banks appoint a successor Collateral Agent as provided above. (d) If no successor Collateral Agent is appointed pursuant to clauses (b) and (c) above within said 20 Business Day period, the resignation of the Collateral Agent shall become effective and the duties of the Collateral Agent shall be performed by the Required Banks. 10.10. FEES AND EXPENSES OF COLLATERAL AGENT. (a) Each Assignor (by its execution and delivery hereof) hereby agrees that it shall pay to Bankers Trust Company as the original Collateral Agent, such fees as have been separately agreed to in writing with Bankers Trust Company for acting as Agent and as Collateral Agent hereunder. In the event a successor Collateral Agent is at any time appointed pursuant to the preceding Section 10.9, each Assignor hereby agrees to pay such successor Collateral Agent such fees for acting as such as would customarily be charged by such Collateral Agent for acting in such capacity in similar situations. (b) In addition, each Assignor agrees to pay all reasonable out-of- pocket costs and expenses of the Collateral Agent in connection with this Agreement and any actions taken by the Collateral Agent hereunder, and agrees to pay all costs and expenses of the Collateral Agent in connection with the enforcement of this Agreement and the documents and instruments referred to herein (including, Page 45 without limitation, reasonable fees and disbursements of counsel for the Collateral Agent). ARTICLE XI MISCELLANEOUS 11.1. NOTICES. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed as follows: (a) if to any Assignor, to the Company (on behalf of such Assignor), at: The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-6799 Attention: Robert Terrence Galvin (b) if to the Collateral Agent: Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Attention: Mary Kay Coyle (c) if to any Bank Creditor, either (x) to the Agent, at the address of the Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Interest Rate Protection Creditor, either (x) to the Representative for the Interest Rate Protection Creditors, at such address as such Representative may have provided to the Company (on behalf of the Assignors) and the Collateral Agent from time to time, or (y) directly to the Interest Rate Protection Creditors at such address as the Interest Rate Protection Creditors shall have specified in writing to the Company (on behalf of the Assignors) and the Collateral Agent. Page 46 11.2. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Assignors and the Collateral Agent with the consent of the Required Banks, PROVIDED, HOWEVER, that no modifications shall be made to Section 7.4(a) of this Agreement without the consent of each Secured Creditor adversely affected thereby; and PROVIDED FURTHER that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Required Creditors of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, I.E., whether (x) the Bank Creditors as holders of the Credit Agreement Obligations or (y) the Interest Rate Protection Creditors as the holders of the Interest Rate Protection Obligations. 11.3. OBLIGATIONS ABSOLUTE. The obligations of each Assignor hereunder shall be absolute and unconditional in accordance with its terms and shall remain in full force and effect without regard to, and shall not be impaired, released, discharged, terminated or otherwise affected by any circumstance or occurrence whatsoever, including, without limitation: (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of such Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement, the Subsidiary Guaranty, the Credit Agreement, any other Credit Document, or any Interest Rate Protection Agreement except as specifically set forth in a waiver granted pursuant to Section 11.2 hereof; (c) any furnishing of any additional security to the Collateral Agent, the other Secured Creditors or their assignees or any acceptance thereof or any release of any security by the Collateral Agent, the other Secured Creditors or their assignees; (d) any lack of validity or enforceability of the Subsidiary Guaranty, the Credit Agreement, any Note, any Interest Rate Protection Agreement, any other Credit Document or any other documents, instruments or agreements referred to therein or any assignment or transfer of any thereof; (e) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; (f) any amendment, indulgence, renewal, extension, modification or Page 47 addition, consent or supplement to or deletion from any Credit Document or any Interest Rate Protection Agreement or any security for any of the Obligations; whether or not such Assignor shall have notice or knowledge of any of the foregoing or (g) any other circumstance which might otherwise constitute a defense available to, or a discharge of such Assignor. The rights and remedies of the Collateral Agent herein provided are cumulative and not exclusive of any rights or remedies which the Collateral Agent would otherwise have. 11.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon each Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and each Secured Creditor and their respective successors and assigns, provided that no Assignor may transfer or assign any or all of its rights or obligations hereunder without the written consent of the Required Banks. All agreements, statements, representations and warranties made by any Assignor herein or in any certificate or other instrument delivered by such Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement, the other Credit Documents and the Interest Rate Protection Agreements regardless of any investigation made by the Secured Creditors or on their behalf. 11.5. HEADINGS DESCRIPTIVE. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 11.6. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Page 48 11.8. ASSIGNORS' DUTIES. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of any Assignor under or with respect to any Collateral. 11.9. TERMINATION; RELEASE. (a) After the Termination Date, this Agreement shall terminate and the Collateral Agent, at the request and expense of the Assignors, will execute and deliver to the Assignors a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Assignors (without recourse and without any representation or warranty) such of the Collateral of the Assignors as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment has been terminated, no Note remains outstanding, all Letters of Credit have been terminated and all Credit Agreement Obligations and Guaranty Obligations then owing by the Assignors have been paid in full. (b) It is expressly acknowledged and agreed that all or a portion of the Collateral shall be released from the Liens and security interests created hereunder upon any sale thereof from time to time to the extent permitted by, and in accordance with the terms of, the Credit Agreement. Upon any sale of the type described in the preceding sentence, the Collateral Agent shall, at the request and expense of any Assignor, and without the further consent of, or liability to, any Secured Creditor, release such Collateral and execute and deliver to such Assignor a proper instrument or instruments acknowledging the release of such Collateral from this Agreement, and will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) the Collateral being sold or released as described above. (c) At any time that any Assignor desires that the Collateral Agent take any action to acknowledge or give Page 49 effect to any release of Collateral pursuant to the foregoing Section 11.9(a) or (b), it shall deliver to the Collateral Agent a certificate signed by its chief financial officer stating that the release of the respective Collateral is permitted pursuant to Section 11.9(a) or (b). If requested by the Collateral Agent (although the Collateral Agent shall have no obligation to make any such request), such Assignor shall furnish appropriate legal opinions (from counsel acceptable to the Collateral Agent) to the effect set forth in the immediately preceding sentence. The Collateral Agent shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it as permitted by this Section 11.9. Upon any release of Collateral pursuant to Section 11.9(a) or (b), none of the Secured Creditors shall have any continuing right or interest in such Collateral, or the proceeds thereof. 11.10. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Company (on behalf of the Assignors) and the Collateral Agent. Page 50 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ADDRESSES 201 Willowbrook Boulevard ASSIGNORS: Wayne, New Jersey 07470 Attn: Robert Terrence Galvin By /s Francis E. Nicastro ---------------------- Francis E. Nicastro, in his/her ------------------- capacity as Vice President -------------- for each of the corporations, each an Assignor, listed on Schedule A hereto One Bankers Trust Plaza BANKERS TRUST COMPANY, New York, New York 10006 as Collateral Agent Attn: Mary Kay Coyle By /s/ Mary Kay Coyle ------------------ Name: Mary Kay Coyle Title: Vice President SCHEDULE A to Subsidary Security Agreement Merchandising Services, Inc. Grand Union Stores, Inc. of Vermont Grand Union Stores of New Hampshire, Inc. ANNEX A to SUBSIDIARY SECURITY AGREEMENT SCHEDULE OF PERMITTED FILINGS
Secured Original Description LOCATION PARTY/IES NUMBER FILE DATE OF COLLATERAL PERMITTED SEE ATTACHED
ANNEX B to SUBSIDIARY SECURITY AGREEMENT SCHEDULE OF RECORD LOCATIONS
LOCATION COUNTY THE GRAND UNION COMPANY Passaic 201 Willowbrook Blvd. Wayne, NJ 07407 THE GRAND UNION COMPANY Saratoga 150 Hudson River Road Waterford, NY 12188 THE GRAND UNION COMPANY Westchester 333 N. Bedford Road Mt. Kisco, NY 10549 THE GRAND UNION COMPANY Orange 7 Governor Drive Newburgh, NY 12550 THE GRAND UNION COMPANY - Orange MONTGOMERY WAREHOUSE 124 Bracken Road Montgomery, NY 12549 BIG STAR Fulton 2251 N. Sylvan Road Eastpoint, GA 30344
ANNEX C to SUBSIDIARY SECURITY AGREEMENT SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS GRAND UNION STORES, INC. OF VERMONT Cigarette and Liquor Inventory at the following locations: STORE LOCATION ADDRESS STATE COUNTY 1870 Barre 355 N. Main St. VT Washington 05641 1836 Bennington 300 Depot St. VT Bennington 05201 1939 Bradford Rt. #5 VT Orange 05033 1992 Brandon Union Street VT Rutland 05733 1861 Brattleboro Putney Rd. VT Windham 05304 1884 Bristol 4 Main St. VT Addison 05443 1134 Burlington North Ave. VT Chittendon 05401 1966 Colchester Colchester Square VT Chittendon 05446 1161 Enosburg Falls 83-85 Main Street VT Franklin 05450 1819 Essex Center RFD #2-Rt. #15 VT Chittendon 05452 1821 Essex Junction Susie Wilson Rd. & VT Chittendon 05452 Rt. #15 1908 Fair Haven Rt. #22A & US #4 VT Rutland 05743 1885 Hardwick Rt. #15 VT Caldonia 05843 1103 Johnson Main St. VT Lamoille 05656 1810 Ludlow Main St. & Rt. #103 VT Windsor 05149 1160 Manchester Rt. #7 & The Meadows VT Bennington 05255 Center 1993 Middlebury Washington St. VT Addison 05753 1876 Milton Rt. #7 VT Chittendon 05468 1933 Montpelier 2 Main St. VT Washington 05602 1817 Morrisville Brooklyn St. VT Lamoille 05661 1820 Newport Waterfront Plaza VT Orleans 05855 1985 North Green Mountain Plaza VT Rutland 05759 Clarendon 1828 Northfield 101 N. Main Street VT Washington 05663 1113 Poultney Main & Depot St. VT Rutland 05764 1967 Randolph 12 Main St. VT Orange 05060 1169 Rutland Norton Place & N. Main VT Rutland 05701 1167 South Odell Pkwy.- VT Chittendon 05401 Burlington Shelburn Rd. 1814 South 41 Hinesberg Rd. VT Chittendon 05401 Burlington 1928 Springfield Rt. #11 & River St. VT Windsor 05156 1166 Stowe Rd. #2 & Rt. #100 VT Lamoille 05672 1983 St. Johnsbury 43 Railroad St. VT Caledonia 05819 1958 Swanton First St. & Brown Ave. VT Franklin 05488
1818 Waitsfield Rt. #100 VT Washington 05673 1968 Waterbury S. Main St. VT Washington 05676 1969 White River Maple St. VT Windsor 05001 1951 Wilmington Main St. & Rt. #9 VT Windham 05363 1811 Windsor Rt. #1 VT Windsor 05089 1893 Winooski 40 Mallets Bay Ave. VT Chittendon 05404 1981 Woodstock 37 Pleasant Street VT Windsor 05091
GRAND UNION STORES OF NEW HAMPSHIRE, INC. Cigarette and Liquor Inventory at the following locations:
STORE LOCATION ADDRESS STATE COUNTY 1914 Hanover 79-81 Main St. NH Grafton 03755 1938 Lincoln N. Main St. NH Grafton 03251 1915 West Lebanon W. Lebanon Rd. NH Grafton 03766
ANNEX D to SUBSIDIARY SECURITY AGREEMENT SCHEDULE OF VEHICLES LOCATIONS
QUANTITY OF CERTIFICATE STATE OF TYPE OF VEHICLE VEHICLES OF TITLE REGISTRATION None
ANNEX E to SUBSIDIARY SECURITY AGREEMENT SCHEDULE OF TRADE, FICTITIOUS AND OTHER NAMES None ANNEX F to SUBSIDIARY SECURITY AGREEMENT SCHEDULE OF MARKS None ANNEX G to SUBSIDIARY SECURITY AGREEMENT SCHEDULE OF LICENSE AGREEMENTS AND ASSIGNMENTS None ANNEX H to SUBSIDIARY SECURITY AGREEMENT SCHEDULE OF PATENTS AND APPLICATIONS None ANNEX I to SUBSIDIARY SECURITY AGREEMENT SCHEDULE OF COPYRIGHTS AND APPLICATIONS None Exhibit 1 SUBSIDIARY SECURITY AGREEMENT U.S. TRADEMARK SECURITY AGREEMENT TRADEMARK SECURITY AGREEMENT ("Agreement") dated as of __________________, 1995, is entered into between The Grand Union Company, a Delaware corporation ("Assignor") with principal offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-6799 and Bankers Trust Company, a New York corporation, as collateral agent, with principal offices at One Bankers Trust Plaza, New York New York 10006 ("Collateral Agent"). Capitalized terms not otherwise defined herein have the meanings set forth in the Subsidiary Security Agreement, dated as of June 15, 1995, among, INTER ALIA, Assignor and Collateral Agent ("Security Agreement"). WHEREAS, pursuant to the Security Agreement, Assignor is granting a security interest to the Collateral Agent for the benefit of itself and the Secured Creditors in certain collateral, including the Marks (as defined herein), NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Assignor and Collateral Agent hereby agree as follows: 1. GRANT OF SECURITY INTEREST (a) As security for the full and prompt payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations, the Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest in all of the right, title and interest of the Assignor in, to and under the U.S. trademarks, trademark registrations, and trademark applications (the "Marks") more particularly set forth on Schedule A attached hereto, together with the goodwill of the business symbolized by the Marks. (b) The security interest granted hereby is granted in conjunction with the security interest granted to the Collateral Agent under the Security Agreement. The rights and remedies of the Collateral Agent on behalf of itself and the other Secured Creditors with respect to the security interest granted hereby are in addition to those set forth in the Security Agreement and the other Credit Documents and those which are now or hereafter available to Collateral Agent on behalf of itself and the other Secured Creditors as a matter of law or equity. Each right, power and remedy of the Collateral Agent provided for herein, in the Security Agreement, in the other Credit Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power, or remedy provided for herein, and the exercise by Collateral Agent on behalf of itself and the other Secured Parties of any one or more of the rights, powers or remedies provided for in this Agreement, in the Security Agreement, in the other Credit Documents, or now or hereafter existing at law or in equity shall not preclude the simultaneous or later exercise by any person, including Collateral Agent, of any or all other rights, powers or remedies. 2. GOVERNING LAW THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 3. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. THE GRAND UNION COMPANY, as Assignor By: ______________________ Name: ____________________ Title: ___________________ BANKERS TRUST COMPANY, as Collateral Agent By: ______________________ Name: ____________________ Title: ___________________ STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of The Grand Union Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by The Grand Union Company. ______________________ Notary Public STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of Bankers Trust Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by Bankers Trust Company. ______________________ Notary Public SCHEDULE A U.S. TRADEMARK SECURITY AGREEMENT REG. NO. REG. DATE MARK (SERIAL NO.) (FILING DATE) Exhibit 2 SUBSIDIARY SECURITY AGREEMENT U.S. PATENT SECURITY AGREEMENT PATENT SECURITY AGREEMENT ("Agreement") dated as of __________________, 1995, is entered into between The Grand Union Company, a Delaware corporation ("Assignor") with principal offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-6799 and Bankers Trust Company, a New York corporation, as collateral agent, with principal offices at One Bankers Trust Plaza, New York, New York 10006 ("Collateral Agent"). Capitalized terms not otherwise defined herein have the meanings set forth in the Subsidiary Security Agreement, dated as of June 15, 1995, among, INTER ALIA, Assignor and Collateral Agent ("Security Agreement"). WHEREAS, pursuant to the Security Agreement, Assignor is granting a security interest to the Collateral Agent for the benefit of itself and the Secured Creditors in certain collateral, including the Patents (as defined herein), NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Assignor and Collateral Agent hereby agree as follows: 1. GRANT OF SECURITY INTEREST (a) As security for the full and prompt payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations, the Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest in all of the right, title and interest of the Assignor in, to and under the U.S. patent and patent applications and all inventions and improvements described and claimed in any of the foregoing (the "Patents") more particularly set forth on Schedule A attached hereto. (b) The security interest granted hereby is granted in conjunction with the security interest granted to the Collateral Agent under the Security Agreement. The rights and remedies of the Collateral Agent on behalf of itself and the other Secured Creditors with respect to the security interest granted hereby are in addition to those set forth in the Security Agreement and the other Credit Documents and those which are now or hereafter available to Collateral Agent on behalf of itself and the other Secured Creditors as a matter of law or equity. Each right, power and remedy of the Collateral Agent provided for herein, in the Security Agreement, in the other Credit Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power, or remedy provided for herein, and the exercise by Collateral Agent on behalf of itself and the other Secured Parties of any one or more of the rights, powers or remedies provided for in this Agreement, in the Security Agreement, in the other Credit Documents or now or hereafter existing at law or in equity shall not preclude the simultaneous or later exercise by any person, including Collateral Agent, of any or all other rights, powers or remedies. 2. GOVERNING LAW THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 3. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. THE GRAND UNION COMPANY, as Assignor By: ______________________ Name: ____________________ Title: ___________________ BANKERS TRUST COMPANY, as Collateral Agent By: ______________________ Name: ____________________ Title: ___________________ STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of The Grand Union Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by The Grand Union Company. ______________________ Notary Public STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of Bankers Trust Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by Bankers Trust Company. ______________________ Notary Public SCHEDULE A U.S. PATENT SECURITY AGREEMENT PATENT NO. DATE ISSUED TITLE INVENTOR (APP. NO.) (APP. DATE) Exhibit 3 SUBSIDIARY SECURITY AGREEMENT U.S. COPYRIGHT SECURITY AGREEMENT COPYRIGHT SECURITY AGREEMENT ("Agreement") dated as of __________________, 1995, is entered into between The Grand Union Company, a Delaware corporation ("Assignor") with principal offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-6799 and Bankers Trust Company, a New York corporation, as collateral agent, with principal offices at One Bankers Trust Plaza, New York, New York 10006 ("Collateral Agent"). Capitalized terms not otherwise defined herein have the meanings set forth in the Subsidiary Security Agreement, dated as of June 15, 1995, among, INTER ALIA, Assignor and Collateral Agent ("Security Agreement"). WHEREAS, pursuant to the Security Agreement, Assignor is granting a security interest to the Collateral Agent for the benefit of itself and the Secured Creditors in certain collateral, including the Copyrights (as defined herein), NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, Assignor and Collateral Agent hereby agree as follows: 1. GRANT OF SECURITY INTEREST (a) As security for the full and prompt payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations, the Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest in all of the right, title and interest of the Assignor in, to and under the U.S. copyrights and all registrations and applications to register the same in the United States Copyright Office, and all renewals thereof (the "Copyrights") more particularly set forth on Schedule A attached hereto. (b) The security interest granted hereby is granted in conjunction with the security interest granted to the Collateral Agent under the Security Agreement. The rights and remedies of the Collateral Agent on behalf of itself and the other Secured Creditors with respect to the security interest granted hereby are in addition to those set forth in the Security Agreement and the other Credit Documents and those which are now or hereafter available to Collateral Agent on behalf of itself and the other Secured Creditors as a matter of law or equity. Each right, power and remedy of the Collateral Agent provided for herein, in the Security Agreement, in the other Credit Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power, or remedy provided for herein, and the exercise by Collateral Agent on behalf of itself and the other Secured Parties of any one or more of the rights, powers or remedies provided for in this Agreement, in the Security Agreement, in the other Credit Documents or now or hereafter existing at law or in equity shall not preclude the simultaneous or later exercise by any person, including Collateral Agent, of any or all other rights, powers or remedies. 2. GOVERNING LAW THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 3. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. THE GRAND UNION COMPANY, as Assignor By: ______________________ Name: ____________________ Title: ___________________ BANKERS TRUST COMPANY, as Collateral Agent By: ______________________ Name: ____________________ Title: ___________________ STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of The Grand Union Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by The Grand Union Company. ______________________ Notary Public STATE OF _______________ ) ) ss.: COUNTY OF ______________ ) On this ___ day of _________, 1995, before me personally appeared _________________, to me known who, being by me duly sworn, did depose and say that he is ___________________ of Bankers Trust Company, described herein and which executed the foregoing instrument and that s/he signed his/her name thereto pursuant to the authority granted by Bankers Trust Company. ______________________ Notary Public SCHEDULE A U.S. COPYRIGHT SECURITY AGREEMENT REG. NO. REG. DATE TITLE (APP. NO.) (APP. DATE) EX-10.13 15 EXHIBIT 10.13 Exhibit 10.13 SUBSIDIARY GUARANTY SUBSIDIARY GUARANTY, dated as of June 15, 1995 (as the same may be amended, modified or supplemented from time to time, the "Subsidiary Guaranty"), made by each of the corporations listed on Annex A attached hereto (individu- ally, a "Guarantor" and collectively, the "Guarantors"), in favor of (a) the Banks and the Agent from time to time party to the Credit Agreement, hereinafter referred to (such Banks and the Agent the "Bank Creditors") and (y) any Bank that enters into an interest rate protection agreement (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements, collectively, the "Interest Rate Protection Agreements") guaranteed by the Guarantors, even if any such Bank subsequently ceases to be a Bank under the Credit Agreement for any reason and for so long as any such Bank participates in the extension of such Interest Rate Protection Agreements, and any subsequent assignee (the "Interest Rate Protection Creditors") (the Interest Rate Protection Creditors and the Bank Creditors, together with their permitted successors and assigns, individually a "Guaranteed Party" and collectively the "Guaranteed Parties"). W I T N E S S E T H: WHEREAS, certain of the parties hereto entered into the Original Credit Agreement; WHEREAS, The Grand Union Company (the "Company"), the various Banks from time to time party thereto, and Bankers Trust Company, as Agent (the "Agent") have agreed to amend and restate the Original Credit Agreement and have entered into the Amended and Restated Credit Agreement, dated as of June 15, 1995, providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contemplated therein (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph, as the same may be amended, modified, extended, renewed, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring (including, but not limited to, any increase in the amount borrowed) all or any portion of the Indebtedness under such agreement or any successor agreements; Page 2 WHEREAS, the Company may at any time and from time to time enter into one or more Interest Rate Protection Agreements with one or more Interest Rate Protection Creditors in compliance with the provisions of the Credit Agreement; WHEREAS, the Company and the Guarantors share an identity of interests as members of a consolidated group of companies engaged in substantially similar businesses, the Company provides centralized financial, accounting and management services to each of the Guarantors and the making of the loans and the issuance of the letters of credit under the Credit Agreement will facilitate expansion of, and enhance the overall financial strength and stability of the Company's corporate group; and WHEREAS, it is a condition precedent to each of the above-described extensions of credit to the Company that the Guarantors shall have executed and delivered to the Guaranteed Parties this Agreement; and WHEREAS, the Guarantors desire to execute and deliver this Agreement to satisfy the conditions described in the preceding paragraph. NOW, THEREFORE, in consideration of the premises contained herein and in order to induce the Banks to make loans and issue letters of credit under the Credit Agreement, the Guarantors hereby jointly and severally agree as follows: SECTION 1. DEFINITIONS. Except as otherwise defined herein, including in the recital paragraphs, capitalized terms used herein and defined in the Credit Agreement shall be used herein as so defined. SECTION 2. GUARANTY. (a) The Guarantors hereby jointly and severally unconditionally guarantee the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all (i) Obligations of the Company and its Subsidiaries now or hereafter existing, whether for principal, interest (including any interest accruing during a Proceeding (as hereinafter defined) whether or not the claim for such interest is allowable or discharged in such Proceeding), fees, expenses or otherwise, (ii) amounts, direct or indirect, contingent or absolute, of every type or description, and Page 3 at any time existing, owing to any Bank arising under any Interest Rate Protection Agreement and (iii) any and all reasonable expenses (including counsel fees and expenses) incurred by any Guaranteed Party in enforcing any rights under this Subsidiary Guaranty (all of the foregoing, collectively, the "Guaranteed Obligations"); PROVIDED, HOWEVER, that the maximum liability of each Guarantor herein as of any date shall in no event exceed the Maximum Guaranty Liability (as hereinafter defined) of such Guarantor as of such date. It is the intention of the parties hereto that in no event shall any Guarantor's obligations under this Subsidiary Guaranty constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction. Therefore, in the event that this Subsidiary Guaranty would, but for the preceding sentence, constitute or result in such violation, then the liability of a Guarantor under this Subsidiary Guaranty shall be reduced to the maximum amount permissible under the applicable fraudulent conveyance or similar laws. Any and all payments by the Guarantors hereunder shall be made free and clear of and without deduction for any set-off or counterclaim. (b) "Maximum Guaranty Liability" of a Guarantor as of any date shall mean the greater of the following amounts as of such date: (i) the sum of the following amounts as of such date: (A) the outstanding amount of all loans, advances, capital contributions or other investments made by the Company to or in such Guarantor with the proceeds of loans made to the Company under the Credit Agreement (such proceeds being referred to herein as "Senior Financing Proceeds"), PLUS (without duplication) (B) the fair market value of all property acquired with Senior Financing Proceeds transferred to such Guarantor, PLUS (C) with respect to each transfer of Senior Financing Proceeds referred to in the foregoing clauses (A) and (B), an amount equal to the amount of interest under the Credit Agreement allocable to such Senior Financing Proceeds until the same is repaid to the Company; and (ii) the greatest of the Fair Value Net Worth (as hereinafter defined) of such Guarantor as of the Effective Date, each fiscal quarter-end of such person thereafter occurring on or prior to the date of determination of Maximum Guaranty Liability, the date on which enforcement of this Subsidiary Guaranty is sought, and the date on which a case under the Bank- ruptcy Code is commenced with respect to the Company or such Guarantor. Page 4 "Fair Value Net Worth" of a Guarantor as of any date shall mean (i) the fair value or fair saleable value (as the case may be, determined in accordance with applicable federal and state laws affecting creditors' rights and governing determinations of insolvency of debtors (collectively, "Insolvency Laws")) of such Guarantor's assets as of such date, MINUS (ii) the amount of all liabilities of such Guarantor (determined in accordance with Insolvency Laws) as of such date, excluding (x) this Subsidiary Guaranty and (y) liabilities under the Credit Agreement effectively assumed by such Guarantor by hypothecation of such Guarantor's assets, MINUS (iii) $1.00. (c) Each Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the Maximum Guaranty Liability of such Guarantor, and may exceed the aggregate Maximum Guaranty Liability of all Guarantors, without impairing this Subsidiary Guaranty or affecting the rights and remedies of any Guaranteed Party hereunder. (d) Additionally, each Guarantor unconditionally and irrevocably, jointly and severally, guarantees the payment of any and all of the Guaranteed Obligations to the Guaranteed Parties whether or not due or payable by the Company upon the occurrence in respect of the Company of any of the events specified in Section 9.5, and unconditionally and irrevocably, jointly and severally, promises to pay such Guaranteed Obligations to the Guaranteed Parties, or order, on demand, in lawful money of the United States. SECTION 3. GUARANTY ABSOLUTE. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Credit Agreement, the Notes, the Interest Rate Protection Agreements and the other Credit Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guaranteed Party with respect thereto. This is a guaranty of payment and not of collection, and the liability of the Guarantors under this Subsidiary Guaranty shall be joint, several, absolute and unconditional, in accordance with its terms and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (a) any change in the Page 5 time, place or manner of payment of, or in any other term of, all or any of the Guaranteed Obligations, any waiver, indulgence, renewal, extension, amendment or modification of, or addition, consent or supplement to, or deletion from, or any other action or inaction under, or in respect of the Credit Agreement, any Note, any Interest Rate Protection Agreement, any other Credit Document or any documents, instruments or agreements relating to the Guaranteed Obligations or any other instrument or agreement referred to therein or any assignment or transfer of any thereof; (b) any lack of validity or enforceability of the Credit Agreement, any Note, any Interest Rate Protection Agreement, any other Credit Document or any other documents, instruments or agreements referred to therein or any assignment or transfer of any thereof; (c) any furnishing of any additional security to the Guaranteed Parties or their assignees or any acceptance thereof or any release of any security by the Guaranteed Parties, or their assignees; (d) any limitation on any party's liability or obligations under any such instrument or agreement (other than as set forth in Section 2 hereof) or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement, or any term thereof; (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Company, or any action taken with respect to this Subsidiary Guaranty by any trustee or receiver, or by any court, in any such proceeding, whether or not any Guarantor shall have notice or knowledge of any of the foregoing and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding; (f) any exchange, release or nonperfection of any other collateral, or any release, or amendment or waiver of, or consent to, departure from any guaranty or security, for all or any of the Guaranteed Obligations; (g) any direction as to application of payment by the Company or by any other party; (h) any dissolution, termination or increase, decrease or change in personnel by the Company; or (i) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Guarantor. This Subsidiary Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Guaranteed Party upon the insolvency, bankruptcy or reorganization of the Company or any Guarantor or otherwise, all as though such payment had not been made. Page 6 SECTION 4. WAIVER. To the extent permitted by applicable law, the Guarantors hereby waive promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Subsidiary Guaranty and any requirement that any Guaranteed Party protect, se- cure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Company, or any other Person or any collateral. The Guarantors waive, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Company or other circumstance which operates to toll any statute of limitations as to the Company shall operate to toll the statute of limitations as to each Guarantor. SECTION 5. WAIVER OF SUBROGATION. Each Guarantor hereby irrevocably waives any right of subrogation, reimbursement, exoneration, contribution or indemnification, any right to participate in any claim or remedy of the Guar- anteed Parties or any collateral which the Agent, any other Guaranteed Party or the Collateral Agent now has or hereafter acquires in connection with the payment, performance or enforcement of such Guarantor's obligations under this Subsidiary Guaranty or any Credit Document, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the Guaranteed Obligations shall not have been paid in full or any commitment of any Guaranteed Party under the Credit Agreement shall not have been irrevocably terminated, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for, the Agent for the benefit of the Guaranteed Parties, and shall forthwith be paid to the Agent to be credited and applied to the Obligations, whether matured or unma- tured. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this Section is knowingly made in contemplation of such benefits. SECTION 6. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby represents and warrants as follows: Page 7 (a) Each representation, warranty and agreement made by the Company in Section 6 of the Credit Agreement concerning such Guarantor is confirmed to be true and correct as to such Guarantor. (b) On the Effective Date, after giving effect to all the transactions contemplated by the Credit Agreement, including, without limitation, the execution and delivery of the Credit Agreement, and the incurrence by such Guarantor of liabilities under this Subsidiary Guaranty, (i) the assets of such Guarantor, at a fair valuation, will exceed its liabilities, including contingent liabilities (but excluding any intercompany liabilities, including contingent intercompany liabilities), (ii) the remaining capital of such Guarantor will not be unreasonably small to conduct its business and (iii) such Guarantor has not incurred debts, and does not intend to incur debts, beyond its ability to pay such debts as they mature. For purposes of this Section 6(b), "debt" means any liability on a claim, and "claim" means (x) right to payment, whether or not such right is reduced to judgment, liquidated, unliq- uidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. SECTION 7. ADDITIONAL GUARANTORS. In accordance with the provisions of Section 7.13 of the Credit Agreement, any Person that becomes a Subsidiary of the Company after the Effective Date (an "Additional Guarantor") shall execute and deliver to the Agent a counterpart (substantially in the form of Annex B hereto) of this Subsidiary Guaranty. Upon such execution, such Additional Guarantor shall be liable to the Guaranteed Parties and the Guarantors pursuant to Section 2 hereof and Annex A hereto shall be deemed to be amended to include such Additional Guarantor. SECTION 8. NOTICES. All notices and other communications provided for hereunder shall be given to the Company (on behalf of any relevant Guarantor) and the Agent at the addresses and in the manner specified in the Credit Agreement. Page 8 SECTION 9. NO WAIVER; REMEDIES. No failure on the part of any Guaranteed Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 10. RIGHT OF SET-OFF. In addition to, and not in limitation of, all rights of offset that any Bank or other holder of a Note may have under applicable law, each Bank or other holder of a Note shall, upon the occurrence of any Event of Default and whether or not such Bank or such holder has made any demand or any Guarantor's obligations hereunder have matured, have the right to appropriate and apply to the payment of the Guaranteed Obligations, all deposits (general or special, time or demand, provisional or final) then or thereafter held by, and other indebtedness or property then or thereafter owing by, such Bank or other holder, whether or not related to this Subsidiary Guaranty or any transaction hereunder. SECTION 11. CONTINUING GUARANTY; TRANSFER OF OBLIGATIONS. This Subsidiary Guaranty is a continuing guaranty and shall (i) remain in full force and effect until payment in full of the Guaranteed Obligations and all other amounts payable under this Subsidiary Guaranty, (ii) be binding upon each Guarantor, its successors and assigns, and (iii) inure to the benefit of and be enforceable by each Guaranteed Party and its permitted successors, transferees and assigns; PROVIDED that each Guarantor may not assign or transfer any of its interests or obligations hereunder without the prior written consent of the Banks. Without limiting the generality of the foregoing clause (iii), any Bank may, in accordance with the terms and provisions of the Credit Agreement, assign to one or more banks or other entities all or any part of, or may grant participations to one or more banks or other entities in or to all or any part of, any of the Guaranteed Obligations, whereupon each such bank or entity shall become vested with all the rights in respect thereof granted to such Bank herein or otherwise in respect hereof. SECTION 12. GOVERNING LAW; APPOINTMENT OF AGENT FOR SERVICE OF PROCESS; SUBMISSION TO JURISDICTION. Page 9 (a) THIS SUBSIDIARY GUARANTY AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). Any legal action or proceeding with respect to this Subsidiary Guaranty or any other Credit Document may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Subsidiary Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 1633 Broadway, New York, NY 10019 as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notices and documents which may be served in any such action or proceeding. The Agent agrees to use reasonable good faith efforts to mail, by registered or certified mail, to the Company (on behalf of the Guarantors) at its address set forth in the Credit Agreement, copies of any and all legal process, summons, notices and documents mailed or delivered to CT Corporation System in connection with the immediately preceding sentence; PROVIDED that the failure of the Company to receive, for any reason, copies of such correspondence shall not in any way affect the effectiveness of the delivery of any legal process, summons, notice or documents delivered to CT Corporation System. If for any reason such designee, appointee and agent shall cease to be available to act as such, the Guarantors agree to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Agent. Each Guarantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Company (on behalf of the Guarantors) at its address set forth in the Credit Agreement, such service to become effective thirty days after such mailing. Nothing herein shall affect the right of the Agent, any Bank or the holder of any Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Guarantors in any other jurisdiction. Page 10 (b) Each Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Subsidiary Guaranty or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Each Guarantor further waives any right it may have to trial by jury in any court or jurisdiction, including without limitation those referred to in clause (a) above, in respect of any matter arising out of or relating to this Subsidiary Guaranty and the other Credit Documents. SECTION 13. SUBORDINATION OF COMPANY'S OBLIGATIONS TO GUARANTORS. As an independent covenant, each Guarantor hereby expressly covenants and agrees for the benefit of each Guaranteed Party that all obligations and liabilities of the Company to such Guarantor of whatsoever description including, without limitation, all intercompany receivables of such Guarantor from the Company ("Junior Claims") shall be subordinate and junior in right of payment to all Obligations of the Company to the Guaranteed Parties, including, without limitation, interest accrued during any Proceeding (as hereinafter defined) on the Obligations whether or not the claim for such interest is allowable or dis- charged in such Proceeding) ("Senior Claims"). If an Event of Default shall occur and the Agent so requests, then no direct or indirect payment (in cash, property, securities by setoff or other- wise) shall be made by the Company to any Guarantor on account of, or in any manner in respect of, any Junior Claim except such payments and distributions the proceeds of which shall be applied to the Senior Claims. Notwithstanding anything to the contrary set forth in the immediately preceding paragraph of this Section 13, in the event of a Proceeding, all Senior Claims shall first be paid in full before any direct or indirect payment or distribution (in cash, property, or securities, by setoff or otherwise) shall be made to any Guarantor on account of or in any manner in respect of any Junior Claim except such payments and distributions the proceeds of which shall be applied to the Senior Page 11 Claims. "Proceeding" means the occurrence of any of the following: the Company shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy" as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or any involuntary case is commenced against the Company; or a custodian (as defined in the Bank- ruptcy Code) is appointed for, or takes charge of, all or any substantial part of the property of the Company, or the Company commences any other proceedings under any reorganization arrangement, adjustment of debt, relief of debtor, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company, or the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company suffers any appointment of any custodian or the like for it or any substantial part of its property; or the Company makes a general assignment for the benefit of creditors; or the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or the Company shall by any act or failure to act indicate its consent to, approval of, or acquiescence in, any of the foregoing; or any corporate action shall be taken by the Company for the purpose of effecting any of the foregoing. In the event any direct or indirect payment or distribution is made to a Guarantor in contravention of this Section 13, such payment or distribution shall be deemed received in trust for the benefit of the Guaranteed Parties and shall be immediately paid over to the Agent for application in accordance with the terms of the Credit Agreement. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any indebtedness of the Company to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Each Guarantor agrees to execute such additional documents as the Agent may request to evidence the subordination provided for in this Section 13. Page 12 By its execution and delivery of this Subsidiary Guaranty, the Company hereby acknowledges and agrees to the subordination provided for in this Section 13. SECTION 14. SEVERABILITY. To the extent permitted by applicable law, any provision of this Subsidiary Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 15. AMENDMENTS. ETC. No amendment or waiver of any provision of this Subsidiary Guaranty nor consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be executed in accordance with the terms of the Credit Agreement. SECTION 16. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY AND EACH GUARANTOR HEREBY IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF, OR IN CONNECTION WITH, THIS SUBSIDIARY GUARANTY OR ANY OTHER CREDIT DOCUMENT OR ANY MATTER ARISING IN CONNECTION HEREUNDER OR THEREUNDER. Page 13 IN WITNESS WHEREOF, each of the Guarantors and the Company has caused this Subsidiary Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. GUARANTORS: By /s/ Francis E. Nicastro -------------------------------------- Francis E. Nicastro ----------------------------------, in his/her capacity as Vice President ------------------------------ for the corporations listed on Annex A hereto ACKNOWLEDGED AND AGREED TO AS APPLICABLE TO THE COMPANY: THE GRAND UNION COMPANY By /s/ Kenneth R. Baum -------------------------------------- Name: Kenneth R. Baum Title: Senior Vice President, Chief Financial Officer and Secretary Page 14 ANNEX A SUBSIDIARY GUARANTY Merchandising Services, Inc. Grand Union Stores, Inc. of Vermont Grand Union Stores of New Hampshire, Inc. Page 15 ANNEX B ADDITIONAL GUARANTOR The undersigned hereby acknowledges that it has read this Subsidiary Guaranty and agrees to be liable to the Guaranteed Parties pursuant to Section 2 of this Subsidiary Guaranty and to be bound by the terms and provisions thereof. IN WITNESS WHEREOF, the undersigned has caused this Subsidiary Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the ____ day of __________, 19__. Notice Address: [Name of Guarantor], a [State of Incorporation] Corporation By -------------------------------------- Title: EX-10.14 16 EXHIBIT 10.14 Exhibit 10.14 This document is intended to be recorded in: - - ------------------------- AFTER RECORDING RETURN TO: SKADDEN, ARPS, SLATE, MEAGHER & FLOM 333 West Wacker Drive Chicago, IL 60606 Attn: Patricia A. Needham, Esq. NOTICE TO VIRGINIA RECORDER: THIS CONVEYANCE IS EXEMPT FROM RECORDATION TAXES IMPOSED UNDER SECTION 58.1-803 OF THE CODE OF VIRGINIA, 1950, AS AMENDED, IN ACCORDANCE WITH THE PROVISIONS OF 11 U.S.C. 1146(c). - - -------------------------------------------------------------------------------- INDENTURE OF OPEN-END MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING made by THE GRAND UNION COMPANY as the Mortgagor, to BANKERS TRUST COMPANY, as Collateral Agent, as the Mortgagee - - -------------------------------------------------------------------------------- THIS INSTRUMENT PREPARED AND DRAFTED BY: Patricia A. Needham, Esq. SKADDEN, ARPS, SLATE, MEAGHER & FLOM 333 West Wacker Drive Chicago, IL 60606 - - -------------------------------------------------------------------------------- THIS OPEN-END INSTRUMENT SECURES, INTER ALIA, COMMERCIAL OBLIGATIONS WHICH PROVIDE FOR A VARIABLE RATE OF INTEREST AND OBLIGATORY FUTURE/REVOLVING CREDIT ADVANCES. ALL SUCH OBLIGATORY FUTURE/REVOLVING CREDIT ADVANCES SHALL HAVE THE SAME LIEN PRIORITY AS IF MADE ON THE DATE HEREOF. THE COLLATERAL INCLUDES FIXTURES. THIS IS A CREDIT LINE DEED OF TRUST. NOTICE TO RECORDERS IN FLORIDA, VIRGINIA AND TENNESSEE: THE ISSUANCE OF THE NOTES SECURED HEREBY AND THE MAKING, DELIVERY AND RECORDATION OF THIS INSTRUMENT ARE EXEMPT, AS SET FORTH IN SECTION 1146(c) OF THE U.S. BANKRUPTCY CODE, FROM ANY LAW IMPOSING A RECORDING TAX, STAMP TAX, TRANSFER TAX, OR OTHER SIMILAR TAX PURSUANT TO A PLAN CONFIRMED BY THE FEDERAL BANKRUPTCY COURT UNDER 11 U.S.C SECTION 1129. NO DOCUMENTARY STAMP TAXES ARE AFFIXED HERETO IN ACCORDANCE WITH RULE 12B-4.054 (31) OF THE FLORIDA ADMINISTRATIVE CODE. Page ---- ARTICLE I REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE MORTGAGOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.1 Title to this Property . . . . . . . . . . . . . . . . . 8 1.2 Operation of this Property . . . . . . . . . . . . . . . 9 1.3 Payment and Performance of Obligations . . . . . . . . . 9 1.4 Maintenance, Repair, Alterations, Etc. . . . . . . . . . 9 1.5 Required Insurance . . . . . . . . . . . . . . . . . . . 10 1.6 Policy Provisions, Etc.. . . . . . . . . . . . . . . . . 10 1.7 Insurance Proceeds . . . . . . . . . . . . . . . . . . . 12 1.8 Indemnification. . . . . . . . . . . . . . . . . . . . . 13 1.9 Impositions. . . . . . . . . . . . . . . . . . . . . . . 13 1.10 Utilities. . . . . . . . . . . . . . . . . . . . . . . . 15 1.11 Actions Affecting this Property. . . . . . . . . . . . . 15 1.12 Condemnation . . . . . . . . . . . . . . . . . . . . . . 15 1.13 Additional Security. . . . . . . . . . . . . . . . . . . 16 1.14 Successors and Assigns . . . . . . . . . . . . . . . . . 16 1.15 Inspections. . . . . . . . . . . . . . . . . . . . . . . 17 1.16 Transfers. . . . . . . . . . . . . . . . . . . . . . . . 17 1.17 Modifications. . . . . . . . . . . . . . . . . . . . . . 17 1.18 Indebtedness Secured by Liens. . . . . . . . . . . . . . 18 1.19 Environmental Protection Matters . . . . . . . . . . . . 18 1.20 Permitted Contests . . . . . . . . . . . . . . . . . . . 18 ARTICLE II SECURITY AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 19 2.1 Creation of Security Interest. . . . . . . . . . . . . . 19 2.2 Representations, Warranties and Covenants of the Mortgagor. . . . . . . . . . . . . . . . . . . . . . . . 20 2.3 Survival of Security Agreement . . . . . . . . . . . . . 21 ARTICLE III ASSIGNMENT OF LEASES, RENTS AND PROFITS. . . . . . . . . . . . . 22 3.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE IV EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . 23 4.1 Events of Default. . . . . . . . . . . . . . . . . . . . 23 4.2 Remedies upon Occurrence of Specified Events . . . . . . 24 4.3 Right of Foreclosure . . . . . . . . . . . . . . . . . . 25 4.4 Sale of Premises Pursuant to Foreclosure . . . . . . . . 27 4.5 Appointment of Receiver. . . . . . . . . . . . . . . . . 27 4.6 Remedies Not Exclusive . . . . . . . . . . . . . . . . . 28 i Page ---- 4.7 Waiver of Redemption, Notice, Marshalling, Etc.. . . . . 28 4.8 Expenses of Enforcement. . . . . . . . . . . . . . . . . 29 ARTICLE V MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 30 5.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . 30 5.2 Limitation on Interest . . . . . . . . . . . . . . . . . 31 5.3 Anti-Merger Provision. . . . . . . . . . . . . . . . . . 31 5.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 31 5.5 Captions . . . . . . . . . . . . . . . . . . . . . . . . 32 5.6 Waiver; Amendment. . . . . . . . . . . . . . . . . . . . 32 5.7 Further Assurances . . . . . . . . . . . . . . . . . . . 32 5.8 Release of Mortgage. . . . . . . . . . . . . . . . . . . 32 5.9 Partial Invalidity . . . . . . . . . . . . . . . . . . . 33 5.10 Additional Advances. . . . . . . . . . . . . . . . . . . 33 5.11 Mortgagee as Agent for Secured Creditors; Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 34 5.12 Default under the Lease. . . . . . . . . . . . . . . . . 34 5.13 No Lien against the Land . . . . . . . . . . . . . . . . 34 5.14 Intentionally Omitted. . . . . . . . . . . . . . . . . . 34 5.15 As to Mortgaged Property Located in Connecticut. . . . . 35 5.16 As to Mortgaged Property Located in Florida. . . . . . . 38 5.17 As to Mortgaged Property Located in Georgia. . . . . . . 39 5.18 Intentionally Omitted. . . . . . . . . . . . . . . . . . 45 5.19 Intentionally Omitted. . . . . . . . . . . . . . . . . . 45 5.20 Intentionally Omitted. . . . . . . . . . . . . . . . . . 45 5.21 As to Mortgaged Property Located in New Jersey . . . . . 45 5.22 As to Mortgaged Property Located in New York . . . . . . 45 5.23 Intentionally Omitted. . . . . . . . . . . . . . . . . . 46 5.24 Intentionally Omitted. . . . . . . . . . . . . . . . . . 46 5.25 Intentionally Omitted. . . . . . . . . . . . . . . . . . 46 5.26 Intentionally Omitted. . . . . . . . . . . . . . . . . . 46 5.27 As to Mortgaged Property Located in Tennessee. . . . . . 46 5.28 As to Mortgaged Property Located in Texas. . . . . . . . 48 5.29 As to Mortgaged Property Located in Vermont. . . . . . . 52 5.30 As to Mortgaged Property Located in Virginia . . . . . . 53 ii Page ---- ARTICLE VI CONCERNING THE TRUSTEES. . . . . . . . . . . . . . . . . . . . . 54 6.1 Acceptance by Trustees . . . . . . . . . . . . . . . . . 54 6.2 Compensation . . . . . . . . . . . . . . . . . . . . . . 61 6.3 Resignation. . . . . . . . . . . . . . . . . . . . . . . 61 6.4 Removal. . . . . . . . . . . . . . . . . . . . . . . . . 61 6.5 Inability of Trustee . . . . . . . . . . . . . . . . . . 61 6.6 Jurisdictional Requirements. . . . . . . . . . . . . . . 62 6.7 Succession . . . . . . . . . . . . . . . . . . . . . . . 62 6.8 Judicial Appointment . . . . . . . . . . . . . . . . . . 62 6.9 Merger of Corporate Trustee. . . . . . . . . . . . . . . 62 6.10 Vesting of Powers in Successor Trustees. . . . . . . . . 62 6.11 Legal Incapacity of Corporate Trustees . . . . . . . . . 63 6.12 Additional Trustees. . . . . . . . . . . . . . . . . . . 64 6.13 Powers of Co-Trustees. . . . . . . . . . . . . . . . . . 65 6.14 No Trustee's Bond. . . . . . . . . . . . . . . . . . . . 66 iii INDENTURE OF OPEN-END MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING THIS INDENTURE OF OPEN-END MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT, SECURITY AGREEMENT, ASSIGNMENT OF LEASES, RENTS AND PROFITS, FINANCING STATEMENT AND FIXTURE FILING, dated as of June 15, 1995 (this "Mortgage"), made by The Grand Union Company, a corporation organized and existing under the laws of the State of Delaware and having an address at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-6769, (the "Mortgagor"), as mortgagor of interests in real property under this Mortgage as a mortgage in the States of Connecticut, Florida, New Jersey, New York and Vermont, as grantor of real property under this Mortgage as a deed to secure debt in the State of Georgia, as trustor of the trusts hereinafter created under this Mortgage as a deed of trust in the States of Tennessee, Texas and Virginia, and as debtor with respect to the security interests in personal property hereby created, with Bankers Trust Company, a New York State banking corporation, having an office at One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, as Collateral Agent (the "Mortgagee") for the benefit of (x) the Agent and the Banks from time to time party to the Credit Agreement hereinafter referred to (such Banks and Agent, the "Bank Creditors") and (y) any Bank that enters into an interest rate protection agreement (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements, collectively, the "Interest Rate Protection Agreements") guaranteed by the Mortgagor, even if such Bank subsequently ceases to be a Bank under the Credit Agreement for any reason and for so long as any such Bank participates in the extension of any such Interest Rate Protection Agreements, and any subsequent assignee (collectively, the "Interest Rate Protection Creditors" and, together with the Bank Creditors, the "Secured Creditors"), and as mortgagee of interests in real property under this Mortgage as a mortgage in the States of Connecticut, Florida, New Jersey, New York and Vermont, as grantee of real property under this Mortgage as a deed to secure debt in the State of Georgia, as beneficiary of the trusts hereinafter created under this Mortgage as a deed of trust in the States of Tennessee, Texas and Virginia, and as secured party with respect to security interests in personal property hereby created, and with C.D. Berry, IV, as trustee of the real property hereinafter described in the State of Tennessee, having a residence in Williamson, Tennessee (the "Tennessee Trustee"), and with John S. Hollyfield, as trustee of the real property hereinafter described in the State of Texas, having a principal office at Fulbright & Jaworski, 1301 McKinney, Suite 5100, Houston, Texas 77010-3095 (the "Texas Trustee"), and with Roseleen P. Rick, Esq. and Philip J. Bagley, III, Esq., as trustees of the real property hereinafter described in the State of Virginia, having a residence in Powhatan, Virginia and the City of Richmond, Virginia, respectively (collectively, the "Virginia Trustee") (the Tennessee Trustee, the Texas Trustee and the Virginia Trustee being hereinafter sometimes referred to severally as the "Trustee" and collectively as the "Trustees"). Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement shall be used herein as so defined. In the event of any conflict between the terms of the Credit Agreement or the Borrower Security Agreement with the terms of this Mortgage, the terms of the Credit Agreement or the Borrower Security Agreement, as the case may be, shall control. W I T N E S S E T H : WHEREAS, the Mortgagor, the various Banks from time to time party thereto and Bankers Trust Company, as Agent (the "Agent") have entered into a Credit Agreement, dated as of June 15, 1995, providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contemplated therein up to a total principal amount of approximately $204,144,371 (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph, as the same may be amended, modified, extended, renewed, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring (including, but not limited to, the inclusion of additional borrowers thereunder that are or any increase in the amount borrowed) all or any portion of the Indebtedness under such agreement or any successor agreements), payable as specified therein, with a maturity date no later than June 15, 2002; 2 WHEREAS, the Mortgagor may at any time and from time to time guaranty obligations of its Subsidiaries under one or more Interest Rate Protection Agreements with one or more Interest Rate Protection Creditors; WHEREAS, it is a condition precedent to each of the above-described extensions of credit made and to be made to the Mortgagor that the Mortgagor shall have executed and delivered to the Mortgagee this Mortgage; WHEREAS, the Mortgagor desires to enter into this Mortgage to satisfy the condition described in the preceding paragraph and to secure the following: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of and interest on the Notes issued, and Loans made, under the Credit Agreement, and all reimbursement obligations and Unpaid Drawings with respect to the Letters of Credit under the Credit Agreement and (y) all other obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Mortgagor to the Bank Creditors now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the due performance and compliance by the Mortgagor with all of the terms, conditions and agreements contained in the Credit Agreement (the obligations described above in this clause (i), the "Credit Agreement Obligations"); and (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities owing by the Mortgagor to the Interest Rate Protection Creditors under, or with respect to, any Interest Rate Protection Agreement, whether the respective Interest Rate Protection Agreement is now in existence or hereafter arises, and the due performance and compliance by the Mortgagor with the terms, conditions and agreements contained therein (all such obligations and liabilities described 3 in this clause (ii), the "Interest Rate Protection Obligations"); and (iii) any and all sums advanced by the Mortgagee in order to preserve the Collateral or preserve its security interest in the Collateral in a manner not in violation of the terms hereof (the sums described above in this clause (iii), the "Collateral Preservation Obligations"); and (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Mortgagor referred to in clauses (i), (ii) and (iii), after an Event of Default (as defined in the Borrower Security Agreement) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Mortgagee of its rights hereunder, together with reasonable attorneys' fees and court costs (the obligations described above in this clause (iv), the "Enforcement Obligations" and, together with the Credit Agreement Obligations, the Interest Rate Protection Obligations, the Collateral Preservation Obligations, the "Obligations"; it being acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Mortgage or extended from time to time after the date hereof); and WHEREAS, this Mortgage is one of a number of deeds of trust, deeds to secure debt and mortgages given pursuant to the Credit Agreement and the Interest Rate Protection Agreements. NOW, THEREFORE, in consideration of the benefits accruing to the Mortgagor, the receipt and sufficiency of which are hereby acknowledged, the Mortgagor HEREBY IRREVOCABLY GIVES, GRANTS A SECURITY INTEREST IN, GRANTS, BARGAINS, SELLS, CONVEYS, PLEDGES, ASSIGNS, REMISES, RELEASES, MORTGAGES, WARRANTS, CONFIRMS, TRANSFERS AND SETS OVER TO the Mortgagee for the benefit of 4 the Bank Creditors, IN TRUST WITH POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, all of its estate, right, title and interest in the fee simple estate or the leasehold estate, as the case may be, whether now owned or hereafter acquired, in and to the property described on Exhibit A hereto, which Exhibit A is incorporated herein by reference. The leasehold estate created by that certain lease described in Exhibit A of premises as set forth on Schedule I to Exhibit A, hereinafter referred to as the "Lease", or the fee simple estate in the property described in Exhibit A, hereinafter referred to as the "Land", and the Improvements (as hereinafter defined), as the case may be, and all other real property, and interests and rights appurtenant thereto and described below as being subject to this Mortgage are herein referred to collectively as "this Property." TOGETHER with all appurtenant rights and easements, rights of way, and other rights used in connection with the Land and/or the Improvements; TOGETHER with all of the Mortgagor's right, title and interest in, to and under any or other leasehold estates, and in any or other agreements, relating to the use and occupancy of the Land and/or the Improvements or any portion thereof; TOGETHER with all rents, issues and profits of this Property subject to and in accordance with the provisions hereof (collectively, "Rents"); TOGETHER with the Mortgagor's right, title and interest in (a) any and all buildings and improvements now or hereafter erected on the Land (hereinafter sometimes collectively referred to as the "Improvements"); and (b) all personal property that constitutes fixtures, attachments, appliances, equipment, machinery and other tangible personal property now or hereafter attached to said Improvements or now or at any time hereafter located on the Land and/or Improvements and necessary for the continued operation of the Land and/or Improvements (hereinafter sometimes collectively referred to as the "Equipment"); 5 TOGETHER with all the right, title, other claim or demand, including claims or demands with respect to the proceeds of insurance in effect with respect thereto, which the Mortgagor now has or may hereafter acquire in this Property, and any and all awards made for the taking by eminent domain, or by any proceedings or purchase in lieu thereof, of the whole or any part of this Property. The entire estate, property and interest hereby mortgaged to the Mortgagee may be referred to herein as the "Mortgaged Property" as well as "this Property." TO HAVE AND TO HOLD as provided herein the above granted and described Mortgaged Property unto the Mortgagee and to its successors and assigns forever, and the Mortgagor hereby binds itself and its successors and assigns to warrant and forever defend the Mortgaged Property unto the Mortgagee, its successors and assigns against the claim or claims of all persons claiming or to claim the same, or any part thereof (but the foregoing warranty shall not be deemed to be for the benefit of any title insurer unless failure to so warrant title would impair the effectiveness of any title insurance policy insuring the lien of this Mortgage); AND UNTO the Mortgagee (for the equal and ratable benefit of the Secured Creditors), as grantee, its successors and assigns, the Mortgaged Property in the State of Georgia; TO HAVE AND TO HOLD the Mortgaged Property in the State of Georgia hereby granted with all and singular rights, members and appurtenances thereto appertaining, to the use, benefit and behoof of Mortgagee, forever, in FEE SIMPLE, OR AS A LEASEHOLD INTEREST, as the case may be, subject to the terms hereof. AND UNTO the Tennessee Trustee, the Texas Trustee and the Virginia Trustee (for the equal and ratable benefit of the Secured Creditors), as trustee for the benefit of the Mortgagee, to the successors of said trustee in the trust created by this Mortgage, and to its or their respective successors and assigns forever, in trust, with 6 power of sale, the Mortgaged Property located in the States of Tennessee, Texas and Virginia, respectively; and TO HAVE AND TO HOLD the Mortgaged Property located in the States of Tennessee, Texas and Virginia with all the privileges and appurtenances to the same belonging, and with the possession and right of possession thereof, unto the Trustees for the benefit of the Mortgagee, to its and their successors in the trust created by this Mortgage, and to its and their respective assigns forever, in trust, however, upon the terms and conditions set forth herein; SUBJECT, HOWEVER, to exceptions and reservations and matters herein recited, and Permitted Encumbrances (as defined in the Credit Agreement). PROVIDED, HOWEVER, that these presents are upon the condition that, if the Mortgagor or its successors and assigns shall pay or cause to be paid the Indebtedness and shall perform or cause to be performed its obligations all at the times and in the manner stipulated in the Credit Documents and if all and singular the covenants and promises in the Credit Documents are duly kept, performed and observed, then after the last such event this Mortgage and the estate and rights hereby granted shall thereupon cease and be void; otherwise they shall remain and be in full force and effect; AND IT IS HEREBY COVENANTED, DECLARED AND AGREED by the Mortgagor that the Obligations and the Credit Agreement and Security Documents are to be secured and that the Mortgaged Property is to be held, subject to the further covenants, conditions, uses and trusts herein set forth for the benefit of the Mortgagee, its successors and assigns and other Secured Creditors. AND TO PROTECT THE SECURITY OF THIS MORTGAGE, the Mortgagor covenants and agrees as follows: 7 ARTICLE I REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE MORTGAGOR 1.1 TITLE TO THIS PROPERTY. (a) The Mortgagor represents and warrants as of the date hereof (i) that it has good and marketable title to a fee simple estate or a valid and subsisting leasehold estate, as the case may be, in this Property, free and clear of any liens and encumbrances (except Permitted Encumbrances); (ii) that, upon recordation, this Mortgage will create a valid, perfected first lien upon this Property, and it has not created any other lien or encumbrance upon this Property which will remain undischarged after recording of this Mortgage (except Permitted Encumbrances); (iii) that the Mortgagor has full power and lawful authority to encumber this Property in the manner set forth herein; and (iv) that there are no defenses or offsets to this Mortgage or to the Obligations which it secures. The Mortgagor shall, subject to Permitted Encumbrances, preserve such title and the validity, perfection and priority of this Mortgage and shall forever warrant and defend the same to the Mortgagee against the claims of all persons and parties whatsoever (but the foregoing warranty shall not be deemed to be for the benefit of any title insurer unless failure to so warrant title would impair the effectiveness of any title insurance policy insuring the lien of this Mortgage). (b) To the extent that this Mortgage secures a leasehold estate and not a fee simple estate, the Mortgagor shall give the Mortgagee prompt notice in writing of any material default under the Lease or of the receipt by the Mortgagor of any notice of default from the lessor thereunder by providing to the Mortgagee a copy of any such notice received by the Mortgagor from such lessor; and the Mortgagor shall furnish to the Mortgagee promptly upon the Mortgagee's request any and all information concerning the performance by the Mortgagor of the covenants of the Lease as shall be reasonably requested by the Mortgagee and shall permit the Mortgagee or its representatives at all reasonable times and upon reasonable notice to make investigation or examination concerning the performance by the Mortgagor of the covenants of the Lease. 8 (c) Unless otherwise permitted under Section 8.1 of the Credit Agreement, to the extent that this Mortgage secures a leasehold estate and not a fee simple estate, the Mortgagor shall, at least six months, or as otherwise required by the Lease, prior to the last day upon which the lessee under the Lease may validly exercise any option to renew or extend the term of the Lease, (i) exercise such option in such manner as will cause the term of the Lease effectively to be renewed or extended for the period provided by such option and (ii) give prompt written notice thereof to the Mortgagee; provided that in the event of the failure of the Mortgagor so to do, the Mortgagee shall have, and is hereby granted, the irrevocable right to exercise any such option, whether in its own name and behalf or in the name and behalf of its designee or nominee or in the name and behalf of the Mortgagor or in any other manner authorized under the Lease as the Mortgagee shall in its sole discretion determine. 1.2 OPERATION OF THIS PROPERTY. The Mortgagor during the term hereof will obtain and maintain all licenses, authorizations, permits and/or approvals necessary for the ownership, operation and management of this Property, except those that the failure of which to obtain could not result in a material adverse effect on the business, property, assets, nature of assets, liabilities, condition (financial or otherwise) or prospects of the Mortgagor or of the Mortgagor and its Subsidiaries taken as a whole, including, without limitation, all required environmental permits. 1.3 PAYMENT AND PERFORMANCE OF OBLIGATIONS. The Mortgagor shall pay all of the Obligations when due and without offset or defense, and shall observe and comply in all respects with all of the terms, provisions, conditions, covenants and agreements to be observed and performed by it under this Mortgage. 1.4 MAINTENANCE, REPAIR, ALTERATIONS, ETC. The Mortgagor will: keep and maintain this Property in good condition and repair; make or cause to be made, as and when necessary, all repairs, renewals and replacements, structural and nonstructural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen which are necessary to so maintain this Property; except as otherwise provided in Sections 1.7 or 1.12 hereof or 9 in the Credit Agreement and provided the Mortgagor has received insurance proceeds for restoration pursuant to Section 1.7(c) hereof, restore any Improvement which may be damaged or destroyed so that the same shall, to the extent permitted by applicable law, be at least equal to its value, condition and character immediately prior to the damage or destruction, and promptly pay when due all claims for labor performed and materials furnished therefor; subject to the Mortgagor's rights pursuant to Section 1.19 hereof, comply with all laws, ordinances, regulations, covenants, conditions and restrictions (collectively, a "Law") now or hereafter affecting this Property or any part thereof or the use thereof or requiring any alterations or improvements, except to the extent that failure to so comply could not, in the aggregate, have a material adverse effect on the business, property, assets, nature of assets, liabilities, condition (financial or otherwise) or prospects of the Mortgagor or of the Mortgagor and its Subsidiaries taken as a whole; not commit or permit any waste or deterioration (usual wear and tear excepted) of this Property; comply with the provisions of the Lease, any material lease, material easement or other material agreement affecting all or any part of this Property; and not permit the Improvements or any part thereof to become deserted or unguarded so as to result in a material adverse affect on the value of the Improvements or any part thereof or the security interest of the Secured Creditors therein. 1.5 REQUIRED INSURANCE. The Mortgagor will, at its expense, at all times during the term hereof provide, maintain and keep in force policies, issued by financially sound and reputable insurance companies, of property, hazard and liability insurance which provide substantially the same (or greater) coverage as those policies of insurance described in the Credit Agreement, together with statutory workers' compensation insurance with respect to any work performed on or about this Property; and such other insurance against loss or damage with respect to this Property and the Equipment incorporated therein to the extent and in the manner provided in the Credit Agreement. 1.6 POLICY PROVISIONS, ETC. (a) Each policy of insurance maintained by the Mortgagor pursuant to Section 1.5 hereof shall (i) name the Mortgagee as an additional insured with respect to liability insurance 10 coverage; (ii) contain the standard non-contributory mortgagee clause endorsement in favor of the Mortgagee with respect to hazard insurance coverage; (iii) name the Mortgagee as loss payee and provide that all insurance proceeds for losses with respect to hazard insurance coverage shall be adjusted and be payable in accordance with Section 1.7 hereof; (iv) include effective waivers by the insurer of all rights of subrogation against any named insured; (v) except in the case of public liability insurance and workers' compensation insurance, provide that any losses shall be payable notwithstanding (A) any act, failure to act, negligence of, or violation or breach of warranties, declarations or conditions contained in such policy by the Mortgagor or the Mortgagee or any other named insured or loss payee, (B) the occupation or use of the insured properties for purposes more hazardous than those permitted by the terms of the policy, (C) any foreclosure or other proceeding or notice of sale relating to the insured properties or (D) any change in the title to or ownership or possession of the insured properties; (vi) provide that if all or any part of such policy is canceled, terminated or expires, the insurer will forthwith give notice thereof to each named insured and loss payee and that no cancellation, termination, expiration or reduction in amount or material change in coverage thereof shall be effective until at least thirty (30) days after receipt by each named insured and loss payee of written notice thereof (but only ten (10) days' prior written notice of cancellation for failure to make payments under such policies); and (vii) not be subject to a deductible in excess of the amount set forth on Schedule VIII to the Credit Agreement. (b) The Mortgagor shall pay as and when the same become due and payable the premiums for all insurance policies that the Mortgagor is required to maintain hereunder, and all such policies shall be nonassessable. The Mortgagor will deliver to the Mortgagee concurrently herewith original certificates setting forth in reasonable detail the terms (including, without limitation, any applicable notice requirements) of all insurance policies that the Mortgagor is required to maintain hereunder. (c) Not later than ten (10) days prior to the expiration, termination or cancellation of any insurance policy which the Mortgagor is required to maintain 11 hereunder, the Mortgagor shall obtain a replacement policy or policies (or a binding commitment for such replacement policy or policies), which shall be effective no later than the date of the expiration, termination or cancellation of the previous policy. (d) All insurers shall be authorized to issue insurance in the State in which this Property is located, and all insurers and reinsurers shall have the A.M. Best rating of "A-" or better and a financial size rating of XII in the current edition of Best Insurance Reports or such other ratings as shall be reasonably acceptable to the Mortgagee. 1.7 INSURANCE PROCEEDS. (a) Mortgagor shall give prompt written notice to the Mortgagee of the occurrence of any damage to or destruction of the Improvements (which term as used in this Section 1.7 shall include Equipment) in an amount greater than $100,000. (b) In the event of any damage to or destruction of the Improvements or any part thereof and at such time there shall have occurred and be continuing (i) a Bankruptcy Default or Notified Acceleration Event (as each such term is defined in the Borrower Security Agreement, provided, however, references therein to the Assignor and the Collateral Agent shall be references to the Mortgagor and the Mortgagee, respectively) or (ii) any other Event of Default hereunder or Acceleration Event (as such term is defined in the Borrower Security Agreement, provided, however, references therein to the Assignor and the Collateral Agent shall be references to the Mortgagor and the Mortgagee, respectively), but in the case of this clause (ii) only to the extent the Required Banks have notified the Mortgagee in writing that a Specified Event (as hereinafter defined) shall be deemed to have occurred hereunder (or under the Mortgages generally) (with the occurrence of any of the events described in preceding clause (i), or preceding clause (ii) if the notice referred to herein has been received, each called a "Specified Event"), the Mortgagee shall receive all proceeds of hazard insurance and shall apply such proceeds to the prepayment of the Obligations in accordance with Section 7.4 of the Borrower Security Agreement. 12 (c) In the event of any damage to or destruction of the Improvements, and if the Mortgagor shall elect to repair or restore the Improvements, and if a Specified Event shall not have occurred and be continuing hereunder, the Mortgagor shall be entitled to receive all insurance proceeds and the Mortgagor shall apply such proceeds to the payment of the costs and expenses of repairing and restoring the Improvements. (d) If Section 1.7(b) shall be applicable because of the occurrence and continuance of a Specified Event, the Mortgagee shall have the right to settle, adjust or compromise any claim under any policy of insurance. In all other cases, the Mortgagor may settle, adjust or compromise any claim. 1.8 INDEMNIFICATION. If the Mortgagee, any Secured Creditor or any of their respective successors, assigns, employees, agents and servants (hereinafter in this Section 1.8 referred to individually as an "Indemnitee" and collectively as "Indemnitee") is made a party defendant to any litigation concerning this Mortgage or this Property or any part thereof, or the construction, operation or occupancy of the Improvements by the Mortgagor or anyone else, the Mortgagor shall indemnify, defend and hold such Indemnitee harmless from all liability by reason of said litigation, including reasonable attorneys' fees and expenses incurred by such Indemnitee in any such litigation, whether or not any such litigation is prosecuted to judgment; provided, however, that nothing herein shall be deemed to require the Mortgagor to indemnify, defend and hold harmless any Indemnitee to the extent any of the foregoing is caused by the gross negligence or willful misconduct of such Indemnitee. If the Mortgagor breaches any term of this Mortgage, the Mortgagee may employ an attorney or attorneys to protect its rights hereunder, and the Mortgagor shall pay the reasonable attorneys' fees and expenses incurred by the Mortgagee, whether or not an action is actually commenced against the Mortgagor by reason of such breach. All amounts due and payable by the Mortgagor to any Indemnitee pursuant to this Section 1.8 shall constitute "Obligations" hereunder and be secured hereby. 1.9 IMPOSITIONS. (a) Subject to Section 1.19 hereof, the Mortgagor will pay or cause to be paid on a timely basis all real property taxes and material assess- 13 ments, general and special, and all other material taxes and material assessments of any kind or nature whatsoever, which are assessed or imposed upon any of this Property, or arising in respect of the operation, occupancy, use or possession thereof (all of which taxes, assessments and other governmental or nongovernmental charges of like or different nature are hereinafter referred to as "Impositions"); provided, however, that if, by Law, any such Imposition is payable, or may at the option of the payer be paid, in installments, the Mortgagor may pay the same together with any accrued interest on the unpaid balance of such Imposition in installments as the same may become due. (b) If under the provisions of any Law now or hereafter in effect there shall be assessed or imposed: (i) a tax or assessment on this Property in lieu of or in addition to the Impositions payable by the Mortgagor pursuant to subparagraph (a) of this Section 1.9, or (ii) a license fee, tax or assessment imposed on the Mortgagee and measured by or based in whole or in part upon the amount of the outstanding Obligations, then all such taxes, assessments or fees shall be deemed to be included within the term "Impositions" as defined in subparagraph (a) of this Section 1.9, and the Mortgagor shall, subject to Section 1.19 hereof, pay and discharge or cause to be paid and discharged the same as herein provided or shall reimburse or otherwise compensate the Mortgagee for the payment thereof. Anything to the contrary herein notwithstanding, the Mortgagor shall not have any obligation to pay any franchise, doing business, estate, inheritance, income, excess profits or similar taxes levied on the Mortgagee or on the Obligations. (c) The Mortgagor covenants to furnish to the Mortgagee, promptly following the Mortgagee's request, receipts of the appropriate taxing or other authority, or other proof reasonably satisfactory to the Mortgagee, evidencing the payment of Impositions. (d) Subject to Section 1.19 hereof, the Mortgagor will pay all taxes, charges, filing, registration and recording fees, excises and levies imposed in connection with the recording of this Mortgage or imposed upon the Mortgagee by reason of its ownership of this Mortgage, other than income, estate, inheritance, excess profits, franchise and doing business taxes or similar 14 taxes, and shall pay any and all stamp taxes and other taxes required to be paid on any of the Obligations. In the event the Mortgagor fails to make any such payment within thirty (30) days after written notice thereof from the Mortgagee, then the Mortgagee shall have the right, but shall not be obligated to, pay the amount due and the Mortgagor shall, on written demand, reimburse the Mortgagee for said amount. 1.10 UTILITIES. Subject to Section 1.19 hereof, the Mortgagor will pay when due all utility charges which are incurred by the Mortgagor for the benefit of this Property or which may become a charge or lien against this Property for gas, electricity, steam, water or sewer services furnished to this Property and all other assessments or charges of a similar nature, whether public or private, affecting this Property whether or not such taxes, assessments or charges are liens thereon. 1.11 ACTIONS AFFECTING THIS PROPERTY. The Mortgagor will appear in and contest any action or proceeding purporting to affect the security hereof or the rights or powers of the Mortgagee hereunder; and the Mortgagor will pay all costs and expenses incurred by the Mortgagor, including cost of evidence of title and attorneys' fees, in any such action or proceeding. 1.12 CONDEMNATION. (a) Should this Property or any part thereof or interest therein be taken or damaged by reason of any public improvements or condemnation proceeding or in any other similar manner ("Condemnation"), or should the Mortgagor receive any notice or other information thereof, the Mortgagor shall give prompt written notice thereof to the Mortgagee. (b) In the event of a Condemnation of this Property or any part thereof and if the Mortgagor (with the consent of the Mortgagee) shall elect not to repair or restore this Property, or if a Specified Event shall have occurred and be continuing hereunder, the Mortgagee shall receive all compensation, awards and other payments or relief therefor made or granted (the "Proceeds") and shall be entitled, at the Mortgagee's option, to commence, appear in and prosecute in its own name any action or proceeding in connection therewith. All Proceeds shall be deemed assigned to the Mortgagee, and the Mortgagor agrees to execute such further assign- 15 ments of the Proceeds as the Mortgagee may require. If the Mortgagor shall elect not to repair or restore this Property (with the consent of the Mortgagee), or if a Specified Event shall have occurred and be continuing hereunder, the Mortgagee shall have the right to receive and apply all such Proceeds in the manner set forth in Section 1.7(b) hereof as if the Proceeds were insurance proceeds. Such application or release shall not, by itself, cure or waive any default hereunder or notice of default under this Mortgage or invalidate any act done pursuant to such notice, and shall affect the lien of this Mortgage only to the extent of a reduction in the amount of said lien by the amount so applied. Provided no Specified Event shall have occurred, nothing herein shall be construed so as to prohibit the Mortgagor from commencing and prosecuting any actions. Upon the occurrence of a Specified Event, the commencement and prosecution of all actions shall be subject to the reasonable consent of the Mortgagee. (c) In the event of a Condemnation and if the Mortgagor shall elect to repair and restore this Property, if a Specified Event shall not have occurred and be continuing hereunder, the Mortgagor shall be entitled to receive all Proceeds and the Mortgagor shall apply the Proceeds to the payment of the costs and expenses of repairing and restoring this Property. (d) If Section 1.12(b) hereof shall govern because of the occurrence and continuance of a Specified Event, the Mortgagee alone shall have the right to settle, adjust or compromise any claim in connection with a Condemnation of this Property. In all other cases the Mortgagee and the Mortgagor shall consult and cooperate with each other and each shall be entitled to participate in all meetings and negotiations with respect to the settlement of such claim. 1.13 ADDITIONAL SECURITY. In the event the Mortgagee at any time holds additional Security for any of the Obligations, it may enforce, sell or otherwise realize upon the same, at its option, either before or concurrently herewith or after enforcing its remedies hereunder. 1.14 SUCCESSORS AND ASSIGNS. This Mortgage applies to, inures to the benefit of and binds the par- 16 ties hereto, the Secured Creditors and their respective successors and assigns. 1.15 INSPECTIONS. The Mortgagor hereby authorizes the Mortgagee, its agents, representatives or workmen, to enter at such reasonable times and intervals and accompanied by a representative designated by the Mortgagor (except that with respect to any emergency, the Mortgagee, its agents, representatives or workmen may enter at any time and alone if a representative of the Mortgagor is not immediately available) upon or in any part of this Property for the purpose of inspecting the same, and for the purpose of performing any of the acts which the Mortgagee is authorized to perform under the terms of this Mortgage. 1.16 TRANSFERS. Except as otherwise permitted in accordance with the Credit Agreement, no part of this Property or of any legal or beneficial interest in this Property shall be sold, assigned, conveyed, transferred or otherwise disposed of (whether voluntarily or involuntarily, directly or indirectly, by sale of stock or any interest in the Mortgagor, by lease, sublease, or assignment of lease, or by operation of law or otherwise). 1.17 MODIFICATIONS. Unless otherwise provided in the Credit Agreement, to the extent that this Mortgage secures a leasehold estate and not a fee simple estate, the Mortgagor shall not, without the Mortgagee's consent, which consent is not to be unreasonably withheld, modify, extend or in any way alter the terms of the Lease or cancel, release, terminate or surrender the Lease or waive, excuse, condone or in any way release or discharge the lessor thereunder of or from the obligations, covenants, conditions and agreements by such lessor to be done and performed, and the Mortgagor further covenants that it will not do or permit anything to be done, the doing of which, or refrain from doing anything, the omission of which, would materially impair the security of this Mortgage or be grounds for declaring a default under the Lease; provided, however, that the Mortgagor shall be allowed to modify the Lease so long as such modification does not materially increase the obligations of the Mortgagor thereunder or materially adversely affect the value of this Property and provided further that the Mortgagee receives notice of any such modification. 17 1.18 INDEBTEDNESS SECURED BY LIENS. Except as otherwise provided in the Credit Agreement and except for Permitted Encumbrances, the Mortgagor shall not create, incur or suffer to exist, directly or indirectly, any lien or other exception to title or ownership upon or against this Property or any part thereof or any rents or income arising therefrom. 1.19 ENVIRONMENTAL PROTECTION MATTERS. The Mortgagor shall comply with the provisions of the Credit Agreement relating to environmental matters, including, but not limited to, Sections 6.16, 7.1(h) and 7.5 of the Credit Agreement, which provisions are incorporated herein by reference. 1.20 PERMITTED CONTESTS. Notwithstanding anything to the contrary contained in this Mortgage, the Mortgagor at its expense may contest (after prior written notice to the Mortgagee if the contested amount is in excess of $75,000) by appropriate legal, administrative or other proceedings conducted in good faith and with due diligence, the amount or validity or application, in whole or in part, of any Imposition or lien therefor or any Law, or the application thereof to the Mortgagor, or the application of any instrument of record affecting this Property or any part thereof (other than this Mortgage) or any claims of mechanics, materialmen, suppliers or vendors and lien therefor, or any utility charges and lien therefor, and may withhold payment of the same pending such proceedings if permitted by Law; provided that (a) in the case of any Impositions or lien therefor or any claims of mechanics, materialmen, suppliers or vendors and lien therefor, such proceedings shall suspend the collection therefor from the Mortgagee and this Property, (b) neither this Property nor any part thereof or interest therein will be sold, forfeited or lost if the Mortgagor pays the amount or satisfies the condition being contested, and the Mortgagor would have the opportunity to do so in the event of the Mortgagor's failure to prevail in the contest, (c) the Mortgagee shall not, by virtue of such permitted contest, be in any danger of any criminal liability, or any civil liability for which the Mortgagor has not furnished secu- 18 rity as provided in clause (d) below, and neither this Property nor any interest therein would be subject to the imposition of any lien which would have priority over the lien of this Mortgage for which the Mortgagor has not furnished security as provided in clause (d) below, and (d) the Mortgagor shall have established on its books in accordance with United States generally accepted accounting principles a sufficient reserve to discharge such Imposition or lien or claim or other security as reasonably requested by and reasonably satisfactory to the Mortgagor if so required pursuant to clause (c) above or if the failure to comply with such Imposition or Law will result in a lien or charge against this Property in excess of $100,000 or the Mortgagee would be in danger of any civil liability. ARTICLE II SECURITY AGREEMENT 2.1 CREATION OF SECURITY INTEREST. The Mortgagor, as debtor, hereby grants to the Mortgagee, as secured party, a security interest in, and lien on, the following property (collectively, the "Secured Property" and, together with the Mortgaged Property, the "Collateral"): (a) All casualty insurance policies required to be maintained by the Mortgagor hereunder, together with all general intangibles, contract rights and accounts arising therefrom; (b) All leases and Rents and all Proceeds in any Condemnation, together with all general intangibles, contract rights and accounts arising therefrom; (c) All of the Equipment which constitutes personal property and all other personal property described in the Granting Clauses hereof; (d) Any and all renewals or replacements of or additions and substitutions to any of the above-mentioned items; and (e) All proceeds of the above-mentioned items. These security interests and liens shall: (a) extend to all collateral of the kind which is the subject of this Article II which the Mortgagor may acquire at any time 19 during the continuation of this Mortgage; and (b) secure all the Obligations. 2.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MORTGAGOR. The Mortgagor hereby warrants, represents and covenants as follows: (a) The Mortgagor is, and as to all the Secured Property acquired after the date hereof will be, the sole owner of the Secured Property, free from any lien, security interest, encumbrance or claim thereon of any kind whatsoever (other than Permitted Encumbrances and liens and encumbrances permitted under the Credit Agreement). The Mortgagor will notify the Mortgagee of, and will defend the Secured Property against, all claims and demands of all persons at any time claiming the Secured Property or any interest therein other than such interests as are permitted herein and in the Credit Agreement. (b) The Secured Property is not used or bought for personal, family or household purposes. (c) Subject to the terms of the Credit Agreement, the Secured Property affixed or attached to this Property will be kept on or at this Property and the Mortgagor will not remove any portion or item of such Secured Property without the prior written consent of the Mortgagee, except such portions or items of such Secured Property which are consumed, worn out in ordinary usage, become obsolete or are removed in the ordinary course of business. (d) The Mortgagor maintains a place of business at the address above stated for the Mortgagor and the Mortgagor will immediately notify the Mortgagee in writing of any change in its place of business. (e) The Mortgagor shall cause all financing and continuation statements and other instruments with respect to the Secured Property at all times to be kept recorded, filed or registered in such manner and in such places as may be required by law fully to evidence, perfect and secure the interests of the Mortgagee in the Secured Property, and shall pay all filing fees in connection therewith. At the request of the Mortgagee, the Mortgagor will join the Mortgagee in executing one or 20 more financing statements and renewals, continuation statements and amendments thereof pursuant to the Uniform Commercial Code of the State in which this Property is located (the "Code") in form satisfactory to the Mortgagee, and will pay the cost of filing the same in all public offices wherever filing is deemed by the Mortgagee to be necessary or desirable to preserve or perfect its security interest granted hereunder. Without limiting the foregoing, to the extent permitted by applicable law, the Mortgagor hereby irrevocably appoints the Mortgagee its attorney-in-fact (coupled with an interest) to execute, deliver and file such instruments for or on behalf of the Mortgagor upon the failure of the Mortgagor to do so within a reasonable time after written demand, and the Mortgagor will pay the cost of any such filing. (f) This Mortgage constitutes a Security Agreement, Fixture Filing and Financing Statement as those terms are used in the Code. 2.3 SURVIVAL OF SECURITY AGREEMENT. (a) Notwithstanding any release of any or all of the property included in the Mortgaged Property which is deemed "real property", or any proceedings to foreclose this Mortgage or its satisfaction of record, the terms hereof shall survive as a security agreement with respect to the security interest created hereby and referred to above until the Termination Date (as defined in the Borrower Security Agreement). (b) After the Termination Date (as defined in the Borrower Security Agreement), at the request and expense of the Mortgagor, the Mortgagee will execute and deliver to the Mortgagor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this security agreement, and will duly assign, transfer and deliver to the Mortgagor (without recourse and without any representation or warranty) such of the Secured Property of the Mortgagor as may be in the possession of the Mortgagee and as has not theretofore been sold or otherwise applied or released pursuant to this security agreement. 21 ARTICLE III ASSIGNMENT OF LEASES, RENTS AND PROFITS 3.1 ASSIGNMENT. To further secure the Obligations, the Mortgagor hereby sells, assigns and transfers unto the Mortgagee all the Rents now due and which may hereafter become due under or by virtue of any lease, whether written or verbal, or any letting of, or of any agreement for the use or occupancy of this Property or any part thereof, which may have been heretofore or may be hereafter made or agreed to or which may be made or agreed to by the Mortgagee under the powers herein granted, it being the intention hereby to establish an absolute transfer and assignment of all such leases and agreements, and all the avails thereunder, to the Mortgagee and not merely the passing of a security interest. The Mortgagor, to the extent permitted by applicable law, hereby irrevocably appoints the Mortgagee its true and lawful attorney (coupled with an interest) in its name, place and stead (with or without taking possession of this Property as provided in Section 4.2 (a) hereof) to rent, lease or let all or any portion of this Property to any party or parties at such rental and upon such terms as the Mortgagee shall, in its reasonable discretion, determine, and to collect all of said Rents arising from or accruing at any time hereafter, and all now due or that may hereafter become due under each and every one of the leases and agreements, written or verbal, or other tenancy existing, or which may hereafter exist on this Property, with the same rights and powers and subject to the same immunities, exoneration of liability and rights of recourse and indemnity as the Mortgagee would have upon taking possession pursuant to the provisions of Section 4.2(a) hereof. The Mortgagor represents and agrees that except with the prior written approval of the Mortgagee, no Rent has been or will be paid by any Person in possession of any portion of this Property for more than one installment in advance and that the payment of none of the Rents to accrue for any portion of this Property will be waived, released, reduced, discounted or otherwise discharged or compromised by the Mortgagor, except as may be approved in writing by the Mortgagee. As between the Mortgagor and the Mortgagee, the Mortgagor waives any rights to set-off disputed amounts due from any Person in possession of any portion of this Property against sums due to the Mortgagee (but the Mortgagor 22 shall not be deemed hereunder to have waived any rights or remedies against such Person). The Mortgagor agrees that, except as provided in this Section 3.1 or expressly permitted under the Credit Agreement, it will not assign any of the Rents of this Property. Nothing herein contained shall be construed as constituting the Mortgagee a mortgagee in possession in the absence of the taking of actual possession of this Property by the Mortgagee pursuant to Section 4.2(a) hereof. In the exercise of the powers herein granted the Mortgagee, no liability shall be asserted or enforced against the Mortgagee, all such liability being expressly waived and released by the Mortgagor, except liability arising out of the gross negligence or willful misconduct of the Mortgagee. The Mortgagor further agrees to assign and transfer to the Mortgagee all future leases upon all or any part of this Property and to execute and deliver, at the request of the Mortgagee, all such further assurances and assignments in this Property as the Mortgagee shall from time to time reasonably require. Although it is the intention of the parties that the assignment contained in this Section 3.1 shall be a present absolute assignment, it is expressly understood and agreed, anything herein contained to the contrary notwithstanding, that the Mortgagee shall not exercise any of the rights or powers conferred upon it by this Section except after the occurrence and during the continuance of a Specified Event and until such time the Mortgagor may continue to collect and use the rents and operate and manage this Property. ARTICLE IV EVENTS OF DEFAULT AND REMEDIES 4.1 EVENTS OF DEFAULT. The occurrence of any of the following specified events shall constitute an "Event of Default" hereunder: (a) The Mortgagor shall default in the payment when due of any amounts owed by it hereunder to the Mortgagee or any other Person and such default shall continue unremedied for a period of five (5) days after written notice to it by the Mortgagee; (b) An "Event of Default" as defined in the Credit Agreement shall occur and be continuing; 23 (c) Any payment default on any of the Obligations after the expiration of any applicable grace period; (d) The Mortgagor shall default in the due performance by it of any other term, covenant or agreement contained in this Mortgage, not listed in clauses (a), (b) or (c), and such default shall continue unremedied for a period of twenty (20) Business Days after written notice to the Mortgagor by the Mortgagee; provided, however, that if such default is not susceptible of complete cure within such twenty (20) Business Day period and the Mortgagor has commenced to cure within such period, no Event of Default shall be deemed to have occurred if the Mortgagor diligently and continuously prosecutes such cure to completion and (i) if such cure or a partial cure is required by Law within a certain time period, such cure or such partial cure is completed within such time period or any period during which the Mortgagor in good faith contests such Law, and the Mortgagor provides the Mortgagee for the benefit of the Secured Creditors with a bond, if required by law or requested by the Mortgagee, or other collateral in an amount sufficient to assure the cure and to pay any damages resulting from the delay caused by such contest, or (ii) if in the Mortgagee's reasonable judgment such cure or a partial cure may be required to be completed in a shorter period in order to prevent imminent risk of damage to property or imminent risk of danger to health and safety as specified in a notice from the Mortgagee to the Mortgagor, the portion of such cure necessary to eliminate such risks is completed within such shorter period; (e) To the extent that this Mortgage secures a leasehold estate and not a fee simple estate, the occurrence of any material default by Mortgagor as lessee under the Lease which is not cured within any applicable grace period. 4.2 REMEDIES UPON OCCURRENCE OF SPECIFIED EVENTS. If a Specified Event shall occur and be continuing, the Mortgagee may, to the extent permitted by applicable law: (a) either in person or by agent with or without bringing any action or proceeding, or by a re- 24 ceiver appointed by a court and without regard to the adequacy of its security, enter upon and take possession of this Property or any part thereof, in its own name or in the name of the Mortgagor, and do or cause to be done any acts which it deems necessary or desirable to preserve the value of this Property or any part thereof or interest therein, increase the income therefrom or protect the security hereof and, with or without taking possession of this Property, make, cancel or modify leases, subject to the terms of any non-disturbance agreements with respect to such leases, and sue for or otherwise collect the Rents thereof, including those past due and unpaid, and apply the same, less costs of operation and collection, including attorneys' fees, to the payment of the Obligations in accordance with Section 7.4 of the Borrower Security Agreement. The entering upon and taking possession of this Property, the collection of such Rents and the application thereof as aforesaid, shall not, by itself, cure or waive any Specified Event or other Event of Default or notice of default hereunder or invalidate any act done in response to such Specified Event or other Event of Default or pursuant to such notice of default hereunder and, notwithstanding the continuance in possession of this Property or the collection, receipt and application of Rents, the Mortgagee shall be entitled to exercise every right provided for herein, in the Credit Agreement or at law or in equity upon the occurrence of any Specified Event; (b) commence and maintain one or more actions at law or in equity or by any other appropriate remedy (i) to protect and enforce the Mortgagee's rights, whether for the specific performance of any covenant or agreement herein contained (which covenants and agreements the Mortgagor agrees shall be specifically enforceable by injunctive or other appropriate equitable remedy), (ii) to collect any sum then due hereunder, (iii) to aid the execution of any power herein granted, or (iv) to foreclose this Mortgage, without prejudice to the right of the Mortgagee thereafter to pursue and enforce any other appropriate remedy against the Mortgagor; and (c) exercise any or all of the remedies available to a secured party under the Code. 4.3 RIGHT OF FORECLOSURE. Following a Specified Event, the Mortgagee shall have the right, at its 25 option, to proceed at law or in equity to foreclose fully or partially this Mortgage. The Mortgagee may, to the extent permitted by law, adjourn from time to time any sale by it to be made under or by virtue of this Mortgage by announcement at the time and place appointed for such sale or for such adjourned sale or sales; and, except as otherwise provided by an applicable provision of law, the Mortgagee may make such sale at the time and place to which the same shall be so adjourned. With respect to all components of the Mortgaged Property, except the Land and the Improvements, the Mortgagee is hereby irrevocably appointed the true and lawful attorney of the Mortgagor (coupled with an interest), in its name and stead, to, after the occurrence of and during the continuance of an Event of Default, make all necessary conveyances, assignments, transfers and deliveries of the Mortgaged Property, exclusive of the Land and the Improvements, and for that purpose the Mortgagee may execute all necessary instruments of conveyance, assignment, transfer and delivery, and may substitute one or more persons with such power, the Mortgagor hereby ratifying and confirming all that its said attorney or such substitute or substitutes shall lawfully do by virtue hereof. Notwithstanding the foregoing, the Mortgagor, if so requested by the Mortgagee, shall ratify and confirm any such sale or sales by executing and delivering to the Mortgagee or to such purchaser or purchasers all such instruments as may be advisable, in the judgment of the Mortgagee, for such purpose, and as may be designated in such request. To the extent permitted by law, any such sale or sales made under or by virtue of this Article IV shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of the Mortgagor in and to the properties and rights so sold, and shall be a perpetual bar both at law and in equity against the Mortgagor and against any and all persons claiming or who may claim the same, or any part thereof, from, through or under the Mortgagor with respect to the property interests sold. Upon any sale made under or by virtue of this Article IV, the Mortgagee may, to the extent permitted by law, bid for and acquire the Mortgaged Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting against the Obligations secured hereby the net sales price after deducting therefrom the expenses of the sale and the reasonable cost of the action and any other sums which the Mortgagee is authorized to deduct by 26 law or under this Mortgage (with the application to the Obligations to be in accordance with Section 7.4 of the Borrower Security Agreement). 4.4 SALE OF PREMISES PURSUANT TO FORECLOSURE. In case of a sale pursuant to a foreclosure of this Mortgage, the Mortgaged Property, whether real, personal or mixed, may be sold for cash or credit as an entirety or in parcels, by one sale or by several sales held at one time or at different times, all as the Mortgagee, in its unrestricted discretion, may elect, and the Mortgagor, for and on behalf of itself and all persons claiming by, through or under the Mortgagor, waives any and all right to have the property and estates comprising the Mortgaged Property marshalled upon any foreclosure sale. Any such sale shall bind the Mortgagor, shall operate to divest all right, title and interest whatsoever, either at law or in equity, of the Mortgagor in and to the property sold, and shall be a perpetual bar, both at law and in equity, against the Mortgagor and its successors and assigns, and against any and all persons claiming through or under the Mortgagor with respect to the property interests sold. The proceeds of any sale made under or by virtue of this Article IV, together with any other sums which then may be held by the Mortgagee under this Mortgage, whether under the provisions of this Article or otherwise, shall be applied to the payment of the Obligations in accordance with Section 7.4 of the Borrower Security Agreement. 4.5 APPOINTMENT OF RECEIVER. If a Specified Event shall have occurred and be continuing, in pursuing any of its remedies hereunder, the Mortgagee as a matter of right and without notice to the Mortgagor or anyone claiming under the Mortgagor, and without regard to the then value of this Property or the interest of the Mortgagor therein, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of this Property, and the Mortgagor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of the Mortgagee in case of entry as provided in subparagraph 4.2(a) hereof and shall continue as such and exercise all such powers until the date of confirmation of 27 sale of this Property unless such receivership is sooner terminated. 4.6 REMEDIES NOT EXCLUSIVE. (a) The Mortgagee shall be entitled to enforce payment and performance of any Obligations secured hereby and to exercise all rights and powers under this Mortgage, under the Credit Documents or other agreement or any laws now or hereafter in force, notwithstanding that some or all of the said Obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, deed or trust, pledge, lien, assignment or otherwise. (b) Neither the acceptance of this Mortgage nor its enforcement, whether by court action or pursuant to the powers herein contained, shall prejudice or in any manner affect the Mortgagee's right to realize upon or enforce any other security now or hereafter held by the Mortgagee, it being agreed that the Mortgagee shall be entitled to enforce this Mortgage and any other security now or hereafter held by the Mortgagee in such order and manner as it may in its absolute discretion determine. No remedy herein conferred upon or reserved to the Mortgagee is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by the Credit Documents to the Mortgagee, or to which it may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Mortgagee, and the Mortgagee may pursue inconsistent remedies. 4.7 WAIVER OF REDEMPTION, NOTICE, MARSHALLING, ETC. Notwithstanding anything herein contained to the contrary, to the extent permitted by law, the Mortgagor: (a) will not (i) at any time insist upon, or plead, or in any manner whatever, claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of this Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance of this Mortgage, nor (ii) claim, take or insist upon any benefit or advantage or any law now or hereafter in force providing for the valuation or appraisal of this Property or any part thereof, prior to 28 any sale or sales thereof which may be made pursuant to any provision hereof, or pursuant to the decree, judgment or order of any court of competent jurisdiction, nor (iii) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof and (b) covenants not to hinder, delay or impede the execution of any power herein granted or delegated to the Mortgagee, but to suffer and permit the execution of every power as though no such law or laws had been made or enacted. The Mortgagor, for itself and all who may claim under it, waives, to the extent that it lawfully may, all right to have the Mortgaged Property marshalled upon any foreclosure hereof. 4.8 EXPENSES OF ENFORCEMENT. In connection with any action to enforce any remedy of the Mortgagee under this Mortgage, the Mortgagor agrees to pay all reasonable expenditures and expenses which may be paid or incurred by or on behalf of the Mortgagee including, without limitation, reasonable attorneys' fees, receiver's fees, appraiser's fees, outlays for documentary and expert evidence, stenographer's charges, publication costs, and costs (which may be estimated as to items to be expended after entry of the decree) of procuring all such abstracts of title, title searches and examinations, title insurance policies and similar data and assurances with respect to title and value as the Mortgagee may deem reasonably necessary, and neither the Mortgagee nor any other person shall be required to accept tender of any portion of the indebtedness then secured hereby unless the same be accompanied by a tender of all such expenses, costs and commissions. All expenditures and expenses of the nature in this Section 4.8 mentioned, and such expenses and fees as may be incurred in the protection of this Property and the maintenance of the lien of this Mortgage, including the reasonable fees of any attorney employed by the Mortgagee in any litigation or proceeding, including appellate proceedings, affecting this Mortgage or this Property (including, without limitation, the occupancy thereof or any construction work performed thereon), including probate and bankruptcy proceedings, or in preparation for the commencement or defense of any proceeding or threatened suit or proceeding whether or not an action is actually commenced, shall be immediately due and payable by the Mortgagor, with interest thereon (from the date of such 29 demand for payment) at the default rate set forth in the Credit Agreement and shall be part of the indebtedness secured by this Mortgage. ARTICLE V MISCELLANEOUS 5.1 GOVERNING LAW. (a) This Mortgage was negotiated in New York, and made by Mortgagor and accepted by Mortgagee in the State of New York, and the proceeds of the Notes secured hereby were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects, including, without limiting the generality of the foregoing, matters of construction, validity and performance, this Mortgage and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America, except that at all times the provisions for the creation, perfection, and enforcement of the liens and security interests created pursuant hereto and the other Credit Documents shall be governed by and construed according to the law of the State in which the Mortgaged Property is located, it being understood that, to the fullest extent permitted by the law of such State, the law of the State of New York shall govern the validity and the enforceability of this Mortgage, the other Credit Documents and the obligations arising hereunder or thereunder. To the fullest extent permitted by law, Mortgagor hereby unconditionally and irrevocably waives any claim to assert that the law of any other jurisdiction governs this Mortgage, the Notes and the other Credit Documents and this Indenture, the Notes and the other Credit Documents shall be governed by and construed in accordance with the laws of the State of New York pursuant to Section 5-1401 of the New York General Obligations Law. (b) Any legal suit, action or proceeding against Mortgagee or Mortgagor arising out of or relating to this Mortgage (other than suits relating to Mortgagee's remedy of judicial foreclosure which shall be instituted in the courts of the State in which the Mortgaged Property is located) shall be instituted 30 in any federal or state court in New York, New York, pursuant to Section 5-1402 of the New York General Obligations Law, and Mortgagor waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding and hereby irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. Mortgagor hereby acknowledges that service of any and all process which may be served in any such suit may be done in accordance with the provisions of the Credit Agreement. 5.2 LIMITATION ON INTEREST. It is the intent of the Mortgagor and the Mortgagee in the execution of this Mortgage and all other instruments evidencing or securing the Obligations to contract in strict compliance with the relevant usury laws. In furtherance thereof, the Mortgagee and the Mortgagor stipulate and agree that none of the terms and provisions contained in this Mortgage shall ever be construed to create a contract for the use, forbearance or detention of money requiring payment of interest or loan charges at a rate in excess of the maximum interest rate permitted to be charged by relevant law, and such interest and loan charges shall be limited to and will in no event exceed such rates. 5.3 ANTI-MERGER PROVISION. In the event the Mortgagee shall acquire the fee title to this Property or any part thereof or a leasehold interest, or any other interest in this Property, or any part thereof, by foreclosure or otherwise, Mortgagor agrees that title to this Property or such leasehold or other interest in this Property or any part thereof, shall not merge with the interests conveyed and Mortgage hereunder as a result of such acquisition or for any other reason, but shall remain separate and distinctive states for all purposes; provided, however, that on such an event, Mortgagee, may, at its sole option, elect to merge such interests. 5.4 NOTICES. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile or cable communication) and mailed, telegraphed, telexed, transmitted via facsimile, cabled or delivered: if to the Mortgagor, at 201 Willowbrook Boulevard, Wayne, New Jersey 07470, Attention: Raymond H. Ayers, facsimile # (201) 890-6000; if to the Mortgagee, at One Bankers Trust Plaza, 130 Liberty 31 Street, New York, New York 10006, Attention: Mary Kay Coyle, facsimile # (212) 250-7200, at such other address as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall, when mailed, telegraphed, telexed, transmitted via facsimile, or cabled or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or facsimile, except that notices and communications to the Mortgagee shall not be effective until received by the Mortgagee. 5.5 CAPTIONS. The captions or headings at the beginning of each Article and Section hereof are for the convenience of the parties and are not a part of this Mortgage. 5.6 WAIVER; AMENDMENT. None of the terms and conditions of this Mortgage may be changed, waived, modified or varied in any manner whatsoever except with the prior written consent of the Mortgagor and the Mortgagee with the consent of the Required Banks; provided, however, that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Required Creditors (as defined in the Borrower Security Agreement) of such affected Class. For the purpose of this Mortgage, the term "Class" shall mean each class of Secured Creditors, I.E., whether (x) the Bank Creditors as holders of the Credit Agreement Obligations or (y) the Interest Rate Protection Creditors as the holders of the Interest Rate Protection Obligations. 5.7 FURTHER ASSURANCES. The Mortgagor, at its own expense, will execute, acknowledge and deliver all such instruments and take all such action as may be reasonably necessary to assure to the Mortgagee the interest in the Mortgaged Property herein described and the rights intended to be provided to the Mortgagee herein. 5.8 RELEASE OF MORTGAGE. After the Termination Date (as defined in the Borrower Security Agreement), this Mortgage shall terminate and the Mortgagee, 32 at the request and expense of the Mortgagor, will execute and deliver to the Mortgagor a proper instrument or instruments acknowledging the satisfaction and termination of this Mortgage. 5.9 PARTIAL INVALIDITY. If any of the provisions of this Mortgage or the application thereof to any person, party or circumstances shall to any extent be invalid or unenforceable, the remainder of this Mortgage, or the application of such provision or provisions to persons, parties or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Mortgage shall be valid and enforceable to the fullest extent permitted by law and to this end the provisions of this Mortgage are declared to be severable. 5.10 ADDITIONAL ADVANCES. This Mortgage is given to secure, among other things, Loans, Letters of Credit and other Obligations arising out of the Credit Documents, the Interest Rate Protection Agreements and shall secure not only presently existing Obligations under the Credit Documents and the Interest Rate Protection Agreements, but also any and all other Obligations now owing or which may hereafter be owing by the Mortgagor to the Secured Creditors pursuant to the Credit Documents or the Interest Rate Protection Agreements, however incurred, whether interest, discount or otherwise, and whether the same shall be deferred, accrued or capitalized, including future advances and readvances, whether such advances are obligatory or to be made at the option of the Secured Creditors, or otherwise, to the same extent as if such future advances were made on the date of the execution of this Mortgage. The lien of this Mortgage shall be valid as to all Obligations secured hereby, including future advances under the Credit Agreement or the other Credit Documents, from the time of its filing for record in the recorder's or registrar's office of the county or town, as appropriate, in which this Property is located. The total principal amount of Obligations secured hereby may increase or decrease from time to time, but the total unpaid principal balance of Obligations secured hereby at any one time outstanding shall not exceed THREE HUNDRED MILLION AND 00/100 DOLLARS ($300,000,000) plus interest thereon and any disbursements which the Mortgagee may make under this Mortgage, the Credit Documents, the Interest Rate Protection Agree- 33 ments or any other document with respect hereto (E.G., for payment of Impositions or insurance on this Property) and interest on such disbursements (all such indebtedness being hereinafter referred to as the "maximum amount secured hereby"). This Mortgage is intended to and shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the real estate, to the extent of the maximum amount secured hereby. 5.11 MORTGAGEE AS AGENT FOR SECURED CREDITORS; APPLICATION OF PROCEEDS. (a) It is expressly understood and agreed that the rights and obligations of the Mortgagee as holder of this Mortgage and as agent of the Secured Creditors and otherwise under this Mortgage are only those expressly set forth in this Mortgage. By accepting the benefits hereof, each Secured Creditor shall be deemed to have agreed to the terms and conditions set forth in Article X of the Borrower Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time, which is incorporated herein by reference in its entirety; provided, that all references therein to the "Security Agreement" shall be a reference to this Mortgage, provided further, that all references therein to "the Assignor" shall be a reference to the "Mortgagor," and provided further that all references therein to "the Collateral Agent" shall be a reference to the "Mortgagee." Mortgagee shall act hereunder on the terms and conditions set forth in said Article X. All proceeds received by the Mortgagee for application to the Obligations secured hereby shall be applied as set forth in Section 7.4 of the Borrower Security Agreement. 5.12 DEFAULT UNDER THE LEASE. This Mortgage will be void as to any Lease wherein this Mortgage will cause the Mortgagor to be in default under such Lease. 5.13 NO LIEN AGAINST THE LAND. To the extent that this Mortgage secures a leasehold estate and not a fee simple estate, this Mortgage is not intended to create a lien against the lessor's interest in the Land but only against the Mortgagor's interest in the Mortgaged Property. 5.14 INTENTIONALLY OMITTED. 34 5.15 AS TO MORTGAGED PROPERTY LOCATED IN CONNECTICUT. THIS MORTGAGE IS AND SHALL BE DEEMED A SECURITY AGREEMENT AS DEFINED IN THE UNIFORM COMMERCIAL CODE OF THE STATE OF CONNECTICUT, AND THE REMEDIES FOR ANY VIOLATION OF THE COVENANTS, TERMS AND CONDITIONS OF THE AGREEMENTS CONTAINED SHALL BE (I) AS PRESCRIBED HEREIN, (II) BY GENERAL LAW AND (III) AS TO SUCH PART OF THE SECURITY WHICH IS ALSO REFLECTED IN SAID FINANCING STATEMENT, BY THE SPECIFIC STATUTORY CONSEQUENCES NOW OR HEREAFTER ENACTED AND SPECIFIED IN SAID UNIFORM COMMERCIAL CODE, ALL AT THE MORTGAGEE'S SOLE ELECTION. THE FILING OF SUCH A FINANCING STATEMENT IN THE RECORDS NORMALLY HAVING TO DO WITH PERSONAL PROPERTY SHALL NEVER BE CONSTRUED AS IN ANY WAY DEROGATING FROM OR IMPAIRING THIS DECLARATION AND HEREBY STATED INTENTION OF THE PARTIES HERETO, THAT ALL ITEMS OF BUILDING EQUIPMENT AND OTHER PROPERTY USED IN CONNECTION WITH THE PRODUCTION OF INCOME FROM THE PREMISES (TENANT FURNITURE ONLY EXCEPTED) OR ADAPTED FOR USE THEREIN OR WHICH ARE DESCRIBED OR REFLECTED IN THE MORTGAGE ARE, AND AT ALL TIMES AND FOR ALL PURPOSES AND IN ALL PROCEEDINGS, BOTH LEGAL AND EQUITABLE, SHALL BE REGARDED AS, PART OF THE REAL ESTATE IRRESPECTIVE OF WHETHER OR NOT (I) ANY SUCH ITEM IS PHYSICALLY ATTACHED TO THE IMPROVEMENTS, (II) SERIAL NUMBERS ARE USED (HEREIN OR OTHERWISE) FOR THE BETTER IDENTIFICATION OF CERTAIN EQUIPMENT OR (III) ANY SUCH ITEM IS REFERRED TO OR REFLECTED IN SUCH FINANCING STATEMENT SO FILED AT ANY TIME. SIMILARLY, THE MENTION IN ANY SUCH FINANCING STATEMENT OF (1) THE RIGHTS IN OR THE PROCEEDS OF ANY FIRE AND/OR HAZARD INSURANCE POLICY, (2) ANY AWARD IN EMINENT DOMAIN PROCEEDINGS FOR A TAKING OR FOR LOSS OF VALUE OR (3) THE DEBTOR'S INTEREST AS LESSOR IN ANY PRESENT OR FUTURE LEASE OR RIGHTS TO INCOME GROWING OUT OF THE USE OR OCCUPANCY OF THE PREMISES, WHETHER PURSUANT TO A LEASE OR OTHERWISE, SHALL NEVER BE CONSTRUED AS IN ANY WAY ALTERING ANY OF THE RIGHTS OF THE MORTGAGEE AS DETERMINED BY THIS INSTRUMENT OR IMPUGNING THE PRIORITY OF THE MORTGAGEE'S LIEN GRANTED HEREBY OR BY ANY OTHER RECORDED DOCUMENT, BUT SUCH MENTION IN THE FINANCING STATEMENT IS DECLARED TO BE THE PROTECTION OF THE MORTGAGEE IN THE EVENT ANY COURT OR JUDGE SHALL AT ANY TIME HOLD WITH RESPECT TO (1), (2) OR (3) THAT NOTICE OF THE MORTGAGEE'S PRIORITY OF INTEREST, TO BE EFFECTIVE AGAINST A PARTICULAR CLASS OR PERSONS, INCLUDING BUT NOT LIMITED TO THE FEDERAL GOVERNMENT AND ANY SUBDIVISIONS OR ENTITY OF THE FEDERAL GOVERNMENT, MUST BE FILED IN THE UNIFORM COMMERCIAL CODE RECORDS. PURSUANT TO SECTION 42a-9-402 35 OF THE GENERAL STATUTES OF THE STATE OF CONNECTICUT, THE MORTGAGOR HEREBY AUTHORIZES THE MORTGAGEE, WITHOUT THE SIGNATURE OF THE MORTGAGOR, TO EXECUTE AND FILE FINANCING STATEMENTS (OR CONTINUATIONS THEREOF) IF THE MORTGAGEE SHALL DETERMINE THAT SUCH ARE NECESSARY OR ADVISABLE IN ORDER TO PERFECT OR CONTINUE ITS SECURITY INTEREST IN ANY FIXTURES, CHATTELS OR ARTICLES OF PERSONAL PROPERTY COVERED BY THE MORTGAGE, AND SHALL PAY TO THE MORTGAGEE ON DEMAND ANY EXPENSES INCURRED BY THE MORTGAGEE IN CONNECTION WITH THE PREPARATION, EXECUTION AND FILING OF SUCH STATEMENTS AND ANY CONTINUATION STATEMENTS THAT MAY BE FILED BY THE MORTGAGEE. (a) PREJUDGMENT REMEDY WAIVER. THE MORTGAGOR REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS MORTGAGE IS A PART IS A "COMMERCIAL TRANSACTION" AS DEFINED BY THE STATUTES OF THE STATE OF CONNECTICUT. MONIES NOW OR IN THE FUTURE TO BE ADVANCED TO OR ON BEHALF OF THE MORTGAGOR ARE NOT AND WILL NOT BE USED FOR CONSUMER, PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. THE MORTGAGOR ACKNOWLEDGES THAT IT HAS THE RIGHT UNDER SECTION 52-278A ET SEQ. OF THE CONNECTICUT GENERAL STATUTES, SUBJECT TO CERTAIN LIMITATIONS, TO NOTICE OF AND HEARING ON THE RIGHT OF THE MORTGAGEE TO OBTAIN A PREJUDGMENT REMEDY, SUCH AS ATTACHMENT, GARNISHMENT OR REPLEVIN, UPON COMMENCING ANY LITIGATION AGAINST THE MORTGAGOR. NOTWITHSTANDING SUCH RIGHT, THE MORTGAGOR HEREBY WAIVES ALL RIGHT TO NOTICE, JUDICIAL HEARING OR PRIOR COURT ORDER TO WHICH IT MIGHT OTHERWISE HAVE THE RIGHT UNDER SAID STATUTE OR UNDER ANY OTHER STATE OR FEDERAL STATUTE OR CONSTITUTION IN CONNECTION WITH THE OBTAINING BY THE MORTGAGEE OF ANY PREJUDGMENT REMEDY IN CONNECTION WITH THIS MORTGAGE. THE MORTGAGOR ALSO WAIVES ANY AND ALL OBJECTION WHICH IT MIGHT OTHERWISE ASSERT, NOW OR IN THE FUTURE, TO THE EXERCISE OR USE BY THE MORTGAGEE OF ANY RIGHT OF SETOFF, REPOSSESSION OR SELF-HELP AS MAY PRESENTLY EXIST UNDER STATUTE OR COMMON LAW AND, TO THE EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL PRESENT AND FUTURE VALUATION, APPRAISEMENT, HOMESTEAD, EXEMPTION, STAY, REDEMPTION AND MORATORIUM LAWS. (b) THIS MORTGAGE IS UPON THE STATUTORY CONDITION. 36 (c) THE MATURITY DATE OF EACH OF THE NOTES AND OF THE OBLIGATIONS IS JUNE 15, 2002. COPIES OF THE NOTES ARE ON FILE IN THE PRINCIPAL OFFICE OF THE MORTGAGEE AT THE ADDRESS STATED ON THE FIRST PAGE HEREOF, AND ADDITIONAL INFORMATION REGARDING THE NOTES MAY BE OBTAINED BY CONTACTING THE MORTGAGEE. (d) PARAGRAPH FIRST OF THE GRANT AND CONVEYANCE AS TO THE PROPERTY DESCRIBED IS AMENDED TO READ AS FOLLOWS: LAND All those parcels of real property described in EXHIBIT A hereto and to the extent permitted by law, all parcels of real property hereafter acquired by the Mortgagor (the "Land"). (e) PARAGRAPH SECOND OF THE GRANT AND CONVEYANCE AS TO THE PROPERTY DESCRIBED IS AMENDED TO READ AS FOLLOWS: LEASEHOLDS The leases of real property described in EXHIBIT A of premises as set forth on SCHEDULE I to EXHIBIT A hereto, and to the extent permitted by law, all leases of real property entered into after the date hereof by the Mortgagor or a Subsidiary as tenant or lessee, but excepting only the last day of the effective term under each such lease (the "Leaseholds"). (f) SECTION 1.8 IS AMENDED BY ADDING THE FOLLOWING SENTENCE TO THE END OF SECTION 1.8: To the extent permitted by law, this indemnity shall survive the satisfaction, release or extinguishment of the Lien of this Mortgage including any extinguishment of such Lien by foreclosure or deed in lieu thereof. (g) SECTION 4.5 IS AMENDED BY ADDING THE FOLLOWING SENTENCE TO THE END OF SECTION 4.5: Notwithstanding the foregoing, the Mortgagee shall be entitled, as a matter of right only to the extent 37 permitted by law, to one or more receiverships of the Mortgaged Property, or any portion thereof, and of the earnings, revenues, issues, profits and income thereof. (h) SECTION 5.1 IS AMENDED TO READ AS FOLLOWS: GOVERNING LAW. This Mortgage shall be construed and enforced in accordance with federal law where applicable and otherwise in accordance with the internal laws of the State of New York except to the extent that the laws of any other jurisdiction mandatorily govern the creation of or the manner or procedure for the enforcement of the Lien created by this Mortgage on the trust estate, provided that any remedies herein provided which shall be valid under the laws of the jurisdiction where proceedings for the enforcement hereof shall be taken shall not be affected by any invalidity hereof under the laws of the State of New York. (i) THIS MORTGAGE IS SUBJECT TO ALL OF THE RIGHTS OF THE LANDLORD UNDER THE PROVISIONS, COVENANTS, CONDITIONS, EXCEPTIONS AND RESERVATIONS CONTAINED IN THE LEASES CREATING THE LEASEHOLDS. (j) THE MORTGAGOR HEREBY ACKNOWLEDGES RECEIPT, WITHOUT CHARGE, OF A TRUE AND COMPLETE COPY OF THIS MORTGAGE. (k) The Credit Agreement shall be deemed to be a "commercial revolving loan agreement" pursuant to Section 49-2 of the Connecticut General Statutes. 5.16 AS TO MORTGAGED PROPERTY LOCATED IN FLORIDA. (a) This Mortgage is given to secure not only existing indebtedness, but also such future or additional advances, whether such advances are obligatory or optional, as are made within twenty (20) years from the date hereof, to the same extent as if such future or additional advances were made on the date hereof. (b) In the event any Loan (as defined in the Credit Documents) or any portion thereof is assigned and additional Note(s) are issued in connection therewith, provided that the aggregate amount of the principal 38 and interest evidenced by such Note(s) shall be identical to the amount of principal and interest evidenced by any such Note(s) previously issued, such Note(s) shall be "replacement notes" for the purposes of Florida documentary stamp tax. 5.17 AS TO MORTGAGED PROPERTY LOCATED IN GEORGIA. (a) Notwithstanding anything to the contrary contained herein, and specifically notwithstanding any use herein of the terms "Mortgage," "Deed of Trust," "Mortgagor," "Mortgagee," or "Mortgaged Property," this instrument shall be deemed to be for all purposes a Deed to Secure Debt, passing title, under the provision of O.C.G.A. Section 44-14-60, ET SEQ., and is not a mortgage, all as set forth in Section 5.17(d) below. Any use of the phrase "Mortgage" herein shall be deemed to mean for all purposes herein the phrase "Deed to Secure Debt" as that term is used in the State of Georgia; any use of the phrase "Mortgagor" herein shall be deemed to mean for all purposes herein the phrase "Grantor"; any use of the phrase "Mortgagee" herein shall be deemed to mean for all purposes herein the phrase "Grantee"; and any use of the phrase "Mortgaged Property" herein shall be deemed to mean for all purposes the property deeded to Mortgagee hereby and subject to this Deed to Secure Debt. (b) The first full paragraph on page 2 after the phrase "WITNESSETH" shall be deleted in its entirety and the following shall be substituted in lieu thereof: WHEREAS, the Mortgagor, the various Banks from time to time party thereto and Bankers Trust Company, as Agent (the "Agent"), have entered into a Credit Agreement dated as of June 15, 1995, providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contemplated therein which such Loan and Letters of Credit shall be evidenced by Notes executed on June 15, 1995, which, in the aggregate, have an original principal face amount of $204,144,371, and which Notes shall mature on, at the latest, June 15, 2002 (as used herein, the term "Credit Agreement" means the Credit Agreement described above in this paragraph as the same may be amended, modified, 39 extended, renewed, restated or supplemented from time to time, and including any agreement extending the maturity of, or restructuring (including but not limited to the inclusion of additional borrowers thereunder that are Subsidiaries of Holdings or any increase of amount borrowed) all or any portion of the Indebtedness under such agreement or any successor agreement); (c) The Grant and Conveyance clause which begins with the phrase "NOW, THEREFORE . . .," and which appears as the last partial paragraph on page 4, shall be deleted in its entirety and the following shall be substituted in lieu thereof: NOW, THEREFORE, in consideration of the benefits accruing to the Mortgagor, the receipt and sufficiency of which are hereby acknowledged, and in order to secure the Obligations, Mortgagor does hereby grant, bargain, sell, convey, assign, transfer and set over unto Mortgagee as collateral agent for the Bank Creditors, and the successors and assigns of Mortgagee, all of its estate, right, title and interest in the fee simple estate or the leasehold estate, as the case may be, whether now owned, or hereafter acquired, in and to the property described in Exhibit A hereto, which Exhibit A is incorporated herein by reference. (d) The Habendum Clause of the Grant and Conveyance shall additionally state the following: This instrument is made and intended as a deed to secure debt, passing title, under the provision of O.C.G.A. Section 44-14-60, ET SEQ., and is not a mortgage. (e) The Defeasance Clause on page 7 hereof which begins with the phrase "PROVIDED, HOWEVER, that the presents . . ." shall be deleted in its entirety and the following shall be substituted in lieu thereof: PROVIDED, HOWEVER, if the Mortgagor or its successors and assigns shall pay or cause to be paid the Indebtedness and shall perform or 40 cause to be performed its obligations all at the times and in the manner stipulated in the Credit Documents and if all and singular the covenants and promises in the Credit Documents are duly kept, performed and observed, then Mortgagee will cause this deed to be satisfied and canceled of record, and the Property shall be reconveyed to Mortgagor. (f) Article II shall be amended by adding the following provisions: THIS INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS. THE NAMES OF THE DEBTOR AND THE SECURED PARTY, THE MAILING ADDRESS OF THE SECURED PARTY FROM WHICH INFORMATION CONCERNING THE SECURITY INTEREST MAY BE OBTAINED AND THE MAILING ADDRESS OF THE DEBTOR ARE AS DESCRIBED IN EXHIBIT "B" HERETO AND A STATEMENT INDICATING THE TYPES, OR DESCRIBING THE ITEMS, OF COLLATERAL IS CONTAINED HEREIN, IN COMPLIANCE WITH THE REQUIREMENTS OF ARTICLE 9, SECTION 402 OF THE UNIFORM COMMERCIAL CODE, SECTION 11-9-402 OF THE OFFICIAL CODE OF GEORGIA ANNOTATED (1982). This conveyance is intended to constitute a security interest under the Uniform Commercial Code of Georgia, and is intended to operate and is to be construed as a deed passing the title to the Mortgaged Property to Mortgagee and is made under those provisions of the existing laws of the State of Georgia relating to deeds to secure debt, and not a mortgage. Should the Obligations be paid according to the terms and effect thereof when the same shall become due or be declared due by Mortgagee and should Mortgagor perform all covenants herein contained in a timely manner, then this Deed shall be canceled and surrendered pursuant to the laws of the State of Georgia. Mortgagor and Mortgagee agree that this Mortgage shall constitute a Security Agreement within the meaning of the Georgia Uniform Com- 41 mercial Code with respect to the Secured Property (as defined herein). A financing statement or statements reciting this Mortgage to be a Security Agreement, affecting all of said property aforementioned, shall be executed by Mortgagor and appropriately filed. * * * EXHIBIT B Schedule 1 Description of "Debtor" and "Secured Party": Debtor: The Grand Union Company Secured Party: Bankers Trust Company, as Collateral Agent * * * Schedule 2 Notice Mailing Addresses of "Debtor" and "Secured Party": The mailing address of Debtor is: 201 Willowbrook Boulevard Wayne, New Jersey 07470 The mailing address of Secured Party is: 1 Bankers Trust Plaza 130 Liberty Street New York, New York 10006 (g) Section 4.1 is hereby amended to add the following to the end of such section: If an Event of Default shall have occurred, and any applicable grace period shall have expired without cure thereof, then the entire indebtedness secured hereby shall, at the option of Mortgagee, immediately become due and payable without notice or demand, time being of the essence of this Mortgage, and no omission on the part of Mortgagee to exercise such option when entitled to do so shall be construed as a waiver of such right. 42 (h) Section 4.2 is hereby amended to add the following to the end of such section: If an Event of Default shall have occurred and be continuing, grantee, at its option, may sell the Premises or any part of the Property at public sale or sales before the door of the courthouse of the county in which the Premises or any part of the Premises is situated, to the highest bidder for cash, in order to pay the indebtedness secured hereby and accrued interest hereon and insurance premiums, liens, assessments, taxes and charges, including utility charges, if any, with accrued interest thereon, and all expenses of the sale and of all proceedings in connection therewith, including actual attorney's fees, if incurred, after advertising the time, place and terms of sale once a week for four (4) weeks immediately preceding such sale (but without regard to the number of days) in a newspaper in which sheriff's sales are advertised in said county. At any such public sale grantee may execute and deliver to the purchaser a conveyance of the Premises or any part of the Premises in fee simple, with full warranties of title (but subject to Permitted Liens) and, to this end, the Mortgagor hereby constitutes and appoints grantee the agent and attorney-in-fact of the Mortgagor to make such sale and conveyance, and thereby to divest the Mortgagor of all right, title or equity that the Mortgagor may have in and to the Premises and to vest the same in the purchaser or purchasers at such sale in the purchaser or purchasers at such sale or sales; and all in the acts and doings of said agent and attorney- in-fact are hereby ratified and confirmed, and any recitals in said conveyance or conveyances as to facts essential to a valid sale shall be binding upon the Mortgagor. The aforesaid power of sale and agency hereby granted are coupled with an interest and are irrevocable by death or otherwise, and granted as cumulative of the other remedies provided hereby or by law for collection of the indebtedness secured hereby and shall not be exhausted by one exercise thereof, but may be exer- 43 cised until full payment of all indebtedness secured hereby. Upon any foreclosure sale, grantee may bid for and purchase the Premises and shall be entitled to apply all or any part of the indebtedness secured hereby as a credit to the purchase price. In the event of a foreclosure sale, the Premises, the proceeds of said sale shall be applied first to the expenses of such sale and of all proceedings in connection therewith, including attorneys' and trustees' fees, then to insurance premiums, liens, assessments, taxes and charges, including utility charges, advanced by grantee, then to payment of the outstanding principal balance of the indebtedness secured hereby, then to the accrued interest of all of the foregoing, and finally the remainder, if any, shall be paid to the Mortgagor. In the event of such foreclosure sale by grantee, the Mortgagor shall be deemed a tenant holding over and shall forthwith deliver possession to the purchaser or purchasers at such sale or be summarily dispossessed according to the provisions of the law applicable to tenants holding over. (i) Section 4.2(a) is hereby amended to add the following to the end of such section: The Mortgagor agrees that possession of the Premises during the existence of the Obligations by the Mortgagor or any person claiming under the Mortgagor, shall be that of tenant under Mortgagee, or its assigns, and in the event of a sale, as herein provided, the Mortgagor or any person in possession to the purchaser at such sale, shall be summarily dispossessed in accordance with the provisions of law applicable to tenants holding over; the power and agency hereby granted are coupled with an interest and are irrevocable by death or otherwise, and are in addition to any and all other remedies at law or in equity. 44 (j) Section 5.8 shall be deleted in its entirety. 5.18 INTENTIONALLY OMITTED. 5.19 INTENTIONALLY OMITTED. 5.20 INTENTIONALLY OMITTED. 5.21 AS TO MORTGAGED PROPERTY LOCATED IN NEW JERSEY. Section 3.1 is hereby amended by deleting the phrase "To further secure the Obligations," from the first sentence thereof. 5.22 AS TO MORTGAGED PROPERTY LOCATED IN NEW YORK. (a) OBLIGATIONS. Notwithstanding anything herein to the contrary, the definition of "Obligations" for purposes of any Mortgage secured by property in New York shall exclude any obligations arising out of any Revolving Note or any Swingline Note, it being the intention of the parties that this Mortgage should not secure any revolving credit advances. (b) TRUST FUND FOR ADVANCES. That in compliance with Section 13 of the Lien Law of the State of New York, that the Mortgagor will receive the advances secured by this Mortgage and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of the building(s) and other improvements located on the Land before using any part of the total of the same for any other purpose. (c) NEW YORK REAL PROPERTY LAW ARTICLE 4-A. If this Mortgage shall be deemed to constitute a "mortgage investment" as defined by New York Real Property Law Section 125, then this Mortgage shall and hereby does (i) confer upon the Mortgagee the powers and (ii) impose upon the Mortgagee the duties of trustees set forth in New York Real Property Law Section 126. (d) MORTGAGE TAX STATEMENT. This Mortgage does not cover real property principally improved or to be improved by one or more structures containing in 45 the aggregate not more than six residential dwelling units, each having their own separate cooking facilities. (e) MAXIMUM SECURED AMOUNT. Notwithstanding anything contained herein to the contrary, the maximum amount of indebtedness secured by this Mortgage at execution or which under any contingency may become secured hereby at any time hereafter is the principal sum of $104,144,371 plus interest thereon, plus amounts expended by the Mortgagee after a declaration of default hereunder to maintain the lien of this Mortgage or to protect the property secured by this Mortgage, including without limitation, amounts in respect of insurance premiums, real estate taxes, litigation expenses to prosecute or defend the rights, remedies and lien of this Mortgage or title to the property secured hereby, and any costs, charges or amounts to which the Mortgagee becomes subrogated upon payment, whether under recognized principles of law or equity or under express statutory authority, together with interest on all the foregoing amounts at the applicable default rate as set forth in the Credit Agreement. (f) LAST DOLLARS SECURED. This Mortgage secures only a portion of the indebtedness owing or which may become owing by the Mortgagor to the Mortgagee. The parties agree that any payments or repayments of such indebtedness by the Mortgagor shall be and be deemed to be applied first to the portion of the indebtedness that is not secured hereby, it being the parties' intent that the portion of the indebtedness last remaining unpaid shall be secured hereby. 5.23 INTENTIONALLY OMITTED. 5.24 INTENTIONALLY OMITTED. 5.25 INTENTIONALLY OMITTED. 5.26 INTENTIONALLY OMITTED. 5.27 AS TO MORTGAGED PROPERTY LOCATED IN TENNESSEE. (a) ADDITIONAL PROVISIONS. The following provisions shall also constitute an integral part of this Mortgage. Furthermore, in the event that any prior 46 provisions of this Mortgage conflict with the following provisions of this Section 5.27, the provisions of this Addendum shall control and shall be deemed a modification of or amendment to the section or provision at issue. (1) References to Sections 9-313 and 9-402 of the Uniform Commercial Code shall mean, if the Mortgaged Property is located in the State of Tennessee, TCA 47-9-313 and TCA 47-9-402. (2) Trustor agrees to pay all transfer taxes, recording fees, and any other fees required by or imposed by the State of Tennessee or the county in which the Mortgaged Property is located in order to record this Deed of Trust in the Register's Office of said County. (3) Upon the occurrence of an Event of Default and upon the election of Mortgagee to effect a trustee's sale of the Mortgaged Property in lieu of judicial foreclosure, then Mortgagee may instruct the Trustee to enter and take possession of the Mortgaged Property, and before or after such entry to advertise for the sale of the Mortgaged Property for twenty-one (21) days by three (3) weekly notices in some newspaper published in the county and state where such property is situated, and sell the Mortgaged Property or such portion of the Mortgaged Property not thereafter released from the liens of this Mortgage as one parcel in its entirety or any part thereof, either in mass or in parcels, at public vendue, to the highest bidder for cash at the usual door of the Courthouse in the county in which the Mortgaged Property is situated, free from equity of redemption, and any statutory or common law rights of redemption, homestead, dower, marital shares, and all other exemptions, all of which are hereby expressly waived; and said Trustee shall execute a conveyance to the purchaser in fee simple and deliver possession to the purchaser, which Mortgagor binds itself and its successors and assigns shall be given without obstruction, hindrance, or delay. Trustee shall deliver to the purchaser, at any such trustee's sale, its deed, without warranty, which will convey to the purchaser of the interest in the property which the Mortgagor has or has the power to convey at the time of the execution of this Mortgage, and such as it may have acquired hereafter. The owners or 47 holders of any part of the indebtedness hereby secured may become purchasers at any sale under this conveyance. (4) The Trustee named herein or any successor trustee shall be clothed with the full power to act when action herein shall be required and to execute any conveyance of the Mortgaged Property except as otherwise expressly required. In the event that the substitution of the Trustee shall become necessary for any reason, the substitution of one trustee in the place of the Trustee herein named shall be sufficient. The necessity of the Trustee herein named, or any successor in trust, making oath or giving bond is expressly waived. The Trustee or anyone acting in his stead, shall have, in his discretion, authority to employ all proper agents and attorneys in the execution of this Mortgage and/or in the conducting of any sale made pursuant to the terms hereof, and to pay for such services rendered out of the proceeds of the sale of the Mortgaged Property, should any be realized; and if no sale be made, then Mortgagor hereby undertakes and agrees to pay the cost of such services rendered to said Trustee. (b) OWNER AND TRUSTEE. The record owner or holder of the leasehold estate of the Mortgaged Property is The Grand Union Company with an office at 201 Willowbrook Boulevard, New Jersey 07470. The Trustee is C.D. Berry, IV, having a residence in Williamson County, Tennessee. 5.28 AS TO MORTGAGED PROPERTY LOCATED IN TEXAS. (a) Notwithstanding anything to the contrary contained in this Mortgage, the Credit Agreement or any other Security Document, Mortgagor and Mortgagee acknowledge and agree that the exercise of any non-judicial foreclosure remedy against any of the Mortgaged Property situated in the State of Texas shall be governed by the following provision: The Texas Trustee, at the request of Mortgagee, at any time during the continuance of any Event of Default, may sell any of the Mortgaged Property situated in the State of Texas, at public auction, to the highest bidder, or bidders, for cash, at the 48 door of the County Courthouse of the County in Texas in which such Mortgaged Property is situated (however, if such Mortgaged Property is situated in more than one County, the sale of such Mortgaged Property may take place at any one County Courthouse where any of such Mortgaged Property is situated, as Beneficiary may elect), as herein described, between the hours of 10:00 a.m. and 4:00 p.m. on the first Tuesday of the month, after giving notice of the time, place and terms of such sale and the Mortgaged Property to be sold, as follows: Notice of such proposed sale shall be given by posting written notice thereof at least twenty-one (21) days preceding the date of the sale at the Courthouse door at the County in which the sale is to be made and by filing at least twenty-one (21) days preceding the date of such sale written or printed notice thereof with the office of the County Clerk of such County. In the event the Mortgaged Property to be sold is situated in more than one County, one notice shall be posted at the Courthouse door of each County in which the Mortgaged Property to be sold is situated and one notice shall be filed with the office of the County Clerk of each such County. In addition, Mortgagee shall, at least twenty-one (21) days preceding the date of sale, serve written notice of the proposed sale by certified mail on each debtor obligated to pay the debt secured hereby according to the records of Beneficiary. Service of such notice shall be completed upon deposit of the notice, enclosed in a postpaid wrapper, properly addressed to such debtor at the most recent address shown by the records of the Mortgagee, in a post office or official depository under the care and custody of the United States Postal Service. The affidavit of any person having knowledge of the facts to the effect that such service was completed shall be prima facie evidence of the fact of service. The sale of any such property situated in the State of Texas by the Texas Trustee shall take place in the area at the Courthouse in the County designated for such purpose by the Commissioner's Court of said 49 County, and, in the event that no area has been designated by such Commissioner's Court, then the notice of sale described above shall designate an area at the County Courthouse where the sale shall take place and, in such event, the sale shall be conducted by the Texas Trustee at the area designated in the notice of sale. The notice of sale shall contain a statement of the earliest time at which such sale will occur, and the sale shall begin at the time stated in the notice of sale or not later than three (3) hours after such time. Any notice that is required or permitted to be given to Mortgagor may be addressed to the Mortgagor at the address as stated herein. Any notice that is to be given by certified mail to any other debtor may, if no address for such other debtor is shown by the records of Mortgagee, be addressed to such other debtor at the address of Mortgagor as is shown by the records of Mortgagee. Notwithstanding the foregoing provisions of this section, notice of such sale given in accordance with the requirements of the applicable law of the State of Texas in effect at the time of such sale shall constitute sufficient notice of such sale. Mortgagee hereby authorizes and empowers the Texas Trustee to sell any of the Mortgaged Property situated in the State of Texas, together or in lots or parcels, as Mortgagee or the Texas Trustee may deem expedient, and to execute and deliver to the purchaser or purchasers of such Mortgaged Property, good and sufficient deed(s) of conveyance of fee simple title with covenants of general warranty made on behalf of Mortgagor. In no event shall the Texas Trustee be required to exhibit, present or display at any such sale, any of the personalty described herein to be sold at such sale. (b) Reference to the Mortgagee throughout this Mortgage shall be interpreted to be references to the Mortgagee, the Texas Trustee, or both as the context may require in light of the intent of the parties. 50 (c) Section 5.1(a) is amended to read as follows: Except as provided to the contrary below, this Deed of Trust shall be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts made and to be performed in such state (without regard to principles of conflicts of law applicable under New York law) and applicable laws of the United States of America; provided, however, that with respect to the provisions hereof which relate to title or the creation, perfection, priority or enforcement of liens on the Property or as otherwise required by the laws of the State of Texas, being the place in which the Property is located, this Deed of Trust shall be governed by the laws of the State of Texas, and provided further, Mortgagor agrees that, to the extent not prohibited by New York law, Sections 1301 and 1371 of the Real Property Actions and Proceedings Law of the State of New York and any related statutes, rules and court decisions of the State of New York concerning actions on debt and for a deficiency judgment following a mortgage foreclosure are not applicable to this Deed of Trust, the Notes or any other Credit Document and compliance with the same by Beneficiary is waived, and to the extent required by applicable law, Sections 51.003 and 51.004 of the Texas Property Code shall govern actions brought for a deficiency judgment following foreclosure; it being understood that, to the fullest extent permitted by the laws of the State of Texas, the laws of the State of New York shall govern the validity and enforceability of this Deed of Trust in all instances where Texas law is not specifically made the law applicable to this Deed of Trust. (d) Without limiting any other provision in this Deed of trust, Mortgagor, as "Debtor" expressly GRANTS unto Mortgagee, as "Secured Party," a security interest in all the Mortgaged Property (including both those now and those hereafter existing) to the full extent that the Mortgaged Property may be subject to the Uniform Commercial Code--Secured Transactions (chapter 9, Business and Commercial Code of texas, as amended) referred to in this Section 5.28 as the "Uniform Commercial 51 Code"). Debtor covenants and agrees with Secured Party that: In addition to any other remedies granted in this Deed of Trust to Secured party or the Texas trustee (including specifically, but not limited to, the right to proceed against all the Mortgaged Property in accordance with the rights and remedies in respect of the Mortgaged Property which is real property pursuant to Section 9.501(d) of the Uniform Commercial Code), Secured party may, should an Event of Default occur, proceed under the Uniform Commercial Code as to all or any part of the personal property (tangible or intangible) and fixtures included in the Mortgaged Property (such portion of the Mortgaged Property being referred to in this Section 5.28 as the "Collateral), and shall have and may exercise with respect to the Collateral all the right, remedies and powers of a secured party under the Uniform Commercial Code including, without limitation, the right and power to sell, at one or more public or private sales, or otherwise dispose of, lease or utilize the Collateral and any part or parts thereof in any manner authorized or permitted under the Uniform Commercial Code after default by a debtor, and to apply the proceeds thereof toward payment of any costs and expenses and attorneys' fees and legal expenses thereby incurred by Secured party, and toward payment of the Indebtedness in such order or manner as Secured party may elect. (e) Certain of the Collateral is or will become "fixtures" (as that term is defined in the Uniform Commercial Code) on the real estate described in Exhibit A and this Deed of Trust upon being filed for record in the real estate records shall operate also as a financing statement upon such of the Collateral which is or may become fixtures. Debtor has an interest of record in the real estate. 5.29 AS TO MORTGAGED PROPERTY LOCATED IN VERMONT. (a) PLACE OF TRIAL. The provisions of Section 5.1(b) shall not apply to any legal suit, action or proceeding against Mortgagee or Mortgagor which is required by applicable law to be brought in the federal or state courts in Vermont. (b) PERIOD OF REDEMPTION. Mortgagor agrees, to the full extent permitted by law, that at all 52 times following an Event of Default, neither Mortgagor nor anyone claiming through or under it shall contest a motion filed by the Mortgagee, pursuant to V.R.C.P. 80.1, to shorten the period of redemption running from the date of entry of judgment, in order to prevent or hinder the enforcement or foreclosure of this Mortgage or the absolute sale of the Mortgaged Property or the final and absolute putting into possession thereof, immediately after such sale, of the purchaser thereat. (c) A power of sale to foreclose this mortgage pursuant to the provisions of 12 VSA 4531-4533, both inclusive, is hereby granted. 5.30 AS TO MORTGAGED PROPERTY LOCATED IN VIRGINIA. (a) REMEDIES OF BENEFICIARY. Subject to the provisions of the Credit Agreement, upon the occurrence of an Event of Default under the terms of the Credit Agreement, in addition to any rights and remedies provided for in the Credit Agreement, and to the extent permitted by applicable law, the following provisions shall apply: (1) BENEFICIARY'S POWER OF ENFORCEMENT. It shall be lawful for the Trustee upon directions of the Mortgagee, to immediately foreclose this Deed of Trust under the provisions of Sections 55-58.2 through 55-60 inclusive, of the Code of Virginia (1950 as amended). The Beneficiary may, at once or at any time thereafter, either before or after sale, without notice and without requiring bond, and without regard to the solvency or insolvency of any person liable for payment of the Obligations secured hereby, and without regard to the then value of the Mortgaged Property or the occupancy thereof as a homestead, name a receiver appointed (the provisions for the appointment of a receiver and assignment of rents being an express condition upon which the Obligations extended to Mortgagor pursuant to the Credit Agreement which are hereby secured is made) for the benefit of Mortgagee and the Trustee, with power to collect rents, issues and profits of the Mortgaged Property, due and to become due, during such foreclosure proceedings and the full statutory period of redemption notwithstanding any redemption. The receiver, out of such rents, issues and profits when collected, may pay costs 53 incurred in the management and operation of the Mortgaged Property, prior and subordinate liens, if any, and taxes, assessments, water and other utilities and insurance, then due or thereafter accruing, and may make and pay for any necessary repairs to the Mortgaged Property, and may pay all or any part of the Obligations or other sums secured hereby or any deficiency decree in such foreclosure proceedings. (2) BENEFICIARY'S RIGHT TO ENTER AND TAKE POSSESSION, OPERATE AND APPLY INCOME. Beneficiary shall, at its option, have the right, acting through its agents or attorneys, either with or without process of law, forcibly or otherwise, to enter upon and take possession of the Mortgaged Property, expel and remove any persons, goods, or chattels occupying or upon the same, to collect or receive all the rents, issues and profits thereof and to manage and control the same, and to lease the same or any part thereof, from time to time, and, after deducting all reasonable attorneys' fees and expenses, and all reasonable expenses incurred in the protection, care, maintenance, management and operation of the Mortgaged Property, distribute and apply the remaining net income in accordance with the terms of the Credit Agreement or upon any deficiency decree entered in any foreclosure proceedings or otherwise established. (b) REFERENCE TO SECTIONS 9-313 AND 9-402 OF THE UNIFORM COMMERCIAL CODE. References to Sections 9-313 and 9-402 of the Uniform Commercial Code shall mean, if the Mortgaged Property is located in the State of Virginia, Section 8.9-313 and 8.9-402 of the Code of Virginia (1950 as amended). ARTICLE VI CONCERNING THE BUSINESS 6.1 ACCEPTANCE BY TRUSTEES. Each Trustee for himself or itself and his or its respective successors hereby accepts the trusts established by this Mortgage with respect to the Mortgaged Property hereby granted and conveyed to him or it but only upon the terms and conditions hereof, including the following, all of which shall bind the Mortgagor and Mortgagee: 54 (a) It shall be no part of the duty of the Trustees to see or to inquire into any recording, rerecording, perfection, filing or registration of the Lien of this Mortgage or of any supplemental indenture or instrument of further assurance or to give any notice thereof or to effect or renew any insurance or to see to the collection or application of any insurance moneys or to inquire into or see that the properties of the Mortgagor are adequately or properly insured, or to see to the payment of or be under any duty in respect of any tax or assessment or other governmental charge which may be levied or assessed on the Mortgaged Property or any part thereof, or against the Mortgagor, or to see to the performance or observance of any of the covenants or agreements hereof on the part of the Mortgagor. The Trustees shall be under no obligation to see to the payment or discharge of any Liens (other than the Lien hereof, and then only to the extent herein provided) upon the Mortgaged Property, or to see to or inquire into the payment of the indebtedness secured thereby or to the delivery or transfer to it of any property released from any such Lien, or to give notice to or make demand upon any mortgagor, mortgagee or other Person for the delivery of any of such property. (b) The Trustees shall not be required to take any action at the direction or request of the Mortgagee in respect of any default or Event of Default, or to take any action towards the execution or enforcement of any trust hereby created, or to institute, appear in or defend any action, suit or other proceeding in connection therewith, where such action will be likely to involve them in expense or liability, unless requested so to do by an instrument in writing, signed by the Mortgagee and unless tendered security and indemnity satisfactory to them against any and all cost, expense and liability, anything herein contained to the contrary notwithstanding. (c) The Trustees shall not be required to recognize anyone except the Mortgagee as a holder of the Notes or the Indebtedness secured hereby. (d) The Trustees shall not be compelled to do any act or to make any payment hereunder or in respect hereof unless funds have theretofore been put in for the applicable purpose and the Trustees have been 55 indemnified to their satisfaction against any cost, liability or expense in connection therewith. Wherever any provision is made herein for the payment of moneys by the Trustees or any of them at any time, the Trustees or such Trustee shall in no event be liable to anyone beyond the amount of moneys deposited with them or it for any such purpose. (e) All representations and recitals contained in this Mortgage are made by and on behalf of the Mortgagor, and the Trustees make no representation as to the validity or sufficiency of this Mortgage or of any supplemental indentures and are in no way responsible therefor or for any statement herein or therein contained or for any action or thing by them done, suffered or permitted by reason of any representation made by the Mortgagor of any of its officers or agents, and the Trustees make no representations as to the value of any property mentioned herein or as to the title thereto, and the Trustees do not purport to have any knowledge in respect thereof. (f) The Trustees shall not be responsible for the execution, acknowledgment or validity hereof or of any instrument supplemental hereto, or of the Notes, or for the proper authorization thereof by corporate or public action, or for the sufficiency of the security purported to be created hereby, and make no representation in respect thereof or in respect of the rights of the holders of any of the Notes. The Trustees shall not be responsible for ascertaining or inquiring as to the performance of any agreements, obligations or covenants of the Mortgagor, except as expressly provided in this Mortgage. The Trustees shall be under no obligation to give notice to any person other than the Mortgagee of the making of this Mortgage or of any supplemental indenture or instrument of further assurance, or to see to the application of the proceeds of the sale or disposition of the Notes. (g) The Trustees shall not be personally liable for any debt duly contracted by any of them, or for damages to persons or property injured, or for salaries or nonfulfillment of contracts incurred in connection with the enforcement of any of the rights, remedies, powers, or other interests of the Trustees in, to and under the Mortgaged Property, including any incurred 56 during any period wherein the Trustees shall manage the Mortgaged Property upon entry or voluntary surrender as provided in this Mortgage. The Trustees shall not be personally liable for any receiver's certificates or obligations issued by any receiver. (h) The Trustees shall be protected in acting or refraining from action in reliance upon any notice, demand, waiver, request, consent, opinion, certificate, report, statement, list, letter, telegram, instrument or other paper or document believed by them to be genuine and to have been signed, sent or presented by the proper party or parties. (i) Whenever under the provisions of this Mortgage the Trustees or any of them shall be required, or shall deem it necessary, to be informed as to any fact or facts or conditions, preparatory to taking or omitting to take any action under this Mortgage, and no provision is contained in this Mortgage for proving or evidencing to the Trustees such fact or facts or conditions, then the existence of such fact or facts or conditions shall be deemed conclusively proved and evidenced to the Trustees when stated in writing to them by the Mortgagee. (j) Whenever under the provisions of this Mortgage, the Trustees or any of them shall be required, or shall deem it necessary, to be furnished with evidence of a determination, direction, request, opinion, designation, selection or authorization of the Mortgagor, or with evidence of the exercise by the Mortgagor of an option, preparatory to taking or omitting to take any action under this Mortgage, and no provision is contained in this Mortgage for evidencing such matter to the Trustees, then the same shall be deemed conclusively evidenced to the Trustees when stated in a written instrument executed in the name of the Mortgagor by a Responsible Officer delivered to the Mortgagee and, in turn, delivered by the Mortgagee to the Trustees. Such instrument shall be conclusive evidence to the Trustees of the matter or matters set forth therein and complete protection to the Trustees in taking or omitting to take such action, whether or not the facts as to any such determination, direction, request, opinion, designation, selection, authorization or exercise of an option shall have been misstated therein. 57 (k) Wherever in this Mortgage it is provided that, before releasing or applying any cash on deposit with the Trustees or any of them, or releasing any property from the Lien of this Mortgage, or taking or permitting any other action contemplated by any provision of this Mortgage, there shall be delivered to the Trustees any resolution, statement, certificate, affidavit, opinion or other instrument, or that the Trustees shall release or apply cash, release property or take or permit any other action only upon the delivery of any resolution, statement, certificate, affidavit, opinion or other instrument, then unless the Trustee are instructed to the contrary by the Mortgagee, the Trustees and any of them may accept the statements contained in any such resolution, statement, certificate, affidavit, opinion or other instrument as conclusive and sufficient evidence of any fact or matter of opinion or otherwise pertinent to the right of the Trustees to release or apply such cash, release such property or take or permit such other action, and shall not be liable for any action taken or permitted by them or any of them on the faith thereof; nor shall they be under any duty to make any investigation in respect thereof. The Trustees may, however, make such investigation of the truth and accuracy of the statements made in any such resolution, statement, certificate, affidavit, opinion or other instrument as to them or any of them may seem proper and unless satisfied as to the truth and accuracy of such statements they shall be under no obligation to take or permit the action requested. The Trustees shall be under no duty to check or verify any financial or other statements or reports furnished to them pursuant to any provision hereof or any certificates or affidavits furnished in connection with any request for the payment of deposited cash, or to check, verify or compare any of such reports with any other of such statements or reports previously or subsequently furnished to them, and shall be under no other duty in respect of the same. (l) The Trustees shall not be concerned with or accountable to anyone for the use or application of any deposited cash which shall be released or withdrawn in accordance with the provisions of this Mortgage or of any property or securities or the proceeds thereof which shall be released from the Lien hereof in accordance with the provisions of this Mortgage. 58 (m) In the event a Default or an Event of Default shall have occurred and is continuing, the Trustees may select and employ in and about the execution of the trusts hereby created, independent counsel, engineers, agents and other employees, whose reasonable compensation shall be deemed part of the expenses of the Trustees and shall be paid by the Mortgagor upon demand. The Trustees shall not be answerable for the act, default or misconduct of any attorney, engineer, agent and other person employed by them in pursuance hereof; nor shall the Trustees be liable for any action whatever by any of them hereunder, except that each of the Trustees shall be liable for its or his own willful misconduct or gross negligence. (n) The Trustees may consult with independent counsel, and the opinion of counsel shall be full protection and justification to the Trustees for anything done or omitted or suffered to be done by them in accordance with such opinion and not contrary to any express provision hereof. (o) The Trustees may engage in or be interested in any financial or other transaction with the Mortgagor or any corporation in which the Mortgagor may be interested. () Any moneys at any time received or held by or to the credit or any of the Trustees under any of the provisions of this Mortgage or for the payment of the Indebtedness, whether trust funds or not, may be held by the Trustees without any liability for interest. If a Trustee has actual knowledge of the existence of any Event of Default, any moneys held by it and subject to payment, repayment or reversion to the Mortgagor need not be so paid or repaid, but may be held by such Trustee as part of the trust estate subject to the provisions of this Mortgage. (q) In accepting the assignment and transfer to them of a part of the Mortgaged Property, whether property, franchises, rights, securities, leases, contracts, licenses, permits or whatever it may be, and whether under this Mortgage or some indenture supplemental hereto, the Trustees act solely as trustees hereunder and not in their individual capacities, and all persons, other than the Mortgagor and the holders of Notes secured 59 hereby, having any claim against the Trustees arising by reason of such assignment or transfer, shall look only to the Mortgaged Property for payment or satisfaction thereof. (r) In any controversy that may arise between the Mortgagor and the United States of America, or any state, county or municipal authority, as to the legality or regularity of any tax, levy or impost that may be assessed upon the Mortgaged Property, or upon the Indebtedness hereby secured, the Trustees shall have full power and authority, on behalf of the Mortgagee and at the direction of the Mortgagee to intervene in any such proceedings or controversy, and to institute and maintain any litigation, either at law or in equity, in the appropriate jurisdiction, in respect of the same, provided indemnity satisfactory to them for all costs and expenses to be incurred in and about said litigation shall have been furnished or tendered. (s) The Trustees shall not be required to take notice or be deemed to have notice or knowledge of any Default or Event of Default unless they shall receive from the Mortgagor or the Mortgagee written notice stating that a Default or Event of Default hereunder has happened and specifying the same. In the absence of such notice the Trustees may conclusively assume for all purposes of this Mortgage that there is no Default or Event of Default except as aforesaid and shall be fully protected in relying thereon. (t) The Trustees shall execute and deliver such further instruments, agreements, and assurances as the Mortgagee may from time to time request, unless such execution and delivery shall be prejudicial to the Trustees. (u) If any Event of Default shall have happened and if the Mortgagee shall so direct in its sole discretion in a written notice given to the Trustees, the counsel engaged by the Trustees in connection with the exercise of any remedies hereunder shall be such counsel as may be specified by the Mortgagee. (v) The Trustees shall execute and deliver such supplemental indentures, instruments of conveyance, assignment or further assurance and such waivers, 60 releases, disclaimers and quitclaims, in addition to those expressly authorized by the other provisions of this Mortgage, as the Mortgagee shall from time to time authorize, direct or approve, unless such execution and delivery shall be prejudicial to the Trustees. 6.2 COMPENSATION. The Trustees shall be entitled to reasonable compensation for all services rendered by them in the execution of the trusts hereby created, and the Mortgagor agrees from time to time to pay such compensation (which shall not be limited or determined by any provision of law with regard to compensation of fiduciaries or of a trustee of an express trust) and to reimburse the Trustees and save them harmless against any and all liability and expenses, including reasonable counsel fees, which they may at any time incur hereunder. All such sums shall be deemed to be advances hereunder. Notwithstanding anything to the contrary in this Mortgage, as security for the payment of such Advances (i) the Trustees shall be secured under this Mortgage by a Lien upon the Mortgaged Property, and (ii) the Trustees shall have the right to use and apply any moneys held by them to cover such Advances. 6.3 RESIGNATION. The Trustees or any of them or any successor or successors hereunder may at any time resign and be discharged or the trusts created by this Mortgage by executing an instrument in writing resigning such trusts, specifying the date when such resignation shall take effect, and filing the same with the Mortgagee. Such resignation shall take effect on the day specified in such instrument, unless, previously, a successor trustee or trustees shall be appointed as hereafter provided, in which event such resignation shall take effect immediately upon the appointment of such successor trustee or trustees. 6.4 REMOVAL. The Trustees or any of them or any successor or successors hereunder may, subject to their rights to compensation, reimbursement and indemnification herein provided for, be removed at any time by an instrument executed by the Mortgagee and delivered to the Trustee being removed. 6.5 INABILITY OF TRUSTEE. In case of the death of a Trustee, or the resignation, incapacity or removal as trustee hereunder of a Trustee, or if a re- 61 ceiver of a Trustee be appointed or if its or his property or affairs be taken over by any public officer or officers, then and in that event a successor shall be appointed by the Mortgagee by an instrument signed by it, notification thereof being given to the predecessor trustee (except in case of dissolution or death). During any vacancy in the office of a Trustee, all of the powers of such Trustee shall be vested in and may be exercised by the Mortgagee to the extent permitted by law. 6.6 JURISDICTIONAL REQUIREMENTS. Any corporate Trustee appointed under any of the provisions of this Mortgage shall always be a corporation entitled to act as such trustee in the State in which Mortgaged Property subject to such trust is located. Each individual Trustee hereunder shall be a citizen and resident of the United States of America and a resident of a State in which Mortgaged Property subject to his trust is located. 6.7 SUCCESSION. Any successor Trustee appointed by the Mortgagee shall, immediately, and without further act, supersede his or its predecessor Trustee. 6.8 JUDICIAL APPOINTMENT. If in a proper case no appointment of a successor trustee shall be made pursuant to the foregoing provisions of this Article at the time the resignation or removal of any trustee hereunder shall have taken effect or within thirty days after any trustee hereunder shall have become incapable of acting, the retiring trustee may (after reasonable prior written notice to the Mortgagee) apply to any court (state or federal), having jurisdiction, to appoint a successor trustee and such court if it deems proper may, appoint a successor trustee. 6.9 MERGER OF CORPORATE TRUSTEE. Any company into which a corporate Trustee while acting as such hereunder may be merged or converted, or with which it may be consolidated, or any company resulting from any merger, conversion or consolidation to which a corporate Trustee shall be a party, shall be the successor Trustee under this Mortgage provided such entity is entitled to act as such trustee in the State in which Mortgaged Property subject to its trust is located. 6.10 VESTING OF POWERS IN SUCCESSOR TRUSTEES. Every successor trustee shall execute, acknowledge and 62 deliver to the Mortgagee an instrument in writing accepting such appointment hereunder, and thereupon such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessor, but such predecessor shall, nevertheless, on the written request of the Mortgagee or the successor trustee, execute and deliver an instrument transferring to such successor trustee all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor trustee shall deliver all property and moneys held by it in its capacity as trustee hereunder to its successor. Should any deed, conveyance or instrument in writing from the Mortgagor be required by any successor trustee for more fully and certainly vesting in such trustee the estates, rights, powers and trust hereby vested or intended to be vested in the predecessor trustee, any and all such deeds, conveyances and instruments in writing shall, on request, be executed, acknowledged and delivered by the Mortgagor. The resignation of any trustee, and the instrument or instruments removing any trustee and appointing a successor trustee hereunder, together with all deeds, conveyances and other instruments provided for in this Section, may (and, if the Mortgagee so requests, shall) be forthwith filed for record in the appropriate place where this Mortgage shall then be required to be recorded, at the expense of the Mortgagor. 6.11 LEGAL INCAPACITY OF CORPORATE TRUSTEES. If, by any present or future law in any jurisdiction in which it may be necessary to perform any act in the execution of the trusts hereby created, a corporate Trustee may be incompetent or unqualified to act as such Trustee, then all the acts required to be performed in such jurisdiction, in the execution of the trusts hereby created, shall and will be performed by a Trustee who is a natural person, or his successor or successors, acting alone. Except as it may be deemed necessary for an individual Trustee solely or jointly with a corporate Trustee to execute the trusts hereby created, a corporate Trustee may solely have and exercise the powers, and shall be solely charged with the performance of the duties herein declared on the part of the Trustees, or any of them, to be had and exercised or to be performed in such jurisdiction. 63 No provision of this Mortgage or of any supplemental agreement shall be deemed to impose any duty or obligation on any corporate Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which any such corporate Trustee shall be unqualified or incompetent to perform any such act or acts or to exercise any such right, power, duty or obligation or if such performance or exercise would constitute doing business by any such corporate Trustee in such jurisdiction. 6.12 ADDITIONAL TRUSTEES. If at any time it shall be desirable in the opinion of the Mortgagee to have an additional trustee or trustees as co- trustee or co-trustees hereunder, either individual or corporate, the Mortgagee may select such co-trustee or co-trustees, and the Trustees and the Mortgagor shall unite in appointing such co-trustee or co-trustees of all or any the property or cash (if any) at the time subject hereto, jointly with the Trustees originally named herein, or their successor or successors, to act as a separate trustee or trustees hereunder or of any of such property or cash, and in either case with such of the rights, powers, duties and obligations hereby conferred or imposed upon the Trustees or any of them as shall be stated in such instrument of appointment, the same to be exercised either jointly with the Trustees or separately as such instrument may prescribe, and the Mortgagor hereby irrevocably appoints the Mortgagee as its agent, without any further act by the Mortgagor, at any time to select and appoint any such additional trustee or co- trustee and to execute, and deliver and perform any and all instruments and agreements necessary or proper in connection therewith. Upon such appointment and upon the recording of the instrument of appointment wherever by law it is appropriate to be recorded, the title of the Trustees in any and all of the Mortgaged Property in the jurisdiction to which such appointment relates shall immediately, and without further evidence of transfer, vest in such co-trustee or co-trustees either jointly with the Trustees or separately according to the terms of such appointment, but the Trustees and/or the Mortgagor shall nevertheless execute, acknowledge and deliver to such co-trustee or co-trustees such conveyances and transfers as may be proper to vest or confirm said Mortgaged Property in the co-trustee or co-trustees. Any co-trustee may resign or 64 be removed in the same manner provided as an original Trustee, or he or it may be removed, and any vacancy in the office of co-trustee may be filled in the manner above provided for the appointment of the original co-trustee or co- trustees, or, if it is not then desirable to fill the vacancy, the vacancy need not be filled. All the immunities provided by this Mortgage in respect of the Trustees shall apply to each and every co-trustee, and neither of the Trustees nor any co-trustee shall be liable for any default or act of omission or commission of any other of the Trustees or co-trustees. 6.13 POWERS OF CO-TRUSTEES. If a co-trustee, individual or corporate, be appointed, then to the extent permitted by law, the powers and duties conferred upon the Trustees hereunder shall nevertheless be exercised and performed by the Trustees alone, even after the Trustees shall under the provisions hereof have become entitled to enter upon the Mortgaged Property; but the co-trustee shall upon appointment receive and hold title to the Mortgaged Property jointly or separately as provided in Section 6.12 with the Trustee, and in case the Trustees shall by reason of the law of any jurisdiction in which the Trustees may be required to act under the terms of this Mortgage to be unqualified, unauthorized, unable or incompetent to exercise any of the powers granted to the Trustees by this Mortgage or to perform any of the duties imposed upon the Trustees hereby or shall decline to exercise any such power or perform any such duty, then and in such case, upon the request in writing of the Mortgagee (which shall be sufficient warrant for the co-trustee to take the action therein requested), the co-trustee shall have and may exercise any such power in the place of any Trustee, and shall be authorized to perform any such duty in that jurisdiction, and shall be deemed to be possessed of such rights and powers as may be necessary to the effectual operation of the trusts herein set forth. The co-trustee may nevertheless delegate to any Trustee insofar as permitted by law, and may exercise every right and perform every duty hereinbefore required to be exercised or performed by him or it, through any Trustee as his or its agents, unless such Trustee is not permitted by law so to act, and may adopt, ratify and confirm any act done by any Trustee, and until the co-trustee is requested in writing by the Mortgagee, to act as above provided, every act of a Trustee shall be deemed to have been performed as the 65 agent of the co-trustee insofar as necessary to the effectual operation of this Mortgage. No Trustee shall be under a duty to request the co-trustee to act as above provided unless they shall have declined to act themselves or shall have received an opinion of independent counsel to the effect that they are unqualified, unauthorized, unable or incompetent to act in any given instance, and any such Trustee shall be under no liability for failure to make such request prior to so declining or to receiving such opinion of counsel. The co- trustee shall in no event be responsible or liable personally for any act of any Trustee performed as agent, attorney or otherwise, and may conclusively assume that he or it is permitted by law to delegate his or its powers and duties hereunder to a Trustee and to exercise and perform his or its powers and duties hereunder through a Trustee as his or its agent, unless and until he or it is otherwise advised in writing by counsel. 6.14 NO TRUSTEE'S BOND. No bond or other security shall be required of any Trustee or any successor trustee or co-trustee unless required by a court having jurisdiction and for cause shown. THIS MORTGAGE WILL ALSO SECURE ANY AND ALL EXTENSIONS, RENEWALS, AND MODIFICATIONS OF THE OBLIGATIONS. THE MORTGAGOR AND MORTGAGEE HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS INSTRUMENT, INCLUDING, BUT NOT LIMITED TO, ALL TORT ACTIONS. THE MORTGAGOR HEREBY DECLARES AND ACKNOWLEDGES THAT THE MORTGAGOR HAS RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS MORTGAGE. 66 IN WITNESS WHEREOF, Mortgagor, by its duly elected officers and pursuant to proper authority of its board of directors has duly executed, sealed, acknowledged and delivered this Mortgage as of the day and year first above written. THE GRAND UNION COMPANY ATTEST: By:_____________________________ Name: Title: _______ President By:______________________ Name: Title: _______ Secretary [Corporate Seal] IN CONNECTICUT, GEORGIA AND OHIO: As to both signatures, signed, sealed, acknowledged and delivered in the presence of: _________________________ Witness Print Name: _______________________ Witness Print Name: STATE OF ) ) ss.: COUNTY OF ) On this ___ day of ______, 1995, before me, the undersigned officer, personally appeared _______________, residing at ____________________________________________, and __________________, residing at ____________________ _____________________, personally known and acknowledged themselves to me to be the ______ President and _________ Secretary, respectively of THE GRAND UNION COMPANY, and that as such officers, being duly authorized to do so pursuant to its bylaws or a resolution of its board of directors, executed, subscribed and acknowledged the foregoing instrument for the purposes therein contained, by signing the name of the corporation by themselves in their authorized capacities as such officers as their free and voluntary act and deed and the free and voluntary act and deed of said corporation. IN WITNESS WHEREOF, hereunto set my hand and official seal. ______________________________________________ Notary Public NOTARIAL SEAL My Commission Expires: _____________________________ [Property Address] Store No. _______ EXHIBIT A FOR FEE MORTGAGE: [Block and Lot Numbers] [Legal Description] [Derivation of Title in Tennessee: Being the same property conveyed to Mortgagor by deed recorded in Book _______, Page ______ in ____________ Office of _________ County, Tennessee.] FOR LEASED MORTGAGE: [Lease Description (the "Lease")] [Derivation of Title in Connecticut and Tennessee: Being the same property leased to Mortgagor by the Lease, a memorandum of which has been recorded in Book _______, Page ______ in ____________ Office of ___________ Town, Connecticut/_________ County, Tennessee.] The name of the record owner or holder of the Leasehold Estate, as the case may be, is: The Grand Union Company A-1 [Property Address] SCHEDULE I [Legal Description of Leased Property, if applicable] A-2 EX-10.15 17 EXHIBIT 10.15 Exhibit 10.15 Miller Tabak Hirsch & Co. 331 Madison Avenue 12th Floor New York, New York 10017 June 15, 1995 The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470 Dear Sirs: In connection with, among other things, (i) the agreement dated July 22, 1992 (the "Agreement") between Miller Tabak Hirsch & Co. ("MTH") and The Grand Union Company (the "Company") and (ii) the Second Amended Plan of Reorganization dated as of April 19, 1995 (the "Plan") of the Company in connection with the chapter 11 case filed by the Company on January 25, 1995 in the United States Bankruptcy Court for the District of Delaware, this will confirm our agreement as follows: 1. Termination of Agreement. The Agreement shall be terminated as of the Effective Date, as such term is defined in the Plan, and the obligations of the Company under the Agreement, including its obligation to pay fees to MTH in the amount of $750,000 per year for financial services rendered by MTH, shall cease as of the Effective Date. The Company shall remain obligated to pay to MTH all fees accrued prior to the Effective Date. 2. Indemnification of MTH Entities. The Company hereby confirms that, notwithstanding the termination of the Agreement, it will indemnify, pay contribution to, reimburse and hold harmless MTH and its present and former partners, officers, employees, advisors, attorneys, consultants, agents and representatives, including Messrs. Martin A. Fox, Glenn L. Goldberg, Claude Incaudo and James A. Lash, and any person or entity that directly or indirectly controls MTH, including Gary Hirsch, Jeffrey Miller and Jeffrey Tabak (MTH and any such partner, officer, employee, advisor, attorney, consultant, agent, representative, person or entity being hereinafter referred to individually as an "MTH Entity" and collectively as the "MTH Entities"), from and against any losses, claims, damages or liabilities, joint or several, including the reimbursement of legal and other expenses (including costs of investigation) in connection with any action, suit or proceeding, whether commenced or threatened, incurred by any MTH Entity or to which any MTH Entity may become subject, in connection with the services or matters which are the subject of the Agreement, which services the parties agree include the performance of services of any of the MTH Entities to the Company or any direct or indirect subsidiary thereof, Grand Union Capital Corporation ("GUCC") or Grand Union Holding Corporation ("GUHC") (GUCC, GUHC or any such other subsidiary hereinafter referred to individually as an "Affiliate" and collectively as the "Affiliates") for or at the request of the Company, prior to the Effective Date, whether prior to the Filing Date (as defined in the Plan) or not; provided, however, that the indemnification, contribution, reimbursement or hold harmless provisions of this paragraph 2 shall not cover any claim to be indemnified, reimbursed or held harmless by any MTH Entity arising out of or related, directly or indirectly, to any action, suit or proceeding against any MTH Entity (i) brought by GUCC or GUHC, (ii) brought by any person which is a present or former purchaser, seller, underwriter or owner of present or former securities of the Company, its predecessors or any present or former Affiliate thereof, including, without limitation, GUCC or GUHC, in such capacity, (iii) brought by any trustee, receiver or other representative on behalf of, or asserting the rights of GUCC, GUHC or any other person described in clause (i) hereof, or (iv) brought by any other person (a "Third Party Claimant") against an MTH Entity asserting claims for contribution, reimbursement or indemnity by such Third Party Claimant arising out of or related to any action, suit or proceeding against such Third Party Claimant which, had it been brought against an MTH Entity, would be described in clauses (i), (ii) or (iii) hereof (such claims described in clauses (i), (ii), (iii) and (iv) being hereinafter referred to as the "Excluded Claims"); and provided further, however, that the Company shall not be liable to any MTH Entity as an indemnified party hereunder in respect of any loss, claim, damage or liability to the extent that a court having jurisdiction shall have determined by a final judgment that such loss, claim, damage or liability of such indemnified party resulted from the willful misfeasance or gross negligence of such indemnified party. In the event that the foregoing indemnity, contribution or reimbursement is unavailable or insufficient to indemnify and hold such MTH Entity harmless, then the Company shall contribute to amounts paid or payable by such MTH Entity in respect of such losses, claims, damages and liabilities in such proportion as appropriately reflects all equitable considerations, including but not limited to the relative benefits received by, and fault of, the Company or such Affiliate on the one hand, and such MTH Entity, on the other hand, in connection with the matters as to which such losses, claims, damages or liabilities relate. For purposes of this agreement, the term "MTH Entity" shall exclude any advisor, financial advisor, investment banker (including Goldman, Sachs & Co., BT Securities Corporation and Nomura Securities International), attorney, or consultant directly engaged by the Company or any Affiliate of the Company and shall also exclude any person or entity other than the individuals expressly named above who are designated by MTH to be excluded from being an MTH Entity. 3. Limited Liability Relating to Excluded Claims. (a) To the extent that any losses, claims, damages or liabilities (including the reimbursement of legal and other expenses, including costs of investigation), arise out of Excluded Claims ("Excluded Claims Liability"), the Company shall indemnify, pay contribution or reimburse MTH or any other MTH Entity in respect of Excluded Claims as set forth in this paragraph 3. (b) The Company and MTH agree that the Company shall indemnify, pay contribution or reimburse MTH and the other MTH Entities for the first $3,000,000 of any Excluded Claims Liability and that any Excluded Claims Liability above $3,000,000 shall be shared, 662/3% to be borne by the Company and 331/3% to be borne by MTH or such other MTH Entities; provided that the Company's indemnity, contribution and reimbursement obligations under this paragraph 3 shall not exceed $13,000,000 in the aggregate; and provided further that the first $3,000,000 of any Excluded Claims Liability shall be increased to $3,150,000 and the limit on the Company's indemnity, contribution and reimbursement obligations under this paragraph shall be increased to $14,000,000 in the aggregate if the release by Federated Research Corp. referred to in paragraph 5 hereof is not delivered for any reason to MTH and any claim is asserted by or on behalf of Federated Research Corp. (including any claim for contribution or reimbursement) against MTH or any MTH Entity or Federated Research Corp. commences an action, suit or proceeding against MTH or any MTH Entity in connection with the Company or any Affiliate of the Company (the Company's obligations as set forth and limited in this clause (b) of this paragraph 3 are hereinafter referred to as the "Excluded Claims Fund"). (c) The Company agrees that the Excluded Claims Fund may be used, subject to the limitations and allocations thereof as set forth in clause (b) of this paragraph 3, to pay any judgment, settle any claim, pay any legal or other expense or pay any contribution or reimbursement and, in the sole and absolute discretion of Gary Hirsch or his designee, any loss, claim, damage or liability incurred by or asserted against any present or former officer or director of the Company, GUCC or GUHC that is not an MTH Entity (the "Continuing Management Group") arising out of Excluded Claims (as used here such term shall have the definition as set forth in Section 15.06(b) of the Plan), and that any such settlement in respect of any asserted Excluded Claims Liability or such Excluded Claims shall be in the sole and absolute discretion of Gary Hirsch or his designee. (d) The Company agrees to pay promptly its share, as determined under the provisions of clause (b) of this paragraph 3, of (i) any Excluded Claims Liability that is a legal or other expense incurred in connection with defending or preparing to defend any Excluded Claims Liability promptly upon being furnished an 2 invoice for such expense that has been approved by Gary Hirsch or his designee (whether for an expense of MTH or any MTH Entity) with a certification of Gary Hirsch or his designee that such expense is subject to reimbursement hereunder, (ii) any judgment against MTH or any other MTH Entity unless a stay of execution of such judgment is obtained within 20 days after the date of such judgment and such stay is thereafter fully maintained in effect, and (iii) any settlement approved by Gary Hirsch or his designee described in clause (c) of this paragraph 3. (e) The Company agrees that the first $3,000,000 of the Company's obligation for the Excluded Claims Fund shall be deposited in escrow on the Effective Date on the terms and with the escrow agent described in the Escrow Agreement annexed hereto as Exhibit A. (f) For purposes of this paragraph 3 and the determination of Excluded Claims, the term "partners" as used in paragraph 2 above with respect to an MTH Entity shall include all partnerships or other persons or entities which may be general or limited partners of MTH and their respective partners, shareholders, directors, officers and employees. (g) The Company has agreed as provided in the Plan to pay certain legal fees and expenses of the "GUHC and GUCC Legal Advisors" (as such term is defined in the Plan). MTH agrees that the amount paid by the Company to the GUHC and GUCC Legal Advisors for services rendered in connection with the dissolution of GUCC and GUHC as provided in Section 2.04(b) of the Plan shall be applied against the first $3,000,000 or $3,150,000, as the case may be, of the Excluded Claims Fund and reduce the Company's Excluded Claims Liability under clause (b) of this paragraph 3 by such amount. 4. Insurance. The Company agrees that any insurance presently in effect covering officers and directors of the Company, GUCC or GUHC will remain in full force and effect with coverage substantially similar in amounts and terms at the sole expense of the Company for not less than six years after the Effective Date of the Plan. 5. Releases of MTH and Other MTH Entities. The Company shall release MTH and each other MTH Entity from all claims, losses, damages and liabilities and all suits, actions and causes of action which the Company has or may have against MTH or any other MTH Entity arising out of any act or failure to act of MTH or any other MTH Entity in connection with the Company or any Affiliate of the Company, including any transaction or agreement to which the Company or any Affiliate of the Company was or is a party and any security, note, instrument or other obligation issued by the Company or any Affiliate of the Company, and MTH shall similarly release the Company and such Affiliates, all such releases to become effective upon the Effective Date of the Plan. In addition, Putnam Investment Management and various funds managed by it or its affiliates, Federated Management and various funds managed by it or its affiliates, and Leland Zaubler shall execute releases in favor of MTH and the other MTH Entities by which MTH and such MTH Entities shall be released from all claims arising in connection with the Company, GUHC, and GUCC and shall on or before April 21, 1995 deliver such releases to counsel for MTH to be held in escrow pursuant to the Escrow Agreement annexed hereto as Exhibit B until the Effective Date of the Plan or any plan which is substantially similar to the Plan, whereupon such releases shall be delivered to MTH, provided that the releases executed by Federated Management and various funds managed by it and its affiliates and by Leland Zaubler shall be delivered to MTH only if the Plan or such substantially similar Plan, the terms of which are not less advantageous to such parties in any material respect, as confirmed by the Bankruptcy Court includes the same or substantially similar release provisions as those contained in Sections 14.01 (b)(i) and 14.01 (c) of the Plan. Notwithstanding anything in the Plan to the contrary, neither MTH nor any MTH Entity shall have waived or released or be deemed to have waived or released any rights it may have against any person or entity which has not released or is not deemed to have released MTH or such MTH Entity of all claims arising in connection with the Company, GUHC or GUCC. The provisions of this agreement shall not affect or release any agreement or obligation between the Company and Penn Traffic Company. 6. Amended Plan of Reorganization of Company. Except to the extent that any such release prevents confirmation of the Plan, the Company agrees (i) to provide for the release and settlement of all claims, losses, 3 damages and liabilities and Causes of Action (as such term is defined in the Plan) against MTH and the other MTH Entities as set forth in the Plan and (ii) to otherwise provide for the rights and remedies of MTH and the other MTH Entities and benefits to MTH and the other MTH Entities as set forth in the Plan. 7. Legal Expenses. The reasonable legal expenses of MTH for services of Denis F. Cronin and Gilmartin, Poster & Shafto incurred in connection with the negotiation and preparation of this agreement, the Plan, and otherwise in connection with the Company's pending chapter 11 case in the United States Bankruptcy Court for the District of Delaware, will be paid by the Company. 8. Effective Date. This agreement shall become effective on the Effective Date of the Plan. 9. Headings. Headings are for reference only and are to be ignored in interpreting this agreement. 10. Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. 11. Entire Agreement. This agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all oral and written negotiations and agreements with respect to the subject matter hereof. 12. Governing Law. This agreement may not be changed orally, shall be binding on the respective successors and assigns of the parties hereto, and shall be governed by and construed and interpreted in accordance with the laws of the State of New York. Very truly yours, Miller Tabak Hirsch & Co. By /s/ Gary D. Hirsch ---------------------------------- Accepted and Agreed: The Grand Union Company By /s/ Francis Nicastro ----------------------------------- BY ITS SIGNATURE BELOW, EACH OF THE UNDERSIGNED AGREES TO EXECUTE AND DELIVER THE RELEASE ON THE TERMS DESCRIBED IN THE SECOND SENTENCE OF PARAGRAPH 5 OF THIS AGREEMENT: EACH OF PUTNAM DIVERSIFIED INCOME TRUST, PUTNAM HIGH INCOME CONVERTIBLE AND BOND FUND, PUTNAM MANAGED HIGH YIELD TRUST, PUTNAM CAPITAL MANAGER TRUST-PCM HIGH YIELD FUND, PUTNAM MASTER INCOME TRUST, PUTNAM PREMIER INCOME TRUST, PUTNAM MASTER INTERMEDIATE INCOME TRUST, PUTNAM CAPITAL MANAGER TRUST-PCM DIVERSIFIED IN- 4 COME, PUTNAM ASSET ALLOCATION FUNDS-BALANCED PORTFOLIO, PUTNAM ASSET ALLOCATION FUNDS-CONSERVATIVE PORTFOLIO, PUTNAM ASSET ALLOCATION FUNDS-GROWTH PORTFOLIO, PUTNAM HIGH YIELD MUNICIPAL TRUST, PUTNAM GLOBAL GOVERNMENTAL INCOME TRUST, PUTNAM HIGH YIELD ADVANTAGE FUND, PUTNAM HIGH YIELD TRUST AND PUTNAM MANAGED HIGH YIELD TRUST By: /s/ ----------------------------------- PUTNAM DIVERSIFIED INCOME PORTFOLIO/SMITH BARNEY/TRAVELERS SERIES FUND BY PUTNAM INVESTMENT MANAGEMENT By: /s/ ----------------------------------- EACH OF SOUTHERN FARM BUREAU ANNUITY INSURANCE COMPANY TRAVELERS SERIES FUND, AMERITECH PENSION TRUST, US BOND TRUST 93, US BOND TRUST 91, US BOND TRUST 92, US BOND TRUST 94-03, US BOND TRUST 93-11, CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, US BOND TRUST 91-12, US BOND TRUST 90, MARSH & McLENNAN COMPANIES, INC. U.S. RETIREMENT PLAN AND PUTNAM EMBASSY FUNDS LTD. DIVERSIFIED INCOME FUND BY THE PUTNAM ADVISORY COMPANY, INC. By: /s/ ----------------------------------- FEDERATED ADVISERS AS ATTORNEY-IN-FACT FOR FEDERATED HIGH YIELD TRUST, FIXED INCOME SECURITIES, INC. ON BEHALF OF ITS STRATEGIC INCOME FUND, INVESTMENT SERIES FUNDS, INC. ON BEHALF OF ITS FORTRESS BOND FUND, INSURANCE MANAGEMENT SERIES ON BEHALF OF ITS CORPORATE BOND FUND, AND LIBERTY HIGH INCOME BOND FUND, INC. By: /s/ ----------------------------------- - - --------------------------- LELAND ZAUBLER 5 EX-10.16 18 EXHIBIT 10.16 Exhibit 10.16 AGREEMENT This Agreement (the "Agreement"), dated as of April , 1995, is made among The Grand Union Company (the "Company"), Grand Union Capital Corporation ("Capital"), Grand Union Holdings Corporation ("Holdings"), the Official Committee of Unsecured Creditors of Grand Union Capital Corporation (the "Capital Committee"), certain holders, that are signatories to this Agreement, of the 15% Senior Zero Coupon Notes Due 2004, Series A and B (the "Senior Zero Coupon Notes") and the 16.5% Senior Subordinated Zero Coupon Notes Due 2007, Series A and B (the "Senior Subordinated Zero Coupon Notes" and, together with the Senior Zero Coupon Notes, the "Zero Coupon Notes") issued by Capital and guaranteed by Holdings (each such holder of Zero Coupon Notes, in its capacity as such, a "Noteholder" and collectively with the Company, Capital, Holdings, and the Capital Committee, the "Parties"). All terms not otherwise defined herein shall have the meanings ascribed to such terms in the Second Amended Chapter 11 Plan of the Company dated April 19, 1995, as amended as provided in Section 1(d) hereof (the "Plan") annexed hereto as Exhibit A. This Agreement is made in consideration of, and in reference to, the following: RECITALS WHEREAS, on January 25, 1995, the Company filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq. (the "Bankruptcy Code"), in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), commencing Case No. 95-84 (PJW) (the "Company Bankruptcy Case"); and WHEREAS, on February 6, 1995, certain members of a then unofficial committee of holders of Zero Coupon Notes (the "Unofficial Capital Committee") commenced an involuntary chapter 11 bankruptcy case against Capital, Case No. 95-130 (PJW), in the Bankruptcy Court, in response to which Capital consented to an entry of an order for relief on February 16, 1995 (the "Capital Bankruptcy Case"); and WHEREAS, on February 16, 1995, Holdings filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the Bankruptcy Court, commencing Case No. 95-172 (PJW) (the "Holdings Bankruptcy Case," together with the Company Bankruptcy Case and the Capital Bankruptcy Case, the "Bankruptcy Cases"); and WHEREAS, the Company, Capital and Holdings remain in possession of their respective assets and continue to manage their affairs as debtors and debtors-in-possession in their respective Bankruptcy Cases; and WHEREAS, the Company is a wholly-owned subsidiary of Capital which, in turn, is a wholly-owned subsidiary of Holdings; and WHEREAS, both prior to and after the commencement of the Bankruptcy Cases, the Unofficial Capital Committee made certain allegations including that (i) Capital had breached certain fiduciary obligations that it purportedly owed to the Noteholders, and (ii) certain purported transfers by Capital to Holdings of proceeds received from the sale of Zero Coupon Notes were avoidable; and WHEREAS, on February 23, 1995, the Unofficial Capital Committee filed a motion in the Bankruptcy Court to substantively consolidate the Company Bankruptcy Case and the Capital Bankruptcy Case (the "Motion"); and WHEREAS, on March 3, 1995, the United States Trustee appointed the Capital Committee; and WHEREAS, the Capital Committee adopted and continues to prosecute the Motion and, additionally, either has filed or continues to prosecute various other motions, applications, and objections in the Bankruptcy Cases including, without limitation, the following: 1. Objection of the Unofficial Committee of Bondholders of Grand Union Capital Corporation to Debtor's Motion for an Order Authorizing Interim and Final DIP Financing filed in the Company Bankruptcy Case on February 7, 1995; 2. Response of the Unofficial Committee of Zero Coupon Noteholders of Grand Union Capital Corporation to Debtor's Motion to Strike Objections filed in the Company Bankruptcy Case on February 15, 1995; 3. Objection of the Committee of Zero Coupon Noteholders to Debtor's Disclosure Statement for the Plan of Reorganization of Grand Union Company filed in the Company Bankruptcy Case on March 2, 1995; 4. Motion Pursuant to Rule 60(b) Vacating the Orders Approving Post- Petition Financing Agreement of the Debtor With Bankers Trust Company and Exit Financing Commitment Fee and Reopening Hearing on the Motions filed in the Company Bankruptcy Case on March 16, 1995; 5. Motion of the Capital Committee to Disqualify Goldman Sachs and BT Securities filed in the Company Bankruptcy Case on March 17, 1995; 6. Objection of the Capital Committee to Debtor's First Amended Disclosure Statement for the First Amended Plan of Reorganization of Grand Union Company filed in the Company Bankruptcy Case on April 3, 1995; and 7. Application for Order Pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure for Joint Administration of Grand Union Capital Corporation and Grand Union Holdings Corporation filed in both the Capital and Holdings Bankruptcy Cases on March 15, 1995. (Hereinafter, the claims, allegations and/or contentions that are the subject of or are asserted by either the Unofficial Capital Committee or the Capital Committee in any of the matters described in these recitals (including, without limitation, the Motion), and any appeals related thereto, are collectively referred to as the "Capital Claims"); and WHEREAS, the Company, Capital, and Holdings dispute any liability to the Noteholders, the Unofficial Capital Committee or the Capital Committee with respect to the Capital Claims; and WHEREAS, due to the complexities of the various issues raised by the Capital Claims, and in order to avoid the inherent uncertainty and expense involved therein, the parties hereto believe that it is in their respective best interests to compromise and settle all of the controversies which exist among them upon the terms and conditions contained herein. NOW, THEREFORE, in consideration of the foregoing, the Parties hereby memorialize their agreement as follows: Section 1. Support of the Plan. Each of the Noteholders and the Capital Committee agree that, so long as (x) with respect to each Noteholder, such Noteholder is the beneficial owner of, or has investment authority or discretion as to, any Zero Coupon Notes and (y) no Material Change, as defined below, or a Disabling Contingency, as defined in Section 12(a) of this Agreement, shall have occurred: (a) Each Noteholder and the Capital Committee will (i) support and assist in the filing of the Plan, (ii) support and assist in the filing of the Disclosure Statement for the Plan, (iii) support and use its reasonable efforts to obtain acceptance of the Plan, (iv) take, or cause to be taken, any and all such other actions as are necessary to cause such Zero Coupon Notes beneficially owned, or as to which such Noteholder has investment authority or discretion, to be voted on the Plan, and (v) not agree to, consent to, or vote for any plan, other than the Plan as it may be amended, that does not contain the terms set forth in the Plan. 2 (b) Each Noteholder and the Capital Committee will not object to or otherwise commence any proceeding to oppose or alter either the Plan or the Disclosure Statement for the Plan, will withdraw any pending objection to the Disclosure Statement for the Plan, and will not take any action that is inconsistent with, or that would delay approval of the Disclosure Statement for the Plan or acceptance, confirmation, effectiveness or substantial consummation of the Plan. (c) While the Noteholders and the Capital Committee have agreed to support and use their reasonable efforts to obtain acceptance of the Plan as set forth in (a) above, it is understood that the Noteholders can have no legally binding obligation to vote to accept the Plan. Nothing contained herein shall be construed as a solicitation of an acceptance or rejection of, or require any party to accept or reject, the Plan. (d) The Noteholders and the Capital Committee acknowledge that the Plan may be modified or amended, and any such modification or amendment which does not constitute a Material Change shall not affect the Parties' obligations set forth in this Section 1. For purposes hereof, a "Material Change" means any modification or amendment of the Plan proposed or supported for approval by the Company such that the Plan contains terms that are different from those set forth in the Plan and which materially and adversely affect a Noteholder's treatment (either absolutely or relatively as compared to the treatment of other claims), unless the affected Noteholder agrees to such terms. Section 2. Transfer of Claims, Interests and Securities. No Noteholder shall, directly or indirectly, sell, assign, hypothecate or otherwise dispose of (collectively, "transfer") (x) any Zero Coupon Notes beneficially owned by it or as to which such Noteholder has investment authority or discretion, (including Zero Coupon Notes acquired after the date hereof), (y) any claim (as that term is defined in Section 101(5) of the Bankruptcy Code) arising from, based on or related to, Zero Coupon Notes or (z) any option, warrant, interest in, or right to acquire, any Zero Coupon Notes or claims referred to in clauses (x) or (y) above, provided that a party shall be permitted to transfer Zero Coupon Notes, claims or interests therein to (i) another Noteholder that is a party to this Agreement, (ii) an Affiliate (as that term is defined in Rule 12b-2 of the General Rules and Regulations promulgated under the Securities Act of 1934, as amended) of a Noteholder, which agrees in writing to be bound by the terms of this Agreement or (iii) any person or entity that is not a Noteholder and a party to this Agreement, or an Affiliate of a Noteholder, that agrees in writing to be bound by the terms of this Agreement. Such an Affiliate, person or entity which enters into the agreements required by clauses (ii) or (iii) of the preceding sentence shall be deemed to be a party to this Agreement for all purposes. Nothing contained in this Agreement is intended to or shall restrict the transfer of the warrants referred to in Section 4 of this Agreement subsequent to their issuance. Section 3. Ownership of Zero Coupon Notes. Each Noteholder represents and warrants that (i) Exhibit B sets forth the total principal amount of Zero Coupon Notes beneficially owned, or as to which such Noteholder, or its Affiliates have investment authority or discretion, and such Zero Coupon Notes constitute all of such securities so owned or controlled by such Noteholder and its Affiliates. Section 4. Plan Treatment. The Plan shall contain provisions providing for the issuance to Noteholders of warrants for the purchase of Reorganized Grand Union's common stock. Section 5. Other Representations and Warranties. (a) By their execution of this Agreement, each Noteholder and the Capital Committee represent and warrant that they (i) have read and understand the Plan, (ii) have had the opportunity to discuss and negotiate the terms of the Plan with the assistance of legal, financial and other advisors of their choosing ("Advisors"), and have had the opportunity to consult with their Advisors with respect to their decision to execute this Agreement, (iii) have read and understand the Disclosure Statement for the Plan, and (iv) have had adequate access, directly or through such Advisors, to such financial, business or other information relating to the Company, Capital, and Holdings that they deemed necessary or advisable to enter into this Agreement. 3 (b) The Parties further represent and warrant to one another as follows: (i) Each party is the sole and lawful owner of all right, title and interest in and to every claim and other matter which the party releases herein, and that the party has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity, any such claim or other matters herein released; and (ii) except as expressly stated in this Agreement, no party has made any statement or representation to any other party regarding any facts relied upon by said party in entering into this Agreement, and each party specifically does not rely upon any statement, representation or promise of any other party in executing this Agreement or in making the settlement provided for herein, except as expressly stated in this Agreement. (c) Capital and Holdings each represents and warrants to the Capital Committee that, after giving effect to the releases contained in or contemplated by this Agreement and the Plan, it has no material assets except as disclosed in its schedules and statements filed, as amended, in the Bankruptcy Cases. Section 6. Authorization. Each Noteholder, the Capital Committee, the Company, Capital, and Holdings each represents and warrants, subject to Bankruptcy Court approval with respect to the Company, Capital, and Holdings, that it has the power, and is authorized, to enter into this Agreement. Section 7. Withdrawal and/or Dismissal of Capital Claims. Each of the Parties and those entities that have indicated their lack of objection to this Agreement on page 16 hereof agrees to forbear and stand still on all litigation, including pre-trial discovery, relating to the Capital Claims. Upon the Effective Date of the Plan, the Noteholders and the Capital Committee will withdraw and/or dismiss the Capital Claims with prejudice. The Company agrees to forbear and stand still on any appeal from the order of the United States District Court for the District of Delaware granting the Unofficial Capital Committee standing to appear in the Company's Bankruptcy Case (the "Standing Order") until a Material Change or a Disabling Contingency, as defined in Section 12 of this Agreement, occurs. This standstill shall not, however, preclude the Company from filing a notice of appeal from the Standing Order or the Capital Committee from responding to such appeal if it is not stayed. Section 8. Noteholder and Capital Committee Releases. For good and valuable consideration, the receipt of which is hereby acknowledged, including, without limitation, the issuance of warrants to purchase common stock of Reorganized Grand Union pursuant to the Plan, each of the Noteholders and the Capital Committee, and their affiliates, agents, and assigns (the "Releasors") hereby unconditionally and irrevocably release the following persons: the Company, Capital, and Holdings, the respective affiliates of the Company, Capital, and Holdings, present and former stockholders, directors, and officers of the Company, Capital, and Holdings, including Miller Tabak Hirsch & Co. ("MTH") and its present and former partners, directors, officers, employees, advisors, attorneys, consultants, agents, and representatives including, without limitation, Messrs. Martin A. Fox, Glenn L. Goldberg, Claude Incaudo and James A. Lash, and any person or entity that directly or indirectly controls MTH, including Gary Hirsch, Jeffrey Miller and Jeffrey Tabak, the members of each of the Official Committee and the Informal Committees, each of the Post-Confirmation Banks, BT Securities Corporation, Goldman, Sachs & Co., and each of the foregoing entity's and/or person's respective attorneys, advisors, financial advisors, investment bankers, employees, successors, agents, and assigns, and any other person and/or entity against whom any of the Releasors may have a Released Claim, as defined below in this section (collectively, the "Released Persons"), from any and all claims, demands, actions, causes of action, suits, costs, dues, sums of money, accounts, bills, bonds, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, expenses, and liability whatsoever, known or unknown, at law or in equity, irrespective of whether such claims arise out of contract, tort, violation of laws or other regulations or otherwise, which the Releasors ever had or now have against the Released Persons or any of them, for, or by reason of, any matter, cause or thing whatsoever from the beginning of the world to and including the date hereof arising out of or in connection with, or related in any manner to, the issuance, ownership, purchase, and/or sale of the Zero Coupon Notes including, without limitation, any claim for substantive consolidation of the Company's Bankruptcy Case and Capital's Bankruptcy Case, any claims arising under any state or federal securities law and/or any claims arising under Sections 544, 548 and 550 of the Bankruptcy Code or under similar state laws, including fraudulent 4 conveyance claims (the "Released Claims"); provided, however, that a Releasor is not releasing hereby such Releasor's right to receive warrants pursuant to the Plan or any Allowed Claim in Classes 1, 2, 3, 4 or 8 of the Plan held by such Releasor. Section 9. Capital Release. For good and valuable consideration, the receipt of which is hereby acknowledged, including, without limitation, the issuance of warrants to purchase common stock of Reorganized Grand Union pursuant to the Plan and the Releases contained in this Agreement, Capital and its affiliates (other than the Company), agents, and assigns (the "Releasors") hereby unconditionally and irrevocably release the following persons: the Company, Holdings, the Noteholders, and the Capital Committee, the respective affiliates of the Company, Holdings, the Noteholders, and the Capital Committee, present and former stockholders, directors, and officers of the Company and Holdings, including Miller Tabak Hirsch & Co. ("MTH") and its present and former partners, directors, officers, employees, advisors, attorneys, consultants, agents, and representatives including, without limitation, Mssrs. Martin A. Fox, Glenn L. Goldberg, Claude Incaudo and James A. Lash, and any person or entity that directly or indirectly controls MTH, including Gary Hirsch, Jeffrey Miller and Jeffrey Tabak, the members of each of the Official Committee and the Informal Committees, each of the Post-Confirmation Banks, BT Securities Corporation, Goldman, Sachs & Co., each of the foregoing entity's and/or person's respective attorneys, advisors, financial advisors, investment bankers, employees, successors, agents, and assigns, each holder of a Zero Coupon Note that executes and delivers a Zero Claims Release pursuant to the Plan, and any other person and/or entity against whom any of the Releasors may have a Released Claim, as defined below in this section (collectively, the "Released Persons"), from any and all claims, demands, actions, causes of action, suits, costs, dues, sums of money, accounts, bills, bonds, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, expenses, and liability whatsoever, known or unknown, at law or in equity, irrespective of whether such claims arise out of contract, tort, violation of laws or other regulations or otherwise, which the Releasors ever had or now have against the Released Persons or any of them, for, or by reason of, any matter, cause or thing whatsoever from the beginning of the world to and including the date hereof arising out of or in connection with, or related in any manner to, the issuance, ownership, purchase, and/or sale of the Zero Coupon Notes including without limitation, any claims arising under any state or federal securities law and/or any claims arising under Sections 544, 548 and 550 of the Bankruptcy Code or under similar state laws, including fraudulent conveyance claims (the "Released Claims"). Section 10. Holdings Release. For good and valuable consideration, the receipt of which is hereby acknowledged, including, without limitation, the issuance of warrants to purchase common stock of Reorganized Grand Union pursuant to the Plan and the Releases contained in this Agreement, Holdings and its affiliates (other than the Company), agents, and assigns (the "Releasors") hereby unconditionally and irrevocably release the following persons: the Company, Capital, the Noteholders, and the Capital Committee, the respective affiliates of the Company, Capital, the Noteholders, and the Capital Committee, present and former stockholders, directors, and officers of the Company or Capital, including Miller Tabak Hirsch & Co. ("MTH") and its present and former partners, directors, officers, employees, advisors, attorneys, consultants, agents, and representatives including, without limitation, Mssrs. Martin A. Fox, Glenn L. Goldberg, Claude Incaudo and James A. Lash, and any person or entity that directly or indirectly controls MTH, including Gary Hirsch, Jeffrey Miller and Jeffrey Tabak, the members of each of the Official Committee and the Informal Committees, each of the Post-Confirmation Banks, BT Securities Corporation, Goldman, Sachs & Co., each of the foregoing entity's and/or person's respective attorneys, advisors, financial advisors, investment bankers, employees, successors, agents, and assigns, each holder of a Zero Coupon Note that executes and delivers a Zero Claims Release pursuant to the Plan and any other person and/or entity against whom any of the Releasors may have a Released Claim, as defined below in this section (collectively, the "Released Persons"), from any and all claims, demands, actions, causes of action, suits, costs, dues, sums of money, accounts, bills, bonds, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, expenses, and liability whatsoever, known or unknown, at law or in equity, irrespective of whether such claims arise out of contract, tort, violation of laws or other regulations or otherwise, which the Releasors ever had or now have against the Released Persons or any of them, for, or by 5 reason of, any matter, cause or thing whatsoever from the beginning of the world to and including the date hereof arising out of or in connection with, or related in any manner to, the issuance, ownership, purchase, and/or sale of the Zero Coupon Notes including without limitation, any claims arising under any state or federal securities law and/or any claims arising under Sections 544, 548 and 550 of the Bankruptcy Code or under similar state laws, including fraudulent conveyance claims (the "Released Claims"). Section 11. Company Release. For good and valuable consideration, the receipt of which is hereby acknowledged, including, without limitation, the Releases contained in this Agreement, the Company and its affiliates, agents, and assigns (the "Releasors") hereby unconditionally and irrevocably release the following persons: Capital, Holdings, the Noteholders, and the Capital Committee, the respective affiliates of the Noteholders and the Capital Committee, and the respective officers, directors, employees, advisors, attorneys and consultants, in such capacities, of the Noteholders and the Capital Committee (collectively, the "Released Persons"), from any and all claims, demands, actions, causes of action, suits, costs, dues, sums of money, accounts, bills, bonds, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, expenses, and liability whatsoever, known or unknown, at law or in equity, irrespective of whether such claims arise out of contract, tort, violation of laws or other regulations or otherwise, which the Releasors ever had or now have against the Released Persons or any of them, for, or by reason of, any matter, cause or thing whatsoever from the beginning of the world to and including the date hereof arising out of or in connection with, or related in any manner to, the issuance, ownership, purchase, and/or sale of the Zero Coupon Notes including without limitation, any claims arising under any state or federal securities law and/or any claims arising under Sections 544, 548 and 550 of the Bankruptcy Code or under similar state laws, including fraudulent conveyance claims. Section 12. Occurrence of Certain Events. (a) The Noteholders and the Capital Committee shall be released of their obligations under this Agreement in the event of either a Material Change, as defined in Section 1 of this Agreement, or: (i) the Company withdraws or otherwise fails to prosecute the Plan; (ii) the Bankruptcy Court enters an order that becomes a Final Order denying the Joint Motion to Compromise Controversies, as defined in Section 14 of this Agreement, in the Company's Bankruptcy Case; (iii) the Bankruptcy Court enters an order that becomes a Final Order denying confirmation of the Plan; or (iv) the Bankruptcy Court does not enter an order confirming the Plan on or before August 15, 1995 (a "Disabling Contingency"). (b) In the event of a Material Change in the Plan, or a Disabling Contingency, the Company shall not schedule a hearing on any of the Capital Claims, or on a new plan of reorganization, such that any such hearing occurs prior to 20 days after the occurrence of the Material Change, or the Disabling Contingency, as applicable. Section 13. Covenant Not to Sue. Each Noteholder and the Capital Committee hereby covenant not to commence any action against any Released Person, as defined in Section 8 of this Agreement, asserting a Released Claim, as defined in that section. Section 14. Bankruptcy Court Motion for Approval. In order to effectuate a timely resolution of these matters, certain of the parties hereto shall jointly file a motion in the Bankruptcy Cases requesting Bankruptcy Court approval of this Settlement Agreement pursuant to Bankruptcy Rule 9019 (the "Joint Motion to Compromise Controversies"). The Parties to this Agreement will cooperate fully with one another and will use their respective best efforts to secure the entry of a Final Order approving the Joint Motion to Compromise Controversies as promptly as possible. Section 15. Effective Date. This Agreement shall be effective upon its execution by each of the Parties, subject to Bankruptcy Court approval of the Joint Motion to Compromise Controversies; provided, however, that notwithstanding such Bankruptcy Court approval, with respect to the provisions of this Agreement relating to the releases contained in Sections 8, 9, 10 and 11, above, this Agreement shall be deemed effective, subject to delivery of the global certificates provided for in Section 2.1 of the Warrant Agreement, upon the 6 occurrence of the Effective Date of the Plan (assuming the order approving the Joint Motion to Compromise Controversies is a Final Order) and provided further that the releases by the Noteholders set forth in Section 8 and the Company's release of the Noteholders in Section 11, above, shall not be effective if prior to the commencement of the distribution of the Warrants by the Warrant Agent (as defined in the Warrant Agreement), in whole or in part, such distribution is enjoined by an Entity other than a holder (present, former or future) of a Zero Note; and provided further that the immediately preceding proviso shall be of no force and effect if such injunction is dissolved. To the extent a particular term or provision of this Agreement is not approved by the Bankruptcy Court, this Agreement may nonetheless become effective if the party that is the intended beneficiary of such term or provision agrees in writing to the deletion of such term from this Agreement. In addition, if orders approving this Agreement have been entered in the Capital Bankruptcy Case and the Holdings Bankruptcy Case, the Company may waive the requirement that any such order be a Final Order with the consent of the Official Committee, which consent shall not be unreasonably withheld. If the Company waives such requirement, this Agreement shall not be binding upon Capital or Holdings if a Final Order approving it has not been entered in its Bankruptcy Case. Section 16. Specific Performance. It is understood and agreed by the Noteholders and the Capital Committee that money damages would not be a sufficient remedy for any breach of this Agreement by any Noteholder or the Capital Committee and that the Company shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach, and each Noteholder and the Capital Committee agree to waive any requirement for the securing or posting of a bond in connection with such remedy. Section 17. No Admission of Liability. The settlement set forth herein is in the best interest of all of the Parties, and the estates of the Company, Capital, and Holdings, because of, among other reasons, the substantial risks inherent in and the significant expenses arising from continuing litigation with respect of the Capital Claims. This Agreement is in compromise of disputed claims and nothing contained herein shall be construed or offered as an admission of liability, or of the amount of any claim, on behalf of, or with respect to, any claims asserted by or against the Parties. The Company, Capital, and Holdings expressly deny such alleged liability to the Noteholders and the Capital Committee. Section 18. Joint Negotiation. This Agreement is a product of negotiation among the Parties and represents jointly conceived, bargained for, and agreed upon, language that has been mutually determined by the Parties to express their intentions in entering into this Agreement. Any ambiguity or uncertainty in this Agreement shall be deemed to be caused by or attributable to all Parties hereto collectively. Section 19. Final Agreement. Except as set forth in the Plan, this Agreement is the complete, final and exclusive statement of all of the agreements, conditions, promises and covenants among the Parties with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements, negotiations, representations, statements, understandings and discussions among the Parties and/or their respective counsel with respect to the subject matter covered. Except as set forth in the Plan, there exist no prior or contemporaneous negotiations, statements, promises or agreements that survive the execution of this Agreement. Section 20. Disclosure. The Parties contemplate that this Agreement will be disclosed in the Disclosure Statement for the Plan and/or a press release issued by the Company, Capital, and/or Holdings, and consent to such disclosure. Section 21. Amendments or Modifications. To be legally binding, any amendment or modification to this Agreement must be in writing, must refer specifically to this Agreement and must be signed by duly-authorized representatives of all Parties hereto. Section 22. Binding Effect. This Agreement shall be binding on the Parties and any and all of their successors and assigns including, without limitation, any trustee that may be appointed in any of the Bankruptcy Cases. 7 Section 23. No Waiver of Breach. The failure of any party to require the performance of any of the terms or provisions of this Agreement or the waiver by any party of any breach under this Agreement shall neither prevent a subsequent enforcement of such term or provision nor be deemed a waiver of any such subsequent breach. Section 24. Headings. The descriptive headings of the several sections of this Agreement are inserted for convenience of reference only and do not constitute a part of this Agreement. Section 25. Governing Law. In all respects, including all matters of construction, validity and performance, this Agreement and the obligations arising hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to contracts made and performed in such state, without regard to the principles thereof regarding conflicts of law, and any applicable laws of the United States of America. Section 26. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall, collectively and separately, constitute one agreement. 8 IN WITNESS WHEREOF, the parties have executed this Agreement the day of April, 1995. THE GRAND UNION COMPANY By: /s/ Francis Nicastro --------------------------- GRAND UNION CAPITAL CORPORATION By: /s/ Martin A. Fox ---------------------------- GRAND UNION HOLDINGS CORPORATION By: /s/ Martin A. Fox ---------------------------- OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF GRAND UNION CAPITAL CORPORATION By: /s/ Peter M. Avelar ---------------------------- Vice President DEAN WITTER HIGH YIELD SECURITIES By: /s/ Peter M. Avelar ---------------------------- Vice President VARIABLE HIGH YIELD By: /s/ Peter M. Avelar ---------------------------- Vice President DEAN WITTER DIVERSIFIED INCOME TRUST By: /s/ Peter M. Avelar ---------------------------- Vice President HIGH INCOME ADVANTAGE TRUST By: /s/ Peter M. Avelar ---------------------------- Vice President HIGH INCOME ADVANTAGE TRUST II By: /s/ Peter M. Avelar ---------------------------- Vice President HIGH INCOME ADVANTAGE TRUST III By: /s/ Peter M. Avelar ---------------------------- Vice President DEAN WITTER HIGH INCOME SECURITIES By: /s/ Peter M. Avelar ---------------------------- Vice President LUTHERAN BROTHERHOOD HIGH YIELD FUND By: /s/ ---------------------------- Assistant V.P. and Portfolio Manager LB SERIES FUND, INC. HIGH YIELD PORTFOLIO By: /s/ ---------------------------- Assistant V.P. and Portfolio Manager 9 FRANKLIN AGE HIGH INCOME FUND By: /s/ --------------------------- FRANKLIN INCOME FUND By: /s/ --------------------------- FRANKLIN VALUEMARK FUND-INCOME By: /s/ --------------------------- BARRE & COMPANY INC. By: /s/ --------------------------- LOCAL 68 IUOE ANNUITY FUND By: /s/ --------------------------- LOCAL 68 IUOE PENSION FUND By: /s/ --------------------------- The Official Committee of Unsecured Creditors of The Grand Union Company and The Informal Committee of Senior Secured Noteholders, which entities are not parties to this Agreement, have reviewed it, have no objection to it, and consent to Section 7 of it. OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF THE GRAND UNION COMPANY By: ___________________________ INFORMAL COMMITTEE OF SENIOR SECURED NOTEHOLDERS By: ___________________________ 10 EXHIBIT A [See Appendix "A" to the Disclosure Statement, The Second Amended Plan of Reorganization] EXHIBIT B
15% Zero 16.5% Zero Member Coupon Notes Coupon Notes - - ----------------------------------------- ------------ ------------ Dean Witter High Yield Securities Two World Trade Center New York, NY 10048.............................. $58,415,000 $123,220,000 Variable High Yield Two World Trade Center New York, NY 10048.............................. 19,558,000 26,950,000 Dean Witter Diversified Income Trust Two World Trade Center New York, NY 10048.............................. 18,000,000 45,750,000 High Income Advantage Trust Two World Trade Center New York, NY 10048.............................. 19,000,000 34,000,000 High Income Advantage Trust II Two World Trade Center New York, NY 10048.............................. 21,500,000 55,500,000 High Income Advantage Trust III Two World Trade Center New York, NY 10048.............................. 10,000,000 20,000,000 Dean Witter High Income Securities Two World Trade Center New York, NY 10048.............................. 6,000,000 2,000,000 LB Series Fund, Inc. High Yield Portfolio 625 Fourth Avenue South Minneapolis, MN 55415........................... 23,200,000 23,500,000 Lutheran Brotherhood High Yield Fund 625 Fourth Avenue South Minneapolis, MN 55415........................... 19,000,000 20,000,000 Frankline AGE High Income Fund 777 Mariners Island Blvd. 7th Floor San Mateo, CA 94404............................. 12,500,000 99,850,400 Franklin Income Fund 777 Mariners Island Blvd. 7th Floor San Mateo, CA 94404............................. 25,000,000 47,700,000 Franklin Valuemark Fund-Income 777 Mariners Island Blvd. 7th Floor San Mateo, CA 94404............................. 1,648,000 3,933,000 Barre & Company Incorporated 717 N. Harwood, Suite 560 Dallas, TX 75201................................ 3,400,000 -0-
15% Zero 16.5% Zero Member Coupon Notes Coupon Notes - - ------------------------------------------------ ------------ ------------ Marine Midland Bank, as Indenture Trustee for the 16.5% Zero Coupon Notes 140 Broadway-12th Floor New York, NY 10005.............................. N/A N/A First Trust National Assn., as Indenture Trustee for the 15% Zero Coupon Notes 180 East 5th Street St. Paul, MN 55101.............................. N/A N/A Local 68 IUOE Pension Fund & Annuity Fund 14 Fairfield Place West Caldwell, NJ 07006......................... -0- 3,000,000
2 EX-10.17 19 EXHIBIT 10.17 Exhibit 10.17 WAIVER With respect to the Second Amended Chapter 11 Plan of The Grand Union Company, dated as of April 19, 1995 (the "Plan") (i) the Debtor hereby waives the condition to the Effective Date in Sections 15.02(a) and (f) of the Plan and the condition to effectiveness of the Zero Settlement in Section 15 thereof, (ii) the Official Committee, the Senior Bank Agent and the Informal Committee of Senior Noteholders hereby consent to the waiver by the Debtor of the condition to the Effective Date in Sections 15.02(a) and (f) of the Plan and (iii) the Official Committee hereby consents to the waiver by the Debtor of the condition to the effectiveness of the Zero Settlement in Section 15 thereof. All capitalized terms not defined herein are as defined in the Plan. Dated June 14, 1995 BANKERS TRUST COMPANY, AS THE GRAND UNION COMPANY SENIOR BANK AGENT By: /s/ Frances Nicastro /s/ Mary Kay Coyle -------------------- ------------------ Its: Vice President and Treasurer Mary Kay Coyle ----------------------------- THE GRAND UNION COMPANY Vice President 201 Willowbrook Boulevard BANKERS TRUST COMPANY Wayne, NJ 07470 One Bankers Trust Plaza New York, NY 10006 THE OFFICIAL COMMITTEE OF UNSECURED INFORMAL COMMITTEE OF SENIOR CREDITORS OF THE GRAND UNION COMPANY NOTEHOLDERS /s/ Alyson B. Gal /s/ Bridget Healy - - ------------------------- ----------------------------- William F. McCarthy, Esq. Daniel H. Golden, Esq. Alyson B. Gal, Esq. Bridget Healy, Esq. Kendrick Chow, Esq. Stroock & Stroock & Lavan Ropes & Gray 7 Hanover Square One International Place New York, NY 10004-2696 Boston, MA 02110-2624 - - - and - Stuart E. Hertzberg Dennis Kayes David B. Stratton Pepper Hamilton & Scheetz 100 Renaissance Center, Suite 3600 Detroit, MI 48243-1157 EX-21.1 20 EXHIBIT 21.1 Exhibit 21.1 Subsidiaries of the Grand Union Company, as of June 15, 1995 Merchandising Services, Inc. Grand Union Stores, Inc. of Vermont Grand Union Stores of New Hampshire, Inc. EX-27.1 21 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS. 1,000 12-MOS APR-01-1995 APR-01-1995 89,423 0 18,592 0 189,467 314,269 634,848 207,886 1,394,756 174,126 1,466,357 9,407 0 164,792 (824,339) 1,394,756 2,391,696 2,391,696 1,704,082 1,704,082 550,913 0 182,016 (159,830) 0 (159,830) 0 0 0 (159,830) 0 0
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