-----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, GMLVwySjVs6Wq9moq0PdOs1kniTL9RGiHISN56+0TaeCSm//lUnqvPnv0jkOSbrX l/A25MsIR2qm2GQk7LwIeQ== 0001047469-97-001974.txt : 19971030 0001047469-97-001974.hdr.sgml : 19971030 ACCESSION NUMBER: 0001047469-97-001974 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19971029 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: JITNEY JUNGLE STORES OF AMERICA INC /MI/ CENTRAL INDEX KEY: 0001005408 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 133863017 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-38957 FILM NUMBER: 97702664 BUSINESS ADDRESS: STREET 1: 1770 ELLIS AVE STE 200 STREET 2: STE 200 CITY: JACKSON STATE: MS ZIP: 39204 BUSINESS PHONE: 2125594333 MAIL ADDRESS: STREET 1: JITNEY JUNGLE STORES OF AMERICA INC STREET 2: 4315 IDUSTRIAL DR CITY: JACKSON STATE: MS ZIP: 39209 FORMER COMPANY: FORMER CONFORMED NAME: JJ ACQUISITIONS CORP DATE OF NAME CHANGE: 19951227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUMP & SAVE INC CENTRAL INDEX KEY: 0000316832 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640779730 STATE OF INCORPORATION: MS FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-38957-01 FILM NUMBER: 97702665 BUSINESS ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUATRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 BUSINESS PHONE: 6019658600 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELCHAMPS INC CENTRAL INDEX KEY: 0000729970 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 630245434 STATE OF INCORPORATION: AL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-38957-02 FILM NUMBER: 97702666 BUSINESS ADDRESS: STREET 1: 305 DELCHAMPS DR STREET 2: P O BOX 1668 CITY: MOBILE STATE: AL ZIP: 36602 BUSINESS PHONE: 2054330431 MAIL ADDRESS: STREET 1: 305 DELCHAMPS DR STREET 2: PO BOX 1668 CITY: MOBILE STATE: AL ZIP: 36602 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELTA ACQUISITION CORP CENTRAL INDEX KEY: 0001048618 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 721394134 STATE OF INCORPORATION: MS FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-38957-03 FILM NUMBER: 97702667 BUSINESS ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 BUSINESS PHONE: 6019658600 MAIL ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JITNEY JUNGLE BAKERY INC CENTRAL INDEX KEY: 0001048619 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640462232 STATE OF INCORPORATION: MS FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-38957-04 FILM NUMBER: 97702668 BUSINESS ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 BUSINESS PHONE: 6019658600 MAIL ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN JITNEY JUNGLE CO CENTRAL INDEX KEY: 0001048621 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640280601 STATE OF INCORPORATION: MS FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-38957-05 FILM NUMBER: 97702669 BUSINESS ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 BUSINESS PHONE: 6019658600 MAIL ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE JITNEY JUNGLE STORES INC CENTRAL INDEX KEY: 0001048622 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640728553 STATE OF INCORPORATION: AL FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-38957-06 FILM NUMBER: 97702670 BUSINESS ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 BUSINESS PHONE: 6019658600 MAIL ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCCARTY HOLMAN CO INC CENTRAL INDEX KEY: 0001048623 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640294093 STATE OF INCORPORATION: MS FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-38957-07 FILM NUMBER: 97702671 BUSINESS ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 BUSINESS PHONE: 6019658600 MAIL ADDRESS: STREET 1: DAVID R BLACK STREET 2: 4315 INDUSTRIAL DRIVE CITY: JACKSON STATE: MS ZIP: 39209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERMARKET CIGARETTE SALES INC CENTRAL INDEX KEY: 0001048704 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 721029831 STATE OF INCORPORATION: LA FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-38957-08 FILM NUMBER: 97702672 BUSINESS ADDRESS: STREET 1: C/O DELCHAMPS INC STREET 2: 305 DELCHAMPS DRIVE CITY: MOBILE STATE: AL ZIP: 36602 BUSINESS PHONE: 3344430437 S-4 1 S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ JITNEY-JUNGLE STORES OF AMERICA, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MISSISSIPPI 5411 64-0280539 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
------------------------ 1770 ELLIS AVENUE, SUITE 200 JACKSON, MISSISSIPPI 39204 (601) 965-8600 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------------ SEE TABLE OF ADDITIONAL REGISTRANTS BELOW ------------------------ DAVID R. BLACK SENIOR VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER JITNEY-JUNGLE STORES OF AMERICA, INC. 1770 ELLIS AVENUE, SUITE 200 JACKSON, MISSISSIPPI 39204 (601) 965-8600 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------------ WITH COPIES TO: BRUCE B. WOOD, ESQ. DECHERT PRICE & RHOADS 30 ROCKEFELLER PLAZA NEW YORK, NEW YORK 10112 (212) 698-3500 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / ------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED MAXIMUM MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE 10% Senior Subordinated Notes due 2007........... $200,000,000 100% $200,000,000 $60,607 Guarantees of Senior Subordinated Notes.......... $200,000,000 -- -- None
(1) Estimated pursuant to Rule 457(f) solely for purposes of calculating the registration fee. ------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JITNEY-JUNGLE STORES OF AMERICA, INC. TABLE OF ADDITIONAL REGISTRANTS
STATE OR OTHER PRIMARY STANDARD JURISDICTION INDUSTRIAL IRS EMPLOYER OF CLASSIFICATION IDENTIFICATION NAME INCORPORATION CODE NUMBER NUMBER - -------------------------------------------------------------- ----------- ---------------------- ------------- Interstate Jitney-Jungle Stores, Inc.......................... Alabama 5411 64-0728553 McCarty-Holman Co., Inc....................................... Mississippi 5411 64-0294093 Southern Jitney-Jungle Company................................ Mississippi 5411 64-0280601 Pump And Save, Inc............................................ Mississippi 5411 64-0779730 Delta Acquisition Corporation................................. Alabama 5411 72-1394134 Supermarket Cigarette Sales, Inc.............................. Louisiana 5194 72-1029831 Jitney-Jungle Bakery, Inc..................................... Mississippi 2051 64-0462232 Delchamps, Inc................................................ Alabama 5411 63-0245434
The address, including zip code, and telephone number, including area code, for each of the additional registrants' principal executive offices, other than Supermarket Cigarette Sales, Inc. and Delchamps, Inc., is 1770 Ellis Avenue, Suite 200, Jackson, Mississippi 39204 (601) 965-8600, and the address, including zip code, and telephone number, including area code, for the principal executive offices of Supermarket Cigarette Sales, Inc. and Delchamps, Inc. is 305 Delchamps Drive, Mobile, Alabama 36602 (334) 433-0437. ii SUBJECT TO COMPLETION, DATED OCTOBER 29, 1997 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. PROSPECTUS [LOGO] OFFER TO EXCHANGE 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 FOR ALL OUTSTANDING 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 OF JITNEY-JUNGLE STORES OF AMERICA, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Jitney-Jungle" or the "Company"), hereby offers to exchange an aggregate principal amount of up to $200,000,000 of its 10 3/8% Senior Subordinated Notes due 2007 (the "New Notes") for a like principal amount of its 10 3/8% Senior Subordinated Notes due 2007 (the "Existing Notes") outstanding on the date hereof upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying letter of transmittal (the "Letter of Transmittal" and, together with this Prospectus, the "Exchange Offer"). The New Notes and the Existing Notes are hereinafter collectively referred to as the "Notes." The terms of the New Notes are identical in all material respects to those of the Existing Notes, except for certain transfer restrictions and registration rights relating to the Existing Notes. The New Notes will be issued pursuant to, and be entitled to the benefits of, the Indenture (as defined) governing the Existing Notes. The New Notes will bear interest from and including the date of consummation of the Exchange Offer. Interest on the New Notes will be payable semi-annually on March 15 and September 15 of each year, commencing March 15, 1998. Additionally, interest on the New Notes will accrue from the last interest payment date on which interest was paid on the Existing Notes surrendered in exchange therefor or, if no interest has been paid on the Existing Notes, from the date of original issue of the Existing Notes. The New Notes will be general unsecured obligations of the Company, subordinated in right of payment to all existing and future Senior Debt (as defined) of the Company, including indebtedness pursuant to the 12% Senior Notes due 2006 of the Company (the "Senior Notes") and the Senior Credit Facility (as defined). The New Notes will be guaranteed (the "Subsidiary Guarantees"), jointly and severally, on a senior subordinated basis by all of the Company's Restricted Subsidiaries (as defined)(the "Subsidiary Guarantors"). The Subsidiary Guarantees will be subordinated in right of payment to all existing and future Senior Debt of the Subsidiary Guarantors, including the guarantees of the Subsidiary Guarantors of the Company's obligations under the Senior Notes and the Senior Credit Facility. At July 26, 1996, on a Pro Forma Basis (as defined), the Company would have had approximately $348.1 million of Senior Debt outstanding (exclusive of an unused commitment of up to $66.1 million under the Senior Credit Facility) and the Subsidiary Guarantors would have had approximately $10.4 million of Senior Debt outstanding (excluding guarantees by the Subsidiary Guarantors of the Company's obligations under the Senior Notes and the Senior Credit Facility). The New Notes are being offered hereunder in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated September 15, 1997 (the "Registration Rights Agreement") by and among the Company, the Subsidiary Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Credit Suisse First Boston (together with DLJ, the "Initial Purchasers") with respect to the initial sale of the Existing Notes. The Company will not receive any proceeds from the Exchange Offer. The Company will pay all the expenses incident to the Exchange Offer. Tenders of Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date (as defined) for the Exchange Offer. In the event the Company terminates the Exchange Offer and does not accept for exchange any Existing Notes with respect to the Exchange Offer, the Company will promptly return such Existing Notes to the holders thereof. See "The Exchange Offer." Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivery of a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Existing Notes where such Existing Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." Prior to the Exchange Offer, there has been no public market for the Existing Notes. If a market for the New Notes should develop, such New Notes could trade at a discount from their principal amount. The Company currently does not intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system, and no active public market for the New Notes is currently anticipated. There can be no assurance that an active public market for the New Notes will develop. The Exchange Offer is not conditioned upon any minimum principal amount of Existing Notes being tendered for exchange pursuant to the Exchange Offer. -------------------------- SEE "RISK FACTORS" COMMENCING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS THAT HOLDERS OF EXISTING NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------------------- The date of this Prospectus is , 1997. AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission" or the "SEC") a Registration Statement on Form S-4 (the "Exchange Offer Registration Statement," which term shall encompass all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the New Notes being offered hereby. This Prospectus does not contain all the information set forth in the Exchange Offer Registration Statement. For further information with respect to the Company and the Exchange Offer, reference is made to the Exchange Offer Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Commission. Such reports and other information, including the Exchange Offer Registration Statement and exhibits thereto, can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, and at the Commission's regional offices in Suite 1400, Northwest Atrium Center, West Madison Street, Chicago, Illinois 60661, and 7 World Trade Center (13th floor), New York, New York 10048. Copies of such material can be obtained from the Commission at prescribed rates through its Public Reference Section at 450 Fifth Street. N.W., Washington, D.C. 20549. The Commission also maintains a site on the World Wide Web, the address of which is http://www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers, such as the Company, that file electronically with the Commission. The obligation of the Company under the Exchange Act to file reports with the Commission will be suspended if the Notes are held of record by fewer than 300 holders at the beginning of any fiscal year of the Company after the fiscal year commencing on April 30, 1995. In the event the Company ceases to be subject to the informational requirements of the Exchange Act, the Indenture provides that the Company will be required, for so long as any of the Notes remain outstanding, to furnish to the Trustee (as defined) and deliver or cause to be delivered to the holders of the Notes and file with the Commission (provided that the Commission will accept such filing) (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including for each a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, and (ii) all reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. This Prospectus includes forward-looking statements which involve risks and uncertainties as to future events. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth under "Risk Factors". 2 SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, (I) THE TERM "JITNEY-JUNGLE" REFERS TO JITNEY-JUNGLE STORES OF AMERICA, INC., (II) THE TERM "DELCHAMPS" REFERS TO DELCHAMPS, INC., AN ALABAMA CORPORATION, (III) THE TERM "THE COMPANY" REFERS TO JITNEY-JUNGLE AND ITS CONSOLIDATED SUBSIDIARIES (INCLUDING DELCHAMPS) AS IF THE DELCHAMPS ACQUISITION (AS DEFINED) HAD BEEN CONSUMMATED AND (IV) THE TERM "MANAGEMENT" REFERS TO THE MANAGEMENT TEAM OF JITNEY-JUNGLE. REFERENCES HEREIN TO 'FISCAL YEARS' ARE TO THE FISCAL YEARS OF JITNEY-JUNGLE AND DELCHAMPS, AS APPLICABLE, WHICH END ON THE SATURDAY NEAREST TO APRIL 30 AND THE SATURDAY NEAREST TO JUNE 30, RESPECTIVELY, IN THE CALENDAR YEAR. PRO FORMA DATA INCLUDED HEREIN FOR THE "LTM PERIOD" REFLECT THE RESULTS OF OPERATIONS OF JITNEY-JUNGLE FOR THE 53 WEEKS ENDED JULY 26, 1997 AND THE RESULTS OF OPERATIONS OF DELCHAMPS FOR THE FISCAL YEAR ENDED JUNE 28, 1997, AND INCLUDE THE PRO FORMA ADJUSTMENTS DESCRIBED UNDER "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS." REFERENCES HEREIN TO THE "SOUTHEAST" ARE TO THE STATES OF ALABAMA, ARKANSAS, FLORIDA, LOUISIANA, MISSISSIPPI AND TENNESSEE, AND REFERENCES HEREIN TO THE NUMBER OF SUPERMARKETS OPERATED BY THE COMPANY ARE TO THE ACTUAL TOTALS AFTER GIVING EFFECT TO THE ANTICIPATED STORE DISPOSITIONS (AS DEFINED). CERTAIN MARKET DATA USED IN THIS PROSPECTUS REFLECT MANAGEMENT ESTIMATES; WHILE SUCH ESTIMATES ARE BELIEVED TO BE RELIABLE, NO ASSURANCE CAN BE GIVEN THAT SUCH DATA IS ACCURATE IN ALL MATERIAL RESPECTS. THE COMPANY The Company is a leading operator of supermarkets in the Southeast. Upon consummation of the Delchamps Acquisition, the Company will operate 199 supermarkets located throughout Mississippi and Alabama as well as in selected markets in Tennessee, Arkansas, Louisiana and Florida. In addition, the Company will be the largest supermarket operator in Mississippi and the second largest supermarket operator in Alabama, with 81 supermarkets in Mississippi and 49 supermarkets in Alabama. The Company will account for an estimated 32% of the grocery sales in Mississippi and an estimated 18% of the grocery sales in Alabama. Jitney-Jungle currently has an estimated 50% of the grocery sales in Jackson, Mississippi and Delchamps has an estimated 37% of the grocery sales in Mobile, Alabama. Jitney-Jungle and Delchamps also have the number one, two or three market share position in approximately 80% of the major markets in which they operate. The Delchamps Acquisition is expected to increase the Company's geographic diversification because the Delchamps stores are primarily located in areas in which Jitney-Jungle currently has no stores. At the same time, the Delchamps Acquisition is expected to result in valuable purchasing, distribution and marketing synergies for the Company. On a Pro Forma Basis, the Company would have had approximately $2.2 billion of net sales and approximately $127.8 million of EBITDA (as defined) for the LTM Period. Management believes that the Company has significant competitive advantages, which include: STRONG FRANCHISE AND PRIME SITES. The Company has a strong consumer franchise built around the "Jitney-Jungle" and "Delchamps" names. Management believes that the Company's customers associate these names with quality, value, convenience and superior service. In addition, Management believes that most of the Company's urban supermarkets are in high-traffic locations that offer significant competitive advantages, and that many of its supermarkets located in smaller towns and rural areas are located on prime, non-replicable sites. MODERN SUPERMARKET BASE. During the last five fiscal years, Jitney-Jungle and Delchamps invested approximately $147.0 million and $111.0 million, respectively, in capital expenditures, a substantial majority of which was for building new supermarkets and expanding or remodeling existing supermarkets. Approximately 81% of the Company's supermarket base has been built or remodeled within the past five fiscal years. 3 SUCCESSFUL PRIVATE LABEL PROGRAM. In addition to branded products, the Company's supermarkets offer a selection of private label products bearing the brand names of Topco Associates, Inc. ("Topco"), the largest cooperative grocery products purchasing organization in the United States. The Company's affiliation with Topco enables it to procure quality merchandise on a competitive basis with larger, national food retailers. Pro forma net sales of private label products, which generally have a lower unit sales price than national brands but provide a higher gross margin due to lower unit costs, accounted for approximately 18.2% of pro forma net non-perishable sales of the Company during the LTM Period. CENTRALIZED AND EFFICIENT DISTRIBUTION FACILITIES. The Company's distribution facility located in Jackson, Mississippi is conveniently located close to major highways and provides a central delivery site for vendors. This facility includes an aggregate of 814,000 square feet of warehouse space and can efficiently supply the Company's 199 supermarkets, as well as potential new markets contiguous to existing markets. THE ACQUISITION AND EXPECTED BENEFITS During fiscal 1997, Delchamps generated net sales and EBITDA of approximately $1.1 billion and $44.1 million, respectively. In addition to the incremental net sales, EBITDA and market share expected to result from the Delchamps Acquisition, Management believes that it should be able to achieve significant cash cost savings as a result of the elimination of certain duplicative costs, increased operating efficiencies and increased purchasing leverage in connection with the combined operation of the Jitney-Jungle and Delchamps businesses following the Delchamps Acquisition. While the exact timing and amount of such cash cost savings is inherently uncertain, Management currently expects that the Company should begin to realize such cash cost savings within three to nine months following the Delchamps Acquisition. Specific anticipated benefits of the Delchamps Acquisition include: - REDUCED GENERAL AND ADMINISTRATIVE EXPENSE. In connection with the Delchamps Acquisition, Management expects to consolidate the corporate headquarters of the Company's combined operations in the existing corporate headquarters of Jitney-Jungle. Although a divisional office will be opened in Mobile, Alabama, the Delchamps Mobile headquarters will be closed and approximately 160 positions currently held by employees at the Jitney-Jungle and Delchamps corporate headquarters will be eliminated. Management estimates that such measures should result in approximately $9.3 million of annualized cash cost savings, which the Company should begin to realize within three to six months following the Delchamps Acquisition. - IMPROVED WAREHOUSING AND DISTRIBUTION EFFICIENCIES. Jitney-Jungle owns or leases 814,000 square feet of warehouse space located in Jackson, Mississippi which is central to, and can efficiently supply, all of the Company's 199 supermarkets. In connection with the Delchamps Acquisition, Management expects to close the Hammond, Louisiana warehouse owned by Delchamps and to utilize Jitney-Jungle's Jackson facility as the Company's central distribution center, thereby reducing headcount and general and administrative expenses. In addition, in order to more efficiently utilize the Jackson facility Jitney-Jungle has negotiated a long-term supply agreement with a supplier to provide direct store delivery of frozen foods and selected grocery products to the Company's supermarkets, which Management believes should result in lower distribution costs and a decrease of approximately 35% in inventory levels. Management believes that, on an annualized basis, the combined effect of these warehousing and distribution efficiencies should result in approximately $3.9 million of cash cost savings, which the Company should to begin to realize within three to six months following the Delchamps Acquisition. - REDUCED ADVERTISING AND PRINTING EXPENSES. Jitney-Jungle and Delchamps operate in contiguous and overlapping geographic areas, particularly in south Mississippi and Florida. As a result, Management believes that it will be able to consolidate the Company's advertising in these regions, thus reducing advertising expenses. In addition, while Delchamps currently outsources the printing of its advertising circulars, after the Delchamps Acquisition approximately 50% of such printing will be 4 performed at Jitney-Jungle's in-house printing facility. Management estimates that moving a portion of Delchamps' printing in-house should result in annualized cash cost savings of approximately $1.0 million, which the Company should begin to realize within three to six months following the Delchamps Acquisition. - INCREASED PURCHASING LEVERAGE. Management expects that Jitney-Jungle's merchandise purchases will approximately double following the Delchamps Acquisition. As a result of this increase and the Company's leading market position, Management believes that the Company should be able to negotiate more favorable terms from vendors, including suppliers of products carried on an exclusive or promoted basis, and to convert some less-than-truckload shipping quantities to full truckload quantities. Management believes that this increased purchasing leverage should result in approximately $3.4 million in annualized cash cost savings, which the Company should begin to realize within six to nine months following the Delchamps Acquisition. - INCREASED BACKHAUL INCOME. The expected increase in merchandise purchases following the Delchamps Acquisition and the resulting improvements in the Company's purchasing leverage are expected to create additional opportunities to increase backhaul income, thereby reducing the Company's operating costs. In particular, the Company's increased presence in the Louisiana and Florida markets should result in a higher number of deliveries to those areas, which have historically provided Jitney-Jungle with backhaul opportunities. Management believes that increased backhaul income should result in annualized cash cost savings of approximately $1.8 million, which the Company should begin to realize within three to six months following the Delchamps Acquisition. Of the aggregate potential $19.4 million in annualized cash cost savings discussed above, approximately $14.2 million are reflected in the Pro Forma Condensed Consolidated Financial Statements included elsewhere herein because Management believes that they are factually supportable and directly related to the Transactions (as defined) and the Delchamps Merger (as defined). Actual cash cost savings achieved by the Company may vary considerably from the estimates discussed above. See 'Risk Factors-- Integration of Delchamps.' BUSINESS STRATEGY The Company's business strategy is focused on enhancing the Company's revenues and profitability by capitalizing on its leading market positions and continuing its growth in certain attractive Southeast markets. Management believes that the Company's leading perishables and grocery merchandising, competitive pricing, range of specialty departments and reputation for quality will help the Company continue its strong history of growth and profitability. The Company's specific business strategies include: - EXPAND SUPERMARKET BASE. Management believes there are a number of attractive Southeast markets in which to continue to grow the Company's supermarket base. Jitney-Jungle has a history of successfully making supermarket acquisitions in both existing and contiguous markets. Since fiscal l990, Jitney-Jungle has acquired 51 supermarkets in 41 markets, excluding the 100 supermarkets to be acquired in the Delchamps Acquisition. In addition, over the past five fiscal years the Company has built or expanded 58 supermarkets in the Southeast. To continue expanding its supermarket base, Management intends to open new supermarkets and make strategic acquisitions in certain of the larger metropolitan areas where it currently operates (including Memphis and Little Rock), as well as in smaller cities and surrounding areas that are contiguous to areas where it currently operates. - CONTINUE TO IMPROVE OPERATING MARGINS. Jitney-Jungle and Delchamps have improved their EBITDA margins from 5.5% and 2.9%, respectively, in fiscal 1992 to 5.7% and 4.0%, respectively, in fiscal 1997. The Company continuously reviews its operations to identify initiatives designed to reduce operating costs and increase EBITDA margins. As a result of the following initiatives, Management 5 believes that the Company can further improve its EBITDA margins during fiscal 1998: (i) headcount reductions implemented by Jitney-Jungle in May 1997, which are expected to result in annualized cost savings of approximately $0.9 million in fiscal 1998; and (ii) improved labor scheduling currently being implemented at Jitney-Jungle supermarkets, which is expected to result in annualized cost savings of approximately $3.5 million in fiscal 1998 and which may also result in additional cost savings when implemented during the next 12 to 18 months at the Delchamps supermarkets. In addition, Management expects to implement programs at Delchamps to reduce inventory shrink to levels comparable to those achieved at Jitney-Jungle. - DECREASE WORKING CAPITAL NEEDS. During fiscal 1997, Jitney-Jungle successfully implemented programs to reduce inventories by eliminating slow moving items, as well as renegotiating its payment terms to bring them more in line with industry practice. As a result of these efforts, Jitney-Jungle improved its ratio of accounts payable to inventory from 51.7% in fiscal 1996 to 77.3% in fiscal 1997. Jitney-Jungle believes that these measures enabled it to decrease its working capital needs by approximately $20.0 million. Management intends to implement similar programs at Delchamps. - CAPITALIZE ON MARKET SEGMENTATION OPPORTUNITIES. The Company attempts to optimize operating results by selecting a format for each of its supermarkets that is best suited to a site's demographics, local preferences and competitive position. The Company's conventional supermarkets offer a range of departments and high-quality services; the Company's combination supermarkets offer a combined supermarket and drug format with a wider variety of premium, full-service departments, merchandise and services; and the Company's discount supermarkets offer items throughout the supermarket at everyday low prices and generally place greater emphasis on self-service. In general, the Company's conventional and combination supermarkets generate higher operating margins than its discount supermarkets. Management believes that there is a growing consumer demand for higher service levels and convenience and, as a result, expects that the Company will open combination supermarkets in preference to conventional and discount supermarkets at all sites where adequate space and consumer demand exist. Management also expects that a significant number of conventional and discount formats will be converted to combination formats. In addition, because the Company's discount supermarkets attract a price sensitive customer who generally would not shop at a combination or conventional supermarket, Management also believes there will be opportunities to open new discount supermarkets in areas where limited or no competing discount supermarkets operate (including Mobile and New Orleans), with minimal risk of cannibalizing sales of the Company's conventional and combination supermarkets located in those areas. - PURSUE INNOVATIVE MARKET INITIATIVES. The Company's goal is to utilize innovative marketing and advertising programs to increase sales while maintaining or increasing profitability. At its conventional and combination stores, Jitney-Jungle has introduced a frequent shopper program utilizing a "Gold Card" designed to increase customer traffic and net sales by offering incentives to its most loyal customers. The "Gold-Card" entitles holders to discounts on certain products every week as well as check cashing privileges, and also serves as a base for market basket analysis and customer-oriented direct marketing. Since the introduction of the Gold Card, Management believes that the number of customers and the amount of the average purchase at Jitney-Jungle supermarkets has increased and, as a result, Management intends to introduce a similar frequent shopper card at Delchamps supermarkets following the Delchamps Acquisition. At its discount supermarkets, the Company employs marketing campaigns designed to appeal to the value conscious consumer, including "truckload sales," private label promotions and bulk produce and similar purchasing incentives. - FOCUS ON "PUMP AND SAVE" GASOLINE STATION OPPORTUNITIES. The Company operates gasoline stations under the name "Pump And Save" at or near 53 of its supermarkets that offer attractive gasoline retailing sites on heavily traveled roads and highways. The Company entered the gasoline business 6 to take advantage of (i) the low incremental capital costs of building gasoline stations on its supermarket parking lots and (ii) the efficiencies associated with operating gasoline stations with the same management and labor as its supermarkets. The Company has opened 25 new gasoline stations over the last five fiscal years and plans to continue this growth with expansion at many of the 100 Delchamps supermarkets. THE TRANSACTIONS Pursuant to the terms of an Agreement and Plan of Merger dated as of July 8, 1997 (the "Merger Agreement") among the Company, Delchamps and Delta Acquisition Corporation, an Alabama corporation and a wholly-owned subsidiary of Jitney-Jungle ("DAC"), on July 14, 1997 DAC commenced a tender offer to purchase all of the issued and outstanding shares of common stock and associated preferred share purchase rights of Delchamps (the "Delchamps Tender Offer"). On September 12, 1997, DAC accepted for payment pursuant to the Delchamps Tender Offer an aggregate of 5,317,510 such shares and preferred share purchase rights. Pursuant to the Merger Agreement and subject to certain conditions, DAC will be merged with and into Delchamps (the "Delchamps Merger" and, together with the Delchamps Tender Offer, the "Delchamps Acquisition"). It is anticipated that Delchamps will continue as the surviving corporation in the Delchamps Merger and will be a wholly-owned subsidiary of Jitney-Jungle. The aggregate consideration expected to be paid in connection with the Delchamps Acquisition is approximately $218.2 million (the "Delchamps Purchase Price"). The Existing Notes were issued on September 12, 1997 concurrently with the consummation of the Delchamps Tender Offer. Upon consummation of the Delchamps Tender Offer, Jitney-Jungle's existing revolving credit agreement with Fleet Capital Corporation, as successor agent to Fleet Bank, N.A., and certain other banks was amended and restated to increase the commitments thereunder from $100.0 million to $150.0 million (as so amended and restated, the "Senior Credit Facility"), the Company borrowed approximately $72.7 million thereunder and the Company repaid approximately $15.4 million of Delchamps' outstanding indebtedness (collectively, the "Refinancing"). See "The Transactions--The Refinancing." In order to permit the Delchamps Acquisition and related financings, Jitney-Jungle solicited and obtained consents (the "Consent Solicitation") from the holders of a majority in principal amount of its 12% Senior Notes due 2006 (the "Senior Notes") to certain amendments to the indenture governing the Senior Notes (the "Senior Note Indenture") that, among other things, permit the Company to issue, and the Subsidiary Guarantors to guarantee, the Notes and increase the amount of borrowings available under the Senior Credit Facility. In connection with the Consent Solicitation, the Company has agreed to pay to the consenting holders of Senior Notes a consent payment. See "The Transactions--The Consent Solicitation." In connection with the Delchamps Acquisition, Management has determined to close 13 Delchamps supermarkets that are unprofitable or that in other respects have not performed in accordance with expectations. In addition, Jitney-Jungle and Delchamps reached a settlement agreement with the Federal Trade Commission (the "FTC") in order to address FTC concerns about the proposed combination with respect to certain markets in which Jitney-Jungle and Delchamps have stores, and pursuant to which Jitney-Jungle and Delchamps have agreed to divest five Jitney-Jungle stores and five Delchamps stores. These supermarket closings and divestitures are collectively referred to herein as the "Anticipated Store Dispositions." See "The Transactions--Expected Store Closures and Divestitures" and "Pro Forma Condensed Consolidated Financial Statements." The Delchamps Tender Offer, the Refinancing and the Consent Solicitation, together with the issuance of the Existing Notes, the initial borrowing under the Senior Credit Facility, the application of the proceeds thereof and the payment of related fees and expenses (including fees and expenses relating to the Consent Solicitation), are collectively referred to herein as the "Transactions." Information provided herein on a "Pro Forma Basis" gives effect to the Transactions, the Delchamps Merger and the Anticipated 7 Store Dispositions. See the Pro Forma Condensed Consolidated Financial Statements included elsewhere in this Prospectus. USE OF PROCEEDS The Company will not receive any proceeds from the Exchange Offer. The gross proceeds to the Company from the sale of the Existing Notes, together with initial borrowings by the Company of approximately $72.7 million under the Senior Credit Facility, were used as follows: (i) approximately $218.2 million was or will be applied to pay the Delchamps Purchase Price; (ii) approximately $15.4 million was or will be applied to repay certain of Delchamps' outstanding indebtedness; (iii) approximately $12.1 million was applied to make change of control payments to certain Delchamps executives pursuant to the requirements of existing contractual provisions; and (iv) approximately $27.0 million was or will be applied to pay the fees and expenses incurred in connection with the Transactions and the Delchamps Merger. Approximately $4.6 million of the Delchamps indebtedness which was repaid had a maturity date of June 1998 and bore interest at a rate equal to LIBOR plus 1.25% (currently 7.26%) and approximately $10.8 million of the remaining Delchamps indebtedness had a maturity date of July 2000 and bore interest at a rate of 5.51%. The following table sets forth the sources and uses of funds in connection with the Transactions.
(DOLLARS IN MILLIONS) SOURCES OF FUNDS: 10 3/8% Senior Subordinated Notes due 2007.............................. $ 200.0 Senior Credit Facility.................................................. 72.7 ------ Total Sources of Funds................................................ $ 272.7 ------ ------ USES OF FUNDS: Delchamps Purchase Price................................................ $ 218.2 Repayment of Delchamps' indebtedness.................................... 15.4 Change of control payments.............................................. 12.1 Transaction fees and expenses........................................... 27.0 ------ Total Uses of Funds................................................... $ 272.7 ------ ------
8 THE EXCHANGE OFFER Securities Offered........ Up to $200,000,000 aggregate principal amount of 10 3/8% Senior Subordinated Notes due 2007. The terms of the New Notes and Existing Notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the Existing Notes. The Exchange Offer........ The New Notes are being offered in exchange for a like principal amount of Existing Notes. Existing Notes may be exchanged only in integral multiples of $1,000. The issuance of the New Notes is intended to satisfy obligations of the Company contained in the Registration Rights Agreement. Expiration Date; Withdrawal of Tender.... The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1997, or such later date and time to which it may be extended by the Company. The tender of Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Existing Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Certain Conditions to the Exchange Offer.......... The Company's obligation to accept for exchange, or to issue New Notes in exchange for, any Existing Notes is subject to certain customary conditions relating to compliance with any applicable law or any applicable interpretation by the staff of the Commission, which may be waived by the Company in its reasonable discretion. The Company currently expects that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer--Certain Conditions to the Exchange Offer." Procedures for Tendering Existing Notes.......... Each holder of Existing Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Existing Notes and any other required documentation, to the Exchange Agent (as defined) at the address set forth herein. See "The Exchange Offer--Procedures for Tendering Existing Notes." Use of Proceeds........... The Company will not receive any proceeds from the Exchange Offer. Exchange Agent............ Marine Midland Bank (the "Exchange Agent") is serving as the Exchange Agent in connection with the Exchange Offer. Federal Income Tax Consequences............ The exchange of Notes pursuant to the Exchange Offer should not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations."
9 CONSEQUENCES OF EXCHANGING EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER Based on certain interpretive letters issued by the staff of the Commission to third parties in unrelated transactions, the Company is of the view that holders of Existing Notes (other than any holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act, who exchange their Existing Notes for New Notes pursuant to the Exchange Offer generally may offer such New Notes for resale, resell such New Notes and otherwise transfer such New Notes without compliance with the registration and prospectus delivery provisions of the Securities Act, provided such New Notes are acquired in the ordinary course of the holders' business and such holders have no arrangement with any person to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Existing Notes must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or in compliance with an available exemption from registration or qualification. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. If a holder of Existing Notes does not exchange such Existing Notes for New Notes pursuant to the Exchange Offer, such Existing Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. In general, the Existing Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Holders of Existing Notes do not have any appraisal or dissenters' rights under the Mississippi Business Corporation Act in connection with the Exchange Offer. See "The Exchange Offer--Consequences of Failure to Exchange; Resales of New Notes." The Existing Notes are currently eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. Following commencement of the Exchange Offer but prior to its consummation, the Existing Notes may continue to be traded in the PORTAL market. Following consummation of the Exchange Offer, the New Notes will not be eligible for PORTAL trading. THE NEW NOTES The terms of the New Notes are identical in all material respects to the Existing Notes, except for certain transfer restrictions and registration rights relating to the Existing Notes. Securities Offered.............. $200.0 million in aggregate principal amount of 10 3/8% Senior Subordinated Notes due 2007. Maturity........................ September 17, 2007. Interest Payment Dates.......... March 15 and September 15 of each year, commencing March 15, 1998. Mandatory Redemption............ The Company will not be required to make mandatory redemption or sinking fund payments with respect to the New Notes. Optional Redemption............. The New Notes (and any outstanding Existing Notes) will be redeemable at the option of the Company, in whole or in part, at any time on or after September 15, 2002 at the redemption prices set forth herein, plus accrued and unpaid interest and Liquidated Damages (as defined), if any, to the date of redemption. In addition, at any time prior to September 15, 2000 the Company may, on one or more occasions, redeem up to 33 1/3% of the then outstanding Notes with any of the net proceeds of one or more public offerings of common stock of the Company at a redemption price of 110.375% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the applicable
10 date of redemption; PROVIDED that at least 66 2/3% of the original principal amount of Notes remain outstanding immediately after the occurrence of each such redemption. Change of Control............... In the event of a Change of Control (as defined), each holder of the Notes will have the right to require the Company to purchase the Notes held by such holder at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Ranking......................... The New Notes will be general unsecured obligations of the Company subordinated in right of payment to all existing and future Senior Debt of the Company, including indebtedness pursuant to the Senior Notes and the Senior Credit Facility. At July 26, 1997, on a Pro Forma Basis, the aggregate principal amount of outstanding Senior Debt of the Company would have been approximately $348.1 million (exclusive of an unused commitment of up to $66.1 million under the Senior Credit Facility). Subsidiary Guarantees........... The New Notes will be guaranteed, jointly and severally, on a senior subordinated basis by each of the Subsidiary Guarantors. The Subsidiary Guarantees will be subordinated in right of payment to all existing and future Senior Debt of the Subsidiary Guarantors, including the guarantees of the Subsidiary Guarantors of the Company's obligations under the Senior Notes and the Senior Credit Facility. At July 26, 1997, on a Pro Forma Basis, the aggregate principal amount of outstanding Senior Debt of the Subsidiary Guarantors would have been approximately $10.4 million (excluding guarantees by the Subsidiary Guarantors of the Company's obligations under the Senior Notes and the Senior Credit Facility). Covenants....................... The Indenture (as defined) contains covenants that, among other things; (i) limit the incurrence by the Company and its Restricted Subsidiaries of additional indebtedness; (ii) limit the issuance by the Company and the Subsidiary Guarantors of Disqualified Stock (as defined); (iii) restrict the ability of the Company and its Restricted Subsidiaries to make dividends and other restricted payments or investments; (iv) limit the ability of the Company and its Restricted Subsidiaries to enter into sale-leaseback transactions; (v) limit transactions by the Company and its Restricted Subsidiaries with affiliates; (vi) limit the ability of the Company and its Restricted Subsidiaries to make asset sales; (vii) limit the ability of the Company and its Restricted Subsidiaries to incur certain liens; (viii) limit the ability of the Company to consolidate or merge with or into, or to transfer all or substantially all of its assets to, another person; and (ix) prohibit the Company and the Subsidiary Guarantors from incurring any indebtedness that is junior to Senior Debt and senior to the Notes or the Subsidiary Guarantees, as applicable.
RISK FACTORS Holders of Existing Notes should carefully consider all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors under "Risk Factors" beginning on page 14 in connection with the Exchange Offer. 11 SUMMARY PRO FORMA CONDENSED CONSOLIDATED FINANCIAL AND OTHER DATA The summary pro forma statement of operations and other data for the LTM Period and balance sheet data at July 26, 1997 set forth below are calculated on a Pro Forma Basis, and have been prepared on the basis set forth in, are qualified in their entirety by reference to, and should be read in conjunction with, the Pro Forma Condensed Consolidated Financial Statements included elsewhere in this Prospectus. The summary pro forma statement of operations data and other data do not purport to represent what the Company's results of operations would have been if the Transactions, the Delchamps Merger and the Anticipated Store Dispositions had actually occurred at the beginning of the period specified nor does such data purport to represent the Company's results of operations for any future period.
LTM PERIOD (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales................................................................................... $ 2,166,461 Gross profit................................................................................ 564,903 Direct store expense........................................................................ 392,673 Warehouse, administrative and general expenses.............................................. 95,462 Special charges, net(1)..................................................................... 4,957 ----------- Operating income............................................................................ 71,811 Interest expense, net....................................................................... 67,484 ----------- Earnings before income taxes................................................................ 4,327 Income taxes................................................................................ 3,260 ----------- Net earnings................................................................................ $ 1,067 ----------- ----------- OTHER DATA: EBITDA(2)................................................................................... $ 127,800 Depreciation and amortization............................................................... 51,632 LIFO benefit................................................................................ (600) Capital expenditures........................................................................ 38,513 Supermarkets open at end of period.......................................................... 199 Remodels during period...................................................................... 17 Gross profit as a percentage of sales....................................................... 26.1% EBITDA as a percentage of sales............................................................. 5.9% Ratio of EBITDA to cash interest expense(3)................................................. 2.0x Ratio of net debt to EBITDA(4).............................................................. 4.3x
PRO FORMA AT JULY 26, 1997 BALANCE SHEET DATA: Cash and cash equivalents........................................................................ $ 14,761 Working capital.................................................................................. 38,829 Total assets..................................................................................... 698,054 Total debt....................................................................................... 558,461 Other long-term liabilities, including current portion........................................... 67,827 Stockholders' deficit............................................................................ (154,328)
- ------------------------ (1) Includes (i) a $1.8 million non-cash charge accrued in fiscal 1997 relating to future payments that will be made under an employment agreement with Jitney-Jungle's former Chief Executive Officer; (ii) a $1.0 million charge relating to termination benefits payable to employees of Jitney-Jungle whose positions were eliminated in May 1997; (iii) a $4.3 million charge relating to cash payments made by Delchamps in connection the settlement of a lawsuit in March 1997; and (iv) a $2.1 million gain on the sale of certain assets of Delchamps in fiscal 1997. 12 SUMMARY PRO FORMA CONDENSED CONSOLIDATED FINANCIAL AND OTHER DATA (2) EBITDA is defined as income from continuing operations before interest, taxes, depreciation, amortization, LIFO expense (benefit) and special items, net. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service indebtedness. However, EBITDA should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. EBITDA reflects $14.2 million of anticipated cash cost savings which Management has identified related to the elimination of duplicative costs for functional areas and facilities which are based on assumptions that Management believes are factually supportable and directly related to the Delchamps Acquisition. EBITDA does not include an additional $5.2 million of estimated cash cost savings that Management believes may occur as a result of increased purchasing leverage and backhaul income. The components of these estimated cash cost savings are set forth in the notes to the Pro Forma Condensed Consolidated Statements of Operations and Other Data included elsewhere in this Prospectus and are summarized as follows (in millions): ANTICIPATED CASH COST SAVINGS REFLECTED IN THE PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA: Reduced general and administrative expenses................................ $ 9.3 Improved warehousing and distribution efficiencies......................... 3.9 Reduced advertising and printing expenses.................................. 1.0 --------- Total.................................................................... $ 14.2 --------- --------- ADDITIONAL POTENTIAL CASH COST SAVINGS: Increased purchasing leverage.............................................. $ 3.4 Increased backhaul income.................................................. 1.8 --------- Total.................................................................... $ 5.2 --------- --------- Total estimated cash cost savings............................................ $ 19.4 --------- ---------
(3) Cash interest expense excludes $2.8 million of amortization of deferred financing fees. (4) Represents the ratio of (i) pro forma indebtedness less pro forma cash as of July 26, 1997 to (ii) pro forma EBITDA for the LTM Period. 13 RISK FACTORS Holders of Existing Notes should carefully consider the specific factors set forth below as well as the other information included in this Prospectus in connection with the Exchange Offer. The risk factors set forth below are generally applicable to the Existing Notes as well as the New Notes. THIS PROSPECTUS INCLUDES "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALTHOUGH JITNEY-JUNGLE BELIEVES THAT ITS PLANS, INTENTIONS AND EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH PLANS, INTENTIONS OR EXPECTATIONS WILL BE ACHIEVED. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM JITNEY-JUNGLE'S FORWARD LOOKING STATEMENTS ARE SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. ALL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO JITNEY-JUNGLE OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH BELOW. INTEGRATION OF DELCHAMPS The integration of the administrative, finance and other operations of Delchamps with those of Jitney-Jungle, the coordination of Delchamps' sales and marketing organizations with those of Jitney-Jungle and the implementation of appropriate operational, financial and management systems and controls in connection with the Delchamps Acquisition will require significant financial resources and substantial attention from Management, and could result in the diversion of such resources and attention from the core businesses of Jitney-Jungle and Delchamps. Specifically, Jitney-Jungle's supermarket base will nearly double as a result of the Delchamps Acquisition and Management expects that the coordination of purchasing and distribution and warehousing for the combined operations following the Delchamps Acquisition will be a significant focus of Management. In addition, Jitney-Jungle's business plan with respect to the combined operations of the Company following the Delchamps Acquisition contemplates anticipated cash cost savings that are expected to result from (i) reduced general and administrative expenses arising from the closure of the corporate headquarters of Delchamps and associated headcount reductions, (ii) improved warehouse and distribution efficiencies, (iii) reduced advertising and printing expenses resulting from moving a portion of Delchamps' print advertising needs to Jitney-Jungle's in-house printing facilities, (iv) increased purchasing leverage that may enable the Company to negotiate more favorable terms from its vendors, and (v) increased backhaul income. Of the aggregate potential $19.4 million in such annualized cash cost savings, approximately $14.2 million are reflected in the Pro Forma Condensed Consolidated Financial Statements included elsewhere herein because Management believes they are factually supportable and directly related to the Transactions and the Delchamps Merger. In addition, certain marketing and cost saving initiatives undertaken at Jitney-Jungle prior to the Delchamps Acquisition will be extended to the Delchamps supermarkets, including introduction of a "frequent shopper card" and implementation of improved labor scheduling, in each case, at the acquired Delchamps supermarkets. The potential cash cost savings discussed above are based on estimates prepared solely by members of Management based on information available to them and have not been independently reviewed. The estimates necessarily make assumptions as to future events, including general industry, competitive and business conditions, many of which are beyond the control of the Company. Actual cash cost savings achieved by the Company may vary considerably from the estimates discussed above. Any inability of the Company to integrate Delchamps successfully or to achieve the cash cost savings described above in a timely and efficient manner could adversely affect the Company's financial condition and results of operations. SUBSTANTIAL LEVERAGE The Company is highly leveraged and its debt instruments contain and will continue to contain restrictions on its operations. See "Description of Certain Indebtedness" and "Description of the Notes." At July 26, 1997, on a Pro Forma Basis, the Company would have had approximately $558.5 million of total debt (including capitalized leases and current installments) and a shareholders' deficit of approximately 14 $154.3 million. On a Pro Forma Basis, the Company's ratio of earnings to fixed charges would have been 1.1 to 1 for the LTM Period. The significant indebtedness of the Company will have several important consequences to the holders of the Notes, including, but not limited to, the following: (i) a substantial portion of the Company's cash flow from operations must be dedicated to the payment of principal and interest with respect to the indebtedness under the Senior Credit Facility, the Senior Notes and the Notes; (ii) indebtedness under the Senior Credit Facility and the Senior Notes will become due prior to the time the Notes will become due and may adversely affect the Company's ability to pay principal of and interest when due on the Notes; (iii) indebtedness under the Senior Credit Facility will bear interest at fluctuating rates, and a substantial increase in interest rates could adversely affect the Company's ability to meet its debt service obligations; (iv) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes may be impaired; (v) the Company's flexibility may be limited in responding to changes in the industry and economic conditions generally; (vi) the Senior Credit Facility, the Senior Note Indenture, the Indenture and other agreements of the Company related to its indebtedness contain numerous financial and other restrictive covenants, the failure to comply with which may result in an event of default, which, if not cured or waived, could have a material adverse effect on the Company; and (vii) the ability of the Company to satisfy its obligations pursuant to such indebtedness will be dependent upon its future performance which, in turn, will be subject to management, financial, competitive and other factors affecting the business and operations of the Company, some of which are beyond the control of the Company. See "Pro Forma Condensed Consolidated Financial Statements," "Pro Forma Liquidity," "Selected Historical Financial Data of Jitney-Jungle," "Management's Discussion and Analysis of Financial Condition and Results of Operations of Jitney-Jungle," "Selected Historical Financial Data of Delchamps" and "Management's Discussion and Analysis of Financial Condition and Results of Operations of Delchamps." If the Company is unable to generate sufficient cash flow to meet its debt obligations, the Company may be required to renegotiate the payment terms or to refinance all or a portion of the Senior Credit Facility, the Senior Notes or the Notes, to sell assets or to obtain additional financing. If the Company could not successfully refinance its indebtedness, substantially all of the Company's long-term debt would be in default and could be declared immediately due and payable. Furthermore, the Senior Credit Facility, the Senior Note Indenture and the Indenture contain numerous financial and operating covenants, including, among others, covenants requiring the Company to maintain certain leverage, interest coverage and fixed charge coverage ratios and restricting the ability of the Company and its subsidiaries to incur indebtedness or to create or suffer to exist certain liens. The ability of the Company to comply with such provisions may be affected by events beyond its control. In the event the Company fails to comply with these covenants, it could be in default under the Senior Credit Facility, the Senior Note Indenture and/or the Indenture. In the event of such default, substantially all of the Company's long-term debt could be declared immediately due and payable. See "Description of Certain Indebtedness" and "Description of the Notes." SUBORDINATION AND RANKING OF THE NOTES The New Notes, like the Existing Notes, will be general unsecured obligations of the Company subordinated in right of payment to all existing and future Senior Debt of the Company, including indebtedness pursuant to the Senior Notes and the Senior Credit Facility. By reason of such subordination, in the event of an insolvency, liquidation, reorganization, dissolution or other winding-up of the Company, the Senior Debt must be paid in full before the principal of, premium, if any, and interest or Liquidated Damages, if any, on the Notes may be paid. At July 26, 1997, on a Pro Forma Basis, the aggregate principal amount of outstanding Senior Debt of the Company would have been approximately $348.1 million (exclusive of an unused commitment of up to $66.1 million under the Senior Credit Facility). If the Company incurs any additional PARI PASSU DEBT, the holders of such debt would be entitled to share ratably 15 with the holders of the Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of the Company. This may have the effect of reducing the amount of proceeds paid to holders of the Notes. The Indenture permits the Company to incur additional Senior Debt or PARI PASSU debt if certain conditions are met. See "Pro Forma Capitalization," "Description of Certain Indebtedness" and "Description of the Notes--Certain Covenants." In addition, certain holders of Senior Debt may prevent cash payments with respect to the principal of, premium, if any, and interest or Liquidated Damages, if any, on the Notes for a period of up to 179 days following a non-payment default with respect to Senior Debt. In addition, the Indenture permits the subsidiaries of the Company to incur debt under certain circumstances. Any such debt incurred by a subsidiary of the Company that is not a Subsidiary Guarantor would be structurally senior to the Notes. All of the Company's subsidiaries are Subsidiary Guarantors with respect to the Notes. The guarantee of the Notes by each Subsidiary Guarantor is subordinated in right of payment to the Senior Debt of such Subsidiary Guarantor on substantially the same terms as the Notes are subordinated to the Senior Debt of the Company. See "Description of the Notes--Subordination." COMPETITION The supermarket industry is highly competitive and characterized by narrow profit margins. The Company's competitors include national and regional supermarket chains, independent and specialty grocers, drug and convenience stores, and the newer "alternative format" food stores, including warehouse club stores, deep discount drug stores and "Supercenters;" in certain areas, the Company also competes with military commissaries. Supermarket chains generally compete on the basis of location, quality of products, service, price, product variety and store condition. During the past three years, an overall lack of inflation in food prices and increasingly competitive markets have made it difficult for the Company and other supermarket operators to achieve comparable store sales gains. Because sales growth has been difficult to attain, many operators, including the Company, have attempted to maintain market share through increased levels of promotional activities and discount pricing, creating a more difficult environment in which to increase year-over-year sales gains consistently. In addition, because of the growth in the Southeast market, where all of the Company's supermarkets are located, many existing operators, including the Company, have opened new supermarkets in existing markets which has resulted in declines in same store sales for the existing (comparable) store base of these same grocery chains. The Company regularly monitors its competitors' prices and adjusts its prices and marketing strategy as Management deems appropriate in light of existing conditions. The Company faces increased competitive pressure in all of its markets, including Jackson, Mississippi and Mobile, Alabama where it has historically held leading market positions, from existing competitors and from the threatened entry by one or more major new competitors. Some of the Company's competitors have greater financial resources and could use these resources to take measures which could adversely affect the Company's competitive position. See "Business--Markets and Competition." RISK OF INABILITY TO SATISFY CHANGE OF CONTROL OFFER Upon the occurrence of a "Change of Control," the Company will be required to make an offer to purchase all of the outstanding Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase. See "Description of the Notes--Repurchase at the Option of Holders--Change of Control" for the definition of "Change of Control." There can be no assurance that the Company will have the funds necessary to effect such a purchase if such an event were to occur. In addition, the Senior Credit Facility would prohibit, and the Senior Notes would restrict, the Company from purchasing any Notes. The Senior Credit Facility also provides that certain changes in control of the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of 16 Control occurs at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its lenders to purchase the Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the Indenture, which would cause a default under the Senior Credit Facility and the Senior Notes. In such circumstances, the subordination provisions in the Notes would likely restrict payments to the holders of the Notes. See "Description of the Notes." RISKS RELATING TO FUTURE ACQUISITIONS The Company's future growth is dependent, in part, on its ability to consummate additional supermarket acquisitions. There can be no assurance, however, that the Company will be able to identify additional acquisitions or that, if consummated, any anticipated benefits will be realized from such acquisitions. Moreover, future acquisitions by the Company could result in the incurrence of additional indebtedness, exposure to contingent liabilities and the amortization of expenses related to goodwill and other intangible assets, all of which could adversely affect the Company's financial condition and results of operations. SUBSIDIARY GUARANTEES The holders of the Notes will have no direct claims against the subsidiaries of the Company other than the claim created by the Subsidiary Guarantees. The Subsidiary Guarantees are subordinated in right of payment to all existing and future Senior Debt of the Subsidiary Guarantors, including the guarantees of the Subsidiary Guarantors of the Company's obligations under the Senior Notes and the Senior Credit Facility. At July 26, 1997, on a Pro Forma Basis, the aggregate principal amount of outstanding Senior Debt of the Subsidiary Guarantors would have been approximately $10.4 million (excluding guarantees by the Subsidiary Guarantors of the Company's obligations under the Senior Notes and the Senior Credit Facility). See "Description of Certain Indebtedness." In addition, the Subsidiary Guarantees may be subject to legal challenge under applicable provisions of the United States Bankruptcy Code or comparable provisions of state fraudulent transfer or conveyance laws. If such a challenge were upheld, the Subsidiary Guarantees would be invalidated and unenforceable and it is possible that holders of the Notes would be ordered by a court to turn over to other creditors of the Subsidiary Guarantors or to their trustees in bankruptcy all or a portion of the payments made to them pursuant to the Subsidiary Guarantees. To the extent that the Subsidiary Guarantees are not enforceable in amounts sufficient to satisfy the claims of the holders of the Notes, the rights of holders of the Notes to participate in any distribution of assets of any Subsidiary Guarantors upon liquidation, bankruptcy, reorganization or otherwise would be subject to prior claims of creditors of that Guarantor. GEOGRAPHIC CONCENTRATION All of the Company's supermarkets are located in the Southeast region, with a strong concentration in Mississippi and Alabama, and thus the performance of the Company will be particularly influenced by the economic and demographic trends in this area. Although the Southeast region has experienced economic and demographic growth over the past several years, a significant economic downturn in the region could have a material adverse effect on the Company. RELIANCE ON KEY MANAGEMENT The Company's success depends to a significant degree upon the continued contributions of Management as well as the Company's sales and marketing, finance and manufacturing personnel, certain of whom would be difficult to replace. The loss of the services of certain of these executives could have an adverse effect on the Company. Although certain of these executives are shareholders of Jitney-Jungle and have employment contracts with the Company, there can be no assurance that the services of such personnel will continue to be available to the Company. See "Management" and "Ownership of Capital Stock." 17 ENVIRONMENTAL RISKS The Company is subject to federal, state and local laws and regulations including those relating to environmental protection, work place safety, public health and community right-to-know. The Company's supermarkets are not highly regulated under environmental laws since the Company does not engage in any industrial activities at those locations. The Company's expenditures to comply with such laws and regulations at its supermarkets primarily consist of those related to retrofitting chlorofluorocarbon ("CFC") chiller units. In addition, 56 of the Company's facilities (including all 53 of the Pump And Save facilities) and one former facility for which the Company has retained responsibility, contain or contained underground tanks for the storage of petroleum products, such as gasoline and diesel fuel. The Company maintains an environmental compliance program that includes the implementation of required technical and operational activities designed to minimize the potential for leaks and spills, maintenance of records and the regular testing and monitoring of tank systems for tightness. There can be no assurance, however, that these tank systems will at all times remain free from leaks or that the use of these tanks will not result in spills. Sixteen of the facilities have had leaks or spills, 12 of which were related to underground or above-ground petroleum storage tanks and four of which were unrelated to tank storage. All of such leaks or spills have been or are being responded to in conjunction with the appropriate regulatory agencies. Historically, none of the 16 locations which have had leaks or spills have required expenditures that would have had a material effect on the results of operations, liquidity or financial condition of the Company. All significant required expenditures in connection with the clean up of such leaks and spills have been made at these 16 sites, except at three newly discovered locations which are still undergoing investigation and one location awaiting state approval of its remediation plan. Any future leak or spill, depending on such factors as the material involved, quantity, environmental setting and availability of state clean-up funds, could result in response activities that could interrupt the Company's operations and could result in costs to the Company that could have a material adverse effect on the Company. In addition, there can be no assurance that future environmental legislation and regulation will not require material expenditures by the Company or otherwise have a material adverse effect on the Company's operations. See "Business-- Environmental Matters." CONTROL BY BRS Approximately 71%, on a fully diluted basis, of the outstanding shares of Jitney-Jungle's common stock is held by Bruckmann, Rosser, Sherrill & Co., L.P. (the "Fund") and certain related investors (collectively, the "Fund Entities"). As a result, the Fund controls Jitney-Jungle and has the power to elect a majority of its directors, appoint new management and approve any action requiring the approval of shareholders, including adopting certain amendments to Jitney-Jungle's articles of incorporation and approving mergers or sales of substantially all of Jitney-Jungle's assets. The directors elected by the Fund will have the authority to effect decisions affecting the capital structure of Jitney-Jungle including the issuance of additional capital stock, the implementation of stock repurchase programs and the declaration of dividends. See "Ownership of Capital Stock." FRAUDULENT CONVEYANCE CONSIDERATIONS Under applicable provisions of the United States Bankruptcy Code or comparable provisions of state fraudulent transfer or conveyance law, if, at the time it issued the Existing Notes, the Company (a) incurred such indebtedness with intent to hinder, delay or defraud creditors, or (b)(i) received less than reasonably equivalent value or fair consideration therefor and (ii)(A) was insolvent at the time of the incurrence, (B) was rendered insolvent by reason of such incurrence (and the application of the proceeds thereof), (C) was engaged or was about to engage in a business or transaction for which the assets remaining with the Company constituted unreasonably small capital to carry on its business, or (D) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature, then, in each such case, a court of competent jurisdiction could void, in whole or in part, the Notes 18 or, in the alternative, subordinate the Notes to existing and future indebtedness of the Company. The measure of insolvency for purposes of the foregoing will vary depending upon the law applied in such case. Generally, however, the Company would be considered insolvent if the sum of its debts, taking contingent liabilities into account, was greater than all of its assets at fair valuation or if the present fair saleable value of its assets was less than the amount that would be required to pay the probable liability on its existing debts, including contingent liabilities, as they become absolute and matured. Under Mississippi fraudulent conveyance law, a transaction may be set aside for lack of consideration, regardless of the solvency of the parties. For purposes of the United States Bankruptcy Code and state fraudulent transfer or conveyance laws, Management believes that, (i) indebtedness under the Existing Notes was incurred without the intent to hinder, delay or defraud creditors and for proper purposes and in good faith, (ii) the Company received reasonably equivalent value or fair consideration, and (iii) based on forecasts, asset valuations and other financial information, the Company, after consummation of the Transactions and the Delchamps Merger, including the incurrence of indebtedness under the Existing Notes and the application of the proceeds thereof, will be solvent, did and will have sufficient capital for carrying on its business and will be able to pay its debts as they mature. There can be no assurance, however, that a court passing on such questions would agree with Management's view. ABSENCE OF PUBLIC MARKET FOR THE NOTES The Existing Notes currently are eligible for trading in the PORTAL Market. The New Notes are new securities for which there is currently no established market. The Company does not intend to list the New Notes on any national securities exchange or to seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Initial Purchasers have advised the Company that they currently intend to make a market in the New Notes but that they are not obligated to do so and any such market making may be discontinued at any time. There can be no assurance as to the development of any market or the liquidity of any market that may develop for the New Notes. If an active public market does not develop, the market, price and liquidity of the New Notes may be adversely affected. Future trading prices of the New Notes will depend on prevailing interest rates, the market for similar securities and other factors, including general economic conditions and the financial condition and performance of the Company. Holders of the New Notes should be aware that they may be required to bear the financial risks of their investment for an indefinite period of time. See "Description of the Notes." 19 THE TRANSACTIONS Concurrently with the Delchamps Tender Offer, Management consummated the Transactions, including the sale of the Existing Notes, the amendment and restatement of the Senior Credit Facility and the initial borrowing thereunder, the repayment of approximately $15.4 million of indebtedness of Delchamps and the Consent Solicitation pursuant to which certain amendments to the Senior Note Indenture were approved by the holders of the Senior Notes. THE DELCHAMPS ACQUISITION The Delchamps Acquisition will be consummated pursuant to the Delchamps Merger Agreement. The aggregate Delchamps Purchase Price will be approximately $218.2 million. The Board of Directors of Delchamps has unanimously approved the Delchamps Acquisition and the Delchamps Merger Agreement, has determined that the Delchamps Purchase Price is fair to the shareholders of Delchamps and has recommended that all shareholders of Delchamps vote in favor of the Delchamps Merger. In accordance with the Delchamps Merger Agreement, on July 14, 1997 DAC commenced the Delchamps Tender Offer to purchase all of the issued and outstanding shares of common stock, par value $.01 per share, and associated preferred share purchase rights of Delchamps (collectively, "Shares"). On September 12, 1997, DAC accepted for payment pursuant to the Delchamps Tender Offer an aggregate of 5,317,510 Shares. Pursuant to the Merger Agreement and subject to the satisfaction of the conditions set forth therein, DAC will be merged with and into Delchamps in accordance with the relevant provisions of the Alabama Business Corporation Act ("ABCA"), the separate corporate existence of DAC will cease and Delchamps will become a wholly owned subsidiary of Jitney-Jungle. The Delchamps Merger Agreement contains customary representations, warranties and covenants and provides for termination prior to closing under certain circumstances. If (i) the Delchamps Merger Agreement is terminated by either Jitney-Jungle or DAC because of a material willful breach of the Delchamps Merger Agreement by Delchamps, or (ii) any Change of Control (as defined in the Delchamps Merger Agreement) occurs during the term of the Delchamps Merger Agreement or, under certain circumstances, within 180 days following the termination thereof, then Delchamps will be required to pay Jitney-Jungle a termination fee of $7.0 million and to reimburse Jitney-Jungle and DAC for up to $3.0 million of their out-of-pocket fees and expenses. THE REFINANCING Upon consummation of the Delchamps Tender Offer, Jitney-Jungle's existing revolving credit agreement with Fleet Capital Corporation, as successor agent to Fleet Bank, N.A., and certain other banks was amended and restated to provide for up to $150.0 million of revolving loans under the Senior Credit Facility, the Company borrowed approximately $72.7 million thereunder and the Company repaid approximately $15.4 million of Delchamps' outstanding indebtedness. THE CONSENT SOLICITATION In order to permit the Delchamps Acquisition and related financings, Jitney-Jungle consummated the Consent Solicitation and obtained from holders of its Senior Notes approval of certain amendments to the Senior Note Indenture that, among other things, permit the Company to issue, and the Subsidiary Guarantors to guarantee, the Notes and increase the amount of borrowings available under the Senior Credit Facility. In connection with the Consent Solicitation, the Company paid to the consenting holders of Senior Notes a consent payment. 20 EXPECTED STORE CLOSURES AND DIVESTITURES In connection with the Delchamps Acquisition, Management has determined to close 13 Delchamps supermarkets that are unprofitable or that in other respects have not performed in accordance with expectations. Seven of such stores are located in Alabama, four are located in Louisiana, one is located in Florida and one is located in Mississippi. In connection with the Delchamps Acquisition, Jitney-Jungle received a request for additional information from the FTC under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act"). As a result of negotiations with the staff of the FTC which addressed the FTC's concerns about the proposed combination with respect to certain markets in which Jitney-Jungle and Delchamps have stores, Jitney-Jungle and Delchamps reached a settlement agreement with the FTC. Pursuant to the terms of the settlement agreement, the FTC terminated the waiting period imposed by the HSR Act, and Jitney-Jungle and Delchamps agreed under the terms of a proposed consent agreement to divest five Jitney-Jungle stores and five Delchamps stores to SUPERVALU, Inc. ("SUPERVALU") by February 12, 1998 or one month after the consent agreement becomes effective, whichever is later. The consent agreement is subject to a final FTC approval following a 60 day public notice period. The five Delchamps stores are located in Hancock, Harrison, Lamar and Forrest Counties, Mississippi. The aggregate proposed purchase price for the five Delchamps' stores will be the sum of the purchase price for the merchandise as determined by a physical inventory and the purchase price for the equipment of $725,000, subject to certain adjustments. The proposed consent agreement would require Jitney-Jungle and Delchamps, for ten years, to notify the FTC before acquiring any supermarkets in Hancock, Jackson, Lamar, Forrest and Warren Counties, Mississippi and Escambia County in Florida. Jitney-Jungle and Delchamps would also be prohibited from attempting to restrict the ability of others to operate any supermarket they formerly owned in those counties. The Pro Forma Condensed Consolidated Financial Statements contained elsewhere in this Prospectus contemplate, in connection with the settlement agreement reached with the FTC, the sale by Jitney-Jungle of an aggregate of ten stores currently operated by Jitney-Jungle and Delchamps. This pro forma adjustment is solely for illustrative purposes and may not represent the actual number of stores finally approved by the FTC for divestment pursuant to the proposed consent agreement among Jitney-Jungle, Delchamps and SUPERVALU. See "Pro Forma Condensed Consolidated Financial Statements." 21 PRO FORMA CAPITALIZATION The following table sets forth the unaudited pro forma cash and cash equivalents and pro forma capitalization of the Company at July 26, 1997, on a Pro Forma Basis. The pro forma data set forth in this table may not be indicative of the actual cash and cash equivalents or capitalization that would have occurred had the Transactions and the Delchamps Merger in fact occurred on the date specified. This table should be read in conjunction with "Pro Forma Condensed Consolidated Financial Statements" and the notes thereto, "Management's Discussion and Analysis of Financial Condition and Results of Operations of Jitney-Jungle," "Management's Discussion and Analysis of Financial Condition and Results of Operations of Delchamps" and the historical financial statements of Jitney-Jungle and Delchamps and the notes thereto included elsewhere in this Prospectus.
AT JULY 26, 1997 (DOLLARS IN THOUSANDS) Cash and cash equivalents................................................................... $ 14,761 ---------- ---------- Long-term debt, including current portion: Senior Credit Facility(1)................................................................. $ 72,700 Senior Notes.............................................................................. 200,000 10 3/8% Senior Subordinated Notes due 2007................................................ 200,000 Capitalized lease obligations............................................................. 73,962 Other long-term debt...................................................................... 11,799 ---------- Total debt.............................................................................. 558,461 Mandatorily redeemable preferred stock: 225,000 shares Class A Preferred Stock authorized, par value $.01 per share, 225,000 shares outstanding; 275,000 shares Class B Preferred Stock authorized, par value $.01 per share, 274,460.24 shares outstanding; 23,958.33 shares Class C Preferred Stock, Series 2 authorized, par value $.01 per share, 23,958.33 shares outstanding............. 59,508 ---------- Stockholders' deficit: 76,041.67 shares Class C Preferred Stock, Series 1 authorized, par value $.01 per share, 76,041.67 shares outstanding............................................................ 8,663 5,000,000 shares Common Stock authorized, par value $.01 per share, 425,000 shares outstanding............................................................................. 4 Additional paid-in capital................................................................ (302,326) Retained earnings......................................................................... 139,331 ---------- Total stockholders' deficit............................................................. (154,328) ---------- Total capitalization........................................................................ $ 463,641 ---------- ----------
- ------------------------ (1) Excludes $10.5 million of letters of credit issued under the Senior Credit Facility and $0.7 million of letters of credit issued under the Senior Credit Facility upon consummation of the Transactions. 22 PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following Pro Forma Condensed Consolidated Balance Sheet is based on the historical balance sheet of Jitney-Jungle at July 26, 1997 and of Delchamps at June 28, 1997 and was prepared as if the Transactions, the Delchamps Merger and the Anticipated Store Dispositions had occurred on July 26, 1997. The Delchamps Acquisition will be accounted for as a purchase, and the total purchase price will be allocated to Delchamps' tangible and intangible assets and liabilities based on their estimated fair values at the closing date of the acquisition, based on valuations and studies which have not yet been performed. Accordingly, the excess of the purchase price over the historical book value of the net assets to be acquired has not yet been allocated to individual assets and liabilities other than the amounts described in the notes to the Pro Forma Condensed Consolidated Financial Statements. Any variation between such amounts and the final allocation will change the amount of goodwill recognized in connection with the Delchamps Acquisition and the related amortization expense. Management believes, however, that when the final valuation of the net assets acquired is completed, the allocation of the purchase price will not differ materially from the amounts shown herein. The following Pro Forma Condensed Consolidated Statements of Operations and Other Data for the fiscal year ended May 3, 1997, the 12 weeks ended July 20, 1996, the 12 weeks ended July 26, 1997 and the LTM Period include (i) the historical results of Jitney-Jungle for the fiscal year ended May 3, 1997 and of Delchamps for the fiscal year ended June 28, 1997, (ii) the historical results of Jitney-Jungle for the 12 weeks ended July 20, 1996 and of Delchamps for the 13 weeks ended June 29, 1996, (iii) the historical results of Jitney-Jungle for the 12 weeks ended July 26, 1997 and of Delchamps for the 13 weeks ended June 28, 1997, and (iv) the historical results of Jitney-Jungle for the 53 weeks ended July 26, 1997 and of Delchamps for the fiscal year ended June 28, 1997. Each of these pro forma statements was prepared as if the Transactions, the Delchamps Merger and the Anticipated Store Dispositions had occurred on April 28, 1996. These pro forma statements reflect certain cost savings that Management has identified related to the elimination of duplicative costs for functional areas and facilities in connection with the Delchamps Acquisition which are based on assumptions that Management believes are both factually supportable and directly related to the Transactions and the Delchamps Merger. However, these pro forma statements do not reflect certain additional potential cost savings described in Note (D) to the Pro Forma Condensed Consolidated Statements of Operations and Other Data that Management believes should arise as a result of expected synergies from increased purchasing leverage and backhaul income. Actual cost savings achieved by the Company may vary considerably from the estimates discussed above. See "Risk Factors-- Integration of Delchamps." These pro forma statements also do not reflect (i) a $2.0 million charge relating to the write-off of commitment fees paid in connection with a bridge commitment obtained to fund the Delchamps Purchase Price if the sale of the Existing Notes was not consummated, (ii) approximately $1.4 million of deferred financing fees relating to Jitney-Jungle's existing credit facility that was written off in connection with the Transactions and (iii) the estimated loss of $1.2 million relating to the expected divestiture of certain Jitney-Jungle stores under an FTC consent decree. Such charges will be recognized by the Company and reflected in its results of operations in the quarter in which the Transactions are consummated. The pro forma financial statements have been prepared by applying to the historical financial statements of Jitney-Jungle and Delchamps the assumptions and adjustments described in the accompanying notes. Such pro forma financial statements are not necessarily indicative of either future results of operations or results that might have occurred had the Transactions, the Delchamps Merger and the Anticipated Store Dispositions been consummated as of the indicated date. Such pro forma financial statements should be read in conjunction with the Consolidated Financial Statements of Jitney-Jungle and Delchamps and the respective accompanying notes thereto included elsewhere in this Prospectus. 23 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (DOLLARS IN THOUSANDS)
AT JULY 26, 1997 ------------------------------------------------------------------------------------------------ COMPANY PRO HISTORICAL FORMA FOR FTC -------------------------- PRO FORMA ADJUSTMENTS COMPANY PRO DIVESTITURES ASSETS JITNEY-JUNGLE DELCHAMPS COMBINED FORMA (H) ------------- ----------- ----------- ---------------------- -------------- --------------- CURRENT ASSETS: Cash and cash equivalents....... $ 5,255 $ 5,670 $ 10,925 $ 67,840 (A) $ 10,886 $ 14,761 190,420 (B) (2,000) (C) (7,500) (D) (233,360) (E) (15,439) (F) Receivables..................... 7,423 7,961 15,384 15,384 15,384 Inventories..................... 77,694 89,726 167,420 14,171 (E) 181,591 181,591 Prepaid expenses and other...... 6,507 2,094 8,601 8,601 8,601 Deferred income taxes........... 2,152 6,525 8,677 760 (C) 12,178 13,234 (3,517) (E) 44 (E) 5,665 (E) 549 (G) ------------- ----------- ----------- ----------- -------------- --------------- Total current assets.......... 99,031 111,976 211,007 17,633 228,640 233,571 Property and equipment, net....... 169,168 129,319 298,487 (4,260) (E) 294,227 287,575 Goodwill.......................... 136,672 (E) 136,672 137,632 Other assets, net................. 16,732 2,166 18,898 4,860 (A) 39,276 39,276 9,580 (B) 7,500 (D) (1,446) (G) (116) (E) ------------- ----------- ----------- ----------- -------------- --------------- Total assets...................... $ 284,931 $ 243,461 $ 528,392 $ 170,423 $ 698,815 $ 698,054 ------------- ----------- ----------- ----------- -------------- --------------- ------------- ----------- ----------- ----------- -------------- --------------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Delchamps notes payable......... $ -- $ 4,600 $ 4,600 $ (4,600) (F) $ -- $ -- Current portion of long-term debt.......................... 4,923 3,697 8,620 (3,697) (F) 4,923 4,923 Current portion of capitalized leases........................ 4,899 844 5,743 5,743 5,743 Current portion of restructuring obligation.................... 2,273 2,273 15,217 (E) 17,490 17,490 Accounts payable................ 60,940 41,571 102,511 102,511 102,511 Accrued expenses................ 34,224 28,996 63,220 63,220 63,220 Income taxes.................... 855 855 855 855 ------------- ----------- ----------- ----------- -------------- --------------- Total current liabilities..... 104,986 82,836 187,822 6,920 194,742 194,742 Senior Credit Facility............ -- 72,700 (A) 72,700 72,700 Senior Notes...................... 200,000 200,000 200,000 200,000 Senior Subordinated Notes offered hereby.......................... 200,000 (B) 200,000 200,000 Obligations under capitalized leases.......................... 58,663 9,556 68,219 68,219 68,219 Long term debt.................... 6,876 7,142 14,018 (7,142) (F) 6,876 6,876 Restructuring obligation.......... 13,453 13,453 31,807 (E) 45,260 45,260 Deferred income taxes............. 6,328 10,211 16,539 (13,706) (E) 2,833 2,833 Other long term liabilities....... 2,244 2,244 2,244 2,244 ------------- ----------- ----------- ----------- -------------- --------------- Total liabilities............. 376,853 125,442 502,295 290,579 792,874 792,874 Redeemable preferred stock........ 59,508 59,508 59,508 59,508 Stockholders' equity (deficit): Preferred stock................. 8,663 8,663 8,663 8,663 Common stock.................... 4 71 75 (71) (E) 4 4 Additional paid in capital...... (302,326) 19,766 (282,560) (19,766) (E) (302,326) (302,326) Retained earnings............... 142,229 98,182 240,411 (98,182) (E) 140,092 139,331 (897) (G) (1,240) (C) ------------- ----------- ----------- ----------- -------------- --------------- Total stockholders' equity (deficit)................... (151,430) 118,019 (33,411) (120,156) (153,567) (154,328) ------------- ----------- ----------- ----------- -------------- --------------- Total liabilities and stockholders' equity (deficit)....................... $ 284,931 $ 243,461 $ 528,392 $ 170,423 $ 698,815 $ 698,054 ------------- ----------- ----------- ----------- -------------- --------------- ------------- ----------- ----------- ----------- -------------- ---------------
See accompanying notes to Pro Forma Condensed Consolidated Balance Sheet. 24 NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (DOLLARS IN THOUSANDS) (A) Reflects receipt of gross proceeds of $72,700 from the initial borrowing under the Senior Credit Facility, net of financing fees of $4,860, which have been included in other assets, net. (B) Reflects receipt of gross proceeds of $200,000 from the issuance of the Existing Notes, net of $9,580 of selling commissions and other offering expenses, which have been reflected as debt issuance costs and included in other assets, net. (C) Reflects the payment and write-off of $2,000 of fees related to a commitment to provide bridge financing, which terminated upon issuance of the Existing Notes, as well as the related tax benefit of $760 and reduction to retained earnings of $1,240. (D) Reflects consent and related solicitation fees totaling $7,500, which have been included in other assets, net, relating to the Consent Solicitation. (E) Reflects (i) the preliminary calculation of the excess of the purchase price in the Delchamps Acquisition over the book value of the net assets acquired and (ii) the preliminary allocation of such excess, in each case, as set forth below. The Delchamps Acquisition will be accounted for as a purchase, and the total purchase price will be allocated to Delchamps' tangible and intangible assets and liabilities based on their estimated fair values at the closing date of the acquisition, based on valuations and studies which have not yet been performed. Accordingly, the excess of the purchase price over the historical book value of the net assets to be acquired has not yet been allocated to individual assets and liabilities, other than as shown below. Any variation between such amounts and the final allocation will change the amount of goodwill recognized in connection with the Delchamps Acquisition and the related amortization expense. Management believes, however, that when the final valuation of the net assets acquired is completed, the allocation of the purchase price will not differ materially from the amounts shown herein. 25 NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED) (UNAUDITED) (DOLLARS IN THOUSANDS) The purchase price and preliminary pro forma calculation of the excess of the purchase price over the book value of net assets acquired is as follows: Cash purchase price............................... $ 218,200 Estimated transaction fees in addition to debt issuance costs.................................. 3,060 Change of control payments to Delchamps management...................................... 12,100 --------- Total cash payments in connection with the Delchamps Acquisition....................... 233,360 Delchamps stockholders' equity: Common stock.................................. 71 Additional paid in capital.................... 19,766 Retained earnings............................. 98,182 --------- Total......................................... 118,019 Elimination of existing deferred financing costs of $116, net of $44 tax benefit....... (72) --------- Book value of net assets acquired............. 117,947 --------- Excess of purchase price over net book value.... $ 115,413 --------- --------- Preliminary allocation of excess of purchase price over net book value: Amount assigned to inventory...................... $ 14,171 Deferred tax liability - current(1)............... (3,517) Deferred tax asset - current(2)................... 5,665 Deferred tax asset - non-current(1)............... 13,706 Adjustments related to Delchamps facilities to be closed in connection with the Delchamps Acquisition(3): Write-off of property and equipment............. (4,260) Current portion of restructuring obligation..... (15,217) Long-term portion of restructuring obligation... (31,807) Amount assigned to goodwill....................... 136,672 --------- Total......................................... $ 115,413 --------- ---------
- ------------------------ (1) Relates to differences between the book and tax basis of assets acquired and liabilities assumed. (2) Relates to change of control payments to Delchamps management and accrued severance costs. (3) Excludes any sales of stores to address FTC concerns. See Note (H) below. (F) Reflects the retirement of $15,439 of Delchamps current and long-term debt obligations. (G) Reflects the write-off of $1,446 of deferred financing costs relating to the March 1996 execution of the Senior Credit Facility, as well as the related tax benefit of $549 and reduction to retained earnings of $897. 26 NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED) (UNAUDITED) (DOLLARS IN THOUSANDS) (H) As discussed under "The Transactions - Expected Store Closures and Divestitures," Management expects that the Company will be required to divest approximately ten stores under a consent decree with the FTC. Adjustments reflected herein for such divestitures are estimated as follows: Jitney-Jungle stores: Book value of property and equipment sold.................................... $ 3,201 Net proceeds from sale....................................................... (1,973) --------- Loss on sale before tax benefit.............................................. 1,228 Tax benefit.................................................................. (467) --------- Net loss (charged to retained earnings)...................................... $ 761 --------- --------- Delchamps stores: Book value of property and equipment sold.................................... $ 3,451 Net proceeds from sale....................................................... (1,902) --------- Loss on sale before tax benefit.............................................. 1,549 Tax benefit.................................................................. (589) --------- Net loss (increase in goodwill).............................................. $ 960 --------- ---------
27 PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA (UNAUDITED) (DOLLARS IN THOUSANDS)
YEAR ENDED MAY 3, 1997 ---------------------------------------------------------------------------------------------- HISTORICAL COMPANY PRO ---------------------------------------- CLOSED PRO FORMA COMPANY FORMA FOR FTC JITNEY-JUNGLE DELCHAMPS(A) COMBINED STORES(B) ADJUSTMENTS PRO FORMA DIVESTITURES(C) ------------- -------------- --------- --------- ----------- ----------- --------------- NET SALES........................ $ 1,228,533 $1,102,947 $2,331,480 $ (80,757) $2,250,723 $ 2,159,542 COSTS AND EXPENSES: Cost of sales.................. 925,446 805,832 1,731,278 (62,671) 1,668,607 1,596,277 Direct store expense........... 199,956 231,835 431,791 (22,899) $ (998)(D) 407,894 390,119 Warehouse, administrative and general expenses............. 63,094 45,273 108,367 (16,335)(D) 96,899 96,931 4,556(E) 750(F) (439)(I) Special charges, net(G)........ 2,737 2,220 4,957 4,957 4,957 ------------- -------------- --------- --------- ----------- ----------- --------------- Operating income............... 37,300 17,787 55,087 4,813 12,466 72,366 71,258 Interest expense, net.......... 36,215 4,982 41,197 -- 31,317(H) 67,492 67,492 (5,022)(I) ------------- -------------- --------- --------- ----------- ----------- --------------- Earnings (loss) before taxes on income....................... 1,085 12,805 13,890 4,813 (13,829) 4,874 3,766 Income tax expense (benefit)... 339 4,851 5,190 1,798 (3,524)(J) 3,464 3,050 ------------- -------------- --------- --------- ----------- ----------- --------------- NET EARNINGS (LOSS).............. $ 746 $ 7,954 $ 8,700 $ 3,015 $ (10,305) $ 1,410 $ 716 ------------- -------------- --------- --------- ----------- ----------- --------------- ------------- -------------- --------- --------- ----------- ----------- --------------- OTHER DATA: EBITDA(K)........................ $ 70,344 $ 44,117 $ 114,461 $ 2,513 $ 13,435 $ 130,409 $ 127,235 Depreciation and amortization.... 31,319 23,719 55,038 (2,245) 969 53,762 51,670 LIFO expense (benefit)........... (1,012) 391 (621) (55) -- (676) (650) Capital expenditures............. 24,099 15,551 39,650 -- -- 39,650 39,650 Gross profit as a percentage of sales............................ 24.7% 26.9% 25.7% 25.9% 26.1% EBITDA as a percentage of sales............................ 5.7% 4.0% 4.9% 5.8% 5.9% Ratio of earnings to fixed charges(L)..................... 1.0x 1.6x 1.2x 1.1x 1.0x Ratio of EBITDA to cash interest expense(M)..................... 1.9x 8.9x 2.8x 2.0x 2.0x
See accompanying notes to Pro Forma Condensed Consolidated Statements of Operations and Other Data. 28 PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA (UNAUDITED) (DOLLARS IN THOUSANDS)
12 WEEKS ENDED JULY 20, 1996 ----------------------------------------------------------------------------------------------- COMPANY PRO HISTORICAL FORMA FOR FTC ---------------------------------------- CLOSED PRO FORMA COMPANY PRO DIVESTITURES JITNEY-JUNGLE DELCHAMPS (A) COMBINED STORES (B) ADJUSTMENTS FORMA (C) ------------- -------------- --------- ---------- ----------- ----------- --------------- NET SALES........................ $ 282,166 $ 284,662 $ 566,828 $ (21,964) $ 544,864 $ 522,745 COSTS AND EXPENSES: Cost of sales.................. 211,627 210,158 421,785 (17,150) 404,635 387,010 Direct store expense........... 45,447 55,813 101,260 (5,880) $ (230)(D) 95,150 90,955 Warehouse, administrative and general expenses............. 14,241 13,148 27,389 (3,769)(D) 24,742 24,749 1,051(E) 173(F) (102)(I) Special charges, net(G)........ (187) (187) (187) (187) ------------- -------------- --------- ---------- ----------- ----------- --------------- Operating income............... 10,851 5,730 16,581 1,066 2,877 20,524 20,218 Interest expense, net.......... 8,378 1,494 9,872 -- 7,271(H) 15,580 15,580 (1,563)(I) ------------- -------------- --------- ---------- ----------- ----------- --------------- Earnings (loss) before taxes on income....................... 2,473 4,236 6,709 1,066 (2,831) 4,944 4,638 Income tax expense (benefit)... 921 1,583 2,504 398 (676)(J) 2,226 2,112 ------------- -------------- --------- ---------- ----------- ----------- --------------- NET EARNINGS (LOSS).............. $ 1,552 $ 2,653 $ 4,205 $ 668 $ (2,155) $ 2,718 $ 2,526 ------------- -------------- --------- ---------- ----------- ----------- --------------- ------------- -------------- --------- ---------- ----------- ----------- --------------- OTHER DATA: EBITDA(K)........................ $ 17,813 $ 11,343 $ 29,156 $ 505 $ 3,100 $ 32,761 $ 31,986 Depreciation and amortization.... 7,062 5,486 12,548 (546) 223 12,225 11,750 LIFO expense (benefit)........... (100) 314 214 (15) -- 199 205 Capital expenditures............. 6,122 7,563 13,685 -- -- 13,685 13,685 Gross profit as a percentage of sales............................ 25.0% 26.2% 25.6% 25.7% 26.0% EBITDA as a percentage of sales............................ 6.3% 4.0% 5.1% 6.0% 6.1% Ratio of earnings to fixed charges(L)..................... 1.3x 1.8x 1.5x 1.2x 1.2x Ratio of EBITDA to cash interest expense(M)..................... 2.1x 7.6x 3.0x 2.2x 2.1x
See accompanying notes to Pro Forma Condensed Consolidated Statements of Operations and Other Data. 29 PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA (UNAUDITED) (DOLLARS IN THOUSANDS)
12 WEEKS ENDED JULY 26, 1997 ----------------------------------------------------------------------------------------------- COMPANY PRO HISTORICAL FORMA FOR FTC ---------------------------------------- CLOSED PRO FORMA COMPANY PRO DIVESTITURES JITNEY-JUNGLE DELCHAMPS (A) COMBINED STORES (B) ADJUSTMENTS FORMA (C) ------------- -------------- --------- ---------- ----------- ----------- --------------- NET SALES........................ $ 288,978 $ 266,893 $ 555,871 $ (18,194) $ 537,677 $ 515,582 COSTS AND EXPENSES: Cost of sales.................. 216,464 188,261 404,725 (13,359) 391,366 374,388 Direct store expense........... 48,058 57,272 105,330 (5,563) $ (230)(D) 99,537 95,089 Warehouse, administrative and general expenses............. 12,772 12,643 25,415 (3,769)(D) 22,768 22,775 1,051(E) 173(F) (102) (I) Special charges, net(G)........ 5 5 5 5 ------------- -------------- --------- ---------- ----------- ----------- --------------- Operating income............... 11,684 8,712 20,396 728 2,877 24,001 23,325 Interest expense, net.......... 8,241 999 9,240 -- 6,797(H) 15,530 15,530 (507)(I) ------------- -------------- --------- ---------- ----------- ----------- --------------- Earnings (loss) before taxes on income....................... 3,443 7,713 11,156 728 (3,413) 8,471 7,795 Income tax expense (benefit)... 1,284 2,859 4,143 272 (897)(J) 3,518 3,265 ------------- -------------- --------- ---------- ----------- ----------- --------------- NET EARNINGS (LOSS).............. $ 2,159 $ 4,854 $ 7,013 $ 456 $ (2,516) $ 4,953 $ 4,530 ------------- -------------- --------- ---------- ----------- ----------- --------------- ------------- -------------- --------- ---------- ----------- ----------- --------------- OTHER DATA: EBITDA(K)........................ $ 18,616 $ 14,778 $ 33,394 $ 193 $ 3,100 $ 36,687 $ 35,543 Depreciation and amortization.... 6,982 6,120 13,102 (523) 223 12,802 12,328 LIFO expense (benefit)........... (50) (59) (109) (12) -- (121) (115) Capital expenditures............. 4,985 4,409 9,394 -- -- 9,394 9,394 Gross profit as a percentage of sales............................ 25.1% 29.5% 27.2% 27.2% 27.4% EBITDA as a percentage of sales............................ 6.4% 5.5% 6.0% 6.8% 6.9% Ratio of earnings to fixed charges(L)..................... 1.4x 2.6x 1.8x 1.4x 1.4x Ratio of EBITDA to cash interest expense(M)..................... 2.3x 14.8x 3.6x 2.5x 2.4x
See accompanying notes to Pro Forma Condensed Consolidated Statements of Operations and Other Data. 30 PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA (UNAUDITED) (DOLLARS IN THOUSANDS)
LTM PERIOD ---------------------------------------------------------------------------------------------- HISTORICAL COMPANY PRO ---------------------------------------- CLOSED PRO FORMA COMPANY FORMA FOR FTC JITNEY-JUNGLE DELCHAMPS(A) COMBINED STORES(B) ADJUSTMENTS PRO FORMA DIVESTITURES(C) ------------- -------------- --------- --------- ----------- ----------- --------------- NET SALES........................ $ 1,235,345 1,102,947 $2,338,292 $ (80,757) $2,257,535 $ 2,166,461 COSTS AND EXPENSES: Cost of sales.................. 930,283 805,832 1,736,115 (62,671) 1,673,444 1,601,558 Direct store expense........... 202,567 231,835 434,402 (22,899) $ (998)(D) 410,505 392,673 Warehouse, administrative and general expenses............. 61,625 45,273 106,898 (16,335)(D) 95,430 95,462 4,556(E) 750(F) (439)(I) Special charges, net(G)........ 2,737 2,220 4,957 4,957 4,957 ------------- -------------- --------- --------- ----------- ----------- --------------- Operating income............... 38,133 17,787 55,920 4,813 12,466 73,199 71,811 Interest expense, net.......... 36,078 4,982 41,060 -- 30,843(H) 67,484 67,484 (4,419)(I) ------------- -------------- --------- --------- ----------- ----------- --------------- Earnings (loss) before taxes on income....................... 2,055 12,805 14,860 4,813 (13,958) 5,715 4,327 Income tax expense (benefit)... 702 4,851 5,553 1,798 (3,573)(J) 3,778 3,260 ------------- -------------- --------- --------- ----------- ----------- --------------- NET EARNINGS (LOSS).............. $ 1,353 $ 7,954 $ 9,307 $ 3,015 $ (10,385) $ 1,937 $ 1,067 ------------- -------------- --------- --------- ----------- ----------- --------------- ------------- -------------- --------- --------- ----------- ----------- --------------- OTHER DATA: EBITDA(K)........................ 71,147 $ 44,117 115,264 $ 2,513 $ 13,435 $ 131,212 $ 127,800 Depreciation and amortization.... 31,239 23,719 54,958 (2,245) 969 53,682 51,632 LIFO expense (benefit)........... (962) 391 (571) (55) -- (626) (600) Capital expenditures............. 22,962 15,551 38,513 -- -- 38,513 38,513 Gross profit as a percentage of sales.......................... 24.7% 26.9% 25.8% 25.9% 26.1% EBITDA as a percentage of sales............................ 5.8% 4.0% 4.9% 5.8% 5.9% Ratio of earnings to fixed charges(L)..................... 1.1x 1.6x 1.2x 1.1x 1.1x Ratio of EBITDA to cash interest expense(M)..................... 2.0x 8.9x 2.8x 2.0x 2.0x
See accompanying notes to Pro Forma Condensed Consolidated Statements of Operations and Other Data. 31 NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER DATA (UNAUDITED) (DOLLARS IN THOUSANDS) (A) Delchamps historically has accounted for warehouse costs as part of cost of goods sold, while Jitney-Jungle has accounted for such costs as part of warehouse, administrative and general expenses. The historical data for Delchamps reflects a reclassification of gross profit and selling, general and administrative expenses as though such warehouse costs had been accounted for in accordance with the historical financial statements of Jitney-Jungle. (B) In connection with the Delchamps Acquisition, Management has identified 13 Delchamps stores which it intends to close due to unprofitability. Pro forma adjustments have been made to eliminate the historical operating results of these stores. (C) As discussed under "The Transactions--Expected Store Closures and Divestitures," Management expects that the Company will be required to divest approximately ten stores under a consent decree with the FTC. Pro forma adjustments have been made to eliminate the historical operating results of these stores. In addition, the difference between the historical carrying amount of the net assets of such stores and the estimated net proceeds to be realized on their disposal (i) in the case of Jitney-Jungle stores, will be recorded as a non-recurring charge or credit to income and (ii) in the case of Delchamps stores, has been reflected herein as an increase in the amount of goodwill recorded in connection with the acquisition and the related goodwill amortization. Because the price at which such stores will ultimately be divested is not yet certain, any variation between the actual price and the price estimated herein (see Note H to the Pro Forma Condensed Consolidated Balance Sheet) will change (i) the non-recurring charge or credit to income in the case of Jitney-Jungle stores and (ii) goodwill and related amortization expense in the case of Delchamps stores. (D) In connection with the Delchamps Acquisition, Management has performed a review of operating activities of Jitney-Jungle and Delchamps and identified duplicative costs of $17,333 (which includes $14,185 of cash costs and $3,148 of depreciation and amortization) that it believes can be eliminated in connection with the Delchamps Acquisition, as follows. (i) Management has decided to consolidate the Mobile, Alabama headquarters of Delchamps with Jitney-Jungle's existing Jackson, Mississippi headquarters. Although a divisional office will be opened in Mobile, the Delchamps headquarters will be closed. Cost savings associated with such closing include savings resulting from headcount reductions at both facilities of $5,951 for the year ended May 3, 1997 and the LTM Period and $1,373 for the 12 weeks ended July 20, 1996 and the 12 weeks ended July 26, 1997. Cost savings resulting from the elimination of other operating costs are estimated at $4,281 (including $975 of reduced depreciation and amortization) for the year ended May 3, 1997 and the LTM Period and $988 (including $225 of reduced depreciation and amortization) for the 12 weeks ended July 20, 1996 and the 12 weeks ended July 26, 1997. (ii) Management has decided to close Delchamps' Hammond, Louisiana warehouse facility and consolidate such operations at the Company's existing warehouse facilities. Total cost savings resulting from this facility consolidation are estimated at $6,103 (including $2,173 of reduced depreciation and amortization) for the year ended May 3, 1997 and the LTM Period and $1,408 (including $501 of reduced depreciation and amortization) for the 12 weeks ended July 20, 1996 and the 12 weeks ended July 26, 1997. (iii) It has been Delchamps' practice to outsource all of its advertising printing to third parties, whereas Jitney-Jungle has utilized an in-house advertising printing facility. Because of excess capacity at Jitney-Jungle's facility, all Delchamps' advertising circulars will be printed at Jitney-Jungle's facility. Annualized cost savings resulting therefrom are estimated at $998 for the year ended May 3, 1997 and the LTM Period and $230 for the 12 weeks ended July 20, 1996 and the 12 weeks ended July 26, 1997. 32 NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER DATA (CONTINUED) (UNAUDITED) (DOLLARS IN THOUSANDS) In addition to the cost savings identified above, Management has identified certain other cost savings opportunities. As a result of the increase in purchasing volume requirements resulting from the Delchamps Acquisition, Management believes that the Company should be able to negotiate more favorable terms from vendors. Management believes that this increased purchasing leverage should result in approximately $3,352 in annualized cost savings, which the Company should begin realizing within six to nine months following the Delchamps Acquisition. Management also believes the increase in purchasing volume will enable the Company to increase its backhaul income by approximately $1,841 on an annualized basis. In addition, Management plans to take certain steps to improve warehouse and distribution efficiencies, including negotiation of a long-term agreement to supply slow turning items to the Company's supermarkets and thereby reduce inventory levels. (E) Reflects amortization of goodwill using an estimated useful life of 30 years. (F) Reflects a $750 increase in the annual BRS management fee pursuant to the amendment of the BRS Management Agreement in connection with the Delchamps Acquisition. See "Certain Relationships and Related Transactions--BRS Management Agreement." (G) Includes for the year ended May 3, 1997 and the LTM Period (i) a $1,779 non-cash charge accrued in fiscal 1997 relating to future payments that will be made under an employment agreement with Jitney-Jungle's former Chief Executive Officer; (ii) a $958 charge relating to termination benefits payable to employees of Jitney-Jungle whose positions were eliminated in May 1997; (iii) a $4,300 charge relating to cash payments made by Delchamps in connection the settlement of a lawsuit in March 1997; and (iv) a $2,080 gain on the sale of certain assets of Delchamps in fiscal 1997. Includes a $187 gain and a $5 loss on the sale of certain assets of Delchamps for the 12 weeks ended July 20, 1996 and the 12 weeks ended July 26, 1997, respectively. (H) Reflects interest expense related to borrowings outstanding under (i) the Senior Credit Facility upon consummation of the Delchamps Acquisition (giving effect to the change in interest rate which occurred in connection with the restatement thereof) and (ii) the Notes:
12 WEEKS ENDED YEAR ENDED ---------------------------- MAY 3, 1997 JULY 20, 1996 JULY 26, 1997 LTM PERIOD ----------- ------------- ------------- ----------- Senior Credit Facility (at a weighted average interest rate of 7.65%): Existing borrowings........................... $ 1,985 $ 507 $ -- $ 1,478 Borrowings in connection with the Delchamps Acquisition................................. 5,562 1,283 1,283 5,562 Amortization of financing fees - Senior Credit Facility(1)................................. 972 224 224 972 Commitment fee under Senior Credit Facility... 257 56 89 290 Notes (10.375%): Cash interest expense......................... 20,750 4,788 4,788 20,750 Amortization of debt issuance costs(1)........ 958 221 221 958 Amortization of consent and related solicitation fees pertaining to the Consent Solicitation(1)............................... 833 192 192 833 ----------- ------ ------ ----------- $ 31,317 $ 7,271 $ 6,797 $ 30,843 ----------- ------ ------ ----------- ----------- ------ ------ -----------
- ------------------------ (1) Debt issuance costs associated with the Notes are amortized over ten years on a straight-line basis. Deferred financing fees associated with the Senior Credit Facility are amortized over five years on a straight-line basis. The consent and related solicitation fees pertaining to the Consent Solicitation are amortized over the remaining life of the Senior Notes on a straight-line basis. 33 NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER DATA (CONTINUED) (UNAUDITED) (DOLLARS IN THOUSANDS) (I) Reflects elimination of interest expense, including amortization of debt issuance costs, in connection with (i) the repayment of Delchamps debt and (ii) existing borrowings under the Senior Credit Facility:
12 WEEKS ENDED YEAR ENDED ---------------------------- MAY 3, 1997 JULY 20, 1996 JULY 26, 1997 LTM PERIOD ----------- ------------- ------------- ----------- Delchamps debt: Notes payable....................... $ 1,748 $ 691 $ 276 $ 1,748 Delchamps long-term debt............ 750 213 175 750 Senior Credit Facility: Cash interest expense related to existing borrowings............... 2,144 584 -- 1,560 Commitment fee under Senior Credit Facility.......................... 380 75 56 361 ----------- ------ ------ ----------- 5,022 1,563 507 4,419 ----------- ------ ------ ----------- Amortization of Delchamps debt issuance costs...................... 39 10 10 39 Amortization of financing fees-- Senior Credit Facility.............. 400 92 92 400 ----------- ------ ------ ----------- 439 102 102 439 ----------- ------ ------ ----------- $ 5,461 $ 1,665 $ 609 $ 4,858 ----------- ------ ------ ----------- ----------- ------ ------ -----------
(J) Reflects the effect on income tax expense of pro forma adjustments described in these footnotes, other than non-deductible goodwill amortization, at an effective statutory tax rate of 38%. (K) EBITDA is defined as income from continuing operations before interest, taxes, depreciation, amortization, LIFO expense (benefit) and special items, net. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service indebtedness. However, EBITDA should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (L) The ratio of earnings to fixed charges is computed by adding fixed charges to earnings (loss) before taxes on income and dividing that amount by fixed charges. Fixed charges consist of interest (including amortization of debt issuance costs) and a portion of rent expense that management considers to be interest. (M) Pro forma cash interest expense excludes amortization of deferred financing fees of $2,763 for the year ended May 3, 1997 and the LTM Period and $637 for the 12 weeks ended July 20, 1996 and the 12 weeks ended July 26, 1997. 34 PRO FORMA LIQUIDITY It is anticipated that the Company's principal sources of liquidity will be cash flow from operations and borrowings under the Senior Credit Facility and its principal uses of cash will be to fund working capital and acquisitions and to meet debt service requirements. The Company incurred significant indebtedness in connection with the Transactions. At July 26, 1997, on a Pro Forma Basis, the Company would have had approximately $558.5 million of total debt (including capitalized leases and current installments) as compared to $275.4 million of actual long-term indebtedness at July 26, 1997. In addition, on a Pro Forma Basis, the Company would have had a shareholders' deficit of approximately $154.3 million at July 26, 1997, as compared to an actual shareholders' deficit of $151.4 million as of July 26, 1997. The Company's significant debt service obligations following the Delchamps Acquisition could, under certain circumstances, have material consequences to security holders of the Company. See "Risk Factors." In connection with the Transactions, the Company borrowed approximately $72.7 million under the Senior Credit Facility. Following the consummation of the Delchamps Merger, the Company will have approximately $11.2 million of outstanding letters of credit under the Senior Credit Facility. Giving effect to such letters of credit, Management expects that approximately $66.1 million of additional borrowings will be available under the Senior Credit Facility immediately following the Delchamps Acquisition to fund ongoing capital requirements. See "Description of Certain Indebtedness--Senior Credit Facility." As of July 26, 1997, the Company had no commitments for capital expenditures. For fiscal 1998 and fiscal 1999, the Company has budgeted approximately $50.0 million and $64.0 million, respectively, of capital expenditures. Such planned capital expenditures primarily relate to new supermarket openings and remodelings and expansions of existing supermarkets. Capital expenditure plans of the Company are frequently reviewed and are modified from time to time depending on cash availability and other economic factors. The Company's expenditures to comply with environmental laws and regulations at its supermarkets primarily consist of those related to remediation of underground storage tank leaks and spills and retrofitting chlorofluorocarbon ("CFC") chiller units. The Company's unreimbursed cost for remediation at the 16 facilities which have had leaks or spills from underground storage tanks has not been material. All significant required expenditures in connection with the clean up of such leaks and spills have been made at these 16 locations, except at three newly discovered locations which are still undergoing investigation and one location awaiting state approval of its remediation plan. Based on past experience, the Company does not anticipate material expenditures at these locations. In addition, the Company has obtained insurance coverage for bodily injury, property damage and corrective action expenses resulting from releases of petroleum products from underground storage tanks during the covered period at 53 of its 57 underground storage tank locations, and an application for such coverage is pending at one of the four remaining locations. The Company spent $515,000, $468,000 and $914,000 retrofitting CFC containing chiller units and upgrading tanks during fiscal 1995, fiscal 1996 and the LTM Period, respectively. Between approximately $472,000 and $1,055,000 in expenditures are contemplated for retrofitting the CFC units and between approximately $455,000 and $755,000 in expenditures are contemplated for tank upgrading to comply with the 1998 tank standards or closure in fiscal 1998 and fiscal 1999. These regulatory compliance costs are not covered by insurance. The Company's ability to fund working capital and acquisitions, and to meet its debt service requirements, will be dependent on its future performance which, in turn, will be subject to management, financial, competitive and other factors affecting the business and operations of the Company, some of which are beyond the control of the Company. Specifically, the Company's future performance will be dependent upon its ability to successfully integrate the Delchamps business and to achieve estimated cost savings both in connection with the Delchamps Acquisition and on an ongoing basis. If the Company is unable to generate sufficient cash flow to meet its debt service obligations, the Company may be required 35 to renegotiate the payment terms or to refinance all or a portion of the Senior Credit Facility, the Senior Notes or the Notes, to sell assets or to obtain additional financing. If the Company could not successfully refinance its indebtedness, substantially all of the Company's long-term debt would be in default and could be declared immediately due and payable. See "Risk Factors--Substantial Leverage." During the fiscal year ended June 28, 1997, Delchamps generated approximately $1.1 billion and $44.1 million, respectively, of net sales and EBITDA. In addition to the incremental net sales, EBITDA and market share expected to result from the Delchamps Acquisition, Management believes that it should be able to achieve significant cash cost savings in connection with the combined operation of the Jitney-Jungle and Delchamps businesses following the Delchamps Acquisition. While the exact timing and amount of such cash cost savings is inherently uncertain, Management currently expects that the Company should begin to realize such cash cost savings within three to nine months after the Delchamps Acquisition. Generally, such cash cost savings are expected to result from (i) reduced general and administrative expenses arising from the closure of the corporate headquarters of Delchamps and associated headcount reductions, (ii) improved warehouse and distribution efficiencies, (iii) reduced advertising and printing expenses resulting from moving a portion of Delchamps' print advertising needs to Jitney-Jungle's in-house printing facilities, (iv) increased purchasing leverage that may enable the Company to negotiate more favorable terms from its vendors, and (v) increased backhaul income. Of the aggregate potential $19.4 million in annualized cash cost savings discussed above, approximately $14.2 million are reflected in the Pro Forma Condensed Consolidated Financial Statements included elsewhere herein because Management believes they are factually supportable and directly related to the Transactions and the Delchamps Merger. The potential cash cost savings discussed above are based on estimates prepared solely by members of Management based on information available to them and have not been independently reviewed. The estimates necessarily make assumptions as to future events, including general industry, competitive and business conditions, many of which are beyond the control of the Company. Actual cash cost savings achieved by the Company may vary considerably from the estimates discussed above. See "Risk Factors--Integration of Delchamps." Jitney-Jungle and Delchamps have improved their EBITDA margins from 5.5% and 2.9%, respectively, in fiscal 1992 to 5.7% and 4.0%, respectively, in fiscal 1997. The Company continuously reviews its operations to identify initiatives designed to reduce operating costs and increase EBITDA margins. As a result of the following initiatives, Management believes that the Company can further improve its EBITDA margins during fiscal 1998: (i) headcount reductions implemented by Jitney-Jungle in May 1997 which are expected to result in annualized cost savings of approximately $0.9 million in fiscal 1998; and (ii) improved labor scheduling currently being implemented at Jitney-Jungle supermarkets, which is expected to result in annualized cost savings of approximately $3.5 million in fiscal 1998 and which may also result in additional cost savings when implemented during the next 12 to 18 months at the Delchamps supermarkets. In addition, Management expects to implement programs at Delchamps to reduce inventory shrink to levels comparable to those achieved at Jitney-Jungle. There can be no assurance, however, that the Company will be able to implement such programs and other changes within the expected time periods, or that such programs and changes, if implemented, will produce the expected cost savings described above. During fiscal 1997, Jitney-Jungle successfully implemented programs to reduce inventories by eliminating slow moving items, as well as renegotiating more favorable payment terms with certain of its vendors. Management believes that these measures enabled Jitney-Jungle to decrease its working capital needs by approximately $20.0 million. Management intends to implement similar programs at Delchamps. 36 SELECTED HISTORICAL FINANCIAL INFORMATION OF JITNEY-JUNGLE The following table sets forth selected historical financial information of Jitney-Jungle for the five years ended May 3, 1997 and for the 12 weeks ended July 20, 1996 and July 26, 1997. The selected financial information for the three years ended May 3, 1997 was derived from the audited consolidated financial statements of Jitney-Jungle included elsewhere in this Prospectus. The selected financial information for the two years ended April 30, 1994 was derived from audited consolidated financial statements of Jitney-Jungle. The selected financial information as of July 20, 1996 and July 26, 1997 and for the 12 weeks ended July 20, 1996 and July 26, 1997 was derived from unaudited consolidated financial statements of Jitney-Jungle included elsewhere in this Prospectus which, in the opinion of Management, include all adjustments necessary for a fair presentation of the financial condition and results of operations of Jitney-Jungle for such periods. The results of operations for interim periods are not necessarily indicative of a full year's operations. The following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of Jitney-Jungle" and the historical consolidated financial statements of Jitney-Jungle included elsewhere in this Prospectus.
12 WEEKS FISCAL YEAR ENDED ENDED --------------------------------------------------------------- ----------- MAY 1, APRIL 30, APRIL 29, APRIL 27, MAY 3, 1993 1994 1995 1996 1997 (52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) JULY 20, 1996 (DOLLARS IN THOUSANDS) OPERATING DATA: Net sales......................................... $ 1,070,693 $ 1,152,333 $ 1,173,927 $ 1,179,318 $ 1,228,533 $ 282,166 Gross profit...................................... 250,999 276,546 288,188 292,063 303,087 70,539 Direct store expense.............................. 167,162 184,121 189,422 193,483 199,956 45,447 Warehouse, administrative and general expenses.... 47,446 53,664 57,723 60,603 63,094 14,241 Special charges, net(1)........................... -- -- -- -- 2,737 -- ----------- ----------- ----------- ----------- ----------- ----------- Operating income.................................. 36,391 38,761 41,043 37,977 37,300 10,851 Interest expense, net............................. 9,920 11,626 10,823 13,000 36,215 8,378 ----------- ----------- ----------- ----------- ----------- ----------- Income from continuing operations before provision for income taxes................................ 26,471 27,135 30,220 24,977 1,085 2,473 Provision for income taxes........................ 9,354 9,956 11,417 9,062 339 921 Extraordinary item(2)............................. -- -- -- (1,456) -- -- ----------- ----------- ----------- ----------- ----------- ----------- Net income........................................ $ 17,117 $ 17,179 $ 18,803 $ 14,459 $ 746 $ 1,552 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- OTHER DATA: EBITDA(3)......................................... $ 57,232 $ 63,457 $ 65,207 $ 64,863 $ 70,344 $ 17,813 Depreciation and amortization..................... 20,119 23,428 25,444 27,323 31,319 7,062 LIFO expense (benefit)............................ 722 1,268 (1,280) (437) (1,012) (100) Capital expenditures.............................. 38,686 30,225 23,921 30,111 24,099 6,122 Supermarkets open at end of period................ 100 106 106 103 105 104 Remodels during period............................ 12 22 40 33 19 7 Gross profit as a percentage of sales............. 23.4% 24.0% 24.5% 24.8% 24.7% 25.0% EBITDA as a percentage of sales................... 5.3% 5.5% 5.6% 5.5% 5.7% 6.3% Ratio of earnings to fixed charges(4)............. 3.1x 2.8x 3.1x 2.4x 1.0x 1.3x BALANCE SHEET DATA (AT PERIOD END): Cash and cash equivalents......................... $ 13,031 $ 30,737 $ 20,159 $ 5,676 $ 14,426 $ 3,033 Working capital................................... 60,108 60,385 71,929 26,449 (92) 15,561 Total assets...................................... 269,798 296,803 312,415 279,003 267,845 274,011 Total debt........................................ 98,665 102,814 99,198 302,461 272,462 286,372 Redeemable preferred stock........................ -- -- -- 49,988 57,921 50,035 Stockholders' equity (deficit).................... 111,099 124,857 140,216 (144,815) (152,002) (143,280) JULY 26, 1997 OPERATING DATA: Net sales......................................... $ 288,978 Gross profit...................................... 72,514 Direct store expense.............................. 48,058 Warehouse, administrative and general expenses.... 12,772 Special charges, net(1)........................... -- ----------- Operating income.................................. 11,684 Interest expense, net............................. 8,241 ----------- Income from continuing operations before provision for income taxes................................ 3,443 Provision for income taxes........................ 1,284 Extraordinary item(2)............................. -- ----------- Net income........................................ $ 2,159 ----------- ----------- OTHER DATA: EBITDA(3)......................................... $ 18,616 Depreciation and amortization..................... 6,982 LIFO expense (benefit)............................ (50) Capital expenditures.............................. 4,985 Supermarkets open at end of period................ 104 Remodels during period............................ 4 Gross profit as a percentage of sales............. 25.1% EBITDA as a percentage of sales................... 6.4% Ratio of earnings to fixed charges(4)............. 1.4x BALANCE SHEET DATA (AT PERIOD END): Cash and cash equivalents......................... $ 5,255 Working capital................................... (5,955) Total assets...................................... 284,931 Total debt........................................ 275,361 Redeemable preferred stock........................ 59,508 Stockholders' equity (deficit).................... (151,430)
- ------------------------------ (1) Includes (i) a $1.8 million non-cash charge accrued in fiscal 1997 relating to future payments that will be made under an employment agreement with Jitney-Jungle's former Chief Executive Officer and (ii) a $1.0 million charge relating to termination benefits payable to employees of Jitney-Jungle whose positions were eliminated in May 1997. (2) Reflects a loss on early retirement of debt, net of an income tax benefit of $0.9 million. (3) EBITDA is defined as income from continuing operations before interest, taxes, depreciation, amortization, LIFO expense (benefit) and special items, net. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service indebtedness. However, EBITDA should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (4) The ratio of earnings to fixed charges is computed by adding fixed charges to earnings (loss) before taxes on income and dividing that sum by the fixed charges. Fixed charges consist of interest (including amortization costs) and a portion of rent expense that management considers to be interest. 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF JITNEY-JUNGLE The following discussion should be read in conjunction with the financial statements and related notes, and the other financial information, included elsewhere in this Prospectus. References in this discussion to fiscal years are to Jitney-Jungle's fiscal years, which end on the Saturday nearest to April 30 in the calendar year. The consolidated statements of earnings for fiscal 1995 and 1996 include 52 weeks of operations and the consolidated statements of earnings for fiscal 1997 include 53 weeks of operations. References to Interim 1997 are to the 12 weeks ended July 20, 1996 and references to Interim 1998 are to the 12 weeks ended July 26, 1997. GENERAL Jitney-Jungle operates a chain of 104 supermarkets and 53 gasoline stations. Net sales from gasoline stations during fiscal 1995, 1996 and 1997 were 4.0%, 5.2% and 6.9%, respectively, of Jitney-Jungle's net sales for such fiscal years. Approximately 21.0% of Jitney-Jungle's net non-perishable sales result from its private label program. Private label products generally have a lower unit sales price than national brands, but provide a higher gross margin to Jitney-Jungle due to lower unit costs. Prior to fiscal 1995, Jitney-Jungle used a LIFO valuation method derived from the Consumer Price Index (CPI). The CPI, a Federal government index that measures changes in retail prices, is published by the Bureau of Labor Statistics on a monthly basis. Due to a general absence of inflation in food prices, Jitney-Jungle changed to an internally developed price index at the beginning of fiscal 1995 to more accurately reflect price level changes that were specific to Jitney-Jungle's actual experience. Jitney-Jungle does not believe that the CPI index provides a satisfactory measure of its inventory. After switching to its own internally generated price index, which measures over 20,000 different SKUs, Jitney-Jungle experienced a LIFO credit in fiscal 1995, 1996 and 1997. During the past three years, an overall lack of inflation in food prices and increasingly competitive markets have made it difficult for Jitney-Jungle and other supermarket operators to achieve comparable store sales gains. Because sales growth has been difficult to attain, many operators, including Jitney-Jungle, have attempted to maintain market share through increased levels of promotional activities and discount pricing, creating a more difficult environment in which to increase year-over-year sales gains consistently. In addition, because of the growth in the Southeast market, many existing operators, including Jitney-Jungle, have opened new supermarkets in existing markets which has resulted in declines in same store sales for the existing (comparable) store base of these same grocery chains. In an effort to offset this trend, Jitney-Jungle intends to focus future new supermarket openings on its combination and conventional supermarket formats which, historically, have achieved higher operating profit margins than its discount supermarkets. THE RECAPITALIZATION On March 5, 1996, Jitney-Jungle effected a recapitalization (the "Recapitalization") pursuant to an Agreement and Plan of Exchange and of Merger dated as of November 16, 1995 by and among Jitney-Jungle, certain of its affiliates and JJ Acquisitions Corp., a Delaware corporation formed by BRS ("JJAC"). Prior to the Recapitalization, Jitney-Jungle had five affiliates (Southern Jitney Jungle Company, McLemore's Wholesale & Retail Stores, Inc., McCarty-Holman Co., Inc., Pump And Save, Inc. and Jitney-Jungle Bakery, Inc., each of which was under common ownership and management with Jitney-Jungle) and five subsidiaries (Florida Jitney-Jungle Stores, Inc., Jitney-Jungle Wholesale Co., Inc., Jackson Jet Corporation, Interstate Jitney Jungle Stores, Inc. and Foodway, Inc., each of which was wholly-owned by Jitney-Jungle). In connection with the Recapitalization, the common stock of each of Southern Jitney Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery, Inc. was exchanged for newly-issued shares of common stock of Jitney-Jungle and certain existing subsidiaries of Jitney-Jungle were merged with and into Jitney-Jungle or another subsidiary of Jitney-Jungle; as a result, Jitney-Jungle had four direct, 38 wholly-owned subsidiaries (Interstate Jitney-Jungle Stores, Inc., Southern Jitney Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery, Inc.) and one indirect wholly-owned subsidiary, Pump And Save, Inc. Immediately thereafter, JJAC was merged with and into Jitney-Jungle and the separate existence of JJAC ceased. The shareholders of Jitney-Jungle received consideration of $272.5 million in cash and $27.5 million aggregate liquidation preference of Class B Preferred Stock. Upon completion of the Recapitalization, 71.25%, on a fully diluted basis, of the outstanding shares of Jitney-Jungle's Common Stock was held by the Fund Entities and 10.0%, on a fully diluted basis, continued to be held by certain shareholders of Jitney-Jungle. THE DELCHAMPS ACQUISITION On July 8, 1997, Jitney-Jungle entered into the Delchamps Merger Agreement pursuant to which the Delchamps Acquisition will be effected. In connection with the Delchamps Acquisition, the Company issued and sold $200.0 million principal amount of the Existing Notes and the Company amended and restated the Senior Credit Facility to increase the commitments thereunder from $100.0 million to $150.0 million. The Company used and will use the $200.0 million of gross proceeds from the sale of the Existing Notes, together with approximately $72.7 million of borrowings under the Senior Credit Facility, to pay the $218.2 million Delchamps Purchase Price, to repay approximately $15.4 million of Delchamps' outstanding indebtedness, to make approximately $12.1 million of change of control payments to certain Delchamps executives and to pay approximately $27.0 million of transaction fees and expenses. As a result of the Transactions, Management anticipates that a one-time pre-tax charge of $4.7 million ($2.9 million after tax) will be recorded in the quarter in which the Transactions are consummated. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected financial information expressed as a percentage of net sales:
FISCAL YEAR ENDED 12 WEEKS ENDED ------------------------------------------- ------------------------ APRIL 29, APRIL 27, MAY 3, 1995 1996 1997 (52 WEEKS) (52 WEEKS) (53 WEEKS) JULY 20, JULY 26, 1996 1997 Net sales................................................ 100.0% 100.0% 100.0% 100.0% 100.0% Gross profit............................................. 24.5 24.8 24.7 25.0 25.1 Direct store expense..................................... 16.1 16.4 16.3 16.1 16.6 Warehouse, administrative and general expenses........... 4.9 5.1 5.1 5.0 4.4 Special charges.......................................... -- -- 0.2 -- -- Operating income......................................... 3.5 3.2 3.0 3.9 4.1 Interest expense, net.................................... 0.9 1.1 2.9 3.0 2.9 Provision for income taxes............................... 1.0 0.8 -- 0.3 0.4 Net income before extraordinary item..................... 1.6 1.3 0.1 0.6 0.8 OTHER DATA: EBITDA................................................... 5.6% 5.5% 5.7% 6.3% 6.4%
INTERIM 1998 VS. INTERIM 1997 NET SALES. Net sales increased $6.8 million or 2.4% in Interim 1998 as compared to Interim 1997. The net sales increase was primarily attributable to the continued favorable results of the Jitney-Jungle Gold Card (a frequent shopper program which was launched by Jitney-Jungle in January, 1997) and sales improvements at five discount supermarkets that were converted during that period (two to the conventional store format and three to the combination store format). Same store sales increased approximately 2.3% in Interim 1998. Jitney-Jungle's store count at the end of Interim 1998 was 104 supermarkets (22 discount stores, 77 conventional stores and five combination stores) and 53 gasoline stations as compared 39 to 104 supermarkets (30 discount stores, 72 conventional stores and two combination stores) and 49 gasoline stations at the end of Interim 1997. GROSS PROFIT. Gross profit in Interim 1998 increased $2.0 million to $72.5 million, or 25.1% of net sales, compared to $70.5 million, or 25.0% of net sales, during Interim 1997. Gross profit increased primarily due to an increase in sales in Interim 1998. DIRECT STORE EXPENSE. Direct store expense was $48.1 million, or 16.6% of net sales, for Interim 1998 as compared to $45.4 million, or 16.1% of net sales, for Interim 1997. Direct store expense increased primarily due to an increase in net sales in Interim 1998. The increase in direct store expense as a percentage of net sales in Interim 1998 was principally due to increases in labor costs and advertising expense associated with the conversion of five discount stores during that period. WAREHOUSE, ADMINISTRATIVE AND GENERAL EXPENSES. Warehouse, administrative and general expenses were $12.8 million, or 4.4% of net sales in Interim 1998 compared to $14.2 million, or 5.0% of net sales, in Interim 1997. The decrease in warehouse, administrative and general expenses was primarily due to (i) a decrease in administrative labor costs as a result of a headcount reduction implemented during Interim 1998, (ii) a decrease in various expenses including travel and supplies and (iii) an increase in backhaul income. OPERATING INCOME. Operating income was $11.7 million, or 4.1% of net sales, in Interim 1998 as compared to $10.9 million, or 3.9% of net sales, in Interim 1997. The increase in operating income was due to the factors discussed above. EBITDA. EBITDA was $18.6 million, or 6.4% of net sales, in Interim 1998 as compared to $17.8 million, or 6.3% of net sales, in Interim 1997. EBITDA increased primarily due to an increase in sales in Interim 1998 and a reduction in warehouse, administrative and general expenses. INTEREST EXPENSE, NET. Interest expense, net was $8.2 million in Interim 1998 as compared to $8.4 million in Interim 1997. The decrease in interest expense was primarily due to a reduction in indebtedness outstanding under the existing Credit Facility. INCOME TAXES. Income taxes were $1.3 million with an effective tax rate of 37.3% for Interim 1998 as compared to $0.9 million with an effective tax rate of 37.2% for Interim 1997. The increase in income taxes was principally due to higher pretax earnings. NET INCOME. Net income for Interim 1998 increased $0.6 million to $2.2 million, compared to $1.6 million in Interim 1997. The increase in net income was due to the factors discussed above. FISCAL 1997 VS. FISCAL 1996 NET SALES. Net sales for fiscal 1997 increased 4.2% to $1,228.5 million compared to $1,179.3 million in fiscal 1996. The increase in net sales was primarily due to the opening of two stores, the opening of seven new gasoline stations and the addition of a "53rd" week in fiscal 1997. Without the additional "53rd" week, net sales would have increased approximately 2.2%. In addition, Jitney-Jungle launched its Gold Card, a frequent shopper card program, in the fourth quarter of fiscal 1997 which increased customer count and, as a result, increased net sales. Same store sales increased 0.2% in fiscal 1997 over fiscal 1996. GROSS PROFIT. Gross profit for fiscal 1997 increased $11.0 million to $303.1 million, or 24.7% of net sales, compared to $292.1 million, or 24.8% of net sales, for fiscal 1996. Gross profit increased primarily due to an increase in net sales in fiscal 1997. The decrease in gross profit as a percentage of net sales in fiscal 1997 was primarily due to the initial effect of the new Jitney-Jungle Gold Card which entitles customers to discounts on certain products. DIRECT STORE EXPENSE. Direct store expense for fiscal 1997 increased $6.5 million to $200.0 million, or 16.3% of net sales, compared to $193.5 million, or 16.4% of net sales, for fiscal 1996. Direct store expenses 40 increased primarily due to an increase in net sales in fiscal 1997. The decrease in direct store expenses as a percentage of net sales in fiscal 1997 was principally due to decreases in store supplies and advertising costs which were partially offset by increases in group insurance expense due to an increase in medical claims paid during the year by the self-insured plan and increases in depreciation expense principally due to acquisitions of property and equipment (including capital leases) associated with Jitney-Jungle's remodeling program and the acquisition of new stores and gasoline stations. WAREHOUSE, ADMINISTRATIVE AND GENERAL EXPENSES. Warehouse, administrative and general expenses for fiscal 1997 increased $2.5 million to $63.1 million, or 5.1% of net sales, compared to $60.6 million, or 5.1% of net sales, for fiscal 1996. Warehouse, administrative and general expenses increased primarily due to (i) an increase in net sales in fiscal 1997 and (ii) an increase in amortization expense due to increased debt issuance costs related to the Recapitalization. The increase in warehouse, administrative and general expenses was partially offset by an increase in backhaul income during fiscal 1997. SPECIAL CHARGES. Includes (i) a $1.8 million non-cash charge accrued in fiscal 1997 relating to future payments that will be made under an employment agreement with Jitney-Jungle's former Chief Executive Officer and (ii) a $1.0 million charge relating to termination benefits payable to employees of Jitney-Jungle whose positions were eliminated in May 1997. There were no comparable charges in fiscal 1996. OPERATING INCOME. Operating income for fiscal 1997 decreased $0.7 million to $37.3 million, or 3.0% of net sales, compared to $38.0 million, or 3.2% of net sales for fiscal 1996. The decrease in operating income was due to the factors discussed above. EBITDA. EBITDA for fiscal 1997 increased $5.4 million to $70.3 million, or 5.7% of net sales, compared to $64.9 million, or 5.5% of net sales, for fiscal 1996. EBITDA increased primarily due to an increase in net sales in fiscal 1997. The increase in EBITDA as a percentage of net sales in fiscal 1997 was primarily due to the renegotiation of a supply agreement with a major supplier and to decreases in direct store expense as discussed above which were offset in part by a decrease in gross profit due primarily to the initial effect of the introduction of the Gold Card. INTEREST EXPENSE, NET. Interest expense, net for fiscal 1997 increased $23.2 million to $36.2 million, compared to $13.0 million for fiscal 1996. The increase in interest expense, net was due to interest expense on the Senior Notes and the existing Credit Facility, which were in place all of fiscal 1997 and only for two months in fiscal 1996. INCOME TAXES. The effective rate for income taxes for fiscal 1997 decreased to 31.2% compared to 36.3% for fiscal 1996. The decrease in effective rate for fiscal 1997 was primarily due to lower pretax earnings which qualified Jitney-Jungle for a lower tax bracket. NET INCOME. Net income for fiscal 1997 decreased $13.8 million to $0.7 million, compared to $14.5 million for fiscal 1996. The decrease in net income was due to the factors discussed above. FISCAL 1996 VS. FISCAL 1995 NET SALES. Net sales for fiscal 1996 increased 0.5% to $1,179.3 million compared to $1,173.9 million in fiscal 1995. The increase in net sales was primarily due to the opening of four supermarkets and the opening of eleven new gasoline stations, partially offset by the effect of closing seven supermarkets and two gasoline stations in fiscal 1996. Same store sales remained relatively flat in fiscal 1996 as compared to fiscal 1995. GROSS PROFIT. Gross profit for fiscal 1996 increased $3.9 million to $292.1 million, or 24.8% of net sales, compared to $288.2 million, or 24.5% of net sales, for fiscal 1995. Gross profit increased primarily due to higher net sales. Gross profit as a percentage of net sales increased primarily due to improved procurement results due to (i) continued enhancements and improved utilization of Jitney-Jungle's 41 information systems, which resulted in better buying decisions at better prices and (ii) the renegotiation of a supply contract of Fleming Companies, Inc. DIRECT STORE EXPENSE. Direct store expense for fiscal 1996 increased $4.1 million to $193.5 million, or 16.4% of net sales, compared to $189.4 million, or 16.1% of net sales, for fiscal 1995. Direct store expense increased primarily due to higher net sales. Direct store expense as a percentage of net sales increased primarily due to increases in personnel costs, repairs and maintenance and depreciation expense as a result of increased capital expenditures relating to the remodeling of stores in fiscal 1995. WAREHOUSE, ADMINISTRATIVE AND GENERAL EXPENSES. Warehouse, administrative and general expenses for fiscal 1996 increased $2.9 million to $60.6 million, or 5.1% of net sales, compared to $57.7 million, or 4.9% of net sales, for fiscal 1995. Warehouse, administrative and general expenses increased primarily due to higher net sales. Warehouse, administrative and general expenses as a percentage of net sales increased primarily due to increases in personnel costs, insurance expense as a result of a larger provision for workers compensation and general liability insurance and amortization expenses as a result of increased debt issuance costs related to the Recapitalization. OPERATING INCOME. Operating income for fiscal 1996 decreased $3.1 million to $38.0 million, or 3.2% of net sales, from $41.0 million, or 3.5% of net sales, for fiscal 1995. The decrease in operating income was due to the factors discussed above. EBITDA. EBITDA for fiscal 1996 decreased $0.3 million to $64.9 million, or 5.5% of net sales, compared to $65.2 million, or 5.6% of net sales, for fiscal 1995. EBITDA decreased primarily due to higher direct store expenses and higher warehouse, administrative and general expenses as discussed above. INTEREST EXPENSE, NET. Interest expense, net for fiscal 1996 increased $2.2 million to $13.0 million, compared to $10.8 million for fiscal 1995. The increase in interest expense, net was due to an increase in Jitney-Jungle's outstanding indebtedness pursuant to the Senior Notes and the existing Credit Facility as a result of the Recapitalization in February 1996, partially offset by an increase in interest income. INCOME TAXES. The effective rate for income taxes for fiscal 1996 decreased to 36.3% compared to 37.8% for fiscal 1995. The decrease in effective rate for fiscal 1996 was principally due to the elimination of inter-company profit of a wholly owned subsidiary which previously was not included in the consolidated tax return. EXTRAORDINARY ITEM. In connection with the Recapitalization, Jitney-Jungle retired $35.7 million in long-term debt prior to its scheduled maturity. Prepayment penalties associated with early retirement of this debt resulted in an extraordinary loss of $1.5 million, net of an income tax benefit of $0.9 million. NET INCOME. Net income for fiscal 1996 decreased $4.3 million to $14.5 million, from $18.8 million for fiscal 1995. The decrease in net income was due to the factors discussed above. LIQUIDITY AND CAPITAL RESOURCES Historically, Jitney-Jungle has funded its working capital requirements, capital expenditures and other needs principally from operating cash flows. Due to the Recapitalization, however, Jitney-Jungle has become highly leveraged and its debt instruments contain restrictions on its operations. At July 26, 1997, Jitney-Jungle had $275.4 million of total long-term debt (including capitalized leases and current installments) and a shareholders deficit of $151.4 million. Jitney-Jungle's principal uses of liquidity have been to fund working capital, meet debt service requirements and finance Jitney-Jungle's strategic plans. Jitney-Jungle's principal sources of liquidity have been cash flow from operations and borrowings under the Senior Credit Facility. Jitney-Jungle has outstanding letters of credit with a face amount of $10.5 million issued under the Senior Credit Facility principally to secure obligations pursuant to a capitalized lease and to secure obligations under an existing 42 supply contract with Topco. At July 26, 1997, Jitney-Jungle had no outstanding borrowings under the Senior Credit Facility. The commitments under the Senior Credit Facility terminate, and all loans outstanding thereunder are required to be repaid in full on March 5, 2001. Borrowings under the Senior Credit Facility, including revolving loans and up to $20.0 million in letters of credit, may not exceed the lesser of (i) the "Total Commitment," which is currently $96.3 million, and (ii) an amount equal to the sum of (A) up to 60% of eligible inventory (valued at the lessor of FIFO cost or market value) of Jitney-Jungle and (B) the "Supplemental Availability", which is currently $41.3 million. Each of the Total Commitment and the Supplemental Availability decline by $1.25 million per quarter. Cash provided by operating activities during fiscal 1995 was $45.7 million compared to $55.5 million for fiscal 1996 and $66.5 million for fiscal 1997. Cash provided by operating activities for Interim 1997 was $18.1 million compared to $5.8 million for Interim 1998. In fiscal 1997, inventories decreased due to an inventory reduction plan implemented by Management and accounts payable increased due to improvement of customer terms to industry standards. These working capital improvements were partially offset by the reduction in net income due principally to the increase in cash interest expense during fiscal 1997 as a result of Jitney-Jungle's higher total indebtedness as discussed above. The principal reason for the increase of cash provided by operating activities for fiscal 1996 was a decrease in inventories due, in part, to store closings and a decrease in receivables which reflects a reduction in the uncollected billbacks due from vendors. In Interim 1998, accounts payable increased due to improvement of customer terms to industry standards and inventories increased due to (i) planned remodel sales associated with store conversions, (ii) the improvement of service levels in Jitney-Jungle's warehouse inventories and (iii) increased purchasing of deal merchandise at a lower cost. Net cash used in investing activities was $46.0 million for fiscal 1995, $12.4 million for fiscal 1996 and $22.3 million during fiscal 1997, and was $4.7 million for Interim 1997 and $4.9 million for Interim 1998. Such cash was primarily used for capital expenditures. Capital expenditures were $23.9 million for fiscal 1995, $30.1 million for fiscal 1996 and $24.1 million for fiscal 1997, and were $6.1 million for Interim 1997 and $5.0 million for Interim 1998. In addition to capital expenditures related to new stores opened in fiscal 1995, 1996 and 1997, Jitney-Jungle converted two discount stores to conventional stores, and expanded ten additional stores. Net cash used in financing activities was $10.2 million for fiscal 1995, $57.6 million for fiscal 1996 and $35.4 million for fiscal 1997, and was $16.1 million for Interim 1997 and $10.1 million for Interim 1998. The principal uses of funds in financing activities for fiscal 1995 and fiscal 1997 were the payment of long-term debt and capital lease obligations. The principal uses of funds in financing activities in fiscal 1996 were the redemption of Common Stock and related costs in connection with the Recapitalization, principal payments on debt and capital lease obligations and payments of dividends to stockholders. The principal uses of funds in financing activities for Interim 1998 were the payment of principal on long-term debt and capital lease obligations. Jitney-Jungle's expenditures to comply with environmental laws and regulations at its grocery stores primarily consist of those related to remediation of underground storage tank leaks and spills and retrofitting chlorofluorocarbon ("CFC") chiller units and tank upgrading to meet 1998 standards. Jitney-Jungle's unreimbursed cost for remediation at the nine Jitney-Jungle facilities which have had leaks or spills has not been material. All significant required expenditures in connection with the cleanup of such leaks and spills have been made at the nine locations. In addition, Jitney-Jungle has obtained insurance coverage for bodily injury, property damage and corrective action expenses resulting from releases of petroleum products from underground storage tanks during the covered period at 53 of its 54 underground storage tank locations, and an application for such coverage is pending at the remaining location. Jitney-Jungle spent $480,000, $246,000 and $500,000 for retrofitting CFC-containing chiller units during fiscal 1995, 1996 and 1997, respectively. Jitney-Jungle spent $0, $130,000 and $220,000 for tank upgrades during fiscal 1995, 1996 and 1997, respectively. 43 SELECTED HISTORICAL FINANCIAL INFORMATION OF DELCHAMPS The following table sets forth selected historical financial information of Delchamps for the five years ended June 28, 1997. The operating and balance sheet data for the three years ended June 28, 1997 were derived from the audited consolidated financial statements of Delchamps included elsewhere in this Prospectus. The operating and balance sheet data for the two years ended July 2, 1994 was derived from audited consolidated financial statements of Delchamps. The following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of Delchamps" and the audited consolidated financial statements of Delchamps included elsewhere in this Prospectus. Delchamps historically has accounted for warehouse costs as part of cost of goods sold, while Jitney-Jungle has accounted for such costs as part of warehouse, administrative and general expenses. Following the Delchamps Acquisition, the Company will include such costs in warehouse, administrative and general expenses. The data set forth below under the heading "Reclassified Data" reflect the reclassification of Delchamps' warehouse costs as though such warehouse costs had been accounted for in accordance with the historical financial statements of Jitney-Jungle.
FISCAL YEAR ENDED ------------------------------------------------------ JULY 3, JULY 2, JULY 1, JUNE 29, JUNE 28, 1993 1994 1995 1996 1997 (DOLLARS IN THOUSANDS) OPERATING DATA: Net sales........................................................... $1,034,531 $1,067,191 $1,054,088 $1,126,629 $1,102,947 Gross profit........................................................ 264,074 270,827 255,551 263,240 272,069 Selling, general and administrative expenses ("SG&A"): Restructuring charge(1)........................................... -- -- 28,779 -- -- Other SG&A........................................................ 236,167 248,808 261,763 250,121 254,282 --------- --------- --------- --------- ---------- Operating income (loss)............................................. 27,907 22,019 (34,991) 13,119 17,787 Interest expense, net............................................... 5,169 4,161 5,275 6,820 4,982 --------- --------- --------- --------- ---------- Earnings (loss) before income taxes and cumulative effect of changes in accounting principles.......................................... 22,738 17,858 (40,266) 6,299 12,805 Income tax expense.................................................. 8,365 6,207 (14,600) 2,447 4,851 --------- --------- --------- --------- ---------- Earnings (loss) before cumulative effect of change in accounting principles.......................................... 14,373 11,651 (25,666) 3,852 7,954 Cumulative effect of change in accounting principles for: Income taxes...................................................... -- 900 -- -- -- Post-employment benefits.......................................... -- (1,600) -- -- -- --------- --------- --------- --------- ---------- Net earnings (loss)................................................. $ 14,373 $ 10,951 $ (25,666) $ 3,852 $ 7,954 --------- --------- --------- --------- ---------- --------- --------- --------- --------- ---------- OTHER DATA: EBITDA(2)........................................................... $ 46,228 $ 40,636 $ 19,077 $ 34,892 $ 44,117 Depreciation and amortization....................................... 18,099 18,770 19,472 21,771 23,719 LIFO expense (benefit).............................................. 210 (38) 536 422 391 Restructuring and other special charges(1).......................... 12 (115) 34,060 (420) 2,220 Capital expenditures................................................ 20,824 17,705 35,239 21,671 15,551 Supermarkets open at end of period.................................. 118 120 118 117 118 Remodels during period.............................................. 7 4 5 1 5 Gross profit as a percentage of sales 25.5% 25.4% 24.2% 23.4% 24.7% EBITDA as a percentage of sales..................................... 4.5% 3.8% 1.8% 3.1% 4.0% Ratio of earnings to fixed charges(3)............................... 2.4x 2.1x -- 1.3x 1.6x BALANCE SHEET DATA (AT PERIOD END): Cash and cash equivalents........................................... $ 12,070 $ 15,378 $ 15,906 $ 10,503 $ 5,670 Working capital..................................................... 49,511 54,926 22,920 22,067 29,140 Total assets........................................................ 252,052 263,269 269,412 255,183 243,461 Total debt.......................................................... 50,814 51,079 62,170 39,746 25,839 Long term portion of restructuring obligation(1).................... -- -- 19,219 15,668 13,453 Stockholders' equity................................................ 126,262 136,300 110,042 112,925 118,019 RECLASSIFIED DATA: Gross profit........................................................ $ 288,761 $ 295,937 $ 279,689 $ 289,539 $ 297,115 Gross profit as a percentage of sales............................... 27.9% 27.7% 26.5% 25.7% 26.9% Other SG&A.......................................................... $ 260,854 $ 273,918 $ 285,901 $ 276,420 $ 277,108
44 - ------------------------ (1) During fiscal 1995, Delchamps recorded a pretax restructuring charge of $28,779. The charge reflected anticipated costs associated with a program to close certain underperforming supermarkets which could not be subleased in whole or in part and, to a lesser extent, severance costs related to the termination of employment of former executives. In March 1997, Delchamps incurred a charge of $4,300, resulting from the settlement of a lawsuit, which was partially offset by a gain of $2,080 resulting from the sale of real property in fiscal 1997. (2) EBITDA is defined as income from continuing operations before interest, taxes, depreciation, amortization, LIFO expense (benefit) and special items, net. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service indebtedness. However, EBITDA should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. (3) The ratio of earnings to fixed charges is computed by adding fixed charges to earnings (loss) before taxes on income and dividing that sum by the fixed charges. Fixed charges consist of interest (including amortization costs) and a portion of rent expense that management considers to be interest. Earnings were insufficient to cover fixed charges in fiscal 1995 by $40,266. 45 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF DELCHAMPS The following discussion should be read in conjunction with the audited consolidated financial statements and related notes, and the other financial information, included elsewhere in this Prospectus. References in this discussion to fiscal years are to Delchamps' fiscal years, which end on the Saturday nearest to June 30 in the calendar year. GENERAL Delchamps operates a chain of 118 supermarkets in the states of Alabama, Florida, Mississippi and Louisiana, as well as ten liquor stores in the State of Florida. Delchamps historically has accounted for warehouse costs as part of cost of goods sold, while Jitney-Jungle has accounted for such costs as part of warehouse, administrative and general expenses. Following the Delchamps Acquisition, the Company will account for such costs as part of warehouse, administrative and general expenses. The data set forth below under the heading "Reclassified Data" reflect the reclassification of Delchamps' warehouse costs as though such warehouse costs had been accounted for in accordance with the historical financial statements of Jitney-Jungle. During the past three years, increasingly competitive markets have made it difficult for Delchamps to achieve comparable store sales gains and improve profitability. During Delchamps' last three fiscal years, competitors have opened approximately 82 new supermarkets in Delchamps' operating regions, approximately 21 of which were opened in fiscal 1997. In fiscal 1997, Delchamps experienced a 2.1% decline in net sales and a 3.5% decline in same store sales. Although net sales and same store sales declined, gross margin improved, primarily as a result of selective retail price increases. Delchamps can give no assurances that improvements in profitability can be achieved if net sales and same store sales continue to decline as a result of competitive pressures. On July 8, 1997, Delchamps announced that it had entered into the Delchamps Merger Agreement pursuant to which it had agreed to be acquired by Jitney-Jungle. The terms of the Delchamps Merger Agreement are described in Delchamps' Schedule 14D-9, as amended, and in Jitney-Jungle's 14D-1, as amended, both of which have been filed with the Commission. Pursuant to the Delchamps Merger Agreement, DAC, a wholly-owned subsidiary of Jitney-Jungle, commenced the Delchamps Tender Offer for all outstanding shares of Delchamps' common stock at a price of $30 per share. On September 12, 1997 DAC accepted for payment pursuant to the Delchamps Tender Offer an aggregate of 5,317,510 of such shares. The Delchamps Merger Agreement provides, generally, that as soon as practicable after the satisfaction or waiver of the conditions set forth in the Delchamps Merger Agreement, DAC will be merged with and into Delchamps, with Delchamps continuing as the surviving corporation and the remaining shareholders of Delchamps receiving $30 per share. Delchamps' Board of Directors has unanimously approved the Delchamps Acquisition and the Delchamps Merger Agreement, and has determined that the consideration to be paid for the shares of Delchamps' common stock is fair to Delchamps' shareholders and that the Delchamps Acquisition is otherwise in the best interests of Delchamps and its shareholders. Delchamps' Board of Directors has unanimously recommended that Delchamps' shareholders vote in favor of the Delchamps Merger. 46 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected financial information expressed as a percentage of net sales:
FISCAL YEAR ENDED ------------------------------------- JULY 1, JUNE 29, JUNE 28, 1995 1996 1997 Net sales............................................................................ 100.0% 100.0% 100.0% Gross profit......................................................................... 24.2 23.4 24.7 SG&A: Restructuring charge............................................................... 2.7 -- -- Other SG&A......................................................................... 24.8 22.2 23.1 Operating income..................................................................... (3.4) 1.2 1.6 Interest expense, net................................................................ 0.5 0.6 0.5 Earnings before income taxes......................................................... (3.8) 0.6 1.2 Provision for income taxes........................................................... (1.4) 0.2 0.4 Net income........................................................................... (2.4) 0.3 0.7 OTHER DATA: EBITDA............................................................................... 1.8% 3.1% 4.0% RECLASSIFIED DATA: Gross profit......................................................................... 26.5% 25.7% 26.9% Other SG&A........................................................................... 27.1 24.5 25.1
FISCAL 1997 VS. FISCAL 1996 NET SALES. Net sales for fiscal 1997 decreased 2.1% to $1,103.0 million compared to $1,127.0 million for fiscal 1996. The decrease in net sales during fiscal 1997 occurred primarily because a significant number of new supermarkets were opened by competitors (approximately 21 new supermarkets were opened by competitors during fiscal 1997) and competitors increased levels of promotional activity (which included the introduction of a frequent shopper card by a competitor). GROSS PROFIT. Gross profit for fiscal 1997 increased $8.8 million to $272.1 million, or 24.7% of net sales, compared to $263.2 million, or 23.4% of net sales, for fiscal 1996. The increase in gross profit as a percentage of net sales was primarily due to selective retail price adjustments and increased levels of promotional and buying allowances from vendors which resulted in a lower cost of merchandise and fewer promotional programs as compared to fiscal 1996. Assuming the reclassification of warehouse expenses from cost of sales to SG&A, gross profit would have been $297.1 million, or 26.9% of net sales, for fiscal 1997, compared to $289.5 million, or 25.7% of net sales, for fiscal 1996. SG&A. SG&A expenses for fiscal 1997 increased $4.2 million to $254.3 million, or 23.1% of net sales, compared to $250.1 million, or 22.2% of net sales, for fiscal 1996. SG&A expenses for fiscal 1997 included a $4.3 million increase in legal expenses relating to the settlement of five related lawsuits and a $1.7 million increase in incentive expenses which resulted from improved pretax earnings. SG&A was favorably impacted by a $2.1 million gain on the sale of certain real property (a former warehouse in Mobile, Alabama and land near Birmingham, Alabama). Excluding the legal settlement and gain on sale of real property, SG&A expenses for fiscal 1997 increased to 22.9% of net sales, compared to 22.2% of net sales for fiscal 1996. Assuming the reclassification of warehouse expenses from cost of sales to SG&A, SG&A would have been $277.1 million, or 25.1% of net sales, for fiscal 1997, compared to $276.4 million, or 24.5% of net sales, for fiscal 1996. OPERATING INCOME. Operating income for fiscal 1997 increased $4.7 million to $17.8 million, or 1.6% of net sales, compared to $13.1 million, or 1.1% of net sales for fiscal 1996. Excluding the charge for the lawsuit settlement and the gain from sale of certain real property, operating income for fiscal 1997 increased $6.9 million to $20.0 million, or 1.8% of net sales, compared to $13.1 million, or 1.1% of net sales for fiscal 1996. The increase in operating income was due to an increase in gross profit partially offset by an increase in SG&A. 47 INTEREST EXPENSE, NET. Interest expense, net for fiscal 1997 decreased $1.8 million to $5.0 million, compared to $6.8 million for fiscal 1996. The decrease in interest expense, net was due to lower levels of indebtedness under Delchamps' revolving credit line and lower levels of long-term indebtedness. INCOME TAXES. The effective rate for income taxes for fiscal 1997 decreased to 37.9% compared to 38.8% for fiscal 1996. The effective rate for fiscal 1997 approximates the combined federal and state statutory rates. NET INCOME. Net income for fiscal 1997 increased $4.1 million to $8.0 million, compared to $3.9 million, for fiscal 1996. Excluding the effects of the charge for the lawsuit settlement and gain from the sale of certain real property, net income increased $5.6 million to $9.5 million for fiscal 1997, compared to $3.9 million for fiscal 1996. The increase in net income was primarily due to an increase in gross profit margins which resulted from selected retail price adjustments and increased levels of promotional and buying allowances and decreases in interest expense and effective rate for income taxes as compared to fiscal 1996. FISCAL 1996 VS. FISCAL 1995 NET SALES. Net sales for fiscal 1996 increased 6.9% to $1,126.6 million compared to $1,054.1 million in fiscal 1995. The increase in net sales was primarily due to the implementation of (i) a new merchandising program, (ii) a new supermarket renovation program and (iii) new programs to improve customer service. The new merchandising program (a) primarily reduced retail prices on thousands of items, (b) increased the amount by which coupons are doubled from $0.49 to $0.50 and (c) introduced a new advertising campaign to promote these changes. The new supermarket renovation program affected 48 supermarkets and included new decor packages, new in-store signage, painting, and for some stores, new fixtures, cases, and shelving. New programs to improve customer service included new training programs for all levels of store personnel, and the enhancement of a field specialist program in which field specialists visit perishable departments in all supermarkets to improve quality and freshness of product, signage, and displays. GROSS PROFIT. Gross profit for fiscal 1996 increased $7.6 million to $263.2 million, or 23.4% of net sales, compared to $255.6 million, or 24.2% of net sales, for fiscal 1995. Gross profit increased primarily due to an increase in net sales in fiscal 1996. The decrease in gross profit as a percentage of net sales in fiscal 1996 was primarily due to the new merchandising program, in which retail prices for thousands of items were reduced, which was implemented for all of fiscal 1996 and was only in place for the last quarter of fiscal 1995. Assuming the reclassification of warehouse expenses from cost of sales to SG&A, gross profit would have been $289.5 million, or 25.7% of net sales, for fiscal 1996, compared to $279.7 million, or 26.5% of net sales, for fiscal 1995. SG&A. SG&A expenses in fiscal 1995 included $28.8 million of restructuring charges which were primarily due to leases for certain stores that were closed in fiscal 1995 that could not be subleased in whole or in part, and a $5.1 million write-off of goodwill related to acquired assets which were consistently producing negative results. Excluding such charges, SG&A expenses for fiscal 1996 decreased $6.6 million to $250.1 million, or 22.2% of net sales, compared to $256.7 million, or 24.3% of net sales, for fiscal 1995. The decrease in SG&A expenses was primarily due to a $5.4 million decrease in salaries and wages from the implementation of a labor scheduling program. Assuming the reclassification of warehouse expenses from cost of sales to SG&A, and excluding the restructuring charge and write-off referred to above SG&A would have been $276.4 million, or 24.5% of net sales, for fiscal 1996, compared to $280.9 million, or 26.6% of net sales, for fiscal 1995. OPERATING INCOME. Excluding the restructuring charges and write-off of goodwill in fiscal 1995 described above, operating income for fiscal 1996 increased $14.3 million to $13.1 million, or 1.2% of net sales, compared to loss of $1.2 million, or (0.9%) of net sales, for fiscal 1995. The increase in operating income was due to an increase in gross profit and a reduction in SG&A as described above. INTEREST EXPENSE, NET. Interest expense, net for fiscal 1996 increased $1.5 million to $6.8 million, compared to $5.3 million for fiscal 1995. The increase in interest expense, net was due to Delchamps' restructure obligation being outstanding for all of fiscal 1996 compared to being outstanding for only the fourth quarter of fiscal 1995. 48 INCOME TAXES. The effective rate for income taxes for fiscal 1996 increased to 38.8% compared to 36.3% for fiscal 1995. The increase in fiscal 1996 was due to the expiration of the targeted jobs tax credit. The effective rate in fiscal 1996 approximates the combined federal and state statutory rates. NET INCOME. Excluding the restructuring charges and write-off of goodwill in fiscal 1995 described above, net income for fiscal 1996 increased $7.3 million to $3.9 million, compared to a net loss of $3.4 million, for fiscal 1995. The increase in net income was primarily due to an increase in gross profit and decrease in SG&A partially offset by increases in interest expense, net and effective rate for income taxes as compared to fiscal 1995. LIQUIDITY AND CAPITAL RESOURCES CAPITAL SPENDING The following table shows capital expenditures during the last three fiscal years, as well as the number of supermarkets that were opened, closed and remodeled during that same period:
1995 1996 1997 Capital expenditures (millions).............................................................. $ 35.2 $ 21.7 $ 15.6 --------- --------- --------- --------- --------- --------- Supermarkets opened.......................................................................... 10 1 2 Supermarkets closed.......................................................................... 12 2 1 Remodels: Expansions/remodels completed.......................................................... 5 1 5 Renovations completed.................................................................. -- 48 --
FINANCING AND LIQUIDITY Although Delchamps' supermarket locations are leased, Delchamps makes substantial expenditures to equip new and expanded supermarkets. The cost to equip a new supermarket is approximately $2.3 million while the additional cost to equip an expanded supermarket is approximately $1.5 million. In addition, Delchamps makes substantial expenditures for distribution center facilities and equipment. Delchamps plans to finance its capital expenditures with funds provided by operations. However, if an insufficient amount of funds in generated, Delchamps may obtain long-term financing or draw on short-term credit lines. Delchamps has a $75.0 million credit line from financial institutions of which $70.4 million was available for future use at June 28, 1997. The credit line is committed to Delchamps through June 1998. Cash flow generated by operating activities was $25.2 million for fiscal 1995, $39.1 million for fiscal 1996 and $23.3 million for fiscal 1997. Cash flows from operating activities decreased in fiscal 1997 as compared to fiscal 1996 primarily because of lower levels of accounts payable. Fiscal 1996 increased over fiscal 1995 because of improved earnings. Cash used in investing activities was $34.6 million for fiscal 1995, $21.0 million for fiscal 1996 and $11.2 million for fiscal 1997. Cash was primarily used for capital expenditures. Capital expenditures were $35.2 million for fiscal 1995, $21.7 million for fiscal 1996 and $15.6 million for fiscal 1997. During fiscal 1995, Delchamps purchased seven supermarkets from the Kroger Co., opened three supermarkets, remodeled five supermarkets, and purchased equipment which had been previously leased at Delchamps' distribution facilities. During fiscal 1996, Delchamps opened one supermarket, remodeled one supermarket, renovated 42 supermarkets, purchased technology to enhance debit and credit transactions, and purchased security systems for substantially all locations. During fiscal 1997, Delchamps opened two new supermarkets and remodeled five supermarkets. Cash generated by financing activities was $10.0 million in fiscal 1995 and cash used in financing activities was $23.5 million in fiscal 1996 and $17.0 million in fiscal 1997. The changes for all periods were the result of activity under Delchamps' revolving loan agreement. At the end of fiscal 1997, the Company was in compliance with all financial covenants under the revolving loan agreement and its long-term debt agreement. 49 THE EXCHANGE OFFER TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING EXISTING NOTES Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), the Company will accept for exchange Existing Notes which are properly tendered on or prior to the Expiration Date and not withdrawn as permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City time, on , 1997; provided, however, that if the Company has extended the period of time for which the Exchange Offer is open, the term "Expiration Date" means the latest time and date to which the Exchange Offer is extended. As of the date of this Prospectus, $200.0 million aggregate principal amount of the Existing Notes are outstanding. This Prospectus, together with the Letter of Transmittal, is first being sent on or about , 1997 to all holders of Existing Notes known to the Company. The Company's obligation to accept Existing Notes for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth under "--Certain Conditions to the Exchange Offer" below. The Company expressly reserves the right, at any time or from time to time, to extend the period of time during which the Exchange Offer is open, and thereby delay acceptance for any exchange of any Existing Notes, by giving notice of such extension to the holders thereof. During any such extension, all Existing Notes previously tendered will remain subject to the Exchange Offer and may be accepted for exchange by the Company. Any Existing Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. The Company expressly reserves the right to amend or terminate the Exchange Offer, and not to accept for exchange any Existing Notes not theretofore accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified below under "--Certain Conditions to the Exchange Offer." The Company will give notice of any extension, amendment, non-acceptance or termination to the holders of the Existing Notes as promptly as practicable, such notice in the case of any extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Holders of Existing Notes do not have any appraisal or dissenters' rights under the Mississippi Business Corporation Act in connection with the Exchange Offer. PROCEDURES FOR TENDERING EXISTING NOTES The tender to the Company of Existing Notes by a holder thereof as set forth below and the acceptance thereof by the Company will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. Except as set forth below, a holder who wishes to tender Existing Notes for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to Marine Midland Bank at the address set forth below under "Exchange Agent" on or prior to the Expiration Date. In addition, either (i) certificates for such Existing Notes must be received by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Existing Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date, or the holder must comply with the guaranteed delivery procedure described below. THE METHOD OF DELIVERY OF EXISTING NOTES, LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF 50 SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO THE COMPANY. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Existing Notes surrendered for exchange pursuant thereto are tendered (i) by a registered holder of the Existing Notes who has not completed the box entitled "Special Issuance Instruction" or "Special Delivery Instruction" on the Letter of Transmittal or (ii) for the account of an Eligible Institution (as defined below). In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company having an office or correspondent in the United States (collectively, "Eligible Institutions"). If Existing Notes are registered in the name of a person other than a signer of the Letter of Transmittal, the Existing Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company in its sole discretion, duly executed by, the registered holder with the signature thereon guaranteed by an Eligible Institution. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Existing Notes tendered for exchange will be determined by the Company in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any and all tenders of any particular Existing Notes not properly tendered or to not accept any particular Existing Notes which acceptance might, in the judgment of the Company or its counsel, be unlawful. The Company also reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Existing Notes either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Existing Notes in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer as to any particular Existing Notes either before or after the Expiration Date (including the Letter of Transmittal and the instructions thereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Existing Notes for exchange must be cured within such reasonable period of time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Existing Notes for exchange, nor shall any of them incur any liability for failure to give such notification. If the Letter of Transmittal or any Existing Notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. By tendering, each holder of Existing Notes will represent to the Company that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the holder and any beneficial holder, that neither the holder nor any such beneficial holder has an arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. If the holder is not a broker-dealer, the holder must represent that it is not engaged in nor does it intend to engage in a distribution of the New Notes. ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES For each Existing Note accepted for exchange, the holder of such Existing Note will receive a New Note having a principal amount equal to that of the surrendered Existing Note. For purposes of the 51 Exchange Offer, the Company shall be deemed to have accepted properly tendered Existing Notes for exchange when, as and if the Company has given oral and written notice thereof to the Exchange Agent. In all cases, issuance of New Notes for Existing Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for such Existing Notes or a timely Book-Entry Confirmation of such Existing Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Existing Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Existing Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Existing Notes will be returned without expense to the tendering holder thereof (or, in the case of Existing Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described below, such non-exchanged Existing Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration of the Exchange Offer. BOOK-ENTRY TRANSFER Any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Existing Notes by causing the Book-Entry Transfer Facility to transfer such Existing Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Existing Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the Exchange Agent at the address set forth below under "Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES If a registered holder of the Existing Notes desires to tender such Existing Notes and the Existing Notes are not immediately available, or time will not permit such holder's Existing Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent received from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Existing Notes and the amount of Existing Notes tendered, stating that the tender is being made thereby and guaranteeing that within five New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Existing Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent and (iii) the certificates for all physically tendered Existing Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. WITHDRAWAL RIGHTS Tenders of Existing Notes may be withdrawn at any time prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth below under "Exchange Agent." Any such notice of withdrawal must specify the name of 52 the person having tendered the Existing Notes to be withdrawn, identify the Existing Notes to be withdrawn (including the principal amount of such Existing Notes), and (where certificates for Existing Notes have been transmitted) specify the name in which such Existing Notes are registered, if different from that of the withdrawing holder. If certificates for Existing Notes have been delivered or otherwise identified to the Exchange Agent then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Existing Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Existing Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Existing Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Existing Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Existing Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Existing Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Existing Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Existing Notes may be retendered by following one of the procedures described under "--Procedures for Tendering Existing Notes" above at any time on or prior to the Expiration Date. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, the Company shall not be required to accept for exchange, or to issue New Notes in exchange for, any Existing Notes and may terminate or amend the Exchange Offer if at any time before the acceptance of such Existing Notes for exchange or the exchange of New Notes for such Existing Notes, the Company determines that the Exchange Offer violates applicable law, any applicable interpretation of the staff of the Commission. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition or may be waived by the Company in whole or in part at any time and from time to time in its reasonable discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition, the Company will not accept for exchange any Existing Notes tendered, and no New Notes will be issued in exchange for any such Existing Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). In any such event the Company is required to use every reasonable effort to obtain the withdrawal of any stop order at the earliest possible time. EXCHANGE AGENT Marine Midland Bank has been appointed as the Exchange Agent for the Exchange Offer. All executed Letters of Transmittal should be directed to the Exchange Agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: 53 BY MAIL, OVERNIGHT COURIER OR HAND: Marine Midland Bank 140 Broadway, Level A New York, New York 10005-1180 Attention: Corporate Trust Operations BY FACSIMILE: (212) 658-2292 CONFIRM BY TELEPHONE: (212) 658-5931 Delivery other than as set forth above will not constitute a valid delivery. FEES AND EXPENSES The Company will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The principal solicitation is being made by mail; however, additional solicitations may be made in person or by telephone by officers and employees of the Company. The expenses to be incurred in connection with the Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Existing Notes, which is the principal amount as reflected in the Company's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized. The debt issuance costs will be capitalized for accounting purposes. TRANSFER TAXES Holders who tender their Existing Notes for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct the Company to register New Notes in the name of, or request that Existing Notes not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES Holders of Existing Notes who do not exchange their Existing Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Existing Notes as set forth in the legend thereon as a consequence of the issuance of the Existing Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of, the Securities Act and applicable state securities laws. Existing Notes not exchanged pursuant to the Exchange Offer will continue to accrue interest at 10 3/8% per annum and will otherwise remain outstanding in accordance with their terms. Holders of Existing Notes do not have any appraisal or dissenters' rights under the Mississippi Business Corporation Act in connection with the Exchange Offer. In general, the Existing Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Existing Notes under the Securities Act. However, (i) the Company is not required to file the Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy 54 or (ii) any holder of Transfer Restricted Securities notifies the Company within the specified time period that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer or (B) that it may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and owns Existing Notes acquired directly from the Company or an affiliate of the Company, the Company will file with the Commission a shelf registration statement to cover resales of the Notes by the Holders thereof who satisfy certain conditions relating to the provision of information in connection with the shelf registration statement. For purposes of the foregoing, "Transfer Restricted Securities" means each Existing Note until the earlier of (i) the date on which such Existing Note has been exchanged by a person other than a broker-dealer for a New Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of an Existing Note for a New Note, the date on which such New Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of this Prospectus, (iii) the date on which such Existing Note has been effectively registered under the Securities Act and disposed of in accordance with the shelf registration statement or (iv) the date on which such Existing Note is distributed to the public pursuant to Rule 144 under the Act. Based on certain interpretive letters issued by the staff of the Commission to third parties in unrelated transactions, the Company is of the view that New Notes issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than (i) any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or (ii) any broker-dealer that purchases Notes from the Company to resell pursuant to Rule 144A or any other available exemption) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement or understanding with any person to participate in the distribution of such New Notes. If any holder has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. A broker-dealer who holds Existing Notes that were acquired for its own account as a result of market-making or other trading activities may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of New Notes. Each such broker-dealer that receives New Notes for its own account in exchange for Existing Notes, where such Existing Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and is complied with. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the New Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. 55 BUSINESS GENERAL The Company is a leading operator of supermarkets in the Southeast. Upon consummation of the Delchamps Acquisition, the Company will operate 199 supermarkets located throughout Mississippi and Alabama as well as in selected markets in Tennessee, Arkansas, Louisiana and Florida. In addition, the Company will be the largest supermarket operator in Mississippi and the second largest supermarket operator in Alabama, with 81 supermarkets in Mississippi and 49 supermarkets in Alabama. The Company will account for an estimated 32% of the grocery sales in Mississippi and an estimated 18% of the grocery sales in Alabama. Jitney-Jungle currently has an estimated 50% of the grocery sales in Jackson, Mississippi and Delchamps has an estimated 37% of the grocery sales in Mobile, Alabama. Jitney-Jungle and Delchamps also have the number one, two or three market share position in approximately 80% of the major markets in which they operate. The Delchamps Acquisition is expected to increase the Company's geographic diversification because the Delchamps stores are primarily located in areas in which Jitney-Jungle currently has no stores. At the same time, the Delchamps Acquisition is expected to result in valuable purchasing, distribution and marketing synergies for the Company. On a Pro Forma Basis, the Company would have had approximately $2.2 billion of net sales and approximately $127.8 million of EBITDA for the LTM Period. Management believes that the Company has significant competitive advantages, which include: STRONG FRANCHISE AND PRIME SITES. The Company has a strong consumer franchise built around the "Jitney-Jungle" and "Delchamps" names. Management believes that the Company's customers associate these names with quality, value, convenience and superior service. In addition, Management believes that most of the Company's urban supermarkets are in high-traffic locations that offer significant competitive advantages, and that many of its supermarkets located in smaller towns and rural areas are located on prime, non-replicable sites. MODERN SUPERMARKET BASE. During the last five fiscal years, Jitney-Jungle and Delchamps invested approximately $147.0 million and $111.0 million, respectively, in capital expenditures, a substantial majority of which was for building new supermarkets and expanding or remodeling existing supermarkets. Approximately 81% of the Company's supermarket base has been built or remodeled within the past five fiscal years. SUCCESSFUL PRIVATE LABEL PROGRAM. In addition to branded products, the Company's supermarkets offer a selection of private label products bearing the brand names of Topco, the largest cooperative grocery products purchasing organization in the United States. The Company's affiliation with Topco enables it to procure quality merchandise on a competitive basis with larger, national food retailers. Pro forma net sales of private label products, which generally have a lower unit sales price than national brands but provide a higher gross margin due to lower unit costs, accounted for approximately 18.2% of pro forma net non-perishable sales of the Company during the LTM Period. CENTRALIZED AND EFFICIENT DISTRIBUTION FACILITIES. The Company's distribution facility located in Jackson, Mississippi is conveniently located close to major highways and provides a central delivery site for vendors. This facility includes an aggregate of 814,000 square feet of warehouse space and can efficiently supply the Company's 199 supermarkets, as well as potential new markets contiguous to existing markets. ANTICIPATED COST SAVINGS During fiscal 1997, Delchamps generated net sales and EBITDA of approximately $1.1 billion and $44.1 million, respectively. In addition to the incremental net sales, EBITDA and market share expected to result from the Delchamps Acquisition, Management believes that it should be able to achieve significant 56 cash cost savings as a result of the elimination of certain duplicative costs, increased operating efficiencies and increased purchasing leverage in connection with the combined operation of the Jitney-Jungle and Delchamps businesses following the Delchamps Acquisition. While the exact timing and amount of such cash cost savings is inherently uncertain, Management currently expects that the Company should begin to realize such cash cost savings within three to nine months after the Delchamps Acquisition. Specific anticipated benefits of the Delchamps Acquisition include: REDUCED GENERAL AND ADMINISTRATIVE EXPENSE. In connection with the Delchamps Acquisition, Management expects to consolidate the corporate headquarters of the Company's combined operations in the existing corporate headquarters of Jitney-Jungle. Although divisional offices will be opened in Mobile, Alabama, the Delchamps Mobile headquarters will be closed and approximately 160 positions currently held by employees at the Jitney-Jungle and Delchamps corporate headquarters will be eliminated. Management estimates that such measures should result in approximately $9.3 million of annualized cash cost savings, which the Company should begin to realize within three to six months following the Delchamps Acquisition. IMPROVED WAREHOUSING AND DISTRIBUTION EFFICIENCIES. Jitney-Jungle owns or leases 814,000 square feet of warehouse space located in Jackson, Mississippi which is central to, and can efficiently supply, all of the Company's 199 supermarkets. In connection with the Delchamps Acquisition, Management expects to close the Hammond, Louisiana warehouse owned by Delchamps and to utilize Jitney-Jungle's Jackson facility as the Company's central distribution center, thereby reducing headcount and general and administrative expenses. In addition, in order to more efficiently utilize the Jackson facility Jitney-Jungle has negotiated a long-term supply agreement with a supplier to provide direct store delivery of slow moving items to the Company's supermarkets, which Management believes should result in lower distribution costs and a decrease of approximately 35% in inventory levels. Management believes that, on an annualized basis, the combined effect of these warehousing and distribution efficiencies should result in approximately $3.9 million of cash cost savings, which the Company should begin to realize within three to six months following the Delchamps Acquisition. REDUCED ADVERTISING AND PRINTING EXPENSES. Jitney-Jungle and Delchamps operate in contiguous and overlapping geographic areas, particularly in south Mississippi and Florida. As a result, Management believes that it will be able to consolidate the Company's advertising in these regions, thus reducing advertising expenses. In addition, while Delchamps currently outsources the printing of its advertising circulars, after the Delchamps Acquisition approximately 50% of such printing will be performed at Jitney-Jungle's in-house printing facility. Management estimates that moving a portion of Delchamps' printing in-house should result in annualized cash cost savings of approximately $1.0 million, which the Company should begin to realize within three to six months following the Delchamps Acquisition. INCREASED PURCHASING LEVERAGE. Management expects that Jitney-Jungle's merchandise purchases will approximately double following the Delchamps Acquisition. As a result of this increase and the Company's leading market position, Management believes that the Company should be able to negotiate more favorable terms from vendors, including suppliers of products carried on an exclusive or promoted basis, and to convert some less-than-truckload shipping quantities to full truckload quantities. Management believes that this increased purchasing leverage should result in approximately $3.4 million in annualized cash cost savings, which the Company should begin to realize within six to nine months following the Delchamps Acquisition. INCREASED BACKHAUL INCOME. The expected increase in merchandise purchases following the Delchamps Acquisition and the resulting improvements in the Company's purchasing leverage are expected to create additional opportunities to increase backhaul income, thereby reducing the Company's operating costs. In particular, the Company's increased presence in the Louisiana and Florida markets should result in a higher number of deliveries to those areas, which have historically provided Jitney-Jungle with backhaul opportunities. Management believes that increased backhaul income should result in 57 annualized cash cost savings of approximately $1.8 million, which the Company should begin to realize within three to six months following the Delchamps Acquisition. Of the aggregate potential $19.4 million in annualized cash cost savings discussed above, approximately $14.2 million are reflected in the Pro Forma Condensed Consolidated Financial Statements included elsewhere herein because Management believes that they are factually supportable and directly related to the Transactions and the Delchamps Merger. Actual cash cost savings achieved by the Company may vary considerably from the estimates discussed above. See 'Risk Factors--Integration of Delchamps.' BUSINESS STRATEGY The Company's business strategy is focused on enhancing the Company's revenues and profitability by capitalizing on its leading market positions and continuing its growth in certain attractive Southeast markets. Management believes that the Company's leading perishables and grocery merchandising, competitive pricing, range of specialty departments and reputation for quality will help the Company continue its strong history of growth and profitability. The Company's specific business strategies include: EXPAND SUPERMARKET BASE. Management believes there are a number of attractive Southeast markets in which to continue to grow the Company's supermarket base. Jitney-Jungle has a history of successfully making supermarket acquisitions in both existing and contiguous markets. Since fiscal l990, Jitney-Jungle has acquired 51 supermarkets in 41 markets, excluding the 100 supermarkets to be acquired in the Delchamps Acquisition. In addition, over the past five fiscal years the Company has built or expanded 58 supermarkets in the Southeast. To continue expanding its supermarket base, Management intends to open new supermarkets and make strategic acquisitions in certain of the larger metropolitan areas where it currently operates (including Memphis and Little Rock), as well as in smaller cities and surrounding areas that are contiguous to areas where it currently operates. CONTINUE TO IMPROVE OPERATING MARGINS. Jitney-Jungle and Delchamps have improved their EBITDA margins from 5.5% and 2.9%, respectively, in fiscal 1992 to 5.7% and 4.0%, respectively, in fiscal 1997. The Company continuously reviews its operations to identify initiatives designed to reduce operating costs and increase EBITDA margins. As a result of the following initiatives, Management believes that the Company can further improve its EBITDA margins during fiscal 1998: (i) headcount reductions implemented by Jitney-Jungle in May 1997, which are expected to result in annualized cost savings of approximately $0.9 million in fiscal 1998; and (ii) improved labor scheduling currently being implemented at Jitney-Jungle supermarkets, which is expected to result in annualized cost savings of approximately $3.5 million in fiscal 1998 and which may also result in additional cost savings when implemented during the next 12 to 18 months at the Delchamps supermarkets. In addition, Management expects to implement programs at Delchamps to reduce inventory shrink to levels comparable to those achieved at Jitney-Jungle. DECREASE WORKING CAPITAL NEEDS. During fiscal 1997, Jitney-Jungle successfully implemented programs to reduce inventories by eliminating slow moving items, as well as renegotiating its payment terms to bring them more in line with industry practice. As a result of these efforts, Jitney-Jungle improved its ratio of accounts payable to inventory from 51.7% in fiscal 1996 to 77.3% in fiscal 1997. Jitney-Jungle believes that these measures enabled it to decrease its working capital needs by approximately $20.0 million. Management intends to implement similar programs at Delchamps. CAPITALIZE ON MARKET SEGMENTATION OPPORTUNITIES. The Company attempts to optimize operating results by selecting a format for each of its supermarkets that is best suited to a site's demographics, local preferences and competitive position. The Company's conventional supermarkets offer a range of departments and high-quality services; the Company's combination supermarkets offer a combined supermarket and drug format with a wider variety of premium, full-service departments, merchandise and services; and the Company's discount supermarkets offer items throughout the supermarket at everyday low prices and generally place greater emphasis on self-service. In general, the Company's conventional and combination 58 supermarkets generate higher operating margins than its discount supermarkets. Management believes that there is a growing consumer demand for higher service levels and convenience and, as a result, expects that the Company will open combination supermarkets in preference to conventional and discount supermarkets at all sites where adequate space and consumer demand exist. Management also expects that a significant number of conventional and discount formats will be converted to combination formats. In addition, because the Company's discount supermarkets attract a price sensitive customer who generally would not shop at a combination or conventional supermarket, Management also believes there will be opportunities to open new discount supermarkets in areas where limited or no competing discount supermarkets operate (including Mobile and New Orleans), with minimal risk of cannibalizing sales of the Company's conventional and combination supermarkets located in those areas. PURSUE INNOVATIVE MARKET INITIATIVES. The Company's goal is to utilize innovative marketing and advertising programs to increase sales while maintaining or increasing profitability. At its conventional and combination stores, Jitney-Jungle has introduced a frequent shopper program utilizing a "Gold Card" designed to increase customer traffic and net sales by offering incentives to its most loyal customers. The "Gold-Card" entitles holders to discounts on certain products every week as well as check cashing privileges, and also serves as a base for market basket analysis and customer-oriented direct marketing. Since the introduction of the Gold Card, Management believes that the number of customers and the amount of the average purchase at Jitney-Jungle supermarkets has increased and, as a result, Management intends to introduce a similar frequent shopper card at Delchamps supermarkets following the Delchamps Acquisition. At its discount supermarkets, the Company employs marketing campaigns designed to appeal to the value conscious consumer, including "truckload sales," private label promotions and bulk produce and similar purchasing incentives. FOCUS ON "PUMP AND SAVE" GASOLINE STATION OPPORTUNITIES. The Company operates gasoline stations under the name "Pump And Save" at or near 53 of its supermarkets that offer attractive gasoline retailing sites on heavily traveled roads and highways. The Company entered the gasoline business to take advantage of (i) the low incremental capital costs of building gasoline stations on its supermarket parking lots and (ii) the efficiencies associated with operating gasoline stations with the same management and labor as its supermarkets. The Company has opened 25 new gasoline stations over the last five fiscal years and plans to continue this growth with expansion at many of the 100 Delchamps supermarkets. GROWING SOUTHEAST MARKET AREA The Southeast is one of the fastest growing regions in the United States in terms of population, income and employment. According to the Bureau of the Census, the population of the Southeast has increased at an annual rate of 1.6% since 1990, compared to the national average of 1.2% over the same period. Furthermore, the Southeast has experienced faster growth than the United States since 1990 in terms of per capita income (4.9% versus 4.1%) and overall employment (2.3% versus 1.4%). Since all of the Company's existing supermarkets and planned new supermarkets will be in the Southeast, the Company believes that it will continue to benefit from the economic strength of this region. Nevertheless, individual markets or regions within the Southeast where the Company operates may experience economic and demographic trends which differ from those of the region as a whole. Notwithstanding growth in these markets, during the past three years an overall lack of inflation in food prices and increasingly competitive markets have made it difficult for supermarket operators to achieve comparable store sales gains. Because sales growth has been difficult to attain, many operators, including the Company, have attempted to maintain market share through increased levels of promotional activities and discount pricing, creating a more difficult environment in which to increase year-over-year sales gains consistently. In addition, because of growth in the Southeast, where all of the Company's supermarkets are located, many existing operators, including the Company, have opened new supermarkets in existing markets. This has resulted in declines in some same store sales for the existing (comparable) store base of the Company as well as other grocery chains. 59 SUPERMARKET FORMATS The Company attempts to optimize operating results by selecting a format for each supermarket that is best suited to a locality's demographics, local preferences and competitive positioning. In this respect, Management believes that its local market knowledge and community awareness are major competitive advantages. Each district manager and supermarket manager will have significant responsibility for merchandising each individual supermarket in a manner that caters specifically to its local customer base. In recent years, the Company has devoted a greater proportion of its new or remodeled supermarket space to fresh, high-quality perishables such as produce, delicatessen items, baked goods, prepared foods, fresh seafood and floral items, and to convenience-oriented services such as pharmacies and video and carpet-cleaning equipment rentals. Management believes that the Company's fresh produce presentation and its delicatessens which serve over 100,000 hot meals weekly, in particular, are competitive advantages and represent important attractions for customers. The Company currently operates its supermarkets in three supermarket format categories: (i) the combination food and drug format, which offers a wide variety of premium, full-service departments, merchandise and services as well as a broad range of non-perishable products; (ii) the conventional format, which offers a range of departments and high-quality services; and (iii) the discount supermarket format, which offers items throughout the supermarket at every day low prices and generally places greater emphasis on self-service. While the combination and conventional formats use a higher margin pricing strategy appropriate for a more service-oriented customer base, the discount format uses a higher volume, lower margin strategy appropriate for a more price-conscious customer base. COMBINATION SUPERMARKETS. In 1993, the Company opened its first combination supermarket, a 57,276 square foot "Jitney-Premier" in Jackson which features enhanced specialty departments and perishables presentations as well as a food court. This supermarket was named "Supermarket of the Year" by Chain Store Age Executive. The Company currently operates seven combination supermarkets, averaging approximately 56,000 square feet. Pro forma net sales from combination supermarkets were approximately $121.8 million in the LTM Period, which represented approximately 5.6% of the Company's pro forma net sales for that period. The Company's combination supermarkets utilize a "Hi-Lo" pricing strategy (featuring competitive prices on all product offerings as well as a selection of items that are promoted at lower prices to generate increased customer traffic), and are open 24-hours a day, seven days a week. Management believes that its combination supermarkets will enable the Company to increase customer loyalty by offering competitively priced merchandise, including expanded general and specialty merchandise, a wider range of full-service departments such as branch banking facilities, expanded beauty care and pharmacy departments, and superior customer service. In light of the perceived growth in consumer demand for higher service levels and convenience, Management has adopted the combination food and drug format as its primary base supermarket for the future at sites where adequate space and consumer demand exist. Management plans to convert three conventional stores and one discount store to combination stores by the end of calendar year 1997. Management also will consider strategic conversions of up to 20 Jitney-Jungle conventional and discount stores to the combination format, and has identified approximately 30 Delchamps' supermarkets as potentially convertible to the combination supermarket format because of their size and location in high traffic, metropolitan areas where customers are generally more receptive to the combination format. CONVENTIONAL SUPERMARKETS. The Company operates 171 conventional supermarkets. Pro Forma net sales from these supermarkets were approximately $1.5 billion in the LTM Period, which represented approximately 69.8% of the Company's pro forma net sales for that period. All of the Company's conventional supermarkets utilize the "Hi-Lo" pricing strategy and are market leaders in many of their trade areas. The average size of the conventional supermarket is approximately 35,000 square feet. 60 DISCOUNT SUPERMARKETS. The Company currently operates 21 discount supermarkets primarily under the name "Sack and Save." Pro Forma net sales from these supermarkets were approximately $429.8 million in the LTM Period, which represented approximately 19.8% of the Company's pro forma net sales for that period. The average size of the discount supermarket is approximately 60,000 square feet. The Company's discount supermarkets utilize an everyday low price strategy (featuring consistently low prices aimed at the value-conscious shopper). These supermarkets use the slogan "Lowest Food Prices in the South" and provide national brand and private label items at everyday low prices. Merchandising programs carried on by those supermarkets include: (i) "Made in the South" sales; (ii) truckload sales of paper products, detergents and similar volume items; (iii) canned meat sales; (iv) private label merchandise promotions; and (v) bulk produce merchandising in pallet quantities. The discount supermarkets have lower operating costs than the combination and conventional supermarkets due to fewer service departments, lower customer service levels and enhanced productivity methods. Approximately half of the Company's discount supermarkets are located in the metropolitan areas of Jackson, Memphis and Little Rock. Management believes that these discount supermarkets attract a price sensitive customer who generally would not shop the combination or conventional supermarket, thereby minimizing the cannibalizing of sales in the Company's nearby combination and conventional supermarkets. In those discount locations where the Company has perceived relatively higher demand for service among its customers, it has made strategic conversions from the discount format to the conventional or combination format, as appropriate, given the size of a particular market. Since the end of fiscal 1997, the Company has converted five supermarkets formerly operated as discount supermarkets; two were converted to conventional supermarkets and three were converted to combination supermarkets. Another conversion is planned for the end of calendar year 1997. By contrast, Management believes that there are discount supermarket expansion opportunities in areas where limited or no competing discount supermarkets operate, including Mobile, New Orleans and Birmingham. GASOLINE STATIONS Through a subsidiary, the Company operates 53 gasoline stations under the "Pump And Save" name. The stations are generally located on parking lots in front of the Company's supermarkets and provide an additional service for its customers. Because the gasoline stations are in close proximity to the supermarkets, they benefit from the high volume supermarket traffic and can be operated with the same management and labor as the Company's supermarkets. In the LTM Period, gasoline station sales were approximately $86.5 million, which represented approximately 4.0% of the Company's pro forma net sales for that period. Management believes that there will be similar opportunities to open gasoline stations in the proximity of many Delchamps supermarkets, which currently do not have gasoline station operations. LIQUOR STORES AND CIGARETTE SALES The Company operates ten liquor stores in the state of Florida, which are located adjacent to the Company's supermarkets. In the LTM Period, liquor store sales were approximately $17.3 million, which represented approximately 0.8% of the Company's pro forma net sales for that period. In addition, a wholly-owned subsidiary of the Company functions as the purchasing agent and distributor for cigarettes sold by certain of the Company's supermarkets. 61 MARKETS AND COMPETITION The Company holds the number one, two or three market share position in approximately 80% of the major markets in which it operates. The Company attributes this success to: (i) its strong franchise and prime sites; (ii) its modern supermarket base; (iii) its successful private label program; and (iv) its centralized and efficient distribution facilities. Given these strengths, Management believes the Company is well positioned to retain its market leadership. The supermarket business is intensely competitive. The number of competitors and the amount of competition experienced by the Company's supermarkets vary by location. Principal competitive factors include supermarket location, price, service, convenience, cleanliness and product quality and variety. Because the supermarket business is characterized by narrow profit margins, the Company's earnings depend primarily on the efficiency of its operations and its ability to maintain a large sales volume. Management believes that the Delchamps Acquisition should enhance the Company's ability to compete with its largest competitors, and will result in opportunities to increase market share in Memphis, Little Rock, Birmingham, Mobile and New Orleans. The Company's primary markets are Jackson, Mississippi and Mobile, Alabama. During the LTM Period, Jitney-Jungle's three combination supermarkets, 17 conventional supermarkets and three discount supermarkets located in Jackson represented a market share of approximately 50% in that area, and Delchamps' two combination supermarkets and 17 conventional supermarkets located in Mobile represented a share of approximately 37% in that market. The Company also has growing market share in the metropolitan markets of Little Rock, Memphis and New Orleans, which in the LTM Period was approximately 13%, 8% and 9%, respectively. The Company's principal competitors are Kroger's (in Alabama, Mississippi, Tennessee and Arkansas), Food World/Bruno's (in Alabama, Florida and Mississippi), Wal-Mart Supercenters (in Alabama, Arkansas, Florida, Louisiana, Mississippi and Tennessee), Winn Dixie (in Alabama, Florida, Louisiana and Mississippi) and Albertson's (in Alabama, Florida, Louisiana and Mississippi). The Company's supermarkets also compete with other regional and national supermarket chains as well as local chains and independent, specialty and convenience food stores that have significant market shares in limited areas, such as the Schwegmann Giant Supermarkets chain in Southeastern Louisiana and Seessels/Bruno's in Tennessee. In addition, the Company's principal competitors in the Florida pandhandle region and the Mississippi Gulf Coast include the commissaries at the U.S. military bases in Pensacola, Florida and Biloxi, Mississippi. PURCHASING AND MERCHANDISING The Company's principal merchandising strategies are to promote an "overall value" image and to achieve high sales volume by offering quality products and services at competitive prices. The Company's supermarkets carry fresh meat and produce, frozen and other convenience foods, dairy products, specialty and gourmet products, and general grocery products, as well as selected lines of non-grocery merchandise. Most supermarkets opened and remodeled during the last several years contain bakeries and delicatessens, which offer prepared ready-to-eat foods, service meat departments, seafood departments and video departments. The Company also operates pharmacies at selected locations. The Company has established strong relationships with a variety of major manufacturers over many years, none of which represents a major source of supply to the Company. Since the Company's supermarkets carry many of the same products, centralized purchasing and distribution facilities are essential. All purchases are made under central buying procedures, rather than on a store-by-store basis, which allows the Company to maintain quality control of its products and to take advantage of volume discounts, more favorable payment terms and more frequent inventory turns. Following the Delchamps Acquisition, Management expects that the Company's merchandise purchases will approximately double. As a result of this increase in the Company's combined volume requirements and its leading market 62 position, Management believes that the Company should be able to negotiate more favorable terms from vendors. PRIVATE LABEL PROGRAM The Company's supermarkets offer a selection of national and regional brand-name products, generic products and products bearing brand names of Topco, a cooperative purchasing organization of which both Jitney-Jungle and Delchamps are shareholding members. The Company's affiliation with Topco, the largest cooperative grocery products purchasing organization in the United States, enables it to procure quality merchandise on a competitive basis with larger, national food retailers. Topco's membership of 30 retail grocery chains and wholesalers located throughout the United States enables it to employ large volume buying techniques on behalf of its members. Topco products are sold under its own brand names, such as "Food Club," "Topco," "Top Fresh" and "Top Frost," or under generic labels. The Company also recently began using a "Delchamps" label to replace the Topco labels on certain products. Private label products generally have a lower unit sales price than national brands but provide a higher gross margin due to lower unit costs. Pro forma net sales of private label products accounted for approximately 18.2% of pro forma net non-perishable sales of the Company during the LTM Period. ADVERTISING AND MARKETING The Company features nationally advertised and distributed merchandise, and also markets both food and non-food products under a private label program. The Company's advertising programs are designed to reinforce for the customer its low prices, high-quality selection and convenience. In each of its major markets, the Company advertises through various media including circulars, newspapers, radio and television. Prior to July 1997, print media was the primary form of advertising and was used extensively on a weekly basis to advertise featured items; however, in July 1997 the Company began shifting a significant portion of its total advertising expenditures to television and radio media, focusing on a quality and service image, in order to reach a wider target audience. The Company's in-house capabilities include an advertising department, which handles most creative work, and the printing of over 1.7 million pieces of print media per week in the Company's full-line print shop. Management intends to print approximately 0.9 million pieces of print media per week for the Delchamps stores after the Delchamps Acquisition. Advertising costs, net of advertising allowances, constituted less than 1.0% of net sales in the LTM Period. Various sales enhancement promotional activities, including coupons and special pricing discounts, are currently conducted under the Company's frequent shopper program. At its conventional and combination stores, the Company has introduced (or, in the case of the Delchamps supermarkets, expects to introduce) a frequent shopper program utilizing a "Gold Card" designed to increase customer traffic and net sales by offering incentives to the Company's most loyal customers. The "Gold Card" entitles holders to discounts on certain products every week as well as check cashing privileges, and also serves as a base for market basket analysis and customer-oriented direct marketing. Since the introduction of the Gold Card, Management believes that the number of customers and the amount of the average purchase has increased at Jitney-Jungle supermarkets and, as a result, Management intends to introduce a similar frequent shopper card at Delchamps supermarkets following the Delchamps Acquisition. At its discount supermarkets, the Company employs marketing campaigns designed to appeal to the value-conscious consumer including truckload sales, private label promotions and similar purchasing incentives. WAREHOUSING AND DISTRIBUTION Jitney-Jungle owns or leases 814,000 square feet of warehouse space located in Jackson, Mississippi which is central to, and can efficiently supply, all of the Company's 199 supermarkets. In connection with the Delchamps Acquisition, Management expects to close the Hammond, Louisiana warehouse owned by Delchamps and to utilize Jitney-Jungle's Jackson facility as the Company's central distribution center, thereby reducing headcount and general and administrative expenses. In addition, in order to more efficiently utilize the Jackson facility, Jitney-Jungle has negotiated a long-term supply agreement with 63 SUPERVALU under which SUPERVALU will become the primary supplier of frozen foods to the combined Jitney-Jungle and Delchamps group of companies and a secondary supplier of selected grocery products to a number of stores within the group. Management believes that the agreement reached with SUPERVALU should result in lower distribution costs and a decrease of approximately 35% in inventory levels. The agreement takes effect in January 1998. The Company leases and maintains a fleet of 143 tractors and 332 trailers with full-time, non-unionized drivers to handle distribution and ensure the timely delivery of products to all of its supermarkets. The Company's trucks also backhaul goods from suppliers to its warehouses, which reduces the Company's overall cost of transportation. SUPERMARKET OPERATIONS Supermarket operations are the responsibility of three regional operating executives who supervise the Company's 14 district managers. Each district manager is responsible for nine to 15 supermarkets in his area. District managers regularly visit the supermarkets under their jurisdiction, thereby providing continuous, direct supervision of day-to-day supermarket operations, including such matters as quality of merchandise, adequacy of staffing levels and adherence to Company policies. Each supermarket is individually supervised by a supermarket manager, assistant supermarket manager and department managers. Management monitors the results of operations of each supermarket through the close and direct supervision of the regional operating executives and the district managers. EMPLOYEES AND LABOR RELATIONS As of May 3, 1997, Jitney-Jungle had 10,600 employees and Delchamps had 7,900 employees. Management believes that the Company enjoys good relations with its employees. Employees at the Hammond, Louisiana distribution facility recently voted to establish a union; however, certification of the election results is currently pending. With the possible exception of the employees at the Hammond distribution facility, none of the Company's employees are subject to a collective bargaining agreement. In connection with the Delchamps Acquisition, Management expects to consolidate the corporate headquarters of the combined operations in the existing corporate headquarters of Jitney-Jungle. Although a divisional office will be opened in Mobile, Alabama, the Delchamps Mobile headquarters will be closed and approximately 160 positions currently held by employees at the Jitney-Jungle and Delchamps corporate headquarters will be eliminated. Management currently expects that the Delchamps headquarters will be closed within three to six months after the Delchamps Acquisition. In addition, in connection with the Delchamps Acquisition, Management expects to close the Hammond, Louisiana warehouse owned by Delchamps and to close 13 supermarkets. INFORMATION SERVICES The Company's Information Services Department provides the software applications, hardware systems and telecommunications technologies necessary to support the Company's operations. The supermarket-based systems are fully integrated via an in-store network and include the following: (i) point-of-sale ("POS") store front-end systems with integrated scanner/scale capability; (ii) Unix-based, In-Store Processors ("ISP") which support business functions such as direct store delivery, inventory management, video rental and pharmacy; (iii) personal computers which support labor scheduling; (iv) an on-line procurement system which supports the purchasing department with a sophisticated forecasting algorithm that assists buying decisions and inventory control; (v) an advanced forecasting module that forecasts product movement and recommends purchases to replenish inventories; (vi) Electronic Data Interchange ("EDI") communication which transmits purchase orders and receives invoices with about 70.0% of the Company's high volume vendors; and (vii) a complete business recovery plan to prevent a data center 64 disaster, which includes mainframe applications, client-server applications and network telecommunications. In addition, the Company's procurement system is interfaced into an extensive warehousing system that controls facets of merchandise receiving and shipping to the supermarkets. The warehousing system utilizes radio frequency-based technology to accomplish merchandise storage at a minimum cost by reducing labor cost and improving warehouse flow. This system also utilizes a complete transportation module for the loading of trailers based upon delivery routes. Additionally, the system has been improved with the implementation of hand-held scanners in the supermarkets for routine processing of supermarket orders. Advances in technology are important to the Company's ability to improve productivity and keep costs in line, and emphasis will continue to be placed on innovations in this area. PROPERTIES Management believes that the Company's retail supermarkets are well situated in high-traffic locations. With the exception of one owned supermarket, all of the Company's supermarket properties are leased pursuant to long-term contracts at market rates. Certain parties affiliated with Jitney-Jungle hold 18 leases, representing 21% of the dollar amount of the Company's capital leases. Management believes that each of these leases is on an arm's length basis and is on terms that are no less favorable to the Company than could have been obtained with non-affiliated parties at the time each was entered into. See "Certain Relationships and Related Transactions". Two other landlords each lease seven supermarkets to Jitney-Jungle. No other landlords hold a significant number of supermarket leases with the Company. With the exception of one lease, which will expire in 2001, all leases for supermarkets operated under the names "Jitney-Jungle", "Sack and Save" and "Jitney-Premier" will expire between 2005 and 2036 if the Company exercises all its options to renew. Five Delchamps supermarket leases expired during the LTM Period, and no more than five Delchamps leases will expire in any one year until the year 2005. The Company has a real estate department the functions of which include (i) negotiation and preparation of legal documents, (ii) the screening of preliminary sites and the disposition of property, and (iii) the management of properties. Management believes that a vital factor in a successful supermarket expansion program is the careful selection of supermarket locations. Management analyzes prospective locations on a continuous basis, both internally and with assistance of outside consultants. The Company regularly enlarges, modernizes, relocates or closes supermarkets in light of their past performance and Management's assessment of their future potential. Except for approximately $3.2 million of supermarket "POS" equipment which is leased, the Company owns the furnishings and fixtures in all supermarkets and has made various leasehold improvements to these supermarket sites. It is anticipated that the Company will own the furnishings and fixtures in all supermarkets presently under construction. The Company owns all of its warehouse and distribution facilities except for a 120,000 square foot dry grocery and health and beauty care facility. The lease for that facility expires on July 31, 2004 (including all renewal options). The table below sets forth the Company's warehouse and distribution capacity in its Jackson and Hammond facilities:
FUNCTION JACKSON HAMMOND (SQUARE FEET IN THOUSANDS) Dry Grocery and Health and Beauty Care.............................. 578 470 Perishables......................................................... 157 101 Frozen.............................................................. 79 63 --- --- Total........................................................... 814 634
Upon consummation of the Delchamps Acquisition, the Company will own the 65,000 square foot building which houses the corporate headquarters of Delchamps in Mobile, Alabama (including a 2.7 acre 65 parcel adjacent to such headquarters), the Hammond warehouse (including a 165 acre parcel adjacent to such warehouse) and interests in six additional parcels, some of which are undeveloped. In connection with the Delchamps Acquisition, Management expects to consolidate the corporate headquarters of the Company's combined operations in the existing corporate headquarters of Jitney-Jungle. Although a divisional office will be opened in Mobile, Alabama, the Delchamps Mobile headquarters will be closed. Management also expects to close the Hammond warehouse, and the Company may determine to sell, or develop for sale, certain of such parcels of real estate. In the first quarter of fiscal 1997, the Company sold the operating assets of Jitney-Jungle's 24,000 square foot bakery for $750,000. The Company purchases bakery products from the new owner of the bakery and additional bread products from outside suppliers. ENVIRONMENTAL MATTERS The Company is subject to federal, state and local laws and regulations including those relating to environmental protection, workplace safety, public health and community right-to-know. The Company's supermarkets are not highly regulated under environmental laws since the Company does not engage in any industrial activities at these locations. The principal environmental requirements applicable to Jitney-Jungle's operations relate to the ownership or use of tanks for the storage of petroleum products, such as gasoline and diesel fuel, the operation of on-site paper trash incinerators, and the operation of an on-site printing facility. The Company operates 56 locations (including all 53 of the Pump And Save locations), and has retained responsibility for one former facility, at which petroleum products are stored in underground tanks. The Company has instituted an environmental compliance program designed to insure that these tanks are in compliance with applicable technical, operational and regulatory requirements, including periodic inventory reconciliation and integrity testing. Jitney-Jungle also operates small incinerators at 21 locations which burn paper trash and has air permits for these facilities. In addition, the Company's printing facility is subject to air and hazardous waste regulations. In addition, the Company's locations may have asbestos-containing materials which must be managed in accordance with environmental laws and regulations. However, the Company does not believe that the cost of such management will be material. The Company believes that the locations where it currently operates are in substantial compliance with regulatory requirements. The Company has undertaken programs to comply with upcoming regulatory obligations. First, at five locations, the Company must comply with petroleum tank upgrade or closure requirements under the Resource Conservation and Recovery Act of 1980, as amended, ("RCRA") (including all applicable requirements of state regulatory agencies) which must be met by 1998. Second, over the next several years, the Company is planning to complete retrofitting of its chloroflurocarbon ("CFC") chiller units to utilize non-CFC based refrigerants pursuant to the phase-out of CFCs under the Clean Air Act. Future events, such as changes in existing laws and regulations or their interpretation and the approach of other compliance deadlines may or will give rise to additional compliance costs or liabilities. Compliance with more stringent laws or regulations, as well as different interpretations of existing laws, may require additional expenditures by the Company which may be material. The Company may also be subject to requirements related to the remediation of, or the liability for remediation of, substances that have been released to the environment at properties owned or operated by the Company or at properties to which Jitney-Jungle sends substances for treatment or disposal. Such remediation requirements may be imposed without regard to fault and liability for environmental rernediation can be substantial. Other than one previously owned property for which the Company retained responsibility for a clean-up in progress at the time of the sale, the Company has not been notified of any such releases relating to off-site treatment or disposal or to previously owned properties. However, 16 of the Company's locations have been or currently are the subject of environmental investigation or remediation, 12 as a consequence of known or suspected petroluem-related leaks or spills from storage tanks and four for minor spills or releases unrelated to tank usage. See "Risk Factors--Environmental 66 Risks." Four other properties have undergone investigation or remediation for minor spills unrelated to tank usage. The Company may be eligible for reimbursement or payment for remediation costs associated with future releases from its regulated underground storage tanks and has obtained such reimbursement in the past. The states in which the Company operates each maintain a fund to assist in the payment of remediation costs and injury or damage to third parties from releases from certain registered underground tanks. Subject to certain deductibles, the availability of funds, compliance status of the tanks and the nature of the release, these funds have been and may be available to Jitney-Jungle for use in remediating releases from its tank systems. Due to the availability of such funds, the Company's unreimbursed cost for remediation at all of the facilities which have had leaks or spills from underground storage tanks has not been material. All significant required expenditures in connection with the clean up of such leaks and spills have been made at such locations, except at three newly discovered locations which are still undergoing investigation and one location awaiting state approval of its remediation plan. Remediation expenses at all the locations which are currently the subject of environmental investigation or remediation are anticipated to cost up to $240,000 in fiscal 1998 and approximately $125,000 per year thereafter, substantially all of which is subject to reimbursement as described above. In addition, the Company has obtained insurance coverage for bodily injury, property damage and corrective action expenses resulting from releases of petroleum products from underground storage tanks during the covered period at 53 of its 57 underground storage tank locations, and an application for such coverage is pending at one of the four remaining locations. Other than expenditures relating to the remediation of tank leaks and spills described above, the Company's expenditures to comply with environmental laws and regulations have primarily consisted of those related to tank upgrading and retrofitting CFC chiller units. The Company spent $515,000, $468,000 and $914,000 for such activities during fiscal 1995, fiscal 1996 and the LTM Period, respectively. Between approximately $472,000 and $1,055,000 in expenditures are contemplated for retrofitting the CFC units and between approximately $455,000 and $755,000 in expenditures are contemplated for tank upgrading to comply with the 1998 tank standards or closure in fiscal 1998 and fiscal 1999. These regulatory compliance costs are not covered by insurance. INTELLECTUAL PROPERTY The Company uses a variety of trade names, service marks and trademarks. Except for "Jitney-Jungle," "Jitney-Premier," "Delchamps," "Sack and Save" and "Pump And Save," Management does not believe any of such trade names, service marks or trademarks are material to its business. GOVERNMENT REGULATION The Company is subject to regulation by a variety of governmental agencies, including but not limited to the United States Food and Drug Administration, the United States Department of Agriculture and other federal, state and local agencies. LEGAL PROCEEDINGS The Company is subject to periodic litigation in the ordinary course of its business, including lawsuits brought by employees and former employees alleging discriminatory termination and promotion practices. Delchamps recently settled a claim of alleged race discrimination for approximately $4.3 million in which a potential class of plaintiffs was denied certification of the class on procedural grounds, and Delchamps is reviewing, revising and improving its termination and promotion policies as part of the related settlement agreement. There can be no assurance that future litigation alleging discrimination in the Company's termination or promotion practices would not have an adverse effect on the Company's financial condition or results of operation. Other than with respect to the foregoing matters, the Company is not a party to any to any material pending legal proceedings except ordinary litigation incidental to the conduct of its business and the ownership of its properties. 67 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS OF JITNEY-JUNGLE The following table sets forth the directors and senior executive officers of Jitney-Jungle. Directors of Jitney-Jungle hold their offices for a term of one year or until their successors are elected and qualified; executive officers of Jitney-Jungle serve at the discretion of the Board of Directors. For information concerning certain arrangements with respect to the election of directors, see "Certain Relationships and Related Transactions--Shareholders Agreement."
NAME AGE POSITION W.H. Holman, Jr....................................... 67 Chairman Michael E. Julian..................................... 46 Director, Chief Executive Officer and President David K. Essary....................................... 47 Executive Vice President David R. Black........................................ 44 Senior Vice President--Finance, Chief Financial Officer Harold D. Evans....................................... 52 Senior Vice President--Store Operations J.R. Hansbrough....................................... 41 Senior Vice President--Information Services Jerry L. Jones........................................ 45 Senior Vice President--Retail Operations James P. Riley........................................ 47 Senior Vice President--Engineering Clyde D. Staley....................................... 60 Senior Vice President--Real Estate W.H. Holman, III...................................... 33 Secretary Bernard E. Ebbers..................................... 55 Director Roger P. Friou........................................ 62 Director Ronald E. Johnson..................................... 47 Director John M. Moriarty, Jr.................................. 40 Director Bruce C. Bruckmann.................................... 43 Director Harold O. Rosser II................................... 48 Director Stephen C. Sherrill................................... 44 Director
W.H. HOLMAN, JR., CHAIRMAN, has been Chairman of the Board of Jitney-Jungle since 1967 and served as Chief Executive Officer from 1967 until January 1997. Mr. Holman is a director of two private companies. MICHAEL E. JULIAN, DIRECTOR, CHIEF EXECUTIVE OFFICER AND PRESIDENT, was appointed as Chief Executive Officer in January 1997 and as President in May 1997. He has served as a director since April 1996. Prior to January 1997, he was Chairman, President and Chief Executive Officer of Farm Fresh, Inc. Mr. Julian is a director of Jackson Hewitt Inc. and one private company. DAVID K. ESSARY, EXECUTIVE VICE PRESIDENT, has spent 21 of his 25 years in the industry with Jitney-Jungle, and has been Executive Vice President since March 1996. Other positions previously held by Mr. Essary within Jitney-Jungle include Executive Vice President--Retail Operations, Senior Vice President--Marketing, Vice President--Perishables and Vice President--Meat Operations. DAVID R. BLACK, SENIOR VICE PRESIDENT--FINANCE, CHIEF FINANCIAL OFFICER since 1996, joined the Company in 1976. During his Jitney-Jungle career, Mr. Black has held various other positions with the Company including Treasurer, Controller and Assistant Controller. HAROLD D. EVANS, SENIOR VICE PRESIDENT--STORE OPERATIONS since 1993, began his retail food career when he joined the Company in 1970. He has also served as Vice President--Store Operations. J.R. HANSBROUGH, SENIOR VICE PRESIDENT--INFORMATION SERVICES, has held that position since 1996. He previously served as Vice President--Information Services from 1994. Prior to 1994, he was a Consulting and Marketing Representative with IBM Corporation. 68 JERRY L. JONES, SENIOR VICE PRESIDENT--RETAIL OPERATIONS, has held that position since March 1996. Prior to that time, he served as Senior Vice President--Human Resources since 1991, having joined the Company in 1986 as District Manager. Mr. Jones was employed with a large regional supermarket chain from 1968 to 1986 and was a District Manager at the time he left the company. JAMES P. RILEY, SENIOR VICE PRESIDENT--ENGINEERING since 1996, previously served as Vice President-- Engineering from 1991. He served as Director of Engineering Services from 1985 to 1991. CLYDE D. STALEY, SENIOR VICE PRESIDENT--REAL ESTATE, has held that position since 1996. He previously served as Vice President--Real Estate from 1985. W.H. HOLMAN, III, SECRETARY, since 1996, is also President of Pump And Save, the Company's petroleum subsidiary. He has 13 years of industry experience, and previously served as Senior Vice President--Sales and Marketing. Mr. Holman is the son of W.H. Holman, Jr. BERNARD E. EBBERS, DIRECTOR, has been President, Chief Executive Officer and a director of WorldCom, Inc. since 1983. ROGER P. FRIOU, DIRECTOR, has 24 years of industry experience having originally joined Jitney-Jungle in 1966. Between March 1996 and May 1997 he served as President of Jitney-Jungle, and between 1991 and 1996 he served as Vice Chairman, Chief Financial Officer and Secretary. Other positions previously held by Mr. Friou at Jitney-Jungle include President, Executive Vice President and Vice President--Finance and Controller. Mr. Friou is a director of The Parkway Properties, Inc. RONALD E. JOHNSON, DIRECTOR, has been President, Chief Executive Officer and a director of Farm Fresh, Inc. since January 1997. Previously, he served as Chairman, President and Chief Executive Officer of Kash n' Karry and as Executive Vice President and Chief Operating Officer of Farm Fresh, Inc. JOHN M. MORIARTY, JR., DIRECTOR, has been a Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation since 1989 and a Managing Director of DLJ Merchant Banking, Inc. since 1996. Mr. Moriarty is a director of a private company. BRUCE C. BRUCKMANN, DIRECTOR, has been a principal of BRS since its formation in 1995. Mr. Bruckmann was an officer and subsequently a Managing Director of Citicorp Venture Capital from 1983 through 1994. Previously, Mr. Bruckmann was an associate at the New York law firm of Patterson, Belknap, Webb & Tyler. Mr. Bruckmann is a director of Mohawk Industries, Inc., AmeriSource Distribution Corporation, Chromcraft Revington Corporation, Anvil Knitwear, Inc., CORT Business Services Corporation and of several private companies. HAROLD O. ROSSER II, DIRECTOR, has been a principal of BRS since its formation in 1995. Mr. Rosser was an officer and subsequently a Managing Director of Citicorp Venture Capital from 1987 through 1994. Previously, he spent 12 years with Citicorp/Citibank in various management and corporate finance positions. Mr. Rosser is a director of DavCo Restaurants, Inc. and of several private companies. STEPHEN C. SHERRILL, DIRECTOR, has been a principal of BRS since its formation in 1995. Mr. Sherrill was an officer and subsequently a Managing Director of Citicorp Venture Capital from 1983 through 1994. Previously, he was an associate at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison. Mr. Sherrill is a director of Galey & Lord, Inc., Windy Hill Pet Food Company, Inc. and of several private companies. DIRECTOR COMPENSATION AND COMMITTEE INTERLOCKS Each non-employee director of Jitney-Jungle is currently paid an annual retainer of $12,000 plus fees of $1,000 for each board meeting attended and $500 for each committee meeting attended. Directors who are employees of the Company do not receive additional compensation as directors. The Board of 69 Directors held four regular meetings during fiscal 1997 and all directors attended at least 75% of the total meetings of the Board of Directors and the committees of which they were members. Jitney-Jungle has a Compensation Committee of the Board of Directors which is responsible for reviewing annual salaries and bonuses paid to senior management and administering Jitney-Jungle's stock option programs. The members of the Compensation Committee are Harold O. Rosser II, Chairman, Michael E. Julian, Roger P. Friou and Bernard E. Ebbers. Robert R. Onstead was also a member of the Compensation Committee but resigned from the Board in March 1997. The Compensation Committee held one meeting during fiscal 1997. Jitney-Jungle has an Audit Committee which reviews external and internal auditing matters and recommends the selection of Jitney-Jungle's independent auditors for approval by the Board of Directors. The members of the Audit Committee are Steven C. Sherrill, Chairman, John M. Moriarty, Jr., and Ronald E. Johnson. The Audit Committee held one meeting during fiscal 1997. In fiscal 1997, Messrs. Julian, Ebbers and Johnson each received fees of $16,000 for serving on the Board of Directors. EXECUTIVE COMPENSATION The following table summarizes the compensation paid or accrued for fiscal 1997, 1996 and 1995 to the Chief Executive Officer of Jitney-Jungle and to each of the four other most highly compensated executive officers of Jitney-Jungle (each such person being referred to as a "Named Executive Officer").
SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION NAME AND OTHER ANNUAL LTIP ALL OTHER PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) PAYOUTS(3) COMPENSATION W.H. Holman, Jr.,............. 1997 $ 331,182 $ 162,920 $ 2,633 $ -- $ 15,795(5) Chairman(4) 1996 315,100 121,193 2,216 1,894,039 15,840 1995 315,100 121,193 2,100 439,147 10,094 Michael E. Julian,............ 1997 57,692 75,000 -- -- -- Chief Executive Officer(4) 1996 -- -- -- -- -- 1995 -- -- -- -- -- Roger P. Friou,............... 1997 223,637 96,537 2,356 -- 106,736(6) President(4) 1996 182,600 68,461 1,807 2,247,911 106,578 1995 172,800 65,230 1,800 444,040 6,594 David K. Essary,.............. 1997 192,463 89,653 2,251 -- 103,485(7) Executive Vice 1996 176,700 67,307 1,745 110,229 103,425 President 1995 145,800 53,422 1,700 -- 3,294 Jerry L. Jones,............... 1997 133,000 33,250 1,790 -- 3,149(8) Senior Vice 1996 125,200 23,654 1,727 -- 3,141 President--Retail 1995 115,000 22,116 1,700 -- 2,907 Operations Harold D. Evans,.............. 1997 121,500 30,376 1,978 -- 3,444(9) Senior Vice 1996 114,000 21,923 1,863 -- 3,394 President--Store 1995 108,100 20,693 1,900 -- 3,330 Operations
70 - ------------------------ (1) The amounts shown in this column include amounts contributed as salary deferral contributions in fiscal 1997, 1996 and 1995, respectively, under the Jitney-Jungle Stores of America, Inc. and Affiliates Profit Sharing Plan and Trust (the "401(k) Plan"), as follows: $8,236, $9,407 and $9,405 for Mr. Holman; $0, $0 and $0 for Mr. Julian; $9,043, $9,288 and $9,287 for Mr. Friou; $8,490, $9,500 and $8,715 for Mr. Essary; $7,507, $7,340 and $6,825 for Mr. Jones; and $6,835, $6,772 and $6,388 for Mr. Evans. (2) Other annual compensation includes the annual estimated value of an automobile furnished by the Company. (3) Includes distributions from the Phantom Stock Plan. (4) W.H. Holman, Jr. served as the Chief Executive Officer of the Company until January 1997. Michael E. Julian became the Chief Executive Officer of the Company in January 1997, and his salary reflects approximately 2/12ths of his annual compensation. In May 1997, Mr. Friou resigned as President of the Company, and Mr. Julian was appointed to serve in that position. (5) Includes for fiscal 1997 $3,000 of Company matching contributions under the 401(k) Plan, $150 of Company profit sharing contributions under the 401(k) Plan, and approximately $12,645 of premiums for group term life insurance. (6) Includes for fiscal 1997 $3,000 of Company matching contributions under the 401(k) Plan, $150 of Company profit sharing contributions under the 401(k) Plan, approximately $3,586 of premiums for group term life insurance, and $100,000 as the second of three annual installments per an employment agreement with Mr. Friou; subsequent to fiscal 1997, Mr. Friou retired and forfeited the third payment. (7) Includes for fiscal 1997 $3,000 of Company matching contributions under the 401(k) Plan, $150 of Company profit sharing contributions under the 401(k) Plan, approximately $335 of premiums for group term life insurance, and $100,000 as the second of three annual installments per an employment agreement with Mr. Essary. (8) Includes for fiscal 1997 $3,000 of Company matching contributions under the 401(k) Plan and $149 of Company profit sharing contributions under the 401(k) Plan. (9) Includes for fiscal 1997 $2,746 of Company matching contributions under the 401(k) Plan, $135 of Company profit sharing contributions under the 401(k) Plan, and approximately $563 of premiums for group term life insurance. EMPLOYMENT AGREEMENTS W.H. Holman, Jr. has an employment contract with Jitney-Jungle covering the period through February 28, 2001. The agreement provides that Mr. Holman, Jr. will serve as Chairman of the Board at the discretion of the Board of Directors. If Mr. Holman, Jr. ceases to be Chairman of the Board prior to March 1, 2001, he will continue to serve on the Board of Directors as Chairman Emeritus until March 1, 2001, with a salary equal to his base salary then in effect until February 28, 1999, and 50% of such base salary thereafter. Mr. Holman, Jr. is also eligible for a bonus through February 28, 1999. David K. Essary has an employment contract with Jitney-Jungle providing for a base salary of approximately $186,000 per year for the period from March 1, 1995 through February 28, 1998. Mr. Essary is eligible to receive a bonus of up to 50% of his base salary less $11,000. A provision in the employment contract states that upon a change of control of Jitney-Jungle, Mr. Essary will be awarded a payment of up to $300,000 to be paid in three annual installments of $100,000. Because the Recapitalization constituted a change of control under such employment agreement, Mr. Essary became entitled to receive such payment; the first two $100,000 installments thereof were paid in March 1996 and March 1997, respectively. Provided he is still employed by Jitney-Jungle when the final installment is due or his employment has been terminated by Jitney-Jungle without cause or terminated by the employee for good reason, Jitney-Jungle will pay Mr. Essary the last annual installment in 1998. No further payments are required under the employment agreement upon any subsequent change of control. In addition, Mr. Essary is entitled to his base salary plus anticipated bonus for the remainder of the term of the agreement if his employment with Jitney-Jungle is terminated by Jitney-Jungle without cause, he resigns his employment at Jitney-Jungle's request without cause, or he terminates his employment for good reason. 71 W.H. Holman, III has an employment contract with Jitney-Jungle covering the period through February 28, 1998 and will serve at the discretion of the Board of Directors as Secretary of Jitney-Jungle and as President of Pump And Save. Mr. Holman, III will receive a base salary of no less than $110,000 per year through February 28, 1998 subject to periodic increases as determined by the Board of Directors. Mr. Holman, III is also entitled to a bonus of up to 50% of his base salary less $11,000. Until his retirement in May 1997, Roger P. Friou had an employment contract with Jitney-Jungle. The terms of such employment contract were substantially identical to those of Mr. Essary's contract, except that Mr. Friou was entitled to receive a base salary of approximately $201,000 per year and a bonus of up to 50% of his base salary less $23,000. Mr. Friou's employment contract terminated upon his retirement. PHANTOM STOCK PLAN On April 17, 1991 the Board of Directors of Jitney-Jungle adopted, and the shareholders approved, the Amended and Restated Consolidated Phantom Stock Plan of Jitney-Jungle (the "Phantom Stock Plan"). The Phantom Stock Plan provided that phantom stock units could be awarded if combined net earnings exceed 15% of stockholders' equity (as defined in the plan) at the beginning of the applicable fiscal year; if earnings exceeded 15% of this base amount, awards could be made equal to 10% of that excess to each participant. W.H. Holman, Jr., Roger P. Friou and David K. Essary are the only three participants who currently have units credited to them under this plan. Effective with the Recapitalization, the Phantom Stock Plan was amended, restated and renamed "the Deferred Compensation Plan for Jitney-Jungle Stores of America, Inc." Under this amended plan, no further awards may be made and no other individuals may become participants. The units credited to each of the three participants effectively have been divided into two component amounts: a cash amount that will be payable in accordance with the terms of the Phantom Stock Plan as in effect before its amendment, and an amount that will continue to be credited under the terms of the plan to an account, the value of which will be equal to the value of the number of shares of Class C Preferred Stock of Jitney-Jungle that could be acquired with that amount. The accrued amounts payable in accordance with the pre-amendment provisions of the Phantom Stock Plan became fully vested and payable in a single lump sum effective with the Recapitalization on March 5, 1996. The amounts paid to Messrs. Holman, Jr., Friou and Essary on March 7, 1996 were approximately $1,894,000, $2,248,000 and $110,000, respectively, and Messrs. Holman, Jr., Friou and Essary applied an additional $474,000, $125,000 and $112,500, respectively, toward the purchase price for shares of Class C Preferred Stock of Jitney-Jungle in connection with the Recapitalization. The Phantom Stock Plan is an unfunded deferred compensation arrangement with an associated rabbi trust. The rabbi trust provides that the initial contributions to the trust will be invested in shares of Class C Preferred Stock. The initial contributions to the rabbi trust should equal the amounts that will continue to be credited under the plan described above. With respect to the amounts that continue to be credited under the plan as amended, an amount equal to the amount of any cash dividends that would have been paid on the number of shares of preferred stock credited to each participant's account will be paid to the participant at the same time as any cash dividends actually are paid on the preferred stock. Payment otherwise will be made under the amended plan at the same time as the preferred stock is redeemed, in an amount equal to the redemption price times the number (or proportionate number, in the event of a partial redemption) of shares of preferred stock credited to the participant's account. 401(K) PLAN Jitney-Jungle maintains a Profit Sharing Plan and Trust (the "401(k) Plan") for the benefit of its employees who have satisfied the plan's eligibility requirements. Participants are permitted to make pre-tax salary reduction contributions, up to the amount permitted under applicable tax law. Jitney-Jungle makes a matching contribution equal to 50% of each participant's salary reduction contribution, up to a maximum 72 of 2% of the participant's compensation. In addition, Jitney-Jungle may make additional profit sharing contributions in its discretion. Although in prior years Jitney-Jungle has made discretionary profit sharing contributions, it has no obligation or present intention to do so in the future. Jitney-Jungle's contributions become vested when the participant has been credited with five years of service. Shares of Common Stock of Jitney-Jungle held under the 401(k) Plan were surrendered in connection with the Recapitalization and exchanged for cash and Class B Preferred Stock in accordance with the Recapitalization documentation. DELCHAMPS PLANS Delchamps currently provides welfare and retirement benefits to its eligible employees under various plans and arrangements, including an employee stock option plan and a 401(k) plan. Following the Delchamps Acquisition, Management intends to terminate the employee stock option plan and the 401(k) plan and provide ongoing welfare and retirement benefits to such employees under the existing plans of Jitney-Jungle. 73 OWNERSHIP OF CAPITAL STOCK PRINCIPAL SHAREHOLDERS The authorized capital stock of Jitney-Jungle consists of 5,000,000 shares of common stock, par value $0.01 per share (the "Common Stock"), and 600,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"). The Preferred Stock is issuable in one or more classes. The following table sets forth certain information with respect to (i) the beneficial ownership of Common Stock of Jitney-Jungle by each person or entity who owns five percent or more thereof and (ii) the beneficial ownership of each class of equity securities of Jitney-Jungle by each director of Jitney-Jungle who is a shareholder, the Chief Executive Officer of Jitney-Jungle and the other executive officers named in the "Summary Compensation Table" above who are shareholders and all directors and officers of Jitney-Jungle as a group. Unless otherwise specified, all shares are directly held.
NUMBER AND PERCENT OF SHARES CLASS B CLASS C PREFERRED PREFERRED NAME OF BENEFICIAL OWNER COMMON STOCK STOCK STOCK Bruckmann, Rosser, Sherrill & Co., L.P.(1)........................................ 331,732/78.05% -- 70,808/70.81% Two Greenwich Plaza Suite 100 Greenwich, CT 06830 DLJ Merchant Banking Partners, L.P. and related investors.......................... 75,000/15.00 (2) -- 15,000/15.00% 277 Park Avenue New York, NY 10172 W.H. Holman, Jr....................................... 29,699/6.99 (3) 21,516/7.84%(4) 4,742/4.72% Jitney-Jungle Stores of America, Inc. P.O. Box 3409 Jackson, MS 39207 Michael E. Julian..................................... 2,500* -- 534* Roger E. Friou........................................ 12,510/2.94% 14(4) 1,252/1.25% David K. Essary....................................... 11,250/2.65% -- 1,125/1.13% Jerry L. Jones........................................ 1,200* -- 120* Harold D. Evans....................................... 850* -- 85* Bruce C. Bruckmann(5)................................. 353,750/83.24% -- 75,508/75.51% Harold O. Rosser II(5)................................ 353,750/83.24% -- 75,508/75.51% Stephen C. Sherrill(5)................................ 353,750/83.24% -- 75,508/75.51% Stephen F. Edwards(5)................................. 332,663/78.27% -- 71,007/71.01% All directors and officers as a group (18 persons)........................................ 421,359/99.14% 26,729/9.74%(4) 92,207/92.21%
- ------------------------ * Less than one percent of total outstanding Common Stock, Class B Preferred Stock and Class C Preferred Stock. (1) The Fund is a limited partnership, the sole general partner of which is BRS Partners, Limited Partnership ("BRS Partners") and the manager of which is BRS. The sole general partner of BRS Partners is BRSE Associates, Inc. ("BRSE Associates"). Bruce C. Bruckmann, Harold O. Rosser II, Stephen C. Sherrill and Stephen F. Edwards are the only stockholders of BRS and BRSE Associates and may be deemed to share beneficial ownership of the shares shown as beneficially owned by the Fund. Such individuals disclaim beneficial ownership of any such shares. 74 (2) Represents warrants to acquire 15%, on a fully diluted basis, of the Common Stock. (3) Includes 19,699 shares held by Performance Partnership, L.P. W.H. Holman, Jr. is the general partner of such partnership and possesses voting power with respect to such shares. (4) All outstanding shares of Class B Preferred Stock are held by Trustmark National Bank ("Trustmark") pursuant to an escrow agreement by and among Trustmark, Jitney-Jungle and the persons who were shareholders of Jitney-Jungle prior to the Recapitalization. Messrs. Holman, Jr. and Friou own an interest in the escrow account through which they have a beneficial interest in the shares of Class B Preferred Stock listed in this table. (5) Includes shares of Common Stock and Class C Preferred Stock which are owned by the Fund and certain other entities and individuals affiliated with BRS. Although Messrs. Bruckmann, Rosser, Sherrill and Edwards may be deemed to share beneficial ownership of such shares, such individuals disclaim beneficial ownership thereof. See Note 1 above. CLASS A PREFERRED STOCK An aggregate of $22.5 million in liquidation preference of the Class A Preferred Stock is outstanding. The Class A Preferred Stock ranks senior in right of payment of cash dividends, liquidation preference and redemption (both mandatory and optional as described below) to the Class B Preferred Stock and the Class C Preferred Stock. Dividends on the Class A Preferred Stock are payable quarterly at an annual rate of 15%. Dividends for the first five years following the Recapitalization are payable, at Jitney-Jungle's option, either by cumulation to liquidation preference or in cash and, thereafter, dividends will be payable in cash. The Senior Credit Facility, the Senior Note Indenture and the Indenture will restrict Jitney-Jungle's ability to pay cash dividends on the Class A Preferred Stock. The Class A Preferred Stock is redeemable at Jitney-Jungle's option, (i) at any time after March 1, 2001 at a price per share equal to the then applicable liquidation preference plus accrued and unpaid dividends and a prepayment premium or (ii) on or prior to March 1, 1999 with the proceeds of a public offering of Common Stock at a price per share equal to 114% of the then applicable liquidation preference plus accrued and unpaid dividends thereon. All of the Class A Preferred Stock is required to be redeemed on or before the twelfth anniversary of issuance at a price per share equal to the then applicable liquidation preference plus accrued and unpaid dividends. Jitney-Jungle is required to offer to repurchase (to the extent permitted by the terms of the Senior Credit Facility) all shares of Class A Preferred Stock upon a Change of Control (as defined in the certificate of designations with respect to the Class A Preferred Stock) at a price per share equal to 101% of the then applicable liquidation preference, plus accrued and unpaid dividends thereon. The Senior Credit Facility will restrict Jitney-Jungle's ability to redeem or repurchase the Class A Preferred Stock. The Class A Preferred Stock does not have any voting rights, except (i) as required by law and (ii) with respect to the issuance of pari passu and senior securities, certain mergers and certain amendments to the Articles of Incorporation of Jitney-Jungle or the Exchange Debenture Indenture. Additionally, in the event of certain defaults, including the failure to pay dividends when required, then the number of directors constituting the Board of Directors will be increased by two, and the holders of Class A Preferred Stock will be entitled to elect two directors to the Board of Directors. The Class A Preferred Stock is exchangeable (with cumulated dividends) at Jitney-Jungle's option, in whole but not in part, for subordinated exchange debentures (the "Exchange Debentures") of Jitney-Jungle. The Exchange Debentures will pay interest from the date of exchange at the rate of 15% per annum, consisting of, at Jitney-Jungle's option, additional Exchange Debentures or cash on or prior to March 1, 2001 and cash thereafter. The Exchange Debentures will mature on March 1, 2008. The Senior Credit Facility, the Senior Note Indenture 75 and the Indenture will restrict Jitney-Jungle's ability to exchange the Class A Preferred Stock for Exchange Debentures and Jitney-Jungle's ability to redeem or repurchase the Exchange Debentures. CLASS B PREFERRED STOCK An aggregate of $27.5 million in liquidation preference of the Class B Preferred Stock is outstanding. The Class B Preferred Stock ranks junior in right of payment of cash dividends, liquidation preference and redemption (both mandatory and optional as described below) to the Class A Preferred Stock and senior in right of payment of cash dividends, liquidation preference and redemption (both mandatory and optional as described below) to the Class C Preferred Stock. Dividends on the Class B Preferred Stock are payable annually when and as declared by the Board of Directors of Jitney-Jungle at a rate of 10.0% per annum. Dividends cumulate on a compounding basis until paid. The Senior Credit Facility, the Senior Note Indenture, the Indenture and the Class A Preferred Stock restrict Jitney-Jungle's ability to pay cash dividends on the Class B Preferred Stock. The Class B Preferred Stock is redeemable at Jitney-Jungle's option at any time, in whole or in part, at a price per share equal to the then applicable liquidation preference plus accrued and unpaid dividends. All of the Class B Preferred Stock is required to be redeemed on the fourteenth anniversary of issuance at a price per share equal to the then applicable liquidation preference plus accrued and unpaid dividends. Jitney-Jungle will also be required to offer to repurchase (to the extent permitted by the terms of the Class A Preferred Stock and any indebtedness to which Jitney-Jungle is a party) all shares upon a Change in Control (as defined in the certificate of designations with respect to the Class B Preferred Stock) at a price in cash equal to 100.0% of the liquidation preference thereof plus accrued and unpaid dividends. Jitney-Jungle is required to offer to repurchase (to the extent permitted by the terms of the Class A Preferred Stock and any indebtedness to which Jitney-Jungle is a party) all shares of Class B Preferred Stock upon the sale by the Fund (or its affiliates) of more than 10.0% of the outstanding shares of the Common Stock of Jitney-Jungle, except that the Fund (or its affiliates) may (i) sell up to 5.0% of the outstanding shares to original shareholders, officers, directors, consultants or employees of Jitney-Jungle; (ii) sell outstanding shares to certain affiliates and principals of the Fund and persons related thereto; or (iii) exchange Common Stock or Class C Preferred Stock for securities which rank junior to the Class B Preferred Stock. Jitney-Jungle is also required to offer to repurchase (to the extent permitted by the terms of the Class A Preferred Stock and any indebtedness to which Jitney-Jungle is a party) all shares of Class B Preferred Stock if Jitney-Jungle changes its state of incorporation. In addition, Jitney-Jungle is required to offer to apply (to the extent permitted by the terms of the Class A Preferred Stock and any indebtedness to which Jitney-Jungle is a party) Net Proceeds (as defined) raised through any primary issuance of securities junior to Class B Preferred Stock to repurchase shares of Class B Preferred Stock. "Net Proceeds" means the net cash proceeds received by Jitney-Jungle from the issuance of such junior securities after payment of expenses of issuance of such securities and application of such funds to repay or redeem senior securities (to the extent required) and the repayment of indebtedness (to the extent required). The Senior Credit Facility, the Senior Note Indenture, the Indenture and the Class A Preferred Stock restrict Jitney-Jungle's ability to redeem or repurchase shares of the Class B Preferred Stock. The Class B Preferred Stock does not have any voting rights except as required by Mississippi law, as in effect on the date of issuance. CLASS C PREFERRED STOCK An aggregate of $10.0 million in liquidation preference of the Class C Preferred Stock, Series 1 and Series 2, is outstanding. The Series 1 is not redeemable by Jitney-Jungle at any time; the Series 2 is redeemable, as described below. The Class C Preferred Stock ranks junior in right of payment of cash 76 dividends, liquidation preference and redemption (both mandatory and optional as described below) to the Class A Preferred Stock and the Class B Preferred Stock. Dividends on the Class C Preferred Stock are payable annually when and as declared by the Board of Directors of Jitney-Jungle at a rate of up to 10.0% per annum. Dividends cumulate on a compounding basis until paid. The Senior Credit Facility, the Senior Note Indenture, the Indenture, the Class A Preferred Stock and the Class B Preferred Stock restrict Jitney-Jungle's ability to pay cash dividends on the Class C Preferred Stock. The Class C Preferred Stock, Series 2, is redeemable at Jitney-Jungle's option at any time, in whole or in part, at a price per share equal to the liquidation preference plus accrued and unpaid dividends (including cumulated dividends). The Class C Preferred Stock, Series 2, is required to be redeemed on the fifteenth anniversary of issuance at a price per share equal to the liquidation preference plus accrued and unpaid dividends (including cumulated dividends). Jitney-Jungle is required to offer to repurchase (to the extent permitted by the terms of the Class A Preferred Stock, the Class B Preferred Stock and any indebtedness to which Jitney-Jungle is a party) all shares of Series C Preferred Stock, Series 1 and Series 2, upon a Change of Control (as defined in the certificate of designations with respect to the Class C Preferred Stock) at a price in cash equal to 100% of the then applicable liquidation preference, plus accrued and unpaid dividends thereon. The Senior Credit Facility, the Senior Note Indenture, the Indenture, the Class A Preferred Stock, the Exchange Debentures and the Class B Preferred Stock restrict Jitney-Jungle's ability to redeem or repurchase the Class C Preferred Stock. The Class C Preferred Stock does not have any voting rights, except as required by law. COMMON STOCK The holders of Common Stock are entitled to one vote for each share held of record and all matters submitted to a vote of shareholders. The holders of Common Stock have no preemptive rights, rights to maintain their respective percentage ownership interests in Jitney-Jungle or other rights to subscribe for additional shares of Jitney-Jungle other than as set forth in the Shareholders Agreement. WARRANTS In connection with the Recapitalization, warrants to purchase 75,000 shares of Common Stock (the "Warrants"), representing 15.0% of the Common Stock of Jitney-Jungle (on a fully diluted basis) outstanding immediately following the Recapitalization, were issued to DLJ Merchant Banking Partners, L.P. and related investors. The Warrants have an exercise price of $0.01 per share and expire 12 years after issuance. 77 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS LEASING AGENT AGREEMENT Pursuant to an agreement with Jitney-Jungle, McCarty-Holman Co., L.P. (the "Partnership") is the exclusive agent for Jitney-Jungle to rent, lease, operate and manage all locations where Jitney-Jungle has sublet space to various tenants and where it has space vacant and available for subleasing. W.H. Holman, Jr. owns a noncontrolling interest in the Partnership. Under the agreement, the Partnership is entitled to fees as follows: (i) for management, 4% of all rental/lease collections; (ii) for leasing, 6% of the annual rent (for a month-to-month tenancy, one-half of the first month's rent); and (iii) for services other than those delineated above, fees are negotiated. In fiscal 1997, the Partnership received approximately $41,000 in fees pursuant to this agreement. Management believes that the agreement is on an arm's length basis and is on terms that are no less favorable to Jitney-Jungle than could have been obtained with non-affiliated parties at the time the agreement was entered into. LEASES OF CERTAIN SUPERMARKETS AND FACILITIES W.H. Holman, Jr., W.H. Holman, III and Roger P. Friou own in the aggregate noncontrolling interests in certain partnerships that are landlords under 18 leases for supermarkets or other facilities where Jitney-Jungle and its affiliates are the tenants. In fiscal 1997 and 1996, Jitney-Jungle paid a combined total rent under these 18 leases of approximately $3.6 million and $3.6 million, respectively. Management believes that each of these leases is on an arm's length basis and is on terms that are no less favorable to Jitney-Jungle than could have been obtained with non-affiliated parties at the time each lease was entered into. MANAGEMENT LOANS David K. Essary, Executive Vice President of Jitney-Jungle has an outstanding loan for the purchase of Common Stock from Jitney-Jungle in an amount of $79,906 as of May 3, 1997. The loan is evidenced by an unsecured note which bears interest at the rate of 8.25% per annum and is payable in three annual installments, the first of which was paid in March 1997. Eight other executive officers of Jitney-Jungle have borrowed an aggregate of $69,824 for the purchase of Common Stock and Class C Preferred Stock from Jitney-Jungle. SHAREHOLDERS AGREEMENT Certain shareholders of Jitney-Jungle, including the Fund Entities, the DLJ Entities and Messrs. Holman, Jr., Holman III and Friou (the "Management Shareholders") are parties to a Shareholders Agreement which contains certain agreements among such shareholders with respect to the capital stock and corporate governance of Jitney-Jungle. The following is a summary of the material terms of the Shareholders Agreement. Pursuant to the Shareholders Agreement, the maximum number of members of the Board of Directors of Jitney-Jungle is 12 (plus any additional directors who may be elected in accordance with the terms of Jitney-Jungle's preferred stock). The DLJ Entities and the Management Shareholders each have the right to appoint one member to the Board of Directors. In addition, the approval of the director appointed by the DLJ Entities is required in order for Jitney-Jungle to enter into certain transactions. The DLJ Entities' rights to appoint a director and to approve of such transactions will terminate upon certain reductions in the DLJ Entities' ownership of the Warrants or upon a person or persons (other than the Fund Entities, DLJ Entities or Management Shareholders) acquiring a majority of the then outstanding Common Stock. The Shareholders Agreement contains certain provisions which with certain exceptions (i) restrict the ability of the Fund Entities, the DLJ Entities and the Management Shareholders from transferring any shares of Common Stock or Warrants until the earlier to occur of the initial public offering of Common 78 Stock of Jitney-Jungle and the second anniversary of the consummation of the Recapitalization, (ii) restrict the ability of the Fund Entities from transferring any shares of Class C Preferred Stock until the earlier to occur of the initial public offering of Common Stock of Jitney-Jungle and the fourth anniversary of the consummation of the Recapitalization and (iii) restrict the ability of the DLJ Entities and the Management Shareholders from transferring any shares of Class C Preferred Stock until the earlier to occur of the initial public offering of Common Stock of Jitney-Jungle and the second anniversary of the consummation of the Recapitalization. The foregoing will not restrict the ability of the DLJ Entities to transfer shares of Common Stock, Class C Preferred Stock or Warrants in connection with a transfer of Class A Preferred Stock or of any shareholder to transfer securities in connection with any public offering of Common Stock of Jitney-Jungle pursuant to certain registration rights set forth in the Shareholders Agreement. Prior to sales of Common Stock by the Fund Entities, the DLJ Entities have the right to negotiate with such Fund Entity for the purchase of any and all shares that Fund Entity desires to sell. With respect to proposed dispositions by the Fund Entities of their securities, the DLJ Entities have the right to require the proposed transferee to purchase, on the same terms and conditions as given to the Fund Entities, a pro rata portion of like securities (or Warrants therefor) held by the DLJ Entities. Subject to certain exceptions, if Jitney-Jungle proposes to issue Common Stock or rights to purchase Common Stock, the Fund Entities and the DLJ Entities have the right, on the same terms and conditions of the proposed issuance, to purchase pro rata portions of the securities to be issued. Jitney-Jungle has granted the Fund Entities three separate demand registration rights with respect to their securities. Jitney-Jungle has granted the DLJ Entities (i) three demand registration rights with respect to their shares of Common Stock, Class C Preferred Stock and Warrants, in the aggregate, which demand rights are not exercisable prior to the earlier to occur of the initial public offering of Common Stock of Jitney-Jungle and the fifth anniversary of the consummation of the Recapitalization and (ii) three demand registration rights with respect to their shares of Class A Preferred Stock. All of the shareholders party to the Shareholders Agreement have the right to participate, or "piggyback," in certain registrations initiated by Jitney-Jungle or pursuant to a demand. DEALER-MANAGER; SOLICITATION AGENT; UNDERWRITER Donaldson, Lufkin & Jenrette Securities Corporation, one of the Initial Purchasers and an affiliate of DLJ Merchant Banking Partners, L.P., acted as Dealer-Manager in connection with the Delchamps Tender Offer and as Solicitation Agent in connection with the Consent Solicitation, and it received customary fees and reimbursement of expenses in connection with the services rendered by it in the latter capacity. Donaldson, Lufkin & Jenrette Securities Corporation also acted as underwriter in connection with the offering of the Senior Notes by the Company, for which it received customary fees and reimbursement of expenses. BRS MANAGEMENT AGREEMENT; CLOSING FEE Pursuant to a management agreement between Jitney-Jungle and BRS, BRS is entitled to receive an annual management fee from Jitney-Jungle for the performance of strategic and financial planning services. The amount of the fee ranges from $250,000 to $1.0 million per year and is based on certain performance criterion. In connection with the Consent Solicitation, Jitney-Jungle solicited and obtained consents to an amendment to the Senior Note Indenture to permit the amendment of the management agreement to eliminate the performance criteria set forth therein and permit the payment of fees to BRS after the end of each fiscal quarter of the greater of (i) $250,000 or (ii) 1.0% of the Company's EBITDA for such quarter (provided that the total amount of all such payments in any fiscal year may not exceed the greater of (x) $1.0 million or (y) one percent of EBITDA for such fiscal year). The amendment of the management agreement occurred simultaneously with the consummation of the Transactions. In addition, upon consummation of the Transactions the Company paid BRS a closing fee of $4.0 million. 79 DESCRIPTION OF CERTAIN INDEBTEDNESS The following is a summary of certain indebtedness of the Company which will remain outstanding following consummation of the Delchamps Merger. See "Summary--Use of Proceeds." To the extent such summary contains descriptions of the Senior Credit Facility, the Senior Note Indenture and other loan documents, such descriptions do not purport to be complete and are qualified in their entirety by reference to such documents, which are available upon request from the Company. SENIOR CREDIT FACILITY In connection with the Delchamps Acquisition, Jitney-Jungle's existing revolving credit facility with Fleet Capital Corporation (as successor agent to Fleet Bank, N.A.) and certain other lenders (collectively, the "Lender") was amended and restated to provide for a $150.0 million Senior Credit Facility. Borrowings by the Company and its subsidiaries (including Delchamps following the consummation of the Delchamps Tender Offer) of $72.7 million under the Senior Credit Facility were used to finance a portion of the Delchamps Purchase Price, to repay certain indebtedness of Delchamps and to pay fees and expenses incurred in connection with the Transactions and the Delchamps Merger. The Senior Credit Facility will also be available to provide for the ongoing working capital requirements of the Company and its subsidiaries. The commitments under the Senior Credit Facility will terminate, and all loans outstanding thereunder will be required to be repaid in full, six and one-half years following the consummation of the Delchamps Tender Offer (the "Closing Date"). Borrowings under the Senior Credit Facility, including revolving loans and up to $30.0 million in letters of credit, will not exceed the lesser of (i) the "Total Commitment," which initially will be $150.0 million and (ii) an amount equal to the sum of (A) up to 65% of eligible inventory (valued at the lesser of FIFO cost or current market value) of the Company and its subsidiaries and (B) the "Supplemental Availability," which initially will be $53.0 million. The maximum amount available for borrowing under the Senior Credit Facility and the Supplemental Availability will be reduced in quarterly installments during each year in the aggregate annual amounts set forth below:
SENIOR CREDIT FACILITY YEAR FOLLOWING CLOSING DATE REDUCTION 1....................................................................................... $ 0 2....................................................................................... $ 5,000,000 3....................................................................................... $ 7,000,000 4....................................................................................... $ 8,000,000 5....................................................................................... $ 9,000,000 6....................................................................................... $ 11,000,000 First quarter year 7............................................................................ $ 6,500,000 Second quarter year 7........................................................................... $ 6,500,000
The Senior Credit Facility is guaranteed by all subsidiaries of the Company who, except for Supermarket Cigarette Sales, Inc., are also borrowers under the Senior Credit Facility. Obligations under the Senior Credit Facility are secured by a first priority lien on all of the Company's and the guarantors' existing and after-acquired tangible and intangible assets, including but not limited to accounts and notes receivable, inventory, machinery, equipment and other fixed assets (including, but not limited to, fixtures and leasehold improvements), real property (including leasehold interests but excluding real property already subject to liens), all related documents, instruments, chattel paper, subsidiary stock, and general intangibles (including, but not limited to, patents, trademarks, trade names and tax refunds) and all proceeds and products thereof. Loans under the Senior Credit Facility, at the Company's option, may be either Base Rate Loans or Eurodollar Loans, provided that not more than six Eurodollar Loans may be outstanding at any one time. Base Rate Loans will bear interest at a Base Rate plus the Applicable Margin and Eurodollar Loans will 80 bear interest at the LIBO Rate (as adjusted pursuant to the terms of the Senior Credit Facility) plus the Applicable Margin for 1-, 2-, 3- or 6-month interest periods. The Base Rate is defined as the higher of (i) the announced prime rate of Fleet Bank, N.A. and (ii) the federal funds rate plus 1/2%, with changes effective as of the date of change in such prime rate or federal funds rate. The Company may convert all or any portion of the Base Rate Loans into Eurodollar Loans, and all or any portion of the Eurodollar Loans into Base Rate Loans provided no event of default has occurred or is continuing. At all times on and after the Closing Date until the date the Company delivers to the agent under the Senior Credit Facility its financial statements for the Company's fiscal quarter ending on or about January 10, 1998 (the "First Adjustment Date"), the Applicable Margin will be 0.75% for Base Rate Loans and 2.0% for Eurodollar Loans. At the Closing Date, the Senior Credit Facility bore interest at approximately 7.65% based on the LIBO Rate plus the Applicable Margin. Beginning on the First Adjustment Date, interest rates will fluctuate based on the Company's ratio of Indebtedness to EBITDA (each as defined in the Senior Credit Facility) for the four most recently concluded fiscal quarters, based upon the following table:
APPLICABLE MARGIN BASE RATE/EURODOLLAR INDEBTEDNESS/EBITDA RATE Greater Than or Equal to 5.............................................................. 1.00%/2.25% Greater Than 4.25 but Less Than 5....................................................... 0.75%/2.00% Greater Than 3.75 but Less Than 4.25.................................................... 0.50%/1.75% Greater Than 3.25 but Less Than 3.75.................................................... 0.25%/1.50% Less Than 3.25.......................................................................... 0%/1.25%
Notwithstanding the foregoing, on and after a default or event of default under the Senior Credit Facility which is continuing, there will be no reduction in the Applicable Margin. After and during the continuance of any such event of default, the interest rate will be 2% above the otherwise applicable rate. The Senior Credit Facility contains numerous restrictive financial and other covenants, including, but not limited to (i) limitations on the incurrence of liens and indebtedness, (ii) restrictions on sale and lease-back transactions, consolidations, mergers and sales of assets, investments (including the purchase of stock or assets), loans, capital expenditures, changes in business, prepayment of indebtedness, including the Senior Notes and the Notes, affiliate transactions, consulting fees and creation of subsidiaries, (iii) a prohibition (with certain limited exceptions) on dividends, distributions and payments on shares of capital stock, and (iv) a requirement to meet certain identified financial targets, based generally on rolling four fiscal quarter periods, such as a maximum leverage ratio, a minimum interest coverage ratio, a minimum cash flow and, under certain circumstances, a minimum fixed charge coverage ratio. Events of default under the Senior Credit Facility include, among others, (i) false representations and warranties, (ii) nonpayment of interest, fees or principal when due under the Senior Credit Facility, (iii) breach in the observance or performance of any covenant, condition or agreement, (iv) voluntary or involuntary bankruptcy proceedings, (v) default in any other indebtedness that permits acceleration of such indebtedness, (vi) any events or conditions which would result in the termination of a pension plan or the creation of certain liabilities under ERISA, (vii) judgments or decrees that remain undischarged or unbonded for 30 consecutive days, (viii) the invalidity of the Senior Credit Facility, the other security documents, security interests or guarantees and (ix) the occurrence of a Change of Control. Change of Control is defined as (A) the failure of the Fund to own, beneficially and all voting rights with respect to, at least 35% of each class of issued and outstanding shares of voting stock of the Company, (B) the failure of the Fund to own capital stock of the Company entitling it to cast the votes required to elect a majority of members of the Board of Directors of the Company, (C) the failure of the Company to own, beneficially and all voting rights with respect to, 100% of all the issued and outstanding shares of each class of capital stock of each of its subsidiaries (other than Delchamps, following the Delchamps Tender Offer and prior to the Delchamps Merger) or (D) the occurrence of a "Change of Control" under the Senior Note Indenture. 81 Upon the occurrence of any event of default under the Senior Credit Facility, the Lender may accelerate the maturity of the loans made thereunder and terminate the commitments under the Senior Credit Facility. SENIOR NOTES Jitney-Jungle is the primary obligor on $200,000,000 in aggregate principal amount of Senior Notes. The Senior Notes bear interest at a rate of 12% per annum, payable semi-annually on March 1 and September 1 of each year. Jitney-Jungle is not required to make any mandatory redemption or sinking fund payment with respect to the Senior Notes prior to maturity. The Senior Notes are redeemable, at the option of Jitney-Jungle, in whole or in part, at any time after March 1, 2001 at the redemption prices set forth in the Senior Note Indenture. In addition, at any time prior to March 1, 1999, Jitney-Jungle may redeem up to 33 1/3% of the aggregate principal amount of the Senior Notes with the net proceeds of one or more public offerings of equity securities; provided that at least 66 2/3% of the original aggregate principal amount of Senior Notes remains outstanding following each such redemption. Upon the occurrence of a "Change of Control" under the Senior Note Indenture, Jitney-Jungle will be required to make an offer to purchase all of the outstanding Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The Senior Notes are unsecured senior obligations of Jitney-Jungle and rank pari passu in right of payment with all existing and future Senior Debt of Jitney-Jungle, including indebtedness under the Senior Credit Facility. Jitney-Jungle's obligations under certain outstanding Senior Debt, including its obligations under the Senior Credit Facility, are secured by liens on all of the assets of Jitney-Jungle and, accordingly, such indebtedness ranks prior to the Senior Notes with respect to such assets. The Senior Notes rank senior in right of payment to all future subordinated indebtedness of Jitney-Jungle, including the Notes. The payment of principal, premium, if any, and interest on the Senior Notes has been guaranteed on a full, unconditional, joint and several, unsecured senior basis (the "Senior Note Guarantees") by all of the Subsidiary Guarantors, and Delchamps will execute a Senior Note Guarantee within three business days following the consummation of the Delchamps Tender Offer. The Senior Note Guarantees rank pari passu in right of payment with all Senior Debt of the Subsidiary Guarantors. The Subsidiary Guarantors' obligations under certain outstanding Senior Debt, including their obligations under the Senior Credit Facility, are secured by liens on substantially all of the assets of the Subsidiary Guarantors and, accordingly, rank prior to the Senior Notes with respect to such assets. The guarantee of a Subsidiary Guarantor may be released upon a sale of such Subsidiary Guarantor or upon repayment or defeasance of the Senior Notes, in each case as permitted by the Senior Note Indenture. The Senior Note Indenture contains restrictive covenants substantially identical to those contained in the Indenture governing the Notes (except with respect to the subordination provisions of the Indenture), including covenants that limit, among other things, (i) the ability of Jitney-Jungle and its Restricted Subsidiaries to pay dividends or make certain other restricted payments or investments, incur additional indebtedness or issue preferred stock, in each case, unless specified financial targets are met, (ii) the ability of Jitney-Jungle to merge, consolidate or sell all or substantially all of its assets, (iii) the ability of Jitney-Jungle and its Restricted Subsidiaries to create liens on assets, (iv) the ability of Jitney-Jungle and its Restricted Subsidiaries to enter into transactions with affiliates and (v) the ability of Jitney-Jungle and its Restricted Subsidiaries to engage in other lines of business. See "Description of the Notes" for a more complete description of such provisions. The Senior Note Indenture would prohibit the issuance of the Notes. The Company has obtained consents from the holders of a majority in principal amount of the outstanding Senior Notes to such issuance. See "Summary--The Transactions" and "The Transactions--The Consent Solicitation." 82 DESCRIPTION OF THE NOTES GENERAL The Existing Notes were issued pursuant to an Indenture (the "Indenture") by and among the Company, each Subsidiary of the Company as Subsidiary Guarantors and Marine Midland Bank, as trustee (the "Trustee") in a private transaction that was not subject to the registration requirements of the Securities Act. The terms of the Indenture apply to the Existing Notes and to the New Notes to be issued in exchange therefor pursuant to the Exchange Offer (all such Notes being referred to herein collectively as the "Notes"). The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of certain provisions of the Indenture is qualified by reference to the Indenture, including the definitions therein of certain terms used below. Copies of the proposed form of Indenture and Registration Rights Agreement are available as set forth under "--Additional Information." The definitions of certain terms used in the following summary are set forth below under "Certain Definitions." The Notes are general unsecured obligations of the Company and are subordinated in right of payment to all current and future Senior Debt. At July 26, 1997, on a Pro Forma Basis, the Company would have had Senior Debt of approximately $348.1 million (exclusive of an unused commitment of up to $66.1 million under the Senior Credit Facility). The Indenture permits the incurrence of additional Senior Debt in the future. See "Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock." PRINCIPAL, MATURITY AND INTEREST The Notes are limited in aggregate principal amount to $200.0 million and will mature on September 15, 2007. Interest on the Notes will accrue at the rate of 10 3/8% per annum and will be payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 1998 to Holders of record on the immediately preceding March 1 and September 1. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes will be payable at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, if any, and interest with respect to the Notes the Holders of which have given wire transfer instructions to the Company will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. SUBORDINATION The payment of principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes will be subordinated in right of payment, as set forth in the Indenture, to the prior payment in full of all Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities, the holders of Senior Debt will be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at 83 the rate specified in the applicable Senior Debt) before the Holders will be entitled to receive any payment with respect to the Notes, and until all Obligations with respect to Senior Debt are paid in full in cash, any distribution to which the Holders would be entitled shall be made to the holders of Senior Debt (except that Holders may receive Permitted Junior Securities and payments made from the trust described under "--Legal Defeasance and Covenant Defeasance"). The Company also may not make any payment upon or in respect of the Notes (except in Permitted Junior Securities or from the trust described under "--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of the principal of, premium, if any, or interest on Designated Senior Debt occurs and is continuing beyond any applicable period of grace or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of such Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Company or the representative of the holders of such Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of (x) the date on which such nonpayment default is cured or waived, (y) 179 days after the date on which the applicable Payment Blockage Notice is received, in each case, unless the maturity of any Designated Senior Debt has been accelerated or (z) the date on which such Payment Blockage Period (as defined below) shall have been terminated by written notice to the Trustee from the representative of the holders of Designated Senior Debt initiating such Payment Blockage Period. During any consecutive 360-day period, the aggregate number of days in which payments due on the Notes may not be made as a result of nonpayment defaults on Designated Senior Debt (a "Payment Blockage Period") shall not exceed 179 days, and there shall be a period of at least 181 consecutive days in each consecutive 360-day period during which no Payment Blockage Period is in effect. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 days. The Indenture further requires that the Company promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a liquidation or insolvency, Holders of the Notes may recover less ratably than creditors of the Company who are holders of Senior Debt. See "Risk Factors--Subordination." SUBSIDIARY GUARANTEES The Company's payment obligations under the Notes are guaranteed on a full, unconditional, joint and several, general unsecured basis (the "Subsidiary Guarantees") by the Subsidiary Guarantors. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee is limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture and (ii) the amount, if any, which would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such term is defined in the United States Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or (B) left such Subsidiary Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into; provided that it will be a presumption in any lawsuit or other proceeding in which a Subsidiary Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Subsidiary Guarantor, or debtor in possession or trustee in bankruptcy of the Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the Subsidiary Guarantor is the amount set forth in clause (ii) above. The Indenture provides that, in making any determination as to solvency or sufficiency of capital of a Subsidiary Guarantor in accordance with the previous sentence, the right of such Subsidiary Guarantor to contribution from other Subsidiary Guarantors, and any other rights such Subsidiary Guarantor may have, will be taken into account. See, however, "Risk Factors--Fraudulent Conveyance Considerations." 84 The Subsidiary Guarantee of each Subsidiary Guarantor is subordinated to the prior payment in full of all existing and future Senior Debt of such Subsidiary Guarantor, including the guarantee of such Subsidiary Guarantor of the Company's obligations under the Senior Notes and the Senior Credit Facility. At July 26, 1997, on a Pro Forma Basis, the Subsidiary Guarantors would have had an aggregate of approximately $10.4 million of Senior Debt outstanding (excluding guarantees by the Subsidiary Guarantors of the Company's obligations under the Senior Notes and the Senior Credit Facility). The Indenture permits the Subsidiary Guarantors to incur additional Senior Debt, subject to certain limitations. The Indenture provides that, except as may be prohibited by the terms of the Indenture described herein under "Certain Covenants" and "Repurchase at the Option of Holders--Change of Control" and "--Asset Sales," nothing contained in the Indenture or in any of the Notes will prevent any consolidation or merger of a Subsidiary Guarantor with or into a corporation or corporations other than the Company or any other Subsidiary Guarantor (in each case, whether or not affiliated with the Subsidiary Guarantor), or successive consolidations or mergers in which a Subsidiary Guarantor or its successor or successors will be a party or parties, or will prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety, to a corporation other than the Company or any other Subsidiary Guarantor (in each case, whether or not affiliated with the Subsidiary Guarantor) authorized to acquire and operate the same; PROVIDED, however, that each Subsidiary Guarantor covenants and agrees that: (i) upon any such consolidation, merger, sale or conveyance, the Subsidiary Guarantee endorsed on the Notes, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture to be performed by such Subsidiary Guarantor, will be expressly assumed (in the event that the Subsidiary Guarantor is not the surviving corporation in the merger), by a supplemental indenture substantially in the form provided for in the Indenture, executed and delivered to the Trustee, by the corporation formed by such consolidation, or into which the Subsidiary Guarantor shall have been merged, or by the corporation which shall have acquired such property; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Company would be permitted, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described below under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock." The foregoing will not prohibit (i) any consolidation or merger of a Subsidiary Guarantor with or into the Company or any other Subsidiary Guarantor or (ii) any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety, to the Company or any other Subsidiary Guarantor. The Indenture provides that concurrently with any sale of assets (including, if applicable, all of the Capital Stock of any Subsidiary Guarantor), any Liens in favor of the Trustee in the assets sold thereby will be released; PROVIDED that, in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of the covenant described herein under the caption "Repurchase at the Option of Holders--Asset Sales." The Indenture further provides that if the assets sold in such sale or other disposition include all or substantially all of the assets of any Subsidiary Guarantor or all of the Capital Stock of any Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or other disposition of all of the Capital Stock of such Subsidiary Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of a Subsidiary Guarantor) will be released from and relieved of its Obligations under its Subsidiary Guarantee; PROVIDED that (i) in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of the covenant described herein under the caption "Repurchase at the Option of Holders--Asset Sales" and (ii) the Company is in compliance with all other provisions of the Indenture applicable to such disposition. OPTIONAL REDEMPTION Except as provided in the following paragraph, the Notes are not redeemable at the Company's option prior to September 15, 2002. Thereafter, the Notes are subject to redemption at the option of the 85 Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of the years indicated below:
YEAR PERCENTAGE 2002.......................................................... 105.188% 2003.......................................................... 103.458% 2004.......................................................... 101.729% 2005 and thereafter........................................... 100.000%
Notwithstanding the foregoing, at any time prior to September 15, 2000 the Company may on any one or more occasions redeem up to 33 1/3% of the aggregate principal amount of Notes originally issued in the Offering at a redemption price of 110.375% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date, with the net proceeds of one or more Public Equity Offerings; PROVIDED that at least 66 2/3% of the original aggregate principal amount of Notes remains outstanding immediately after the occurrence of each such redemption; and PROVIDED, further, that each such redemption shall occur within 120 days of the date of the closing of the Public Equity Offering to which it relates. MANDATORY REDEMPTION Except as set forth below under "Repurchase at the Option of Holders," the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL The Indenture provides that upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail or cause to be mailed a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof. The Indenture provides that, prior to complying with the provisions of this covenant, but in any event within 30 days following a Change of Control, the Company will either repay all outstanding Senior Debt, or offer to repay in full all outstanding Senior Debt and repay the Senior Debt with respect to which such offer has been accepted, or obtain the requisite consents, if any, under all outstanding Senior Debt to permit the repurchase of the Notes required by this covenant. The Indenture provides that on the payment date set forth in the Change of Control Offer (the "Change of Control Payment Date"), the Company will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Trustee or with the Paying Agent (or, if the Company or any of its subsidiaries is the Paying Agent, 86 separate and hold in trust) an amount in same-day funds equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee for cancellation the Notes so accepted together with an Officers' Certificate stating that such Notes or portions thereof have been tendered to and purchased by the Company. The Indenture provides that the Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar restructuring. The existence of a Holder's right to require the Company to repurchase such Holder's Notes upon the occurrence of a Change of Control may deter a third party from seeking to acquire the Company in a transaction that would constitute a Change of Control. "CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Principals, their Related Parties, the DLJ Entities or their Affiliates, (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the Company consolidates with, or merges with or into, another "person" (as defined above) in a transaction or series of related transactions in which the voting stock of the Company is converted into or exchanged for cash, securities or other property, other than any transaction where (A) the outstanding voting stock of the Company is converted into or exchanged for voting stock (other than Disqualified Stock) of the surviving or transferee corporation and (B) either (1) the "beneficial owners" (as such term is defined in Rule 13d-3 and 13d-5 under the Exchange Act) of the voting power of the voting stock of the Company immediately prior to such transaction own, directly or indirectly through one or more Subsidiaries, not less than a majority of the total voting power of the voting stock of the surviving or transferee corporation immediately after such transaction or (2) if immediately prior to such transaction the Company is a direct or indirect Subsidiary of any other Person (the "Holding Company"), then the "beneficial owners" (as defined above) of the voting stock of such Holding Company immediately prior to such transaction own, directly or indirectly through one or more Subsidiaries, not less than a majority of the voting power of the voting stock of the surviving or transferee corporation immediately after such transaction, (iv) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that (A) the Principals, their Related Parties, the DLJ Entities or their Affiliates cease to be the "beneficial owners" (as defined above), directly or indirectly, of at least 35% of the voting power of the voting stock of the Company and (B) any "person" (as defined above) becomes the "beneficial owner" (as defined above; PROVIDED that at any time following the occurrence of a Public Equity Offering, the term "beneficial owner" shall exclude for such purpose the effect of Rule 13d-3(d)(1), other than any such effect with respect to the Warrants) directly or indirectly, of more of the voting power of the voting stock of the Company than is at the time "beneficially owned" (as defined above) by the Principals, their Related Parties, the DLJ Entities and their Affiliates in the aggregate, or (v) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. For purposes of this definition, any transfer of an equity interest of an entity that was formed for the purpose of acquiring voting stock of the Company will be deemed to be a transfer of such portion of such voting stock as corresponds to the portion of the equity of such entity that has been so transferred. 87 The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of the Company and its Restricted Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Restricted Subsidiaries taken as a whole to another Person or group may be uncertain. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "DLJ ENTITIES" means DLJ Merchant Banking Partners, L.P., DLJ Offshore Partners, C.V. and DLJ Merchant Banking Funding, Inc. "PRINCIPALS" means (i) the Fund and any of its Affiliates and (ii) Messrs. W. H. Holman, Jr., W. H. Holman III, Essary, Friou, Bruckmann, Rosser, Sherrill and Edwards. "RELATED PARTY" means (i) any controlling stockholder, general partner, 80% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of any Principal or (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons holding an 80% or more controlling interest of which consist solely of one or more Principals and/or such other Persons referred to in the immediately preceding clause (i). ASSET SALES The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of; and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets and (y) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision and PROVIDED further that (1) the 75% limitation referred to above shall not apply to any Asset Sale in which the cash or Cash Equivalents portion of the consideration received therefor, determined in accordance with the foregoing proviso, is equal to or greater than what the net after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation and (2) the provisions of clauses (i) and (ii) above shall not apply to any sale or other disposition of assets required pursuant to a consent order or other agreement entered into by the Company with the Federal Trade Commission or the Department of Justice in connection with the Delchamps Acquisition. Within 435 days after the receipt of any Net Proceeds from an Asset Sale, the Company or its Restricted Subsidiary, as the case may be, may apply such Net Proceeds by (i) permanently reducing Indebtedness under the Senior Credit Facility (and correspondingly reducing commitments with respect thereto) or other Senior Debt, (ii) investing (or entering into a binding commitment to invest) in any one or more business, capital expenditure or other tangible asset, in each case in the same line of business as the Company or its Restricted Subsidiaries was engaged in on the date of the Indenture or a line of 88 business reasonably related thereto, (iii) investing (or entering into a binding commitment to invest) in properties or assets that replace the properties and assets that are the subject of such Asset Sale and (iv) in the case of a sale of a store or stores, deeming such Net Proceeds to have been applied to the extent of any capital expenditures made to acquire or construct another store within 435 days preceding the date of the Asset Sale; PROVIDED that if such Net Proceeds are applied by entering into a binding commitment under clause (ii) or (iii) above, then the investment contemplated by such commitment shall be made no later than 45 days following the end of such 435 day period. Pending the final application of any such Net Proceeds, the Company or its Restricted Subsidiary, as the case may be, may temporarily reduce Indebtedness under the Senior Credit Facility or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company will be required to make an offer to all Holders (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at a price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the aggregate amount of Excess Proceeds, the Company or its Restricted Subsidiary, as the case may be, may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the aggregate amount of Excess Proceeds, the Trustee shall select the Notes to be purchased in accordance with the terms of the Indenture. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. CERTAIN RESTRICTIONS ON REPURCHASES Certain of the Company's Senior Debt, including Indebtedness under the Senior Credit Facility and the Senior Notes, currently prohibits or restricts the Company from purchasing any Notes, and also provides that certain changes in control of the Company and certain dispositions of Company assets would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs, or an Asset Sale Offer is required to be made, at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the Indenture. SELECTION AND NOTICE If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate; PROVIDED that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption. 89 CERTAIN COVENANTS RESTRICTED PAYMENTS The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or dividends or distributions payable to the Company or any Restricted Subsidiary of the Company that is a Subsidiary Guarantor) on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including in connection with a merger or consolidation); (ii) purchase, redeem or otherwise acquire or retire for value any outstanding Equity Interests of the Company or any Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary Guarantor); (iii) make any principal payment on, or purchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, any sinking fund date or its scheduled maturity date, any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees; (iv) make any Restricted Investment or (v) make any payment pursuant to the BRS Management Agreement (all such payments and other actions set forth in clauses (i) through (v) above being collectively referred to as "Restricted Payments"), unless: (a) at the time of and after giving effect to such Restricted Payment, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock"; and (c) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (o), (s)(ii), (x) and (y) of the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds (or non-cash proceeds when converted into cash) received by the Company in the form of capital contributions or from the issue, sale or exercise since the date of the Indenture of Equity Interests of the Company or of debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after the date of the Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment, plus (iv) 50% of the excess, if any, of the cash received upon the sale or other disposition of a Restricted Investment over the amount described in clause (iii) above. The foregoing provisions do not prohibit: (o) any repurchase, redemption or retirement for value of capital stock of a Restricted Subsidiary of the Company deemed to occur upon the merger of such Restricted Subsidiary with or into the Company or another Wholly Owned Restricted Subsidiary of the Company within one year following the date on which such merged Restricted Subsidiary became a Restricted Subsidiary of the Company; (p) acquisition and retirement by the Company of any Class B Preferred Stock in satisfaction of any claim by the Company for indemnity pursuant to the 1996 Merger 90 Agreement; (q) retirement of the Class A Preferred Stock in connection with the issuance by the Company of the Exchange Debentures; (r) the payment of cash in lieu of the issuance of (A) fractional shares of common stock upon exercise of the Warrants and (B) any Exchange Debenture that is not an integral multiple of $1,000 upon any exchange of Class A Preferred Stock for Exchange Debentures; (s) the amendment of the BRS Management Agreement to permit the payment of, and the payment of, fees to BRS or any Affiliate of BRS (i) under the BRS Management Agreement after the end of each fiscal quarter in an amount not to exceed the greater of (a) $250,000 or (b) 1.0% of the Company's EBITDA for such fiscal quarter (PROVIDED, that the total amount of all such payments shall not exceed in any fiscal year the greater of (x) $1.0 million or (y) one percent of the Company's EBITDA for such fiscal year) and (ii) in connection with the Delchamps Acquisition in an amount not to exceed $5.0 million in the aggregate; (t) the payment of dividends on the Company's capital stock, following the first Public Equity Offering after the date of the Indenture, of up to 6.0% of the aggregate proceeds to the Company in such Public Equity Offering, other than a public offering with respect to the Company's common stock registered on Form S-8; (u) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (v) the repurchase of the Class A Preferred Stock in accordance with the terms thereof upon the occurrence of a Change of Control; (w) the redemption of Exchange Debentures in accordance with the terms thereof upon the occurrence of a Change of Control; (x) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests of the Company (other than any Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (y) the defeasance, redemption, repurchase, retirement or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness or the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of Equity Interests of the Company (other than Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, defeasance, retirement or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; and (z) the repurchase, redemption, defeasance or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement or stock option agreement in effect as of the date of the Indenture or any other option plan adopted by the Board of Directors of the Company; PROVIDED that the aggregate price paid for all such repurchased, redeemed, defeased, acquired or retired Equity Interests shall not exceed $2.0 million in any twelve-month period plus (i) the aggregate cash proceeds received by the Company during such twelve-month period from any issuance of Equity Interests by the Company to members of management of the Company and its Restricted Subsidiaries and (ii) the proceeds of any insurance policy to the extent applied toward such repurchase, redemption, defeasance or other acquisition or retirement for value of such Equity Interests; PROVIDED, that with respect to clause (z) above, no Default or Event of Default shall have occurred and be continuing immediately after such transaction. As of the date of the Indenture, all of the Company's Subsidiaries are Restricted Subsidiaries. The Board of Directors may designate any Restricted Subsidiary (other than Interstate Jitney Jungle Stores, Inc., McCarty-Holman Co., Inc., Southern Jitney Jungle Company, Pump And Save, Inc., DAC, Supermarket Cigarette Sales, Inc. ("SCSI") and Delchamps, Inc.) to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greatest of (x) the net book value of such Investments at the time of such designation and (y) the fair market value of 91 such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) on the date of the Restricted Payment of the asset(s) proposed to be transferred by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed, which calculations may be based upon the Company's latest available internal financial statements. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, Guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Indebtedness) and that the Company will not issue and will not permit any of its Restricted Subsidiaries to issue any Disqualified Stock (other than the Preferred Stock); PROVIDED, however, that the Company or its Restricted Subsidiaries may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been (A) at least 2.25 to 1.0 if such date is prior to September 15, 2000 and (B) 2.50 to 1.0 if such date is on or after September 15, 2000, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The foregoing provisions do not apply to: (i) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness and reimbursement obligations in respect of letters of credit pursuant to the Senior Credit Facility (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) in an aggregate principal amount not to exceed an amount equal to (x) the greater of (1) the amount of the Borrowing Base and (2) $150.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied to permanently reduce the total commitments with respect to such Indebtedness pursuant to the covenant described above under the caption "Repurchase at Option of Holders--Asset Sales" plus (y) $50.0 million less any outstanding Indebtedness incurred pursuant to clause (viii) below; (ii) the incurrence by the Company or any of its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by the Notes, the New Notes and the Subsidiary Guarantees; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage or construction financing or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount not to exceed $30.0 million in any fiscal year; PROVIDED that the principal amount (or, in the case of a Capital Lease Obligation, the amount required to be capitalized on a balance sheet under GAAP) of such Indebtedness when incurred shall not 92 exceed the purchase price and/or actual cost of construction or improvement, as the case may be, to which such incurrence relates; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, Indebtedness that was permitted by the Indenture to be incurred; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries; PROVIDED, however, that (i) any subsequent issuance or transfer (other than for security purposes) of Equity Interests that results in any such Indebtedness being held by a Person other than a Wholly Owned Restricted Subsidiary and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of the Indenture to be outstanding; (viii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other clause of this paragraph) in an aggregate principal amount at any time outstanding not to exceed $50.0 million less the amount of any Indebtedness incurred pursuant to clause (i)(y) of this paragraph; (ix) the incurrence by the Company or any of its Restricted Subsidiaries of Acquired Indebtedness, PROVIDED that such Indebtedness (A) is not incurred in contemplation of the acquisition to which it relates and (B) is nonrecourse to the Company and its Restricted Subsidiaries, or to any of their respective assets (other than the acquired Subsidiary and its Subsidiaries, or the acquired assets, as applicable); (x) the incurrence by the Company of Indebtedness pursuant to Exchange Debentures described under clause (2) of the definition of Exchange Debentures; (xi) the Guarantee of any Indebtedness otherwise permitted to be incurred pursuant to the Indenture; and (xii) Obligations in respect of performance and surety bonds. LIENS The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness on any asset now owned or hereafter acquired by the Company or any of its Restricted Subsidiaries, or any income or profits therefrom, or assign or convey any right to receive income therefrom; PROVIDED, however that the Company and its Restricted Subsidiaries may create, incur, assume or suffer to exist a Lien securing Pari Passu Indebtedness if the Notes are equally and ratably secured with the obligations so secured until such time as such obligations are no longer secured by a Lien. 93 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries on its Capital Stock or (b) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (ii) make loans or advances to the Company or any of its Restricted Subsidiaries; or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except (in each case) for such encumbrances or restrictions existing under or by reason of: (a) the Existing Indebtedness as in effect on the date of the Indenture; (b) the Senior Credit Facility, as in effect as of the date of the Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof; PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive in the aggregate than those contained in the Senior Credit Facility, as in effect on the date of the Indenture; (c) the Indenture, the Subsidiary Guarantees and the Notes; (d) applicable law; (e) any instrument governing Capital Stock or Indebtedness of any Person acquired by the Company or any of its Restricted Subsidiaries, as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with, or in contemplation of, such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the properties or assets of the Person, so acquired; (f) customary non-assignment and subletting provisions in leases and other contracts entered into in the ordinary course of business and consistent with past practices; (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired; (h) Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive in the aggregate than those contained in the agreements governing the Indebtedness being refinanced; (i) contractual encumbrances or restrictions in effect on the date of the Indenture; (j) mortgage or construction financing that imposes restrictions on the real property acquired or improved; (k) contracts for the sale of assets that include customary restrictions concerning the disposition of property; (l) secured indebtedness permitted by the Indenture that limits the right to dispose of the assets securing the indebtedness; and (m) encumbrances or restrictions imposed by any amendments to the contracts, agreements or obligations referred to in clauses (a) through (l) above if not more restrictive in the aggregate than under existing contracts. 94 ADDITIONAL GUARANTEES The Indenture provides that if the Company or any of its Restricted Subsidiaries shall, after the date of the Indenture, transfer or cause to be transferred, in one transaction or a series of related transactions, any assets, businesses, divisions, real property or equipment having an aggregate fair market value (as determined in good faith by the Board of Directors) in excess of $1.0 million to any Subsidiary that is not a Subsidiary Guarantor, or if the Company or any of its Restricted Subsidiaries shall acquire another Subsidiary having total assets with a fair market value (as determined in good faith by the Board of Directors) in excess of $1.0 million, then such transferee or acquired Subsidiary shall execute a Subsidiary Guarantee and a supplemental indenture and deliver to the Trustee an opinion of counsel in accordance with the terms of the Indenture. Notwithstanding the foregoing, if such transferee or acquired Subsidiary has been properly designated as an Unrestricted Subsidiary in accordance with the Indenture, then for so long as it continues to constitute an Unrestricted Subsidiary that transferee or acquired Subsidiary shall not be required to execute a Subsidiary Guarantee or deliver to the Trustee an opinion of counsel in accordance with the terms of the Indenture. MERGER, CONSOLIDATION, OR SALE OF ASSETS The Indenture provides that the Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another Person unless (i) the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof, the District of Columbia or a territory thereof; (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described above under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock." The foregoing will not prohibit any consolidation or merger of, or transfer of all or part of the property and assets of, any Restricted Subsidiary with or to the Company or any Subsidiary Guarantor. TRANSACTIONS WITH AFFILIATES The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make any contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with clause (i) above and that such Affiliate Transaction or series of related Affiliate Transactions 95 has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million (other than Affiliate Transactions in the ordinary course of business of the Company and its Restricted Subsidiaries between or among the Company or any Restricted Subsidiary of the Company and any Person providing goods and/or services to the Company or any Restricted Subsidiary in the ordinary course of business that is an Affiliate of the Company or such Restricted Subsidiary solely by virtue of the fact that the Fund, or any Person controlling the Fund, directly or indirectly controls both the Company or such Restricted Subsidiary and such Affiliate; PROVIDED, however, that such Affiliate Transaction shall comply with clause (i) above), an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an independent nationally recognized investment banking or appraisal firm experienced in the appraisal or similar review of similar types of transactions (or if an opinion is unavailable as to the fairness from a financial point of view of any transaction for which a fairness opinion is not customarily rendered then an opinion that such transaction meets the requirements of clause (i) above); PROVIDED that (u) payments by Delchamps pursuant to change of control agreements with certain employees of Delchamps in an amount not to exceed $13.0 million, (v) payments to McCarty-Holman Co., L.P. in accordance with the terms of the Management Agreement in an amount not to exceed $100,000 in each fiscal year, (w) the 18 leases described elsewhere in this Offering Memorandum under the caption "Certain Transactions--Leases of Certain Stores and Facilities," (x)(1) any employment agreement entered into by the Company or any of its Restricted Subsidiaries and (2) payment of employee benefits, including bonuses, retirement plans and stock options, in each case, in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, (y) transactions between or among the Company and/or its Restricted Subsidiaries and (z) transactions permitted by the provisions of the Indenture described above under the caption "Certain Covenants--Restricted Payments," in each case, shall not be deemed Affiliate Transactions. SALE AND LEASEBACK TRANSACTIONS The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction (other than the sale and leaseback of newly constructed grocery stores as part of the development of grocery store sites); PROVIDED that the Company and its Restricted Subsidiaries may enter into a sale and leaseback transaction if (i) the Company or such Restricted Subsidiary could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "Certain Covenants--Incurrence of Additional Indebtedness and Issuance of Disqualified Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described above under the caption "Certain Covenants--Liens," (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Company's Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the Company or such Restricted Subsidiary applies the proceeds of such transaction in compliance with, the covenant described above under the caption "Repurchase at Option of Holders--Asset Sales." LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF GUARANTORS The Indenture provides that, except with respect to the pledge of Capital Stock of its Subsidiaries pursuant to the Senior Credit Facility, the Company (i) will not, and will not permit any Wholly Owned Restricted Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Subsidiary Guarantor to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary Guarantor), unless (a) such transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Subsidiary Guarantor and (b) the cash Net Proceeds 96 from such transfer, conveyance, sale, lease or other disposition are applied in accordance with the covenant described above under the caption "Repurchase at Option of Holders--Asset Sales," and (ii) will not permit any Subsidiary Guarantor to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or another Subsidiary Guarantor. NO SENIOR SUBORDINATED DEBT The Indenture provides that (i) the Company will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes, and (ii) no Subsidiary Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Subsidiary Guarantor and senior in any respect in right of payment to the Subsidiary Guarantees. For purposes of this provision, no Indebtedness shall be deemed to be subordinated in right of payment to any other Indebtedness solely by reason of the fact that such other Indebtedness is secured by a Lien or is subject to a Guarantee. BUSINESS ACTIVITIES The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than (i) the retail and wholesale grocery business and such business activities as are incidental or reasonably related thereto, including the sale of liquor and the retail gasoline business, and (ii) such other businesses as the Company or its Restricted Subsidiaries are engaged in on the date of the Indenture. NO RESTRICTIONS ON CONSUMMATION OF DELCHAMPS ACQUISITION The Indenture provides that, notwithstanding any provision contained herein to the contrary, the Indenture will not prohibit the consummation of the Delchamps Acquisition and the transactions related thereto in accordance with the terms set forth in this Prospectus and in the tender offer statement on Schedule 14D-1, as filed with the Securities and Exchange Commission (the "Commission") on July 14, 1997 and as subsequently amended or supplemented, naming Delchamps, Inc. as the subject company. REPORTS The Indenture provides that so long as required to do so under the Exchange Act, the Company shall file with the Commission and distribute to the Holders copies of the quarterly and annual financial information required to be filed with the Commission pursuant to the Exchange Act. All such financial information shall include consolidated financial statements (including footnotes) prepared in accordance with GAAP. Such annual financial information shall also include an opinion thereon expressed by an independent accounting firm of established national reputation. All such consolidated financial statements shall be accompanied by a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Restricted Subsidiaries. In addition, the Indenture provides that, whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company will furnish to the Holders (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that complies with the rules and regulations of the Commission and that describes the financial condition and results of operations of the Company and its Restricted Subsidiaries and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will submit a copy of all such information and reports to the Commission for 97 public availability (unless the Commission will not accept such materials) and make such information available to prospective investors upon written request. In addition, the Company has agreed that, during any period in which the Company is not subject to the reporting requirements of the Exchange Act, it will furnish to holders and prospective purchasers of the Notes the information required by Rule 144A(d)(4) under the Securities Act. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due, upon redemption, acceleration or otherwise, of interest on, or Liquidated Damages with respect to, the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes; (iii) failure by the Company for 30 days after receipt of written notice from the Trustee or from Holders of at least 25% of the aggregate principal amount of the Notes then outstanding to comply with the provisions described under the captions "Repurchase at Option of Holders--Change of Control" and "--Asset Sales," and under the captions "Certain Covenants--Restricted Payments" and "-- Incurrence of Indebtedness and Issuance of Disqualified Stock"; (iv) failure by the Company for 60 days after receipt of written notice from the Trustee or from Holders of at least 25% of the aggregate principal amount of the Notes then outstanding to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries (other than Indebtedness owed to the Company or its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, if both (a) such default either (1) results from the failure to pay any such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or (2) relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $15.0 million or more; (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments (other than any judgments as to which a reputable insurance company has accepted liability) aggregating in excess of $15.0 million, which judgments are not paid, discharged, bonded or stayed for a period of 60 days after their entry; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company, any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Restricted Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; PROVIDED, however, that, so long as any Designated Senior Debt shall be outstanding, no such acceleration shall be effective until the earlier of (i) acceleration of any such Designated Senior Debt or (ii) five business days after the giving of written notice to the Company and the representatives under the Designated Senior Debt of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, any Significant Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Restricted Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. In the event of any Event of Default specified in clause (v) above, such Event of Default and all consequences thereof (including, without limitation, any acceleration or resulting payment 98 default) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders of the Notes, if within 20 days after such Event of Default arose (x) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged in a manner that does not violate the terms of the Indenture or (y) the holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, interest or Liquidated Damages) if it determines that withholding notice is in their interest. In addition, the Trustee shall have no obligation to accelerate the Notes if, in the best judgment of the Trustee, acceleration is not in the best interests of the Holders. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to September 15, 2002 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to September 15, 2002, then the premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or Liquidated Damages with respect to, or the principal of, any such Note held by a non-consenting Holder. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company under the Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Subsidiary Guarantees. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have all obligations of the Company and the Subsidiary Guarantors discharged with respect to the outstanding Notes and the Subsidiary Guarantees ("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest and Liquidated Damages, if any, on such Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company 99 may, at its option and at any time, elect to have the obligations of the Company and the Subsidiary Guarantors released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages, if any, on the outstanding Notes on the stated maturity date or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of the Subsidiary Guarantors is a party or by which the Company or any of the Subsidiary Guarantors is bound; (vi) on or prior to the 91st day following the deposit, the Company must have delivered to the Trustee an opinion of counsel to the effect that, subject to customary assumptions and exclusions, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) the Company must have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (viii) the Company must have delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that, subject to customary assumptions and exclusions, all conditions precedent provided for in the Indenture relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Registrar is not required to transfer or exchange any Note selected for redemption. Also, 100 the Registrar is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default or compliance with any provision of the Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest or Liquidated Damages on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest or Liquidated Damages on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders") or (viii) make any change in the foregoing amendment and waiver provisions. In addition, any amendment to the subordination provisions of the Indenture will require the consent of the Holders of at least 75% in aggregate principal amount of the Notes then outstanding if such amendment would adversely affect the legal rights of Holders. Notwithstanding the foregoing, without the consent of any Holder, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture, the Subsidiary Guarantees or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders in the case of a merger, consolidation or sale of assets in accordance with the terms of the Indenture, to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. GOVERNING LAW The Indenture, the Subsidiary Guarantees and the Notes are, subject to certain exceptions, governed by and construed in accordance with the internal laws of the State of New York, without regard to the choice of law rules thereof. 101 CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee is permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. 102 CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "1996 MERGER" means the transactions contemplated by the 1996 Merger Agreement. "1996 MERGER AGREEMENT" means the Merger Agreement and Plan of Exchange and Merger, dated as of November 16, 1995, by and among BRS No. 1, Inc. (renamed JJ Acquisitions Corp.) and Jitney-Jungle Stores of America, Inc., Southern Jitney Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery, Inc., as amended. "ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (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 that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. Notwithstanding the foregoing, in no event will the holders of Indebtedness under or in respect of the Senior Credit Facility (by reason of holding such Indebtedness) or Donaldson, Lufkin & Jenrette Securities Corporation or any of their respective Affiliates be deemed Affiliates of the Company or any of its Affiliates. "ASSET SALE" means: (i) the sale, conveyance, transfer or other disposition of any assets (including, without limitation, by way of a sale and leaseback) other than sales of inventory in the ordinary course of business (provided that the sale, conveyance, transfer or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "Repurchase at Option of Holders--Change of Control" and/or the provisions described above under the caption "Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant) or (ii) the issuance or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of clauses (i) and (ii) above, whether in a single transaction or a series of related transactions for net proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i) a sale, conveyance, transfer or other disposition of assets by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary; (ii) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary and (iii) a Restricted Payment that is permitted by the covenant described above under the caption "Certain Covenants--Restricted Payments," in each case, shall not be deemed to be Asset Sales. "ATTRIBUTABLE DEBT" means, in respect of a sale and leaseback transaction, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). 103 "BRS MANAGEMENT AGREEMENT" means that certain management agreement, dated September 8, 1995 between BRS and the Company, as amended on February 29, 1996 and on the date of the Indenture, and as it may be further amended from time to time. "BORROWING BASE" means 60% of the net book value of all inventory of the Company and its Restricted Subsidiaries. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any lender party to the Senior Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within one year after the date of acquisition. "CLASS A PREFERRED STOCK" means the Class A Senior Exchangeable Preferred Stock, par value $0.01 per share, of the Company. "CLASS B PREFERRED STOCK" means the Class B Compounding Cumulative Redeemable Preferred Stock, par value $0.01 per share, of the Company. "CLASS C PREFERRED STOCK" means the Class C Compounding Cumulative Preferred Stock, Series 1 and Series 2, par value $0.01 per share, of the Company. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; PROVIDED that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included to the extent of the amount of dividends or distributions paid in cash (or converted into cash) to the referent Person or a Wholly Owned Restricted Subsidiary thereof that is a Subsidiary Guarantor, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "DEFAULT" means any event that is or with the passage of time or the giving of notice or both would become an Event of Default. 104 "DELCHAMPS ACQUISITION" means the Delchamps Merger and the Delchamps Tender Offer. "DELCHAMPS MERGER" means the merger contemplated by the Delchamps Merger Agreement. "DELCHAMPS MERGER AGREEMENT" means the Agreement and Plan of Merger, dated July 8, 1997, by and among the Company, Delta Acquisition Corporation and Delchamps, Inc. "DELCHAMPS TENDER OFFER" means the tender offer contemplated by the Delchamps Merger Agreement. "DESIGNATED SENIOR DEBT" means (i) for so long as any Indebtedness is outstanding under the Senior Credit Facility or the Senior Notes, any such Indebtedness, and (ii) any other Senior Debt permitted under the Indenture the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the Notes mature. "EBITDA" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary or non-recurring loss plus any net loss realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the dispositions of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries (in the case of clauses (a) and (b) above, to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of original issue discount, non- cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financing, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) non-cash LIFO charges (credits) of such person and its Restricted Subsidiaries for such period, plus (v) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash charges (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash charges were deducted in computing such Consolidated Net Income, plus (vi) non-recurring severance and transaction costs incurred in connection with any acquisition, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXCHANGE DEBENTURES" means the Company's Class A Exchange Debentures due 2008 issuable (1) in exchange for outstanding shares of Class A Preferred Stock at the Company's option on the date of any scheduled dividend payment with respect to the Class A Preferred Stock and (2) as payment of interest 105 with respect to outstanding Class A Exchange Debentures due 2008, in each case, pursuant to the indenture related thereto in the form as in effect on the date of the Indenture. "EXISTING INDEBTEDNESS" means (i) up to $75.0 million of Indebtedness under Capital Lease Obligations of the Company and its Restricted Subsidiaries in existence on the date of the Indenture, (ii) up to $200.0 million in aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries under the Senior Notes, (iii) up to $13.0 million in aggregate principal amount of other Indebtedness of the Company and its Restricted Subsidiaries (excluding Indebtedness under the Senior Credit Facility) in existence on the date of the Indenture until such amounts are repaid and (iv) up to $16.0 million of Acquired Indebtedness in connection with the Delchamps Acquisition. "FIXED CHARGES" means, with respect to any Person for any period, the sum of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, to the extent such expense was included in computing Consolidated Net Income (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financing, and net payments (if any) pursuant to Hedging Obligations), (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash (other than dividend payments to the Company or any Restricted Subsidiary and other than dividend payments on Equity Interests of the Company and its Restricted Subsidiaries that are paid solely in additional shares, or by accretion to the liquidation preference, of such Equity Interests) on any series of preferred stock of such Person and its Restricted Subsidiaries, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person and its Restricted Subsidiaries, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the EBITDA of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. For purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period, and (ii) the EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. 106 "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of the Indenture. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "INDEBTEDNESS" means, with respect to any Person and without duplication, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; PROVIDED that an acquisition of assets, Equity Interests or other securities by the Company for consideration consisting of common equity securities of the Company shall not be deemed to be an Investment. "IRB INDEBTEDNESS" means that certain Indebtedness of McCarty-Holman Co., Inc. pursuant to the Industrial Revenue Bond Issue with the City of Jackson, Mississippi, dated December 1, 1985, evidenced by the Lease recorded in Book 3166 at Page 443 of the Land Records of Hinds County, First Judicial District, Mississippi, including all agreements and documents related thereto. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement (other than with respect to a lease that does not create a Capital Lease Obligation) under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "MANAGEMENT AGREEMENT" means that certain Management Agreement, dated March 19, 1980, between McCarty-Holman Co., L.P. and the Company, concerning the management of leased properties. "NET INCOME" means, with respect to any Person, the net income (loss) of such Person and its Restricted Subsidiaries, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any 107 securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness (other than Indebtedness described in clause (i) of the second paragraph under "--Asset Sales") secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) and (b) is directly or indirectly liable (as a guarantor or otherwise); and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "PARI PASSU INDEBTEDNESS" means Indebtedness of the Company or any of its Restricted Subsidiaries that ranks PARI PASSU in right of payment to the Notes or any Guarantee thereof. "PERMITTED INVESTMENTS" means (a) any Investments in the Company or in a Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (b) any Investments in Cash Equivalents; (c) Investments by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary of the Company and a Subsidiary Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (d) Restricted Investments made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "Repurchase at the Option of Holders--Asset Sales"; and (e) other Investments in any Person that do not exceed $1.5 million at any time outstanding. "PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company and debt securities of the Company or any Subsidiary Guarantor that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt of the Company or such Subsidiary Guarantor) to substantially the same extent as, or to a greater extent than, the Notes or Subsidiary Guarantees, as applicable, are subordinated to Senior Debt pursuant to the subordination provisions of the Indenture. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries that is permitted to be incurred by the provisions of the Indenture; PROVIDED, that, except with respect to Capital Lease Obligations, (i) the principal amount (or accreted value, as applicable) of, or (with respect to 108 revolving credit Indebtedness) maximum commitment under, such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, as applicable) of, or (with respect to revolving credit Indebtedness) maximum commitment under, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of premiums and reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and (other than with respect to revolving credit Indebtedness) has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company and/or by a Subsidiary Guarantor. "PERSON" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "PREFERRED STOCK" means the Class A Preferred Stock, the Class B Preferred Stock and the Class C Preferred Stock. "PUBLIC EQUITY OFFERING" means a public offering of common stock of the Company. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "SENIOR CREDIT FACILITY" means that certain revolving credit agreement, dated as of March 5, 1996, as amended and restated on or prior to the date of the Indenture, by and among the Company, each of the Subsidiary Guarantors and the lenders named therein, and Fleet Capital Corporation, as successor agent to Fleet Bank, N.A., including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as it may from time to time be amended, renewed, supplemented or otherwise modified at the option of the parties thereto and any other agreement pursuant to which any of the Indebtedness, commitments, Obligations, costs, expenses, fees, reimbursements and other indemnities payable or owing thereunder may be refinanced, restructured, renewed, extended, increased, replaced or refunded, as any such other agreements may from time to time at the option of the parties thereto be amended, supplemented, renewed or otherwise modified, in each case, whether or not with the same group of lenders. "SENIOR DEBT" means (i) Indebtedness pursuant to the Senior Credit Facility, (ii) Indebtedness pursuant to the Senior Notes or guarantees thereof, as applicable, (iii) the IRB Indebtedness, (iv) any other Indebtedness permitted to be incurred by the Company or a Restricted Subsidiary under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or the Subsidiary Guarantees, as applicable, and (v) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (w) any liability for federal, state, local or other taxes owed or owing by the Company or any Subsidiary Guarantor, (x) any Indebtedness of the Company or any Subsidiary Guarantor to any of their respective Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of the Indenture. "SENIOR NOTES" means the 12% Senior Notes of the Company due 2006. 109 "SIGNIFICANT RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. "SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries which is by its terms expressly subordinated in right of payment to the Notes, any Subsidiary Guarantee or any other Indebtedness that is subordinated in right of payment to the Notes or any Subsidiary Guarantee. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "SUBSIDIARY GUARANTORS" means each of (i) Interstate Jitney-Jungle Stores, Inc., an Alabama corporation; (b) McCarty-Holman Co., Inc., a Mississippi corporation; (c) Southern Jitney Jungle Company, a Mississippi Corporation; (d) Pump And Save, Inc., a Mississippi corporation; (e) DAC; (f) SCSI and (g) Delchamps and (ii) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company (other than Interstate Jitney-Jungle Stores, Inc., McCarty-Holman Co., Inc., Southern Jitney Jungle Company, Pump And Save, Inc. DAC, SCSI and Delchamps or any successor to any of them) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution and (ii) any Subsidiary of an Unrestricted Subsidiary; but, in each case, only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an officers' certificate indicating that such designation complied with the foregoing conditions and was permitted by the covenant described above under the caption "Certain Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock," the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall 110 only be permitted if (i) such Indebtedness is permitted under the covenant described under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock," (ii) no Default or Event of Default would be in existence immediately following such designation and (iii) the Company shall have delivered to the Trustee an officers' certificate indicating that such designation complied with the foregoing conditions. "WARRANTS" means the warrants to purchase up to 15% (on a fully diluted basis) of the common stock, par value $0.01 per share, of the Company dated March 5, 1996. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person, or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. 111 BOOK-ENTRY; DELIVERY AND FORM Except as set forth below, the New Notes will initially be issued in the form of one registered note in global form without coupons (the "Global Note"). Upon issuance, the Global Note will be deposited with, or on behalf of, the Depository Trust Company (the "Depositary") and registered in the name of Cede & Co., as nominee of the Depository. If a holder tendering Existing Notes so requests, such holder's New Notes will be issued as described below under "Certificated Securities" in registered form without coupons (the "Certificated Securities"). The Depository has advised the Company that it is (i) a limited purpose trust company organized under the laws of the State of New York, (ii) a member of the Federal Reserve System, (iii) a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to Section 17A of the Exchange Act. The Depository was created to hold securities for its participants (collectively, the "Participants") and facilitates the clearance and settlement of securities transactions between Participants through electronic book-entry changes to the accounts of its Participants, thereby eliminating the need for physical transfer and delivery of certificates. The Depository's Participants include securities brokers and dealers (including the Initial Purchaser), banks and trust companies, clearing corporations and certain other organizations. Access to the Depository's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. The Company expects that pursuant to procedures established by the Depository (i) upon deposit of the Global Notes, the Depository will credit the accounts of Participants who elect to exchange Existing Notes with an interest in the Global Note and (ii) ownership of the New Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depository (with respect to the interest of Participants), the Participants and the Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own and that securities interests in negotiable instruments can only be perfected by delivery of certificates representing the instruments. So long as the Depository or its nominee is the registered owner of the Global Note, the Depository or such nominee, as the case may be, will be considered the sole owner or holder of the New Notes represented by the Global Note for all purposes under the Indenture. Except as provided below, owners of beneficial interests in the Global Note will not be entitled to have New Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Certificated Securities, and will not be considered the owners or holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instruction or approval to the Trustee thereunder. As a result, the ability of a person having a beneficial interest in New Notes represented by the Global Note to pledge such interest to persons or entities that do not participate in the Depository's system, or to otherwise take action with respect to such interest, may be affected by the lack of a physical certificate evidencing such interest. The Company understands that under existing industry practice, in the event the Company requests any action of holders or an owner of a beneficial interest in the Global Note desires to take any action that the Depository, as the holder of such Global Note, is entitled to take, the Depository would authorize the Participants to take such action and the Participant would authorize persons owning through such Participants to take such action or would otherwise act upon the instruction of such persons. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of New Notes by the Depository, or for maintaining, supervising or reviewing any records of the Depository relating to such New Notes. 112 Payments with respect to the principal of, premium, if any, and interest on any New Notes represented by the Global Note registered in the name of the Depository or its nominee on the applicable record date will be payable by the Trustee to or at the direction of the Depository or its nominee in its capacity as the registered holder of the Global Note representing such New Notes under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names the New Notes, including the Global Note, are registered as the owners thereof for the purpose of receiving such payment and for any and all other purposes whatsoever. Consequently, neither the Company nor the Trustee has or will have any responsibility for liability for the payment of such amounts to beneficial owners of New Notes (including principal, premium, if any, and interest), or to immediately credit the accounts of the relevant Participants with such payment, in amounts proportionate to their respective holdings in principal amount of beneficial interest in the Global Note as shown on the records of the Depository. Payments by the Participants and the Indirect Participants to the beneficial owners of New Notes will be governed by standing instructions and customary practice and will be the responsibility of the Participants or the Indirect Participants. CERTIFIED SECURITIES If (i) the Company notifies the Trustee in writing that the Depository is no longer willing or able to act as a depository and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in definitive form under the Indenture, then, upon surrender by the Depository of its Global Note, Certificated Securities will be issued to each person that the Depository identifies as the beneficial owner of the New Notes represented by the Global Note. In addition, any person having a beneficial interest in the Global Note or any holder of Exiting Notes whose Existing Notes have been accepted for exchange may, upon request to the Trustee or the Exchange Agent, as the case may be, exchange such beneficial interest or Existing Notes for Certificated Securities. Upon any such issuance, the Trustee is required to register such Certificated Securities in the name of such person or persons (or the nominee of any thereof), and cause the same to be delivered thereto. Neither the Company nor the Trustee shall be liable for any delay by the Depository or any Participant or Indirect Participant in identifying the beneficial owners of the related New Notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from the Depository for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the New Notes to the issued). 113 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following discussion summarizes the material United States federal income tax consequences of the Exchange Offer to a holder of Existing Notes that is an individual citizen or resident of the United States or a United States corporation that purchased the Existing Notes pursuant to their original issue (a "U.S. Holder"). It is based on the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), existing and proposed Treasury regulations, and judicial and administrative determinations, all of which are subject to change at any time, possibly on a retroactive basis. The following relates only to the Existing Notes, and the New Notes received therefor, that are held as "capital assets" within the meaning of Section 1221 of the Code by U.S. Holders. It does not discuss state, local, or foreign tax consequences, nor does it discuss tax consequences to subsequent purchasers (persons who did not purchase the Existing Notes pursuant to their original issue), or to categories of holders that are subject to special rules, such as foreign persons, tax-exempt organizations, insurance companies, banks, and dealers in stocks and securities. Tax consequences may vary depending on the particular status of an investor. No rulings will be sought from the Internal Revenue Service with respect to the federal income tax consequences of the Exchange Offer. THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE EXISTING NOTES FOR NEW NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING NOTES FOR NEW NOTES. THE EXCHANGE OFFER The exchange of Existing Notes pursuant to the Exchange Offer should be treated as a continuation of the corresponding Existing Notes because the terms of the New Notes are not materially different from the terms of the Existing Notes. Accordingly, such exchange should not constitute a taxable event to U.S. Holders and, therefore, (i) no gain or loss should be realized by a U.S. Holder upon receipt of a New Note, (ii) the holding period of the New Note should include the holding period of the Existing Note exchanged therefor and (iii) the adjusted tax basis of the New Note should be the same as the adjusted tax basis of the Existing Note exchanged therefor immediately before the exchange. STATED INTEREST Stated interest on a Note will be taxable to a U.S. Holder as ordinary interest income at the time that such interest accrues or is received, in accordance with the U.S. Holder's regular method of accounting for federal income tax purposes. The Notes are not considered to have been issued with original issue discount for federal income tax purposes. SALE, EXCHANGE OR RETIREMENT OF THE NOTES A U.S. Holder's tax basis in a Note generally will be its cost. A U.S. Holder generally will recognize gain or loss on the sale, exchange or retirement of a Note in an amount equal to the difference between the amount realized on the sale, exchange or retirement and the tax basis of the Note. Gain or loss recognized on the sale, exchange or retirement of a Note (excluding amounts received in respect of accrued interest, which will be taxable as ordinary interest income) generally will be capital gain or loss. In the case of a U.S. Holder who is an individual, such capital gain may be taxed at a maximum rate of 28% if the holding period of the New Notes exceeds one year or a maximum rate of 20% if the holding period of the New Notes exceeds eighteen months. 114 BACKUP WITHHOLDING Under certain circumstances, a U.S. Holder of a Note may be subject to "backup withholding" at a 31% rate with respect to payments of interest thereon or the gross proceeds from the disposition thereof. This withholding generally applies if the U.S. Holder fails to furnish his or her social security number or other taxpayer identification number in the specified manner and in certain other circumstances. Any amount withheld from a payment to a U.S. Holder under the backup withholding rules is allowable as a credit against such U.S. Holder's federal income tax liability, provided that the required information is furnished to the IRS. Corporations and certain other entities described in the Code and Treasury regulations are exempt from backup withholding if their exempt status is properly established. PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Existing Notes where such Existing Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Exchange Offer Registration Statement is declared effective, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 1998 (90 days after the date of this Prospectus), all dealers effecting transactions in the New Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Existing Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Existing Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 115 LEGAL MATTERS The validity of the New Notes offered hereby will be passed upon for the Company by Dechert Price & Rhoads, New York, New York. EXPERTS The consolidated financial statements of Jitney-Jungle included in this Prospectus and Registration Statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report thereon appearing elsewhere herein, and are included in reliance upon such firm given upon their authority as experts in accounting and auditing. The consolidated financial statements of Delchamps Inc., and subsidiary as of June 28, 1997 and June 29, 1996 and for each of the years in the three-year period ended June 28, 1997 have been included in this Prospectus and in the Registration Statement in reliance on the report of KPMG Peat Marwick L.L.P., independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 116 INDEX TO FINANCIAL STATEMENTS JITNEY-JUNGLE STORES OF AMERICA, INC.
PAGE --------- Independent Auditors' Report............................................................................... F-3 Consolidated Balance Sheets as of April 27, 1996, May 3, 1997 and July 26, 1997 (unaudited)................ F-4 Consolidated Statements of Earnings for the Years Ended April 29, 1995, April 27, 1996 and May 3, 1997 and the 12 weeks Ended July 20, 1996 (unaudited) and July 26, 1997 (unaudited)............................... F-6 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended April 29, 1995, April 27, 1996 and May 3, 1997 and the 12 weeks Ended July 20, 1996 (unaudited) and July 26, 1997 (unaudited)...... F-7 Consolidated Statements of Cash Flows for the Years Ended April 29, 1995, April 27, 1996 and and May 3, 1997 and the 12 weeks Ended July 20, 1996 (unaudited) and July 26, 1997 (unaudited)...................... F-8 Notes to Consolidated Financial Statements................................................................. F-9
DELCHAMPS, INC.
PAGE --------- Independent Auditors' Report............................................................................... F-22 Consolidated Balance Sheets as of June 29, 1996 and June 28, 1997.......................................... F-23 Consolidated Statements of Earnings for the Years Ended July 1, 1995, June 29, 1996 and June 28, 1997............................................................ F-24 Consolidated Statements of Stockholders' Equity for the Years Ended July 1, 1995, June 29, 1996 and June 28, 1997................................................................................................. F-25 Consolidated Statements of Cash Flows for the Years Ended July 1, 1995, June 29, 1996 and June 28, 1997.......................................................................... F-26 Notes to Consolidated Financial Statements................................................................. F-27
F-1 (This page has been left blank intentionally.) F-2 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Jitney-Jungle Stores of America, Inc.: We have audited the accompanying consolidated balance sheets of Jitney-Jungle Stores of America, Inc. and subsidiaries (the "Company") as of May 3, 1997 and April 27, 1996, and the related consolidated statements of earnings, changes in stockholders' equity, and cash flows for each of the three fiscal years in the period ended May 3, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Jitney-Jungle Stores of America, Inc. and subsidiaries as of May 3, 1997 and April 27, 1996, and the results of their operations and their cash flows for each of the three fiscal years in the period ended May 3, 1997, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP July 10, 1997 Jackson, Mississippi F-3 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
APRIL 27, MAY 3, JULY 26, 1996 1997 1997 ---------- ---------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents................................................. $ 5,676 $ 14,426 $ 5,255 Investments in debt securities............................................ 337 -- -- Receivables............................................................... 4,892 5,463 7,423 Inventories: Stores.................................................................. 48,907 43,462 47,328 Warehouses.............................................................. 28,538 21,157 30,366 Prepaid expenses and other................................................ 5,155 1,213 6,507 Deferred income taxes..................................................... 376 2,152 2,152 ---------- ---------- ----------- Total current assets.................................................... 93,881 87,873 99,031 PROPERTY AND EQUIPMENT, at cost: Land...................................................................... 2,782 2,648 2,573 Buildings................................................................. 22,537 26,370 26,568 Fixtures and equipment.................................................... 165,202 167,241 170,186 Property under capitalized leases......................................... 76,371 74,089 74,089 Leasehold improvements.................................................... 39,003 41,518 43,014 ---------- ---------- ----------- Total................................................................... 305,895 311,866 316,430 Less accumulated depreciation and amortization............................ 130,480 140,378 147,262 Net property and equipment.............................................. 175,415 171,488 169,168 ---------- ---------- ----------- OTHER ASSETS................................................................ 9,707 8,484 16,732 ---------- ---------- ----------- TOTAL ASSETS................................................................ $ 279,003 $ 267,845 $ 284,931 ---------- ---------- ----------- ---------- ---------- -----------
See notes to consolidated financial statements. F-4 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
APRIL 27, MAY 3, JULY 26, 1996 1997 1997 ----------- ----------- ----------- (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable......................................................... $ 40,008 $ 49,978 $ 60,940 Accrued expenses: Personnel costs........................................................ 6,042 9,350 7,548 Taxes, other than income taxes......................................... 6,738 8,436 8,148 Insurance claims....................................................... 4,110 5,972 7,006 Interest............................................................... 3,742 4,298 9,679 Other.................................................................. 2,533 5,032 1,843 Current portion of capitalized leases.................................... 4,259 4,899 4,899 Current portion of long-term debt........................................ -- -- 4,923 ----------- ----------- ----------- Total current liabilities............................................ 67,432 87,965 104,986 LONG-TERM DEBT............................................................. 239,059 208,000 206,876 OBLIGATIONS UNDER CAPITALIZED LEASES, less current installments................................................ 59,143 59,563 58,663 DEFERRED INCOME TAXES...................................................... 8,196 6,398 6,328 ----------- ----------- ----------- Total liabilities...................................................... 373,830 361,926 376,853 COMMITMENTS AND CONTINGENCIES (Notes 6, 7, 9 and 14) REDEEMABLE PREFERRED STOCK (aggregate liquidation preference value of $52,342 at April 27, 1996, $60,086 at May 3, 1997 and $61,624 at July 26, 1997)................................ 49,988 57,921 59,508 STOCKHOLDERS' EQUITY (DEFICIT): Class C Preferred Stock--Series 1 (at liquidation preference value)...... 7,604 8,502 8,663 Common Stock ($.01 par value, authorized 5,000,000 shares, issued and outstanding 425,000 shares)............................................ 4 4 4 Additional paid-in capital............................................... (302,326) (302,326) (302,326) Retained earnings........................................................ 149,903 141,818 142,229 ----------- ----------- ----------- Total stockholders' equity (deficit)................................... (144,815) (152,002) (151,430) ----------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)................................................................ $ 279,003 $ 267,845 $ 284,931 ----------- ----------- ----------- ----------- ----------- -----------
See notes to consolidated financial statements. F-5 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED 12 WEEKS ENDED ---------------------------------------- ---------------------- APRIL 29, APRIL 27, MAY 3, JULY 20, JULY 26, 1995 1996 1997 1996 1997 ------------ ------------ ------------ ---------- ---------- (UNAUDITED) NET SALES...................................... $ 1,173,927 $ 1,179,318 $ 1,228,533 $ 282,166 $ 288,978 COSTS AND EXPENSES: Cost of sales................................ 885,739 887,255 925,446 211,627 216,464 Direct store expenses........................ 189,422 193,483 199,956 45,447 48,058 Warehouse, administrative and general........ 57,723 60,603 63,094 14,241 12,772 Interest expense, net........................ 10,823 13,000 36,215 8,378 8,241 Special charges.............................. -- -- 2,737 -- -- ------------ ------------ ------------ ---------- ---------- Total costs and expenses................... 1,143,707 1,154,341 1,227,448 279,693 285,535 ------------ ------------ ------------ ---------- ---------- Earnings before taxes on income and extraordinary item........................... 30,220 24,977 1,085 2,473 3,443 TAXES ON INCOME................................ 11,417 9,062 339 921 1,284 ------------ ------------ ------------ ---------- ---------- Earnings before extraordinary item............. $ 18,803 $ 15,915 $ 746 $ 1,552 $ 2,159 EXTRAORDINARY ITEM, NET OF INCOME TAX BENEFIT OF $866...................................... -- (1,456) -- -- -- ------------ ------------ ------------ ---------- ---------- NET EARNINGS................................... $ 18,803 $ 14,459 $ 746 $ 1,552 $ 2,159 ------------ ------------ ------------ ---------- ---------- ------------ ------------ ------------ ---------- ---------- EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: Earnings (loss) before extraordinary item...... $ 923.15 $ 162.88 $ (16.26) $ (0.12) $ 0.92 Extraordinary item............................. -- (15.96) -- -- -- ------------ ------------ ------------ ---------- ---------- Net earnings (loss)............................ $ 923.15 $ 146.92 $ (16.26) $ (0.12) $ 0.92 ------------ ------------ ------------ ---------- ---------- ------------ ------------ ------------ ---------- ----------
See notes to consolidated financial statements. F-6 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
CLASS C PREFERRED STOCK SERIES 1 COMMON STOCK ---------------------- -------------------- NUMBER NUMBER ADDITIONAL OF OF PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ----------- --------- --------- --------- ----------- ---------- BALANCE, APRIL 30, 1994.................................. -- -- 20,368 $ 1,061 $ 1,807 $ 121,989 Cash dividends ($169.09 per share)....................... -- -- -- -- -- (3,444) Net earnings............................................. -- -- -- -- -- 18,803 ----------- --------- --------- --------- ----------- ---------- BALANCE, APRIL 29, 1995.................................. -- -- 20,368 1,061 1,807 137,348 Cash dividends ($92.15 per share)........................ -- -- -- -- -- (1,877) Net earnings............................................. -- -- -- -- -- 14,459 Issuance of shares and warrants.......................... 76,042 $ 7,604 425,000 4 7,377 -- Redemption of common stock and related merger costs...... -- -- (20,368) (1,061) (311,510) -- Accretion of discount on Class A Preferred Stock.................................................. -- -- -- -- -- (27) ----------- --------- --------- --------- ----------- ---------- BALANCE, APRIL 27, 1996.................................. 76,042 7,604 425,000 4 (302,326) 149,903 Net earnings............................................. -- -- -- -- -- 1,552 Accretion of discount on Class A Preferred Stock.................................................. -- -- -- -- -- (47) Cumulation of dividends on Preferred Stock............... -- 898 -- -- -- (8,642) ----------- --------- --------- --------- ----------- ---------- BALANCE, MAY 3, 1997..................................... 76,042 8,502 425,000 4 (302,326) 141,818 Net earnings............................................. -- -- -- -- -- 2,159 Accretion of discount on Class A Preferred Stock.................................................. -- -- -- -- -- (48) Cumulation of dividends on Preferred Stock............... -- 161 -- -- -- (1,700) ----------- --------- --------- --------- ----------- ---------- BALANCE, JULY 26, 1997 (UNAUDITED)....................... 76,042 $ 8,663 425,000 $ 4 $ (302,326) $ 142,229 ----------- --------- --------- --------- ----------- ---------- ----------- --------- --------- --------- ----------- ----------
See notes to consolidated financial statements. F-7 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
12 WEEKS YEAR ENDED ENDED --------------------------------- ----------- APRIL 29, APRIL 27, MAY 3, JULY 20, 1995 1996 1997 1996 ----------- --------- --------- ----------- (UNAUDITED) OPERATING ACTIVITIES: Net earnings.............................................................. $ 18,803 $ 14,459 $ 746 $ 1,552 Adjustment to reconcile net earnings to net cash provided by operating activities: Extraordinary Item...................................................... -- 1,456 -- -- Depreciation and amortization........................................... 25,444 27,323 31,319 7,062 Loss on disposition of property and other assets.................................................................. 1,037 817 1,899 (46) Deferred income tax expense (benefit)................................... 2,260 2,577 (3,574) -- Changes in assets and liabilities: Receivables........................................................... 43 5,866 (571) (707) Store and warehouse inventories....................................... (3,621) 5,826 12,826 (2,034) Prepaid expenses and other............................................ (1,630) (2,011) 3,941 1,064 Accounts payable...................................................... 2,690 1,562 9,970 9,663 Accrued expenses...................................................... 644 (2,356) 9,923 1,550 ----------- --------- --------- ----------- Net cash provided by operating activities........................................................ 45,670 55,519 66,479 18,104 ----------- --------- --------- ----------- INVESTING ACTIVITIES: Capital expenditures...................................................... (23,921) (30,111) (24,099) (6,122) Debt issue costs.......................................................... -- (8,214) -- -- Proceeds from sale of property and other assets........................... 1,210 2,617 1,477 1,097 Purchase of investments in debt securities................................ (65,416) (23,026) -- -- Maturities of investments in debt securities.............................. 42,096 46,301 337 337 ----------- --------- --------- ----------- Net cash used in investing activities............................... (46,031) (12,433) (22,285) (4,688) ----------- --------- --------- ----------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt.................................. -- 239,059 -- -- Proceeds from issuance of stock and warrants.............................. -- 35,840 -- -- Redemption of common stock and related merger costs..................................................................... -- (286,824) -- 30 Payments on long-term debt................................................ (2,431) (38,412) (31,059) (15,826) Payments on capitalized lease obligations................................. (4,342) (5,355) (4,385) (263) Dividends paid............................................................ (3,444) (1,877) -- -- ----------- --------- --------- ----------- Net cash used in financing activities............................... (10,217) (57,569) (35,444) (16,059) ----------- --------- --------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................................................... (10,578) (14,483) 8,750 (2,643) ----------- --------- --------- ----------- CASH AND CASH EQUIVALENTS, Beginning of Year........................................................ 30,737 20,159 5,676 5,676 ----------- --------- --------- ----------- CASH AND CASH EQUIVALENTS, End of Year...................................... $ 20,159 $ 5,676 $ 14,426 $ 3,033 ----------- --------- --------- ----------- ----------- --------- --------- ----------- NON-CASH INVESTING AND FINANCING ACTIVITIES: Capitalized lease obligations incurred.................................... $ 3,158 $ 7,971 $ 3,538 ----------- --------- --------- ----------- --------- --------- Insurance premiums financed............................................... Recapitalization transactions: Preferred stock issued in exchange for notes receivable and common stock........................................... $ 184 Preferred stock issued in settlement of deferred compensation obligation...................................... 712 Preferred stock issued in redemption of common stock.......................................................... 27,446 Common stock issued in exchange for notes receivable...................................................... 176 Common stock issued in redemption of common stock.......................................................... 588 --------- $ 29,106 --------- --------- SUPPLEMENTAL DISCLOSURES: Cash paid for interest.................................................... $ 12,534 $ 12,915 $ 35,902 $ 2,786 ----------- --------- --------- ----------- ----------- --------- --------- ----------- Cash paid for income taxes, net of refunds................................ $ 10,283 $ 7,700 $ (1,521) $ 15 ----------- --------- --------- ----------- ----------- --------- --------- ----------- JULY 26, 1997 --------- OPERATING ACTIVITIES: Net earnings.............................................................. $ 2,159 Adjustment to reconcile net earnings to net cash provided by operating activities: Extraordinary Item...................................................... -- Depreciation and amortization........................................... 6,982 Loss on disposition of property and other assets.................................................................. (3) Deferred income tax expense (benefit)................................... -- Changes in assets and liabilities: Receivables........................................................... (1,960) Store and warehouse inventories....................................... (13,075) Prepaid expenses and other............................................ (371) Accounts payable...................................................... 10,962 Accrued expenses...................................................... 1,136 --------- Net cash provided by operating activities........................................................ 5,830 --------- INVESTING ACTIVITIES: Capital expenditures...................................................... (4,985) Debt issue costs.......................................................... -- Proceeds from sale of property and other assets........................... 81 Purchase of investments in debt securities................................ -- Maturities of investments in debt securities.............................. -- --------- Net cash used in investing activities............................... (4,904) --------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt.................................. -- Proceeds from issuance of stock and warrants.............................. -- Redemption of common stock and related merger costs..................................................................... -- Payments on long-term debt................................................ (9,197) Payments on capitalized lease obligations................................. (900) Dividends paid............................................................ -- --------- Net cash used in financing activities............................... (10,097) --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................................................... (9,171) --------- CASH AND CASH EQUIVALENTS, Beginning of Year........................................................ 14,426 --------- CASH AND CASH EQUIVALENTS, End of Year...................................... $ 5,255 --------- --------- NON-CASH INVESTING AND FINANCING ACTIVITIES: Capitalized lease obligations incurred.................................... Insurance premiums financed............................................... $ 12,996 --------- --------- Recapitalization transactions: Preferred stock issued in exchange for notes receivable and common stock........................................... Preferred stock issued in settlement of deferred compensation obligation...................................... Preferred stock issued in redemption of common stock.......................................................... Common stock issued in exchange for notes receivable...................................................... Common stock issued in redemption of common stock.......................................................... SUPPLEMENTAL DISCLOSURES: Cash paid for interest.................................................... $ 2,860 --------- --------- Cash paid for income taxes, net of refunds................................ $ 2,895 --------- ---------
See notes to consolidated financial statements. F-8 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. NATURE OF OPERATIONS AND BASIS OF PRESENTATION -- Jitney-Jungle operates supermarkets and gasoline stations located in six southeastern states primarily using distribution centers located in Jackson, Mississippi. The consolidated financial statements include those of Jitney-Jungle Stores of America, Inc. and its wholly-owned subsidiaries, Southern Jitney Jungle Company, Interstate Jitney Jungle Stores, Inc., McCarty-Holman Co., Inc. and subsidiary, and Jitney Jungle Bakery, Inc. All material intercompany profits, transactions and balances have been eliminated. B. USE OF ESTIMATES -- The consolidated financial statements are prepared in conformity with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. C. FISCAL YEAR -- Jitney-Jungle's fiscal year ends on the Saturday nearest April 30. Fiscal 1995 and 1996 include the operations of 52 weeks and fiscal 1997 includes the operations of 53 weeks. D. INVESTMENTS IN DEBT SECURITIES -- Debt securities have been categorized as available for sale and as a result are stated at fair value. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and interest are included in interest income. Realized gains and losses are included in other income or expense. Unrealized holding gains and losses are included as a component of stockholders' equity until realized. The cost of securities sold is based on the specific identification method. E. INVENTORIES -- Store inventories are stated at cost (last-in, first-out method), as determined principally by the retail inventory method. Warehouse inventories are stated at cost (last-in, first-out method). F. CAPITALIZATION, DEPRECIATION AND AMORTIZATION -- The cost of property, fixtures, equipment and improvements is depreciated and amortized by the straight-line method over the estimated useful lives of the assets. The estimated useful lives of buildings range up to forty years and the estimated useful life of fixtures and equipment is eight years. Capitalized lease assets are recorded at the lower of fair market value or the present value of future minimum lease payments. These assets and leasehold improvements are amortized by the straight-line method over their primary lease term. License and franchise rights are amortized by the straight-line method over twenty years. Debt issue costs are amortized over the life of the related debt by the interest method. At each balance sheet date the Company evaluates the recoverability of property, equipment and other long-term assets based upon expectations of nondiscounted cash flows and operating income. G. STORE OPENING/CLOSING COSTS -- Non-capital expenditures incurred for new or remodeled retail stores are expensed as incurred. When a store is closed, the remaining investment in fixtures and leasehold improvements, net of expected salvage, is charged against earnings; the present value of any remaining lease liability, net of expected sublease recovery, is also expensed. F-9 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. INCOME TAXES -- Deferred tax liabilities and assets are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. I. CASH EQUIVALENTS -- For purposes of reporting cash flows, cash equivalents include investments with maturities of three months or less when purchased. J. PER SHARE AMOUNTS -- Earnings per common and common equivalent share is based on net income (loss) after preferred stock dividend requirements ($987 in fiscal 1996, $7,655 in fiscal 1997, and the weighted average number of shares outstanding during each year including shares attributed to outstanding warrants to purchase common stock. For fiscal 1997, warrants have not been included as their effect is antidilutive. The number of shares used in computing the earnings (loss) per share was 20,368 in fiscal 1995, 91,241 in fiscal 1996 and 425,000 in fiscal 1997. Dividends per common share are presented on the basis of total dividends paid, including dividends paid by the entities acquired in the business acquisitions accounted for in a manner similar to that followed for poolings of interest (see Note 2), divided by common shares outstanding after giving retroactive effect to common shares issued in such business acquisitions. K. RECLASSIFICATIONS -- Certain reclassifications have been made in the 1995 and 1996 consolidated financial statements to conform to the 1997 method of presentation. 2. MERGER ACTIVITIES In a series of transactions that were consummated on March 5, 1996, Jitney-Jungle acquired all of the issued and outstanding stock of Southern Jitney Jungle Company, McCarty-Holman Company, Inc. and Jitney Jungle Bakery (each of which was under common control with Jitney-Jungle) in exchange for 7,495 shares of common stock. These acquisitions have been accounted for at historical cost in a manner similar to that followed for poolings of interest. Prior to the acquisition, the operating results of the acquired entities had been included in Jitney-Jungle's financial statements on a combined basis. Accordingly, the acquisitions had no effect on the previously reported results of operations of Jitney-Jungle; however, for purposes of computing earnings per share the issuance of the additional shares of common stock has been given retroactive effect. On March 5, 1996, JJ Acquisitions Corp. (JJAC) merged with and into Jitney-Jungle with Jitney-Jungle continuing as the surviving corporation (the "Merger"). JJAC was a wholly-owned subsidiary of Bruckmann, Rosser, Sherrill & Co., L.P. (the "Fund"). Upon consummation of the Merger, the Fund and related investors received 83.82% of Jitney-Jungle's common stock and 11.76% was retained by the shareholders at the time of the Merger. The Merger was accounted for as a recapitalization which resulted in a charge to equity of $312,571 to reflect the redemption of common stock of Jitney-Jungle outstanding immediately prior to the Merger and related merger costs, including a closing fee of $4,000 paid to the Fund Manager, an affiliate of the Fund's sole General Partner. F-10 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2. MERGER ACTIVITIES (CONTINUED) Prior to the Merger, JJAC issued 425,000 shares of common stock for an aggregate of $6,500, issued an aggregate of $22,500 in liquidation preference of Class A Preferred Stock, issued $10,000 in liquidation preference of Class C Preferred Stock, and issued warrants to purchase 75,000 shares of common stock to the then holder (along with related investors) of 100% of the Class A Preferred Stock and 15% of the Class C Preferred Stock. Jitney-Jungle issued $27,446 in liquidation preference of Class B Preferred Stock as part of the consideration to shareholders at the time of the Merger. In the Merger the common stock, Class A Preferred Stock, and Class C Preferred Stock issued by JJAC were converted into like shares of Jitney-Jungle and Jitney-Jungle assumed the obligations of JJAC under the warrants. In connection with the Merger, Jitney-Jungle retired $35,700 of long-term debt prior to its scheduled maturity. Early retirement of this debt resulted in an extraordinary loss of $1,456, net of an income tax benefit of $866. 3. INVENTORIES Had the cost for all inventories been determined on the first-in, first-out method, inventories would have been higher by approximately $18,227 at April 27, 1996 and $17,245 at May 3, 1997. LIFO liquidations resulted in an increase in fiscal year 1997 net earnings of approximately $148. The effect on net earnings of LIFO liquidations in fiscal years 1995 and 1996 was not material. 4. INVESTMENTS IN DEBT SECURITIES Investments in debt securities consisted of U.S. Treasury securities which matured in fiscal 1997. Such investments, classified as available for sale, had no unrealized gains or losses at April 27, 1996. Proceeds from sale of investments in debt securities were approximately $6,100 in fiscal 1995 and $13,000 in fiscal 1996. Gains of $14 (1995) and losses of $43 (1996) were realized on those sales. 5. OTHER ASSETS Other assets, net of accumulated amortization of $3,059 (1996) and $3,916 (1997), consisted of the following:
APRIL 27, MAY 3, 1996 1997 ----------- --------- Debt issue costs.............................................................................. $ 7,917 $ 6,913 License and franchise rights.................................................................. 838 746 Other, primarily covenant not to compete...................................................... 952 825 ----------- --------- Total....................................................................................... $ 9,707 $ 8,484 ----------- --------- ----------- ---------
F-11 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 6. PROPERTY UNDER CAPITAL LEASES AND LEASE COMMITMENTS Leased property capitalized in the financial statements is summarized as follows:
APRIL 27, MAY 3, 1996 1997 --------- --------- Store property.............................................................................. $ 76,371 $ 70,920 Computer equipment.......................................................................... -- 3,169 Less accumulated depreciation............................................................... (32,993) (32,112) --------- --------- $ 43,378 $ 41,977 --------- --------- --------- ---------
Most store leases provide for contingent rentals based on percentages of sales in excess of stipulated amounts. The leases have primary terms are ranging from five to twenty years and generally contain renewal options. Portions of store space are sublet under leases. The present value of future minimum lease payments relative to capitalized leases is included in the financial statements as obligations under capitalized leases. Lease liabilities are amortized over the lease term using the interest method. The future minimum rental commitments for capital leases and noncancelable operating leases as of May 3, 1997, were as follows:
CAPITAL OPERATING LEASES LEASES ---------- ----------- 1998...................................................................................... $ 13,840 $ 6,056 1999...................................................................................... 13,693 5,176 2000...................................................................................... 13,261 4,401 2001...................................................................................... 12,114 2,557 2002...................................................................................... 10,796 1,777 Remaining balance......................................................................... 70,024 4,895 ---------- ----------- Total minimum lease commitments........................................................... $ 133,728 $ 24,862 ---------- ----------- ---------- -----------
CAPITAL LEASES --------- Less amount representing estimated executory costs (taxes, maintenance and insurance)....... $ 1,917 --------- Net minimum lease commitments............................................................... 131,811 Less amount representing imputed interest................................................... 67,349 --------- Present value of minimum lease commitments.................................................. 64,462 Current portion of obligations under capitalized leases..................................... 4,899 --------- Obligations under capitalized leases, less current installments............................. $ 59,563 --------- ---------
F-12 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 6. PROPERTY UNDER CAPITAL LEASES AND LEASE COMMITMENTS (CONTINUED) Minimum rental commitments have not been reduced by minimum sublease rentals of $1,306 applicable to capital leases and $841 applicable to operating leases due in the future under noncancelable subleases. The following schedule shows the composition of total rental expense for all operating leases:
YEAR ENDED --------------------------------- APRIL 29, APRIL 27, MAY 3, 1995 1996 1997 ----------- --------- --------- Minimum rentals................................................................ $ 10,075 $ 10,211 $ 10,717 Continent rentals.............................................................. 328 346 325 Less: Sublease rentals......................................................... (323) (219) (288) ----------- --------- --------- $ 10,080 $ 10,338 $ 10,754 ----------- --------- --------- ----------- --------- ---------
Rents, net of sublease income, paid to affiliated partnerships under long-term lease commitments were as follows:
YEAR ENDED ----------------------------------- APRIL 29, APRIL 27, MAY 3, 1995 1996 1997 ----------- ----------- --------- Capitalized Leases............................................................... $ 3,001 $ 3,017 $ 3,062 Operating leases................................................................. 321 334 331 ----------- ----------- --------- $ 3,322 $ 3,351 $ 3,393 ----------- ----------- --------- ----------- ----------- ---------
Obligations to affiliated partnerships under capitalized leases were $9,150 at April 27, 1996 and $8,602 at May 3, 1997. 7. LONG-TERM DEBT Long-term debt consisted of the following:
APRIL 27, MAY 3, 1996 1997 ---------- ---------- Senior notes.............................................................................. $ 200,000 $ 200,000 Revolving credit loans.................................................................... 39,059 8,000 ---------- ---------- Long-term debt............................................................................ $ 239,059 $ 208,000 ---------- ---------- ---------- ----------
Aggregate maturities of long-term debt for the fiscal years following May 3, 1997 are as follows: 2001.............................................................................. $ 8,000 2006.............................................................................. 200,000 --------- $ 208,000 --------- ---------
F-13 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 7. LONG-TERM DEBT (CONTINUED) In March 1996, Jitney-Jungle issued $200,000 of unsecured Senior Notes which mature on March 1, 2006 and accrue interest at the rate of 12% per annum payable semi-annually. The proceeds from issuance of the Senior Notes were used to fund a portion of the Merger consideration (See Note 2). Except under certain conditions, the Senior Notes are not redeemable at Jitney-Jungle's option prior to March 1, 2001. Thereafter, the Senior Notes are subject to redemption at the option of Jitney-Jungle at 106% of principal amount if redeemed during the twelve-month period beginning March 1, 2001 decreasing to 100% of principal amount if redeemed during the twelve-month period beginning March 1, 2004 and thereafter plus accrued and unpaid interest thereon. In the event of a change of control as defined in the Indenture, holders of Senior Notes have the right to require Jitney-Jungle to repurchase all or any part of such holder's notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon. In March 1996, Jitney-Jungle entered into a revolving credit agreement with a bank which provides a $100,000 Credit Facility. The Credit Facility was used to finance a portion of the Merger consideration, refinance certain indebtedness, and provide for working capital requirements. The commitments under the Credit Facility will terminate and all loans outstanding thereunder will be required to be repaid in full in March, 2001. Borrowings under the Credit Facility, including revolving loans and up to $20,000 in letters of credit, are limited to the lesser of (i) the "total commitment" which initially was $100,000 and (ii) an amount equal to the sum of (a) up to 60% of eligible inventory (valued at the lesser of FIFO cost or current market) and (b) the "supplemental availability" which initially was $45,000. Each of the total commitment and the supplemental availability will be reduced by $1,250 per quarter, commencing December 31, 1996. The interest rates on borrowings under the Credit Facility are, at Jitney-Jungle's option, a function of the bank's prime rate or LIBOR. The weighted average interest rate of loans under the Credit Facility was 8.62% at April 27, 1996 and 8.44% at May 3, 1997. The agreement requires Jitney-Jungle to pay a facility fee at an annual rate of .50% (.25% subsequent to March 31, 1997) of the unused amount available under the Credit Facility. Letters of credit aggregating $10,481 were outstanding as of April 27, 1996 and May 3, 1997 under the Credit Facility. The Senior Notes are guaranteed on a full, unconditional and joint and several basis by each of Jitney-Jungle's subsidiaries. The Credit Facility is guaranteed by each of Jitney-Jungle's subsidiaries. In addition, obligations under the Credit Facility are secured by a first lien on all of Jitney-Jungle's and its subsidiaries' assets. The Credit Facility and the Indenture pursuant to which the Senior Notes were issued contain numerous covenants which, among other things, restrict or limit the incurrence of indebtedness, payments of dividends and distributions, and capital expenditures. The Credit Facility also contains numerous financial covenants, the more significant of which relate to leverage ratio, interest coverage ratio and cash flows. As of May 3, 1997 Jitney-Jungle was in compliance with the covenants under its debt agreements. F-14 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 8. INCOME TAXES Income taxes were composed of the following:
YEAR ENDED --------------------------------- APRIL 29, APRIL 27, MAY 3, 1995 1996 1997 --------- ----------- --------- Current provision................................................................. $ 9,157 $ 6,485 $ 3,913 Deferred provision (benefit)...................................................... 2,260 2,577 (3,574) --------- ----------- --------- Total........................................................................... $ 11,417 $ 9,062 $ 339 --------- ----------- --------- --------- ----------- ---------
The effective tax rate varied from the federal statutory rate of 35% as follows:
YEAR ENDED ----------------------------------- APRIL 29, APRIL 27, MAY 3, 1995 1996 1997 --------- ----------- ----------- Federal tax at statutory rate..................................................... $ 10,577 $ 8,742 $ 380 State income taxes, net of federal tax benefit.................................... 665 400 (25) Other............................................................................. 175 (80) (16) --------- ----------- ----- Income tax provision.............................................................. $ 11,417 $ 9,062 $ 339 --------- ----------- ----- --------- ----------- -----
Deferred income tax expense relates to the following:
YEAR ENDED ----------------------------------- APRIL 29, APRIL 27, MAY 3, 1995 1996 1997 ----------- ----------- --------- LIFO inventory................................................................... $ 1,499 $ 669 $ 773 Deferred compensation............................................................ (24) 2,290 9 Accrued estimated insurance claims............................................... (166) (285) (690) Deferred income.................................................................. -- -- (1,567) Property and equipment........................................................... 1,345 158 (676) Capital leases................................................................... (448) (147) (1,004) Other............................................................................ 54 (108) (419) ----------- ----------- --------- Total............................................................................ $ 2,260 $ 2,577 $ (3,574) ----------- ----------- --------- ----------- ----------- ---------
F-15 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 8. INCOME TAXES (CONTINUED) The sources of temporary differences and the related deferred income tax effects were as follows:
APRIL 27, MAY 3, 1996 1997 --------- --------- CURRENT DEFERRED TAX ASSETS (LIABILITIES): LIFO inventory............................................................................ $ (1,739) $ (2,152) Deferred compensation and compensated absences............................................ 571 562 Deferred income........................................................................... -- 1,567 Accrual of estimated insurance claims..................................................... 1,538 2,228 Other..................................................................................... 436 307 --------- --------- Total net current deferred tax asset.................................................... $ 376 $ 2,152 --------- --------- --------- --------- NONCURRENT DEFERRED TAX (ASSETS) LIABILITIES: Property and equipment.................................................................... $ 13,651 $ 12,975 Capital and closed store leases........................................................... (5,706) (6,710) Other..................................................................................... 251 133 --------- --------- Total net noncurrent deferred tax liability............................................. $ 8,196 $ 6,398 --------- --------- --------- ---------
Currently payable income taxes of $1,835 at May 3, 1997 are included in accrued expenses. Refundable income taxes of $3,890 at April 27, 1996 represent an overpayment of estimated taxes and are included in prepaid expenses and other in the balance sheet. The Company's income tax returns through fiscal year 1994 have been examined by the Internal Revenue Service. F-16 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 9. CAPITAL STOCK PREFERRED STOCK Preferred stock consisted of the following:
APRIL 27, 1996 MAY 3, 1997 ----------------------- ----------------------- DIVIDEND OUTSTANDING LIQUIDATION CARRYING LIQUIDATION CARRYING CLASS RATE SHARES PREFERENCE AMOUNT PREFERENCE AMOUNT - --------------------------------------- ------------- ----------- ----------- ---------- ----------- ---------- A...................................... 15% 225,000 $ 22,500 $ 20,146 $ 26,722 $ 24,557 B...................................... 10% 274,460 27,446 27,446 30,685 30,685 C--Series 2............................ 10% 23,958 2,396 2,396 2,679 2,679 ----------- ---------- ----------- ---------- Total Mandatorily Redeemable....................................... $ 52,342 $ 49,988 $ 60,086 $ 57,921 ----------- ---------- ----------- ---------- ----------- ---------- ----------- ---------- C--Series 1............................ 10% 76,042 $ 7,604 $ 7,604 $ 8,502 $ 8,502 ----------- ---------- ----------- ---------- ----------- ---------- ----------- ----------
The excess of liquidation preference over the carrying amount of the Class A Preferred Stock is being accreted by periodic charges to retained earnings to the mandatory redemption date. Dividends on Class A Preferred Stock are payable quarterly. Through March, 2001, such dividends are payable, at Jitney-Jungle's option, either by cumulation to liquidation preference or in cash and thereafter are payable in cash. Dividends on Class B Preferred Stock and Class C Preferred Stock cumulate on a compounding basis until paid. Cumulative dividends not declared or paid on preferred shares aggregated $8,642 at May 3, 1997. The Class A Preferred Stock is redeemable at Jitney-Jungle's option, (i) at any time after March 1, 2001 at a price equal to the then applicable liquidation preference plus accrued and unpaid dividends and a prepayment premium or (ii) on or prior to March 1, 1999 with the proceeds of a public offering of common stock at a price per share equal to 114% of the then applicable liquidation preference plus accrued and unpaid dividends thereon. All of the Class A Preferred Stock is required to be redeemed on or before March, 2008 at a price per share equal to the then applicable liquidation preference, plus accrued and unpaid dividends thereon. The Class B Preferred Stock and Class C Preferred Stock, Series 2, are redeemable at Jitney-Jungle's option at any time, in whole or in part, at a price per share equal to the then applicable liquidation preference, plus accrued and unpaid dividends. All of the Class B Preferred Stock and all of the Class C Preferred Stock, Series 2, are required to be redeemed in March, 2010 and March, 2011, respectively, at a price per share equal to the then applicable liquidation preference plus accrued and unpaid dividends (including cumulated dividends). The Class C Preferred Stock, Series 1, is not redeemable by Jitney-Jungle at any time. Under certain conditions, as defined, Jitney-Jungle is required to offer to repurchase all shares of preferred stock. Upon a change in control, Jitney-Jungle is required to offer to repurchase all shares of the F-17 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 9. CAPITAL STOCK (CONTINUED) Class A Preferred Stock at 101% of the then applicable liquidation preference plus accrued and unpaid dividends and all shares of Class B Preferred Stock and all shares of Class C Preferred Stock, Series 1 and Series 2, at 100% of the liquidation preference thereof plus accrued and unpaid dividends. In addition, Jitney-Jungle is required to offer to apply, subject to certain limitations, net proceeds raised through a primary issuance of securities junior to Class B Preferred Stock to repurchase shares of Class B Preferred Stock. Except as required by law and with respect to certain specified matters, Class A Preferred Stock has no voting rights. Neither the Class B Preferred Stock nor the Class C Preferred Stock has any voting rights, except as required by law. The Class A Preferred Stock is exchangeable (with cumulated dividends) at Jitney-Jungle's option, in whole but not in part, for subordinated exchange debentures of Jitney-Jungle. The exchange debentures will pay interest from the date of the exchange at the rate of 15% per annum, consisting of, at Jitney- Jungle's option, additional exchange debentures or cash on or prior to March 2001 and cash thereafter. The exchange debentures will mature in March 2008. Class A Preferred Stock ranks senior to Class B Preferred Stock and Class C Preferred Stock in right of payment of cash dividends, liquidation preference and redemption (both mandatory and optional). The Class C Preferred Stock ranks junior to the Class B Preferred Stock in right of such cash payments. The Credit Facility and the Indenture (See Note 7) restrict Jitney-Jungle's ability to pay cash dividends, exchange Class A Preferred Stock for exchange debentures and redeem or repurchase Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock and exchange debentures. WARRANTS Warrants to purchase 75,000 shares of common stock were issued in conjunction with the Merger (See Note 2) and were outstanding as of April 27, 1996 and May 3, 1997. The warrants were recorded at fair value of $881 at date of issue. The warrants have an exercise price of $.01 per share and will expire in 2008. 10. EMPLOYEE BENEFIT AND COMPENSATION PLANS Jitney-Jungle has a profit-sharing plan covering substantially all employees with one or more years' service. Contributions are made at the discretion of the Board of Directors of Jitney-Jungle and totaled $1,200 in fiscal 1995, 1996, and 1997. Prior to March 1996, Jitney-Jungle had a Phantom Stock Plan for certain key officers whereby deferred compensation units (expressed in shares of common stock) were earned to the extent that performance targets (expressed in terms of growth in stockholders' equity) were met. The amounts payable in accordance with the provisions of the Phantom Stock Plan became fully vested and immediately payable at the time of the Merger and Recapitalization (see Note 2). Effective with the Merger, $4,252 was paid to the participants and $712 was applied against the purchase price for shares of Class C Preferred Stock acquired by them in connection with the Recapitalization. F-18 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 10. EMPLOYEE BENEFIT AND COMPENSATION PLANS (CONTINUED) Effective with the Recapitalization, the Phantom Stock Plan was amended and restated and renamed the Deferred Compensation Plan for Jitney-Jungle Stores of America, Inc. Under the amended plan no further awards may be made and no other individuals will become participants. Units credited to the participants consist of a cash amount payable in accordance with the terms of the Phantom Stock Plan before its amendment and an amount that will continue to be credited under the terms of the plan to an account, the value of which will be equal to the value of the number of shares of Class C Preferred Stock of Jitney-Jungle that could be acquired with that amount. With respect to the amounts that continue to be credited under the plan as amended, an amount equal to the amount of any cash dividends that would have been paid on the number of shares of preferred stock credited to each participant's account will be paid to the participant at the same time as any cash dividends actually are paid on the preferred stock. Payment otherwise will be made under the amended plan at the same time as the preferred stock is redeemed, in an amount equal to the redemption price times the number (or proportionate number, in the event of a partial redemption) of shares of preferred stock credited to the participant's account. 11. SPECIAL CHARGES Included in special charges is approximately $1,779 attributable to the employment agreement with Jitney-Jungle's then Chairman and Chief Executive Officer who, in January 1997, relinquished his position and duties as Chief Executive Officer. Payments to be made under the employment agreement were deemed to not relate to future services to be provided by the Chairman and, accordingly, such amounts were charged to expense in fiscal 1997. Special charges also include termination and retirement benefits payable to employees whose positions were eliminated. 12. FAIR VALUES OF FINANCIAL INSTRUMENTS In accordance with Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value of Financial Instruments", information is provided about the fair value of certain financial instruments for which it is practicable to estimate that value. The fair value amounts disclosed represent management's best estimate of fair value. In accordance with SFAS No. 107, this disclosure excludes certain financial instruments and all nonfinancial instruments. The aggregate fair value amounts presented are not intended to represent the underlying aggregate fair value of Jitney-Jungle. The estimated fair values are significantly affected by assumptions used, principally the timing of future cash flows, the discount rate, judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument. The following methods and assumptions were used by Jitney-Jungle in estimating fair value disclosures for financial instruments: F-19 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 12. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance sheet approximates fair value. INVESTMENTS IN DEBT SECURITIES: The securities are carried at fair value and are based on quoted market prices. RECEIVABLES, ACCOUNTS PAYABLE AND ACCRUED EXPENSES: The carrying amount reported in the balance sheet approximates fair value. LONG-TERM DEBT: The fair value of Jitney-Jungle's Senior Notes is based on quoted market prices. The interest rates on borrowings under the Credit Facility reset periodically. Consequently, the carrying value of borrowings under the Credit Facility approximates fair value. REDEEMABLE PREFERRED STOCK: The fair value of redeemable preferred stock is estimated at carrying value as such stock is not traded in the open market and a market price is not readily available. The carrying amounts and fair values of Jitney-Jungle's financial instruments were as follows:
APRIL 27, 1996 MAY 3, 1997 -------------------- -------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE --------- --------- --------- --------- Cash and cash equivalents............................................. $ 5,676 $ 5,676 $ 14,426 14,426 Investments in debt securities........................................ 337 337 Receivables........................................................... 4,892 4,892 5,463 5,463 Accounts payable...................................................... 40,008 40,008 49,978 49,978 Accrued expenses...................................................... 23,165 23,165 33,088 33,088 Long-term debt: Senior Notes........................................................ 200,000 204,700 200,000 217,000 Credit Facility..................................................... 39,059 39,059 8,000 8,000 Redeemable preferred stock............................................ 49,988 49,988 57,921 57,921
13. ACCOUNTING STANDARD TO BE ADOPTED IN THE FUTURE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share." The new standard changes, the presentation and method in which earnings per share are computed and is effective for Jitney-Jungle's year ending May 2, 1998. The new standard will be applied on a "retroactive restatement of all prior periods" basis. Jitney-Jungle is currently in the process of ascertaining the impact the new standard will have on its earnings per share amounts for fiscal 1997 and prior periods. F-20 JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 14. COMMITMENTS AND CONTINGENCIES Jitney-Jungle is defendant in certain litigation incurred in the normal course of business. Management, after consulting legal counsel, is of the opinion that the liability, if any, which may result from this litigation will not have a material adverse effect on Jitney-Jungle's financial position or results of operations. In 1996, Jitney-Jungle entered into a five-year supply agreement, which replaced a previously existing agreement, relating to merchandise purchases for stores located in Memphis, Tennessee and Little Rock and Pine Bluff, Arkansas. In fiscal 1997, Jitney-Jungle sold the operating assets of its bakery subsidiary for $750 and received $5,250 as consideration for entering into a five-year supply agreement with the purchaser of such operating assets. The $5,250 is being amortized over the term of the supply agreement. In connection with the Merger and Recapitalization, Jitney-Jungle entered into an agreement whereby the Fund Manager is entitled to receive $250 per year from Jitney-Jungle as a management fee for the performance of strategic and financial planning services. The amount of the annual management fee may be increased by up to an additional $750 per year based upon certain performance criteria. Management fees for fiscal year 1997 approximated $250. 15. SUBSEQUENT EVENTS On June 3, 1997, Jitney-Jungle entered into a $12,996 insurance premium finance agreement payable in monthly installments of $473, including interest at 6.75% per annum. On July 8, 1997, Jitney-Jungle entered into a merger agreement with Delchamps, Inc. ("Delchamps") which operates retail supermarkets in Alabama, Florida, Louisiana and Mississippi. Pursuant to the agreement, Jitney-Jungle has commenced an all-cash tender offer for all of Delchamps' outstanding common stock at a price of $30 per share. The offer is conditioned upon, among other things, there being tendered and not withdrawn prior to the expiration date of the offer at least two-thirds of the outstanding shares of Delchamps' common stock. In addition, regulatory approval and consent of the holders of Jitney- Jungle's senior notes are required. Jitney-Jungle intends to issue up to $280 million of debt to finance the acquisition and to repay indebtedness of Delchamps in connection with the acquisition. 16. INTERIM FINANCIAL DATA The unaudited consolidated balance sheet as of July 26, 1997 and the related unaudited consolidated statements of earnings and of cash flows for the 12 weeks ended July 20, 1996 and July 26, 1997 have been prepared in accordance with the accounting policies in effect as of May 3, 1997 as set forth in the annual consolidated financial statements. In the opinion of management, such interim financial statements contain all adjustments (all of which are normal and recurring in nature) necessary to present fairly Jitney-Jungle's consolidated financial position, results of operations and cash flows. The results of operations for the 12 weeks ended July 26, 1997 are not necessarily indicative of results to be expected for the full year. F-21 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of: Delchamps, Inc.: We have audited the accompanying consolidated balance sheets of Delchamps, Inc. and subsidiary as of June 28, 1997 and June 29, 1996, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended June 28, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Delchamps, Inc. and subsidiary at June 28, 1997 and June 29, 1996 and the results of their operations and their cash flows for each of the years in the three-year period ended June 28, 1997, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick L.L.P. KPMG PEAT MARWICK L.L.P. August 8, 1997 Atlanta, Georgia F-22 DELCHAMPS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
JUNE 29, 1996 JUNE 28, 1997 ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents (2)............................................................... $ 10,503 $ 5,670 Trade and other accounts receivable......................................................... 8,422 7,961 Merchandise inventories (3 and 6)........................................................... 90,797 89,726 Prepaid expenses............................................................................ 1,376 2,094 Income taxes receivable (10)................................................................ 764 -- Deferred income taxes (10).................................................................. 3,878 6,525 ------------- ------------- Total current assets.................................................................... 115,740 111,976 PROPERTY AND EQUIPMENT (4): Land........................................................................................ 15,210 13,744 Buildings and improvements.................................................................. 58,111 59,079 Fixtures and equipment...................................................................... 221,090 233,542 Construction in progress.................................................................... 9,771 2,626 ------------- ------------- 304,182 308,991 Less accumulated depreciation and amortization.............................................. 166,931 179,672 ------------- ------------- Net property and equipment.............................................................. 137,251 129,319 OTHER ASSETS.................................................................................... 2,192 2,166 ------------- ------------- TOTAL ASSETS.................................................................................... $ 255,183 $ 243,461 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current installments of obligations under capital leases (4)................................ $ 749 $ 844 Current installments of long-term debt (5).................................................. 3,760 3,697 Notes payable (6)........................................................................... 14,000 4,600 Restructure obligation (12)................................................................. 3,996 2,273 Accounts payable............................................................................ 48,308 41,571 ACCRUED EXPENSES: Salaries and wages.......................................................................... 4,603 7,026 Licenses and other taxes.................................................................... 8,017 7,778 Other....................................................................................... 10,240 14,192 ------------- ------------- Total accrued expenses...................................................................... 22,860 28,996 Income taxes(10)............................................................................ -- 885 ------------- ------------- Total current liabilities................................................................... 93,673 82,836 Obligations under capital leases, excluding current installments (4)............................ 10,398 9,556 Long-term debt, excluding current installments (5).............................................. 10,839 7,142 Restructure obligation, excluding current installments (12)..................................... 15,668 13,453 Deferred income taxes (10)...................................................................... 9,225 10,211 Other liabilities............................................................................... 2,455 2,244 ------------- ------------- Total liabilities........................................................................... 142,258 125,442 ------------- ------------- STOCKHOLDERS' EQUITY (5 and 11): Junior participating preferred stock of no par value. Authorized 5,000,000 shares; no shares issued..................................................................................... -- -- Common stock of $.01 par value. Authorized 25,000,000 shares; issued 7,112,320 shares at June 29, 1996 and 7,121,749 shares at June 28, 1997........................................ 71 71 Additional paid-in capital.................................................................. 19,657 19,856 Retained earnings........................................................................... 93,359 98,182 ------------- ------------- 113,087 118,109 Less: Unamortized restricted stock award compensation (8)..................................... (162) (90) ------------- ------------- Total stockholders' equity.............................................................. 112,925 118,019 Commitments and contingencies (4, 9, and 13) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................................... $ 255,183 $ 243,461 ------------- ------------- ------------- -------------
See notes to consolidated financial statements. F-23 DELCHAMPS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF EARNINGS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED ---------------------------------------- JULY 1, JUNE 29, JUNE 28, 1995 1996 1997 ------------ ------------ ------------ Sales................................................................... $ 1,054,088 $ 1,126,629 $ 1,102,947 Cost of Sales (3)....................................................... 798,537 863,389 830,878 Gross profit.......................................................... 255,551 263,240 272,069 Selling, general and administrative expenses ("SG&A"): Restructuring charge (12)............................................. 28,779 -- -- Other SG&A............................................................ 261,763 250,121 254,282 Total SG&A............................................................ 290,542 250,121 254,282 Operating income (loss)............................................. (34,991) 13,119 17,787 Other (expense) income: Interest expense...................................................... (5,375) (7,169) (5,215) Interest income....................................................... 100 349 233 ------------ ------------ ------------ Total other (expense) income............................................ (5,275) (6,820) (4,982) Earnings (loss) before income taxes..................................... (40,266) 6,299 12,805 Income tax expense (benefit) (10)....................................... (14,600) 2,447 4,851 ------------ ------------ ------------ Net earnings (loss)................................................. $ (25,666) $ 3,852 $ 7,954 ------------ ------------ ------------ ------------ ------------ ------------ Net earnings (loss) per common share.................................... $ (3.61) $ 0.54 $ 1.12 ------------ ------------ ------------ ------------ ------------ ------------ Weighted average number of common shares................................ 7,113 7,110 7,116 ------------ ------------ ------------ ------------ ------------ ------------
See notes to consolidated financial statements. F-24 DELCHAMPS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
COMMON STOCK ISSUED ADDITIONAL ------------------------ PAID-IN RETAINED GUARANTEED STOCK STOCKHOLDERS' SHARES AMOUNT CAPITAL EARNINGS ESOP DEBT AWARDS EQUITY ----------- ----------- ----------- ----------- ----------- ----------- ------------- Balances at July 2, 1994............ 7,114 $ 71 $ 19,731 $ 121,434 $ (4,000) $ (936) $ 136,300 Amortization of restricted stock awards............................ -- -- -- -- -- 539 539 Retirement of restricted stock awards............................ (5) -- (128) -- -- 128 -- Reduction of guaranteed ESOP debt... -- -- -- -- 2,000 -- 2,000 Net loss............................ -- -- -- (25,666) -- -- (25,666) Dividends declared of $.44 per share............................. -- -- -- (3,131) -- -- (3,131) ----- --- ----------- ----------- ----------- ----------- ------------- Balances at July 1, 1995............ 7,109 71 19,603 92,637 (2,000) (269) 110,042 Amortization of restricted stock awards............................ -- -- -- -- -- 21 21 Retirement of restricted stock awards............................ (3) -- (86) -- -- 86 -- Reduction of guaranteed ESOP debt... -- -- -- -- 2,000 -- 2,000 Issuance of shares for director compensation...................... 4 -- 108 -- -- -- 108 Stock options exercised (14)........ 2 -- 32 -- -- -- 32 Net earnings........................ -- -- -- 3,852 -- -- 3,852 Dividends declared of $.44 per share............................. -- -- -- (3,130) -- -- (3,130) ----- --- ----------- ----------- ----------- ----------- ------------- Balances at June 29, 1996........... 7,112 71 19,657 93,359 -- (162) 112,925 Amortization of restricted stock awards............................ -- -- -- -- -- 72 72 Issuance of shares for director compensation...................... 8 -- 167 -- -- -- 167 Stock options exercised (14)........ 2 -- 32 -- -- -- 32 Net earnings........................ -- -- -- 7,954 -- -- 7,954 Dividends declared of $.44 per share............................. -- -- -- (3,131) -- -- (3,131) ----- --- ----------- ----------- ----------- ----------- ------------- Balances at June 28, 1997........... 7,122 $ 71 $ 19,856 $ 98,182 $ -- $ (90) $ 118,019 ----- --- ----------- ----------- ----------- ----------- ------------- ----- --- ----------- ----------- ----------- ----------- -------------
See notes to consolidated financial statements. F-25 DELCHAMPS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOW (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED JULY 1, JUNE 29, JUNE 28, 1995 1996 1997 --------- ----------- ---------- Cash flows from operating activities: Net earnings (loss)............................................................. $ (25,666) $ 3,852 $ 7,954 Adjustment to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization................................................... 19,472 21,771 23,719 Write-off of cost in excess of fair value of assets acquired.................... 5,050 -- -- (Gain) loss on sale of property and equipment................................... 231 (420) (2,054) Restricted stock award amortization............................................. 667 21 72 Non cash director compensation expense.......................................... -- 108 167 Deferred income tax expense (benefit)........................................... (9,206) 1,928 (1,661) Decrease (increase) in merchandise inventories.................................. 11,855 3,011 1,071 Increase in accounts payable, accrued expenses, and current portion of restructure obligation........................................................ 10,887 5,567 (2,324) Increase (decrease) in income taxes, net........................................ (6,491) 5,785 1,619 (Decrease) increase in other liabilities and restructure obligation............. 19,113 (1,653) (2,023) Increase in other assets........................................................ (716) (890) (3,203) --------- ----------- ---------- Net cash flows provided by operating activities................................. 25,196 39,080 23,337 --------- ----------- ---------- Cash flows from investing activities: Additions to property and equipment............................................. (35,239) (21,671) (15,551) Proceeds from sale of property and equipment, net............................... 611 710 4,387 --------- ----------- ---------- Net cash used in investing activities........................................... (34,628) (20,961) (11,164) --------- ----------- ---------- Cash flows from financing activities: Principal payments on obligation under capital leases........................... (1,576) (665) (747) Principal payments on long-term debt and notes payable.......................... (15,333) (25,239) (26,760) Proceeds from issuance of long-term debt and notes payable...................... 30,000 5,480 13,600 Issuance of stock options....................................................... -- 32 32 Dividends paid.................................................................. (3,131) (3,130) (3,131) --------- ----------- ---------- Net cash (used in) provided by financing activities........................... 9,960 (23,522) (17,006) --------- ----------- ---------- Net (decrease) increase in cash and cash equivalents............................ 528 (5,403) (4,833) Cash and cash equivalents at beginning of year.................................. 15,378 15,906 10,503 --------- ----------- ---------- Cash and cash equivalents at end of year........................................ $ 15,906 $ 10,503 $ 5,670 --------- ----------- ---------- --------- ----------- ----------
See notes to consolidated financial statements. F-26 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. DESCRIPTION OF BUSINESS Delchamps, Inc. and subsidiary ("Delchamps") are engaged in the business of retail food distribution through Delchamp's supermarkets located in Alabama, Florida, Louisiana, and Mississippi. B. DEFINITION OF FISCAL YEAR Delchamp's fiscal year ends on the Saturday closest to June 30. Fiscal 1995, 1996 and 1997 all comprised 52 weeks. C. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Delchamps, Inc. and its wholly owned wholesale subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. D. CASH EQUIVALENTS For purposes of the consolidated statements of cash flows, the company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. E. MERCHANDISE INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined on the last-in, first-out ("LIFO") basis for 87% in 1995, 88% in 1996 and 89% in 1997. With respect to the remaining inventories, primarily produce and market, cost is determined on the first-in, first-out ("FIFO") basis. Inventories developed from the retail method comprised approximately 55% of total inventories in 1995, 58% in 1996 and 59% in 1997. F. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Buildings and equipment acquired prior to July 1, 1984 are depreciated over the estimated useful lives of the respective assets using primarily the double-declining balance method. Buildings and equipment acquired subsequent to July 1, 1984, are depreciated over the estimated useful lives of the respective assets using the straight-line method. Buildings and equipment under the capital leases are stated at the lower of the present value of the minimum lease payments at the beginning of the lease term or fair value of the property at the inception of the lease. Assets leased under capital leases and leasehold improvements are amortized using the straight-line method over the lesser of the lease term or the estimated useful lives of the related assets. Delchamps uses the following periods for depreciating and amortizing property and equipment:
10-50 Buildings............................................................... years Leasehold improvements.................................................. 10 years Fixtures and equipment.................................................. 5-10 years
F-27 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. COST IN EXCESS OF FAIR VALUE OF ASSETS ACQUIRED Cost in excess of fair value of assets acquired arose from the purchase of three supermarkets and real estate in fiscal 1988. For fiscal 1988 through 1994, amortization was recorded over a 40 year period on a straight-line basis. The acquired property did not achieve sales and earnings projections prepared at the time of the acquisition. The primary cause of the short-fall in Delchamp's projections was because of the competitors increasing promotional activity, competitors opening new supermarkets, and competitors expanding existing supermarkets. Delchamps determined, based on the trend of operating results for 1988 through 1995, that the projected results of the acquired property would not support the future amortization of the remaining balance of the costs in excess of fair value of assets acquired. Accordingly, Delchamps wrote-off its remaining balance of cost in excess of fair value of assets acquired of $5.1 million in the fourth quarter of fiscal 1995. H. INCOME TAXES Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. The major temporary differences and their net effect are shown in the "Income Taxes" note. Job credits are recorded as a reduction of the provision for Federal income taxes in the year realized. I. EARNINGS PER SHARE Earnings per share are computed by dividing net earnings by the weighted average number of shares of common stock outstanding. J. MANAGEMENT ESTIMATES Management of Delchamps has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates. K. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash, accounts receivable, accounts payable, and accrued expenses approximate fair value because of the short maturity of these items. The carrying amounts of the notes payable and long-term debt approximate fair value because the interest rates in these instruments approximate market interest rates. L. IMPAIRMENT OF LONG-LIVED ASSETS Effective June 30, 1996, the Company adopted the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be F-28 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Disposed Of" ("SFAS No. 121"). SFAS No. 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used, or to be disposed of. The implementation did not have a significant impact on the Company's financial condition or results of operation. (M) STOCK COMPENSATION During fiscal 1997, Delchamps adopted Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," which was effective for fiscal years beginning after December 15, 1995. The statement encourages the use of a fair-value-based method of accounting for stock-based awards under which the fair value of stock options is determined on the date of grant and expensed over the vesting period. Companies may, however, continue to measure compensation costs for those plans using the method prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees." Companies that continue to apply APB No. 25 are required to include pro forma disclosures of net earnings and earnings per share as if the fair-value-based method of accounting had been applied. Delchamps has elected to continue to account for such plans under the provisions of APB No. 25. Compensation expense computed under the fair-value-based method is not significant to the financial statements as a whole, therefore pro forma disclosures have not been included. (2) CASH EQUIVALENTS Cash equivalents are stated at cost which approximates market value. Cash equivalents at June 29, 1996 and June 28, 1997 consisted of the following:
(IN THOUSANDS) 1996 1997 --------- --------- Euro Dollar Time Deposits...................................................................... $ 1,130 $ 2 Marketable Unit Investment Fund................................................................ 856 856 Cash Management Tax Exempt Fund................................................................ 20 77 --------- --------- $ 2,006 $ 935 --------- --------- --------- ---------
(3) MERCHANDISE INVENTORIES Delchamps uses the LIFO method of valuing certain of its merchandise inventories to minimize inflation-induced inventory profits and to achieve a better matching of current costs with current revenues. Inventories would increase by approximately $13,780,000 at June 29, 1996 and $14,171,000 at June 28, 1997 if all of Delchamp's inventories were stated at cost determined by the first-in, first-out method. Further, net earnings would increase by approximately $322,000 in fiscal year 1995, increase $262,000 in fiscal year 1996, and increase $240,000 in fiscal year 1997, after applying Delchamp's marginal tax rate and without assuming an investment return on the applicable income tax savings Delchamps is a member of a cooperative association from which it purchases private label merchandise for resale and certain supermarket equipment. Merchandise inventories purchased from this cooperative association approximated 19% of total inventory purchases in 1995, 1996 and 1997. F-29 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (4) LEASES Delchamps leases certain supermarket properties and equipment under capital leases that expire over the next 11 years. Delchamps also leases warehouses, store properties, and store equipment under noncancelable operating leases that expire over the next 20 years. Contingent rentals on store properties are paid as a percentage of sales in excess of a stipulated minimum. In the normal course of business, it is expected that most leases will be renewed or replaced by leases on other properties and equipment. Included in property and equipment are the following amounts applicable to capital leases:
(IN THOUSANDS) -------------------- 1996 1997 --------- --------- Buildings................................................................................... $ 13,998 $ 13,998 Fixtures and equipment...................................................................... 19,040 19,040 --------- --------- 33,038 33,038 Less accumulated amortization............................................................... 26,888 27,578 --------- --------- $ 6,150 $ 5,460 --------- --------- --------- ---------
Future minimum lease payments under noncancelable operating leases and the present value of future minimum capital lease payments as of June 28, 1997 are as follows:
(IN THOUSANDS) CAPITAL OPERATING LEASES LEASES --------- ----------- Fiscal Year 1998....................................................................................... $ 2,081 $ 38,292 1999....................................................................................... 2,081 37,702 2000....................................................................................... 2,081 37,081 2001....................................................................................... 2,081 34,989 2002....................................................................................... 1,961 33,766 Later years.................................................................................. 6,968 241,182 --------- -----------
Total minimum lease payments............................................. 17,253 $ 423,012 --------- --------- Less amount representing interest........................................ 6,853 --------- Present value of net minimum capital lease payments...................... 10,400 Less current installments of obligations under capital leases............ 844 --------- Long-term obligations under capital leases............................... $ 9,556 --------- ---------
F-30 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (4) LEASES (CONTINUED) Rental expense and contingent rentals for operating leases are as follows:
(IN THOUSANDS) 1995 1996 1997 --------- --------- --------- Minimum rentals.................................................................. $ 43,552 $ 45,514 $ 45,329 Contingent rentals............................................................... 99 66 129 --------- --------- --------- $ 43,651 $ 45,580 $ 45,458 --------- --------- --------- --------- --------- ---------
Most of Delchamp's leases stipulate that Delchamps pay taxes, maintenance, insurance, and certain other operating expenses applicable to the leased property. (5) LONG-TERM DEBT Long-term debt as of June 29, 1996 and June 28, 1997 consisted of the following:
(IN THOUSANDS) 1996 1997 --------- --------- 5.51% note payable, due in 84 monthly installments of $297,619 in principal plus interest, with the final installment due July 1, 2000, unsecured.................................... $ 14,286 $ 10,714 Note payable, with interest rates based on LIBOR + 1.5%, due in 60 monthly installments of $15,625 in principal plus interest, with the final installment due March 1, 1998, secured by deposit accounts with the lender....................................................... 313 125 --------- --------- Total long-term debt........................................................................ 14,599 10,839 Less current installments................................................................... 3,760 3,697 --------- --------- Long-term debt, excluding current installments.............................................. $ 10,839 $ 7,142 --------- --------- --------- ---------
Agreements underlying the notes payable contain restrictive covenants which limit the payment of dividends, additional debt, lease rentals, and transactions with affiliates, and require maintenance of certain working capital and equity levels. At June 28, 1997, Delchamps was in compliance with all covenants. At June 28, 1997, approximately $4,950,000 of Delchamp's retained earnings was available for the payment of dividends under such restrictive provisions. Cash payments for interest were approximately $5,368,000, $7,129,000 and $5,268,000 in 1995, 1996 and 1997, respectively. Aggregate annual maturities of long-term debt for fiscal years after June 28, 1997 are approximately as follows:
(IN THOUSANDS) FISCAL YEAR ANNUAL MATURITIES - ----------------------------------------------------------------------------------------------- ----------------- 1998........................................................................................... $ 3,697 1999........................................................................................... 3,571 2000........................................................................................... 3,571 ------- $ 10,839 ------- -------
F-31 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (5) LONG-TERM DEBT (CONTINUED) Based on the borrowing rates currently available to Delchamps for long-term debt with similar terms and maturities, the fair value of the long-term debt outstanding at June 29, 1996 and June 28, 1997 approximated the carrying value, with the exception of the 5.51% note payable, the fair value of which approximated $13.7 million and $10.0 million at June 29, 1996 and June 28, 1997, respectively. The fair value was estimated using a discounted cash flow analysis based on Delchamps' borrowing rate for similar liabilities. (6) NOTES PAYABLE Short-term borrowings as of June 29, 1996 and June 28, 1997 consisted of the following:
(IN THOUSANDS) 1996 1997 --------- --------- Revolving loan commitments, due on various dates throughout fiscal 1996 and fiscal 1997, respectively, with interest rates based on LIBOR + 1.25%, secured by all of Delchamps' inventory................................................................................. $ 14,000 $ 4,600
On June 29, 1995, Delchamps entered into a $75,000,000 revolving loan credit agreement. The revolving loan agreement is committed through June, 1998. There is an annual commitment fee of .25 of 1% on the unused portion. At Delchamps' option, interest under the agreement may be based on LIBOR or the prime rate. As of June 28, 1997, Delchamps is committed to a LIBOR contract which expires July 28, 1997 and has a weighted average interest rate of 6.9375%. The credit agreement requires Delchamps to maintain minimum levels of earnings and to comply with stated debt covenants. At June 28, 1997, Delchamps was in compliance with all covenants. (7) LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN In November 1987, Delchamps leveraged its existing Employee Stock Ownership Plan ("ESOP"). The ESOP used the proceeds of the loan to purchase approximately 1,097,000 shares of Delchamps' common stock. The common stock was held by the ESOP trustee in a suspense account and these shares served as collateral for the loan. Each year through fiscal 1996, Delchamps made a contribution to the ESOP which the trustee used to make principal payments. With each loan payment a portion of the common stock was released from the suspense account and allocated to participating employees. Delchamps was required to pay interest on the loan in excess of any dividends received on unallocated shares. Delchamps guaranteed $20 million of ESOP debt under the loan agreement. On June 26, 1996, the ESOP loan was repaid in full. Therefore, as of June 29, 1996 and June 28, 1997, all shares had been allocated to participants and no shares remain in the "suspense account." F-32 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (8) EMPLOYEE BENEFIT AND INCENTIVE PLANS Delchamps has an employee stock ownership plan and a profit sharing plan pursuant to section 401(k) of the Internal Revenue Code (the "Code") which cover substantially all employees who have completed two years of service. The profit sharing plan was implemented in fiscal year 1995. Participants may contribute a percentage of compensation, but not in excess of the maximum allowed under the Code. The plan provides for a matching contribution by Delchamps. The total annual contributions to these plans by Delchamps for fiscal 1995, 1996 and 1997 were as follows:
(IN THOUSANDS) 1995 1996 1997 --------- --------- --------- Employee stock ownership plan........................................................ $ 2,000 $ 2,000 $ -- Profit sharing plan.................................................................. 1,421 1,157 1,055 --------- --------- --------- $ 3,421 $ 3,157 $ 1,055 --------- --------- --------- --------- --------- ---------
Delchamps has an incentive compensation plan for certain management personnel tied to Delchamps' overall performance. Incentive compensation expense was $1,252,000 in fiscal 1996 and $2,943,000 in fiscal 1997. Incentive compensation was not paid in 1995. In fiscal 1988, Delchamps adopted, with stockholder approval, a restricted stock award plan. The plan provides that a maximum of 150,000 shares of common stock be awarded to key executives. During 1989, 138,000 shares were awarded to key executives at a price of $.01 per share. No shares have been awarded since 1989. These awarded shares are held by Delchamps for future distribution in accordance with the provisions of the plan. Total compensation expense to be charged to operations over the term of the plan is approximately $3,209,000. Total compensation expense associated with the plan was determined based on the market value of the stock at the date of award, and is being amortized on a straight-line basis over the period the restrictions lapse. Charges to operations for this plan were approximately $293,000 in 1995, $21,000 in 1996 and $72,000 in 1997. (9) POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Delchamps provides a postemployment longevity bonus to associates that leave employment after either attaining age 55 or completing 25 years of service. The amount of longevity bonus is based on length of service and is recognized on an accrual basis as employees perform services to earn the benefits. Longevity bonus expense was $276,000 in 1995 and $304,000 in 1996 and 1997. F-33 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (10) INCOME TAXES The components of income tax expense (benefit) are as follows:
(IN THOUSANDS) CURRENT DEFERRED TOTAL --------- --------- ---------- 1995: Federal........................................................................ $ (4,746) $ (8,101) $ (12,847) State.......................................................................... (648) (1,105) (1,753) --------- --------- ---------- $ (5,394) $ (9,206) $ (14,600) --------- --------- ---------- --------- --------- ---------- 1996: Federal........................................................................ $ 461 $ 1,711 $ 2,172 State.......................................................................... 58 217 275 --------- --------- ---------- $ 519 $ 1,928 $ 2,447 --------- --------- ---------- --------- --------- ---------- 1997: Federal........................................................................ $ 5,750 $ (1,467) $ 4,283 State.......................................................................... 762 (194) 568 --------- --------- ---------- $ 6,512 $ (1,661) $ 4,851 --------- --------- ---------- --------- --------- ----------
The actual income tax expense (benefit) differs from the statutory tax rate for all years (computed by applying the U.S. federal corporate rate to earnings (loss) before income taxes) as follows:
(IN THOUSANDS) 1995 1996 1997 ---------- ---------- --------- Statutory tax rate.............................................................. $ (13,690) $ 2,142 $ 4,354 Increase (reduction) in income taxes resulting from: State income taxes, net of Federal income tax benefit......................... (2,219) 270 570 Targeted jobs tax credits..................................................... (385) (25) -- Cost in excess of fair value of assets acquired............................... 1,771 -- -- Other, net.................................................................... (77) 60 (73) ---------- ---------- --------- Actual tax expense (benefit)................................................ $ (14,600) $ 2,447 $ 4,851 ---------- ---------- --------- ---------- ---------- --------- Effective tax rate.............................................................. 36.3% 38.8% 37.9% ---------- ---------- --------- ---------- ---------- ---------
F-34 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (10) INCOME TAXES (CONTINUED) The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are as follows:
(IN THOUSANDS) 1996 1997 --------- --------- Deferred tax assets: Restructure obligation..................................................................... $ 7,531 $ 6,054 Capital lease obligation................................................................... 1,939 1,901 Accrued self-insurance..................................................................... 2,879 4,515 Accrued postemployment benefits............................................................ 888 847 Other accrued liabilities.................................................................. 1,585 2,099 --------- --------- Net deferred tax assets.................................................................... 14,797 15,416 --------- --------- Deferred tax liabilities: Accelerated depreciation................................................................... 19,985 18,942 Other...................................................................................... 159 160 --------- --------- Total gross deferred liabilities........................................................... 20,144 19,102 --------- --------- Net deferred tax liability................................................................... $ 5,347 $ 3,686 --------- --------- --------- ---------
No valuation allowance was recorded against the deferred tax assets at June 28, 1997. Delchamps' management believes the existing net deductible temporary differences comprising the total gross deferred tax assets will reverse during the periods in which Delchamps generates net taxable income. Cash payments for income taxes were approximately $1,437,000, $67,000 and $5,454,000 in fiscal 1995, 1996 and 1997, respectively. (11) SHARE PURCHASE RIGHTS PLAN In October 1988, Delchamps adopted a Share Purchase Rights Plan and declared a dividend distribution of one Right for each outstanding share of common stock. Under certain conditions, each Right may be exercised to purchase one one-hundredth of a share of Junior Participating Preferred Stock at a purchase price of $70, subject to adjustment. Delchamps will be entitled to redeem the Rights at $.01 per Right at any time prior to the earlier of the expiration of the Rights in October 1998 or ten days following the time a person or group acquires or obtains the right to acquire a 15% position in Delchamps. The Rights do not have voting or dividend privileges. Until such time as they become exercisable, the Rights have no dilutive effect on the earnings per share of Delchamps. (12) RESTRUCTURING CHARGE During fiscal 1995, Delchamps recorded a pretax restructuring charge of $28.8 million. The charge reflected anticipated costs associated with a program to close certain underperforming stores which could not be subleased in whole or in part and, to a lesser extent, severance costs related to the termination of employment of former executives. Of the total $28.8 million restructuring reserve, $3.2 million, $5.9 million F-35 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (12) RESTRUCTURING CHARGE (CONTINUED) and $3.9 million of costs and payments have been charged against the reserve for fiscal 1995, 1996 and 1997, respectively. A detail of charges against the restructure obligation follows:
(IN THOUSANDS) 1995 1996 1997 --------- --------- --------- Lease payments....................................................................... $ 1,421 $ 3,438 $ 2,745 Inventory write-offs................................................................. -- 253 300 Fixture and equipment write-offs..................................................... 24 1,828 138 Severance payments................................................................... 1,752 400 755 --------- --------- --------- $ 3,197 $ 5,919 $ 3,938 --------- --------- --------- --------- --------- ---------
(13) COMMITMENTS AND CONTINGENCIES Delchamps is a defendant in various claims and legal actions considered to be in the normal course of business. Management intends to vigorously defend these claims and believes that the ultimate disposition of these matters will not have a material adverse effect on Delchamps' consolidated financial condition. In fiscal 1989, and subsequently, Delchamps has entered into certain agreements with officers and key management. The agreements contain provisions entitling each officer or employee covered by these agreements to receive from 1 to 3 times his annual compensation (as defined) if there is a change in control of Delchamps (as defined) and a termination of his employment. The agreements also provide for severance benefits under certain other circumstances. The agreements do not constitute employment contracts and only apply in circumstances following a change in control of Delchamps. In the event of a change in control of Delchamps and termination of all persons covered by these agreements, the cost would be approximately $12,100,000. (14) STOCK INCENTIVE PLAN Key employees of Delchamps (including officers and directors who are also full-time employees of Delchamps) are eligible to receive one or more of the following: incentive stock options and non-qualified stock options, stock awards, restricted stock, performance shares, and cash awards. Approximately 460,800 stock options have been granted of which approximately 351,550 shares are exercisable as of June 28, 1997. The stock options expire from December 2000 through October 2006. During fiscal 1997, approximately 2,000 options were exercised. Exercise prices range from $17.88 to $23.00 which was market value at date of grant. F-36 DELCHAMPS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997 (15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected quarterly financial data for the years ended June 29, 1996 and June 28, 1997 is summarized as follows:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) -------------------------------------------------- FISCAL QUARTERS 1996 FIRST SECOND THIRD FOURTH - ------------------------------------------------------------- ---------- -------------- ---------- ---------- Sales........................................................ $ 284,689 $ 277,053 $ 280,225 $ 284,662 Gross profit................................................. 64,470 64,915 65,684 68,171 Earnings (loss) before tax................................... (1,124) 1,290 1,897 4,236 Net earnings (loss).......................................... (756) 808 1,147 2,653 Net earnings (loss) per common share......................... (0.11) 0.12 0.16 0.37 Dividends declared per common share.......................... 0.11 0.11 0.11 0.11
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) -------------------------------------------------- FISCAL QUARTERS 1997 FIRST SECOND THIRD FOURTH - ------------------------------------------------------------- ---------- -------------- ---------- ---------- Sales........................................................ $ 289,699 $ 272,602 $ 273,753 $ 266,893 Gross profit................................................. 65,367 65,116 69,182 72,404 Earnings before tax.......................................... 343 321 4,428 7,713 Net earnings................................................. 204 176 2,720 4,854 Net earnings per common share................................ .03 .03 .38 .68 Dividends declared per common share.......................... 0.11 0.11 0.11 0.11
(16) SUBSEQUENT EVENT On July 8, 1997, Delchamps announced that it had entered into an agreement to be acquired by Jitney-Jungle Stores of America, Inc. ("Jitney-Jungle"). The terms of the agreement are described in Delchamps' 14D-9 and in Jitney-Jungle's 14D-1, both of which have been filed with the Securities and Exchange Commission. Pursuant to the agreement, Jitney-Jungle has begun an all-cash tender offer for all of Delchamps' outstanding common stock at a price of $30 per share. Following successful completion of the tender offer, Jitney-Jungle will acquire for the same cash price any shares that are not tendered by means of a merger of Delchamps with a wholly owned subsidiary of Jitney-Jungle. Delchamps' Board of Directors has approved the transaction unanimously and has recommended approval by Delchamps' stockholders. F-37 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------------------------ TABLE OF CONTENTS
PAGE ---- Available Information..................................................... 2 Summary................................................................... 3 Use of Proceeds........................................................... 8 Risk Factors.............................................................. 14 The Transactions.......................................................... 20 Pro Forma Capitalization.................................................. 22 Pro Forma Condensed Consolidated Financial Statements..................... 23 Pro Forma Liquidity....................................................... 35 Selected Historical Financial Information of Jitney-Jungle................ 37 Management's Discussion and Analysis of Financial Condition and Results of Operations of Jitney-Jungle............................................. 38 Selected Historical Financial Information of Delchamps.................... 44 Management's Discussion and Analysis of Financial Condition and Results of Operations of Delchamps................................................. 46 The Exchange Offer........................................................ 50 Business.................................................................. 56 Management................................................................ 68 Ownership of Capital Stock................................................ 74 Certain Relationships and Related Transactions............................ 78 Description of Certain Indebtedness....................................... 80 Description of the Notes.................................................. 83 Book-Entry; Delivery and Form............................................. 112 Certain Federal Income Tax Considerations................................. 114 Plan of Distribution...................................................... 115 Legal Matters............................................................. 116 Experts................................................................... 116 Index to Financial Statements............................................. F-1
------------------------ UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN THE ORIGINAL DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. PROSPECTUS $200,000,000 [LOGO] JITNEY-JUNGLE STORES OF AMERICA, INC. OFFER TO EXCHANGE 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 FOR ALL OUTSTANDING 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 79-48.51 of the Mississippi Business Corporation Act provides that a Mississippi corporation may indemnify an individual made a party to a proceeding because he is or was a director against liability incurred in the proceeding if the individual (1) conducted himself in good faith; (2) reasonably believed (i) in the case of conduct in his official capacity with the corporation, that his conduct was in its best interests; and (ii) in all other cases, that his conduct was a least not opposed to its best interests; and (3) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. A corporation may indemnify a director in these circumstances only upon specific authorization by the board of directors (or in certain circumstances, a committee thereof) special legal counsel or by shareholders as provided in Section 79-4-8.55. Section 79-4-8.52 of the Mississippi Business Corporation Act provides that a Mississippi corporation must indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he is or was a director of the corporation against reasonable expenses incurred by him in connection with the proceeding, unless the articles of incorporation provide otherwise. The Articles of Incorporation of the Company provide that a director of the Company shall not be liable to the corporation or its shareholders for money damages for an action taken, or any failure to take any action, as a director, except liability for: (i) the amount of a financial benefit received by a director to which he is not entitled: (ii) an intentional infliction of harm on the corporation or the shareholders; (ii) a violation Section 79-4-8.33 of the Mississippi Business Corporation Act regarding unlawful distributions; or (iv) an intentional violation of criminal law. The bylaws of the Company provide that the Company will indemnify any person who is a party or is threatened to be made a party to any threatened, pending or instituted action, suit or proceedings, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director or officer of the Company, or is or was servicing at the request of the Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses, attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonable incurred by him in connection with such action, suit or proceeding interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable judgment, order, settlement, conviction, or plea or nolo contendere or its equivalent, will not, in itself, create a presumption that the person did not act in good faith and in a manner which reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. The provision does not apply to such claims on behalf of the Company against such director or officer. To the extent that any person described above has been successful on the merits or otherwise in defense of any action, suit or proceeding or in defense of any claim, issue or matter discussed above, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Such indemnification under the bylaws may be made by the Company only as authorized in each specific case upon a determination that indemnification of the director or officer is proper under the determination shall be made, (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such actions, suit or proceedings, or (ii) if such quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the shareholders. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding if authorized by the Board II-1 of Directors in a specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Company. The indemnification provided by the bylaws should not be deemed exclusive of any other rights to which a person seeking indemnification maybe e entitled under any statute, by-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators or such a person. The Company has power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against any lability asserted against him or incurred by him in any such capacity, or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability under the provisions of the bylaws. The Company has the power to designate an attorney for such persons, and in any event, any officer or director must notify the Board of Directors, in writing of any potential claim or threatened action against him in order to be entitled to indemnification. The requisite notice must be given within a reasonable time. The foregoing summary of the Mississippi Business Corporation Act, of the Company's Articles of Incorporation and of the Company's Bylaws, is qualified in its entirety by reference to the relevant provisions of the Mississippi Business Corporation Act and by reference to the relevant provisions of the Company's Articles of Incorporation (filed as Exhibit 3.1) and the relevant provisions of the Company's By-laws (filed as Exhibit 3.2). ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits:
EXHIBIT NO. DESCRIPTION - ---------- --------------------------------------------------------------------------------------------------------- 2.1 Agreement and Plan of Exchange and of Merger, dated as of November 16, 1995 by and among JJ Acquisitions Corp. and the Company, Southern Jitney-Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery, Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 3.1 Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.3 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 3.2 Restated by-laws of the Company (incorporated by reference to Exhibit 3.6 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 4.1 Indenture dated as of September 15, 1997 between the Company, the Subsidiary Guarantors and Marine Midland Bank, as Trustee 4.2 Registration Rights Agreement dated as of September 15, 1997 among the Company, the Subsidiary Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston 4.3 Form of the Company's 10 3/8% Senior Subordinated Notes due 2007 (included in Exhibit 4.1)
II-2
EXHIBIT NO. DESCRIPTION - ---------- --------------------------------------------------------------------------------------------------------- 4.4 Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the Company 4.5 Indenture dated March 5, 1996 between the Company and Marine Midland Bank, as Trustee, relating to the issuance and sale of $200,000,000 aggregate principal amount of 12% Senior Notes due 2006 (incorporated by reference to Exhibit No. 4.2 to Amendment No. 2 to Form S- 1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on February 27, 1996) 4.6 Warrant dated March 4, 1996 to purchase 75,000 shares of Common Stock of the Company by DLJ Merchant Banking Partners, L.P. and related investors (incorporated by reference by Exhibit No. 4.3 to Amendment No. 2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on February 27, 1996) 4.7 Memorandum of Agreement dated October 15, 1985 by and among the City of Jackson, Mississippi and McCarty-Holman Co., Inc. ($3,650,000)(incorporated by reference to Exhibit No. 4.8 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions corp. filed with the Commission on February 27, 1996) 5.1 Opinion of Dechert Price & Rhoads* 9.1 Voting Trust Agreement dated November 1, 1990 by and among Carolyn Holman Kroeze, as Executrix and the parties named therein (incorporated by reference to Exhibit No. 9.1 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.1 Purchase Agreement dated September 10, 1997 among the Company, Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston with respect to the 10 3/8% Senior Subordinated Notes due 2007 10.2 Supply Agreement dated March 19, 1989 as amended by and among Fleming Companies Inc. (successor in interest to Malone & Hyde, Inc.), the Company and Interstate Jitney-Jungle Stores, Inc. (incorporated by reference to Exhibit No. 10.2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.3 Membership in Topco Associates, Inc. (Cooperative) by ownership of six hundred (600) shares of Common Stock, such stock certificate being dated July 1, 1991 (incorporated by reference to Exhibit No. 10.3 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on February 27, 1996) 10.4 Flour Sale Confirmation and Contract dated July 19, 1995 by and among Cargill, Incorporated and Jitney-Jungle Bakery, Inc. (incorporated by reference to Exhibit No. 10.4 to Amendment No. 2 to Form S-1 [No. 33-808833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.5 Employment Agreement dated as of February 15, 1995 by and among the Company and Roger P. Friou (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions corp. filed with the Commission on February 27, 1996) 10.6 Employment Agreement dated as of February 24, 1995 by and among the Company and David K. Essary (incorporated by reference to Exhibit 10.7 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.7 Employment Agreement dated as of March 5, 1996 by and among the Company and W.H. Holman, Jr. (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K, dated July 24, 1997)
II-3
EXHIBIT NO. DESCRIPTION - ---------- --------------------------------------------------------------------------------------------------------- 10.8 Employment Agreement dated as of March 5, 1996 by and among the Company and W.H. Holman, III (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K, dated July 24, 1997) 10.9 Restatement and Amendment by the Entirety of the Jitney-Jungle Stores of America, Inc. and Affiliates Profit Sharing Plan and Trust (incorporated by reference to Exhibit No. 10.8 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.10 Deferred Compensation Plan for the Company dated as of November 16, 1995 by and among the Company, Southern Jitney-Jungle Company, Jitney-Jungle Bakery, Inc. McCarty-Holman Co., Inc. and W.H. Holman, Jr., Roger P. Friou and David K. Essary (incorporated by reference to Exhibit No. 10.9 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.11 Shareholders Agreement dated as of March 5, 1996 by and among DLJ Merchant Banking Partners, L.P. JJ Acquisitions Corp., and certain other signatories party thereto (incorporated by reference to Exhibit No. 10.10 to Amendment No. 2 to Forms S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.12 Securities Purchase and Holders Agreement dated as of March 5, 1996 by and among JJ Acquisitions Corp., Bruckmann, Rosser, Sherrill & Co., L.P. and other parties thereto (incorporated by reference to Exhibit No. 10.12 to Amendment No. 2 to Form S-1 [No. 33- 80833] of JJ Acquisitions Corp. filed with the commission on February 27, 1996) 10.13 Registration Rights Agreement dated as of March 5, 1996 dated as of March 5, 1996 by and among the Company and other parties named therein (incorporated by reference to Exhibit No. 10.13 to Amendment No. 2 to Form S-1 [No.33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 12.1 Statement of Ratio of Earnings to Fixed Charges 21.1 Subsidiaries of the Company 23.1 Consent of Dechert Price & Rhoads (included in Exhibit 5.1) 23.3 Consent of Deloitte & Touche LLP 23.4 Consent of KPMG Peat Marwick 24 Power of Attorney (included on signature pages of this Registration Statement) 25 Statement of Eligibility and Qualification, Form T-1, of Marine Midland Bank 99.1 Form of Letter of Transmittal* 99.2 Form of Notice of Guaranteed Delivery*
- ------------------------ * To be supplied by amendment. (b) Financial Statement Schedules: Schedule II--Valuation and Qualifying Accounts and Reserves Schedules not listed above are omitted because of the absence of the conditions under which they are required or because the information required by such omitted schedules is set forth in the financial statements or the notes thereto. II-4 ITEM 22. UNDERTAKINGS (a) The undersigned registrants hereby undertake: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-5 SIGNATURES JITNEY-JUNGLE STORES OF AMERICA, INC. Pursuant to the requirements of the Securities Act of 1933, as amended, the above-named Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson, State of Mississippi, on the 28th day of October, 1997. JITNEY-JUNGLE STORES OF AMERICA, INC. By: /s/ MICHAEL E. JULIAN ----------------------------------------- Michael E. Julian PRESIDENT AND CHIEF EXECUTIVE OFFICER POWER OF ATTORNEY Each person whose signature appears below appoints Michael E. Julian and David R. Black, either of whom may act without the joinder of the other, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on October 28, 1997.
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ W.H. HOLMAN, JR. - ------------------------------ Chairman of the Board W.H. Holman, Jr. President, Chief Executive /s/ MICHAEL E. JULIAN Officer and Director - ------------------------------ (Principal Executive Michael E. Julian Officer) Senior Vice President, /s/ DAVID R. BLACK Finance and Chief - ------------------------------ Financial Officer David R. Black (Principal Accounting Officer)
II-6
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ ROGER P. FRIOU - ------------------------------ Director Roger P. Friou /s/ BRUCE C. BRUCKMANN - ------------------------------ Director Bruce C. Bruckmann /s/ HAROLD O. ROSSER II - ------------------------------ Director Harold O. Rosser II /s/ STEPHEN C. SHERRILL - ------------------------------ Director Stephen C. Sherrill /s/ JOHN M. MORIARTY, JR. - ------------------------------ Director John M. Moriarty, Jr. /s/ RONALD E. JOHNSON - ------------------------------ Director Ronald E. Johnson /s/ BERNARD E. EBBERS - ------------------------------ Director Bernard E. Ebbers /s/ DONALD BENNETT - ------------------------------ Director Donald Bennett
II-7 INTERSTATE JITNEY-JUNGLE STORES, INC. Pursuant to the requirements of the Securities Act of 1933, as amended, the above-named Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson, State of Mississippi, on the 28th day of October, 1997. INTERSTATE JITNEY-JUNGLE STORES, INC. By: /s/ MICHAEL E. JULIAN ----------------------------------------- Michael E. Julian PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY Each person whose signature appears below appoints Michael E. Julian and David R. Black, either of whom may act without the joinder of the other, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on October 28, 1997.
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ W.H. HOLMAN, JR. - ------------------------------ Chairman of the Board W.H. Holman, Jr. President, Chief Executive /s/ MICHAEL E. JULIAN Officer and Director - ------------------------------ (Principal Executive Michael E. Julian Officer) Senior Vice President, /s/ DAVID R. BLACK Chief Financial Officer - ------------------------------ and Assistant Secretary David R. Black (Principal Accounting Officer) /s/ ROGER P. FRIOU - ------------------------------ Director Roger P. Friou /s/ BRUCE C. BRUCKMANN - ------------------------------ Director Bruce C. Bruckmann /s/ HAROLD O. ROSSER II - ------------------------------ Director Harold O. Rosser II /s/ STEPHEN C. SHERRILL - ------------------------------ Director Stephen C. Sherrill
II-8
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ JOHN M. MORIARTY, JR. - ------------------------------ Director John M. Moriarty, Jr. /s/ RONALD E. JOHNSON - ------------------------------ Director Ronald E. Johnson /s/ BERNARD E. EBBERS - ------------------------------ Director Bernard E. Ebbers /s/ DONALD BENNETT - ------------------------------ Director Donald Bennett
II-9 MCCARTY-HOLMAN CO., INC. Pursuant to the requirements of the Securities Act of 1933, as amended, the above-named Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson, State of Mississippi, on the 28th day of October, 1997. MCCARTY-HOLMAN CO., INC. By: /s/ MICHAEL E. JULIAN ----------------------------------------- Michael E. Julian PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY Each person whose signature appears below appoints Michael E. Julian and David R. Black, either of whom may act without the joinder of the other, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on October 28, 1997.
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ W.H. HOLMAN, JR. - ------------------------------ Chairman of the Board W.H. Holman, Jr. President, Chief Executive /s/ MICHAEL E. JULIAN Officer and Director - ------------------------------ (Principal Executive Michael E. Julian Officer) Senior Vice President, /s/ DAVID R. BLACK Chief Financial Officer - ------------------------------ and Assistant Secretary David R. Black (Principal Accounting Officer) /s/ ROGER P. FRIOU - ------------------------------ Director Roger P. Friou /s/ BRUCE C. BRUCKMANN - ------------------------------ Director Bruce C. Bruckmann /s/ HAROLD O. ROSSER II - ------------------------------ Director Harold O. Rosser II /s/ STEPHEN C. SHERRILL - ------------------------------ Director Stephen C. Sherrill
II-10
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ JOHN M. MORIARTY, JR. - ------------------------------ Director John M. Moriarty, Jr. /s/ RONALD E. JOHNSON - ------------------------------ Director Ronald E. Johnson /s/ BERNARD E. EBBERS - ------------------------------ Director Bernard E. Ebbers /s/ DONALD BENNETT - ------------------------------ Director Donald Bennett
II-11 SOUTHERN JITNEY JUNGLE COMPANY Pursuant to the requirements of the Securities Act of 1933, as amended, the above-named Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson, State of Mississippi, on the 28th day of October, 1997. SOUTHERN JITNEY JUNGLE COMPANY By: /s/ MICHAEL E. JULIAN ----------------------------------------- Michael E. Julian PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY Each person whose signature appears below appoints Michael E. Julian and David R. Black, either of whom may act without the joinder of the other, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on October 28, 1997.
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ W.H. HOLMAN, JR. - ------------------------------ Chairman of the Board W.H. Holman, Jr. President, Chief Executive /s/ MICHAEL E. JULIAN Officer and Director - ------------------------------ (Principal Executive Michael E. Julian Officer) Senior Vice President, /s/ DAVID R. BLACK Chief Financial Officer - ------------------------------ and Assistant Secretary David R. Black (Principal Accounting Officer) /s/ ROBER P. FRIOU - ------------------------------ Director Roger P. Friou /s/ BRUCE C. BRUCKMANN - ------------------------------ Director Bruce C. Bruckmann /s/ HAROLD O. ROSSER II - ------------------------------ Director Harold O. Rosser II /s/ STEPHEN C. SHERRILL - ------------------------------ Director Stephen C. Sherrill
II-12
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ JOHN M. MORIARTY, JR. - ------------------------------ Director John M. Moriarty, Jr. /s/ RONALD E. JOHNSON - ------------------------------ Director Ronald E. Johnson /s/ BERNARD E. EBBERS - ------------------------------ Director Bernard E. Ebbers /s/ DONALD BENNETT - ------------------------------ Director Donald Bennett
II-13 PUMP AND SAVE, INC. Pursuant to the requirements of the Securities Act of 1933, as amended, the above-named Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson, State of Mississippi, on the 28th day of October, 1997. PUMP AND SAVE, INC. By: /s/ MICHAEL E. JULIAN ----------------------------------------- Michael E. Julian CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY Each person whose signature appears below appoints Michael E. Julian and David R. Black, either of whom may act without the joinder of the other, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on October 28, 1997.
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ W.H. HOLMAN, JR. - ------------------------------ Chairman of the Board W.H. Holman, Jr. /s/ MICHAEL E. JULIAN Chief Executive Officer - ------------------------------ and Director (Principal Michael E. Julian Executive Officer) Senior Vice President, /s/ DAVID R. BLACK Chief Financial Officer - ------------------------------ and Assistant Secretary David R. Black (Principal Accounting Officer) /s/ ROGER P. FRIOU - ------------------------------ Director Roger P. Friou /s/ BRUCE C. BRUCKMANN - ------------------------------ Director Bruce C. Bruckmann /s/ HAROLD O. ROSSER II - ------------------------------ Director Harold O. Rosser II /s/ STEPHEN C. SHERRILL - ------------------------------ Director Stephen C. Sherrill
II-14
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ JOHN M. MORIARTY, JR. - ------------------------------ Director John M. Moriarty, Jr. /s/ RONALD E. JOHNSON - ------------------------------ Director Ronald E. Johnson /s/ BERNARD E. EBBERS - ------------------------------ Director Bernard E. Ebbers /s/ DONALD BENNETT - ------------------------------ Director Donald Bennett
II-15 DELTA ACQUISITION CORPORATION Pursuant to the requirements of the Securities Act of 1933, as amended, the above-named Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson, State of Mississippi, on the 28th day of October, 1997. DELTA ACQUISITION CORPORATION By: /s/ MICHAEL E. JULIAN ----------------------------------------- Michael E. Julian PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY Each person whose signature appears below appoints Michael E. Julian, and David R. Black, either of whom may act as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on October 28, 1997.
SIGNATURE TITLE - ------------------------------ -------------------------- President, Chief Executive /s/ MICHAEL E. JULIAN Officer, Secretary and - ------------------------------ Director (Principal Michael E. Julian Executive Officer) Senior Vice President, /s/ DAVID R. BLACK Chief Financial Officer, - ------------------------------ Assistant Secretary and David R. Black Treasurer (Principal Accounting Officer)
II-16 SUPERMARKET CIGARETTE SALES, INC. Pursuant to the requirements of the Securities Act of 1933, as amended, the above-named Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson, State of Mississippi, on the 28th day of October, 1997. SUPERMARKET CIGARETTE SALES, INC. By: /s/ MICHAEL E. JULIAN ----------------------------------------- Michael E. Julian PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY Each person whose signature appears below appoints Michael E. Julian and David R. Black, either of whom may act without the joinder of the other, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on October 28, 1997.
SIGNATURE TITLE - ------------------------------ -------------------------- President, Chief Executive /s/ MICHAEL E. JULIAN Officer and Director - ------------------------------ (Principal Executive Michael E. Julian Officer) Senior Vice President, Treasurer, Chief /s/ DAVID R. BLACK Financial Officer and - ------------------------------ Assistant Secretary David R. Black (Principal Accounting Officer) /s/ W.H. HOLMAN, JR. - ------------------------------ Director W.H. Holman, Jr. /s/ ROGER P. FRIOU - ------------------------------ Director Roger P. Friou /s/ BRUCE C. BRUCKMANN - ------------------------------ Director Bruce C. Bruckmann /s/ HAROLD O. ROSSER II - ------------------------------ Director Harold O. Rosser II /s/ STEPHEN C. SHERRILL - ------------------------------ Director Stephen C. Sherrill
II-17
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ CARL F. BAILEY - ------------------------------ Director Carl F. Bailey /s/ E.E. BISHOP - ------------------------------ Director E.E. Bishop /s/ WILLIAM W. CRAWFORD - ------------------------------ Director William W. Crawford
II-18 JITNEY-JUNGLE BAKERY, INC. Pursuant to the requirements of the Securities Act of 1933, as amended, the above-named Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson, State of Mississippi, on the 28th day of October, 1997. JITNEY-JUNGLE BAKERY, INC. By: /s/ MICHAEL E. JULIAN ----------------------------------------- Michael E. Julian PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY Each person whose signature appears below appoints Michael E. Julian and David R. Black, either of whom may act without the joinder of the other, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on October 28, 1997.
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ W.H. HOLMAN, JR. - ------------------------------ Chairman of the Board W.H. Holman, Jr. President, Chief Executive /s/ MICHAEL E. JULIAN Officer and Director - ------------------------------ (Principal Executive Michael E. Julian Officer) Senior Vice President, /s/ DAVID R. BLACK Chief Financial Officer - ------------------------------ and Assistant Secretary David R. Black (Principal Accounting Officer) /s/ ROGER P. FRIOU - ------------------------------ Director Roger P. Friou /s/ BRUCE C. BRUCKMANN - ------------------------------ Director Bruce C. Bruckmann /s/ HAROLD O. ROSSER II - ------------------------------ Director Harold O. Rosser II /s/ STEPHEN C. SHERRILL - ------------------------------ Director Stephen C. Sherrill
II-19
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ JOHN M. MORIARTY, JR. - ------------------------------ Director John M. Moriarty, Jr. /s/ RONALD E. JOHNSON - ------------------------------ Director Ronald E. Johnson /s/ BERNARD E. EBBERS - ------------------------------ Director Bernard E. Ebbers /s/ DONALD BENNETT - ------------------------------ Director Donald Bennett
II-20 DELCHAMPS, INC. Pursuant to the requirements of the Securities Act of 1933, as amended, the above-named Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson, State of Mississippi, on the 28th day of October, 1997. DELCHAMPS, INC. By: /s/ MICHAEL E. JULIAN ----------------------------------------- Michael E. Julian CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY Each person whose signature appears below appoints Michael E. Julian and David R. Black, either of whom may act without the joinder of the other, as his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on October 28, 1997.
SIGNATURE TITLE - ------------------------------ -------------------------- Chairman of the Board and /s/ MICHAEL E. JULIAN Chief Executive Officer - ------------------------------ (Principal Executive Michael E. Julian Officer) Senior Vice President, /s/ DAVID R. BLACK Treasurer, Chief - ------------------------------ Financial Officer and David R. Black Secretary (Principal Accounting Officer) /s/ E.E. BISHOP - ------------------------------ Director E.E. Bishop /s/ BRUCE C. BRUCKMANN - ------------------------------ Director Bruce C. Bruckmann /s/ ROGER P. FRIOU - ------------------------------ Director Roger P. Friou /s/ WILLIAM W. CRAWFORD - ------------------------------ Director William W. Crawford /s/ W.H. HOLMAN, JR. - ------------------------------ Director W.H. Holman, Jr.
II-21
SIGNATURE TITLE - ------------------------------ -------------------------- /s/ CARL F. BAILEY - ------------------------------ Director Carl F. Bailey /s/ HAROLD O. ROSSER II - ------------------------------ Director Harold O. Rosser II /s/ STEPHEN C. SHERRILL - ------------------------------ Director Stephen C. Sherrill
II-22
EXHIBIT NO. DESCRIPTION - ---------- --------------------------------------------------------------------------------------------------------- 2.1 Agreement and Plan of Exchange and of Merger, dated as of November 16, 1995 by and among JJ Acquisitions Corp. and the Company, Southern Jitney-Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery, Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 3.1 Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.3 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 3.2 Restated by-laws of the Company (incorporated by reference to Exhibit 3.6 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 4.1 Indenture dated as of September 15, 1997 between the Company, the Subsidiary Guarantors and Marine Midland Bank, as Trustee 4.2 Registration Rights Agreement dated as of September 15, 1997 among the Company, the Subsidiary Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston 4.3 Form of the Company's 10 3/8% Senior Subordinated Notes due 2007 (included in Exhibit 4.1) 4.4 Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the Company 4.5 Indenture dated March 5, 1996 between the Company and Marine Midland Bank, as Trustee, relating to the issuance and sale of $200,000,000 aggregate principal amount of 12% Senior Notes due 2006 (incorporated by reference to Exhibit No. 4.2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on February 27, 1996) 4.6 Warrant dated March 4, 1996 to purchase 75,000 shares of Common Stock of the Company by DLJ Merchant Banking Partners, L.P. and related investors (incorporated by reference by Exhibit No. 4.3 to Amendment No. 2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on February 27, 1996) 4.7 Memorandum of Agreement dated October 15, 1985 by and among the City of Jackson, Mississippi and McCarty-Holman Co., Inc. ($3,650,000)(incorporated by reference to Exhibit No. 4.8 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions corp. filed with the Commission on February 27, 1996) 5.1 Opinion of Dechert Price & Rhoads* 9.1 Voting Trust Agreement dated November 1, 1990 by and among Carolyn Holman Kroeze, as Executrix and the parties named therein (incorporated by reference to Exhibit No. 9.1 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.1 Purchase Agreement dated September 10, 1997 among the Company, Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston with respect to the 10% Senior Subordinated Notes due 2007 10.2 Supply Agreement dated March 19, 1989 as amended by and among Fleming Companies Inc. (successor in interest to Malone & Hyde, Inc.), the Company and Interstate Jitney-Jungle Stores, Inc. (incorporated by reference to Exhibit No. 10.2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
EXHIBIT NO. DESCRIPTION - ---------- --------------------------------------------------------------------------------------------------------- 10.3 Membership in Topco Associates, Inc. (Cooperative) by ownership of six hundred (600) shares of Common Stock, such stock certificate being dated July 1, 1991 (incorporated by reference to Exhibit No. 10.3 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on February 27, 1996) 10.4 Flour Sale Confirmation and Contract dated July 19, 1995 by and among Cargill, Incorporated and Jitney-Jungle Bakery, Inc. (incorporated by reference to Exhibit No. 10.4 to Amendment No. 2 to Form S-1 [No. 33-808833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.5 Employment Agreement dated as of February 15, 1995 by and among the Company and Roger P. Friou (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions corp. filed with the Commission on February 27, 1996) 10.6 Employment Agreement dated as of February 24, 1995 by and among the Company and David K. Essary (incorporated by reference to Exhibit 10.7 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.7 Employment Agreement dated as of March 5, 1996 by and among the Company and W.H. Holman, Jr. (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K, dated July 24, 1997) 10.8 Employment Agreement dated as of March 5, 1996 by and among the Company and W.H. Holman, III (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K, dated July 24, 1997) 10.9 Restatement and Amendment by the Entirety of the Jitney-Jungle Stores of America, Inc. and Affiliates Profit Sharing Plan and Trust (incorporated by reference to Exhibit No. 10.8 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.10 Deferred Compensation Plan for the Company dated as of November 16, 1995 by and among the Company, Southern Jitney-Jungle Company, Jitney-Jungle Bakery, Inc. McCarty-Holman Co., Inc. and W.H. Holman, Jr., Roger P. Friou and David K. Essary (incorporated by reference to Exhibit No. 10.9 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.11 Shareholders Agreement dated as of March 5, 1996 by and among DLJ Merchant Banking Partners, L.P. JJ Acquisitions Corp., and certain other signatories party thereto (incorporated by reference to Exhibit No. 10.10 to Amendment No. 2 to Forms S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 10.12 Securities Purchase and Holders Agreement dated as of March 5, 1996 by and among JJ Acquisitions Corp., Bruckmann, Rosser, Sherrill & Co., L.P. and other parties thereto (incorporated by reference to Exhibit No. 10.12 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the commission on February 27, 1996) 10.13 Registration Rights Agreement dated as of March 5, 1996 dated as of March 5, 1996 by and among the Company and other parties named therein (incorporated by reference to Exhibit No. 10.13 to Amendment No. 2 to Form S-1 [No.33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996) 12.1 Statement of Ratio of Earnings to Fixed Charges 21.1 Subsidiaries of the Company 23.1 Consent of Dechert Price & Rhoads (included in Exhibit 5.1) 23.3 Consent of Deloitte & Touche LLP
EXHIBIT NO. DESCRIPTION - ---------- --------------------------------------------------------------------------------------------------------- 23.4 Consent of KPMG Peat Marwick 24 Power of Attorney (included on signature pages of this Registration Statement) 25 Statement of Eligibility and Qualification, Form T-1, of Marine Midland Bank 99.1 Form of Letter of Transmittal* 99.2 Form of Notice of Guaranteed Delivery*
- ------------------------ * To be supplied by amendment. EX-4.1 2 INDENTURE DATED 9/15/97, MARINE MIDLAND BANK EXHIBIT 4.1 EXECUTION COPY ================================================================================ JITNEY-JUNGLE STORES OF AMERICA, INC. INTERSTATE JITNEY JUNGLE STORES, INC. MCCARTY-HOLMAN CO., INC. SOUTHERN JITNEY JUNGLE COMPANY PUMP AND SAVE, INC. DELTA ACQUISITION CORPORATION DELCHAMPS, INC. SUPERMARKET CIGARETTE SALES, INC. ----------------------------------------- $200,000,000 103/8% SENIOR SUBORDINATED NOTES DUE 2007 ----------------------------------------- ---------------- INDENTURE DATED AS OF SEPTEMBER 15, 1997 ---------------- MARINE MIDLAND BANK Trustee ================================================================================ Indenture, dated as of September 15, 1997, among Jitney-Jungle Stores of America, Inc., a Mississippi corporation, (the "COMPANY"), Interstate Jitney-Jungle Stores, Inc., an Alabama corporation ("INTERSTATE"), McCarty-Holman Co., Inc., a Mississippi corporation ("MCCARTY-HOLMAN"), Southern Jitney Jungle Company, a Mississippi corporation ("SOUTHERN"), Pump And Save, Inc., a Mississippi corporation ("PUMP AND SAVE"), Delta Acquisition Corporation, an Alabama corporation ("DAC"), Delchamps, Inc., an Alabama corporation ("DELCHAMPS") and Supermarket Cigarette Sales, Inc., a Louisiana corporation ("SCSI") (each of Interstate, McCarty-Holman, Southern, Pump And Save, DAC, Delchamps and SCSI a "SUBSIDIARY GUARANTOR" and together with any Subsidiary of the Company that executes a Subsidiary Guarantee substantially in the form of EXHIBIT D attached hereto, the "SUBSIDIARY GUARANTORS") and Marine Midland Bank, as trustee (the "TRUSTEE"). The Company, the Subsidiary Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the holders of the Company's 103/8% Senior Subordinated Notes due 2007 (the "SENIOR SUBORDINATED NOTES") and the new 103/8% Senior Subordinated Notes due 2007 (the "NEW SENIOR SUBORDINATED NOTES" and, together with the Senior Subordinated Notes, the "NOTES"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "1996 MERGER" means the transactions contemplated by the 1996 Merger Agreement. "1996 MERGER AGREEMENT" means the Merger Agreement and Plan of Exchange and Merger, dated as of November 16, 1995, by and among BRS No. 1, Inc. (renamed JJ Acquisitions Corp.) and the Company, Southern, McCarty-Holman and Jitney-Jungle Bakery, Inc., as amended. "ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (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 that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. Notwithstanding the foregoing, in no event will the holders of Indebtedness under or in respect of the Senior Credit Facility (by reason of holding such Indebtedness) or Donaldson, Lufkin & Jenrette Securities Corporation or any of their respective Affiliates be deemed Affiliates of the Company or any of its Affiliates. "AGENT" means any Registrar, Paying Agent or co-registrar. 1 "APPLICABLE PROCEDURES" means applicable procedures of the Depositary, Euroclear or Cedel, as the case may be. "ASSET SALE" means: (i) the sale, conveyance, transfer or other disposition of any assets (including, without limitation, by way of a sale and leaseback) other than sales of inventory in the ordinary course of business (provided that the sale, conveyance, transfer or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of Sections 3.09, 4.14 and/or 5.01 hereof and not by the provisions of Section 4.10 hereof) or (ii) the issuance or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of clauses (i) and (ii) above, whether in a single transaction or a series of related transactions for net proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i) a sale, conveyance, transfer or other disposition of assets by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary; (ii) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary and (iii) a Restricted Payment that is permitted by Section 4.07 hereof, in each case, shall not be deemed to be Asset Sales. "ATTRIBUTABLE DEBT" means, in respect of a sale and leaseback transaction, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction, determined in accordance with GAAP) of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "BANKRUPTCY LAW" means title 11, U.S. Code or any similar Federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means, unless otherwise specified, the Board of Directors of the Company or any authorized committee thereof. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. "BORROWING BASE" means 60% of the net book value of all inventory of the Company and its Restricted Subsidiaries. "BRS" means Bruckmann, Rosser, Sherrill & Co., Inc. "BRS MANAGEMENT AGREEMENT" means that certain management agreement, dated September 8, 1995 between BRS and the Company, as amended on February 29, 1996 and on the date hereof, and as it may be further amended from time to time. "BUSINESS DAY" means any day other than a Legal Holiday. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. 2 "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than one year from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any lender party to the Senior Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings Services and in each case maturing within one year after the date of acquisition. "CEDEL" means Cedel Bank, societe anonyme. "CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Principals, their Related Parties, the DLJ Entities or their Affiliates, (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the Company consolidates with, or merges with or into, another "person" (as defined above) in a transaction or series of related transactions in which the Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any transaction where (A) the outstanding Voting Stock of the Company is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee corporation and (B) either (1) the "beneficial owners" (as such term is defined in Rule 13d-3 and 13d-5 under the Exchange Act) of the voting power of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly through one or more Subsidiaries, not less than a majority of the total voting power of the Voting Stock of the surviving or transferee corporation immediately after such transaction or (2) if immediately prior to such transaction the Company is a direct or indirect Subsidiary of any other Person (the "Holding Company"), then the "beneficial owners" (as defined above) of the Voting Stock of such Holding Company immediately prior to such transaction own, directly or indirectly through one or more Subsidiaries, not less than a majority of the voting power of the Voting Stock of the surviving or transferee corporation immediately after such transaction, (iv) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that (A) the Principals, their Related Parties, the DLJ Entities or their Affiliates cease to be the "beneficial owners" (as defined above), directly or indirectly, of at least 35% of the voting power of the Voting Stock of the Company and (B) any "person" (as defined above) becomes the "beneficial owner" (as defined above) (PROVIDED that at any time following the occurrence of a Public Equity Offering, the term "beneficial owner" shall exclude for such purpose the effect of Rule 13d-3(d)(1), other than any such effect with respect to the Warrants) directly or indirectly, of more of the voting power of the Voting Stock of the Company than is at the time "beneficially owned" (as defined above) by the Principals, their Related Parties, the DLJ Entities and their Affiliates in the aggregate, or (v) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. For purposes of 3 this definition, any transfer of an equity interest of an entity that was formed for the purpose of acquiring Voting Stock of the Company will be deemed to be a transfer of such portion of such Voting Stock as corresponds to the portion of the equity of such entity that has been so transferred. "CLASS A PREFERRED STOCK" means the Class A Senior Exchangeable Preferred Stock, par value $0.01 per share, of the Company. "CLASS B PREFERRED STOCK" means the Class B Compounding Cumulative Redeemable Preferred Stock, par value $0.01 per share, of the Company. "CLASS C PREFERRED STOCK" means the Class C Compounding Cumulative Preferred Stock, Series 1 and Series 2, par value $0.01 per share, of the Company. "COMMON STOCK" means the common stock, par value $.01 per share, of the Company. "COMPANY" means Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Jitney-Jungle"), unless and until a successor replaces Jitney-Jungle in accordance with Article 5 hereof, and thereafter includes such successor. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; PROVIDED that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included to the extent of the amount of dividends or distributions paid in cash (or converted into cash) to the referent Person or a Wholly Owned Restricted Subsidiary thereof that is a Subsidiary Guarantor, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date hereof or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "DEFAULT" means any event that is or with the passage of time or the giving of notice or both would become an Event of Default. "DEFINITIVE NOTES" means Notes that are in the form of EXHIBIT A-1 attached hereto (but without including the text referred to in footnotes 1 and 3 thereto). 4 "DELCHAMPS ACQUISITION" means the Delchamps Merger and the Delchamps Tender Offer. "DELCHAMPS MERGER" means the merger contemplated by the Delchamps Merger Agreement. "DELCHAMPS MERGER AGREEMENT" means the Agreement and Plan of Merger, dated July 8, 1997, by and among the Company, Delta Acquisition Corporation and Delchamps, Inc. "DELCHAMPS TENDER OFFER" means the tender offer contemplated by the Delchamps Merger Agreement. "DEPOSITARY" means, with respect to any Global Note, the Person specified in Section 2.03 hereof as the Depositary with respect to such Note, until a successor shall have been appointed and become such pursuant to the applicable provision of this Indenture, and thereafter, "Depositary" shall mean or include such successor. "DESIGNATED SENIOR DEBT" means (i) for so long as any Indebtedness is outstanding under the Senior Credit Facility or the Senior Notes, any such Indebtedness, and (ii) any other Senior Debt permitted under this Indenture the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the Notes mature. "DLJ ENTITIES" means DLJ Merchant Banking Partners, L.P., DLJ Offshore Partners, C.V. and DLJ Merchant Banking Funding, Inc. "EBITDA" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary or non-recurring loss plus any net loss realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the dispositions of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries (in the case of clauses (a) and (b) above, to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of original issue discount, non- cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financing, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) non-cash LIFO charges (credits) of such Person and its Restricted Subsidiaries for such period, plus (v) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash charges (excluding any such non-cash charge to the extent that it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash charges were deducted in computing such 5 Consolidated Net Income, plus (vi) non-recurring severance and transaction costs incurred in connection with any acquisition, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the Net Income of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EUROCLEAR" means Morgan Guaranty Trust Company of New York, the Brussels office, as operator of the Euroclear system. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE DEBENTURES" means the Company's Class A Exchange Debentures due 2008 issuable (1) in exchange for outstanding shares of Class A Preferred Stock at the Company's option on the date of any scheduled dividend payment with respect to the Class A Preferred Stock and (2) as payment of interest with respect to outstanding Class A Exchange Debentures due 2008, in each case, pursuant to the indenture related thereto in the form as in effect on the date hereof. "EXCHANGE OFFER" means the offer by the Company to Holders to exchange Senior Subordinated Notes for New Senior Subordinated Notes. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "EXISTING INDEBTEDNESS" means (i) up to $75.0 million of Indebtedness under Capital Lease Obligations of the Company and its Restricted Subsidiaries in existence on the date hereof, (ii) up to $200.0 million in aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries under the Senior Notes, (iii) up to $13.0 million in aggregate principal amount of other Indebtedness of the Company and its Restricted Subsidiaries (excluding Indebtedness under the Senior Credit Facility) in existence on the date hereof until such amounts are repaid and (iv) up to $16.0 million of Acquired Indebtedness in connection with the Delchamps Acquisition. "FIXED CHARGES" means, with respect to any Person for any period, the sum of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, to the extent such expense was included in computing Consolidated Net Income (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financing, and net payments (if any) pursuant to Hedging Obligations), (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash (other than dividend payments to the Company or any Restricted Subsidiary and other than dividend payments on Equity Interests of the Company and its Restricted Subsidiaries that are paid solely in 6 additional shares, or by accretion to the liquidation preference, of such Equity Interests) on any series of preferred stock of such Person and its Restricted Subsidiaries, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person and its Restricted Subsidiaries, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the EBITDA of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. For purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period, (ii) the EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "FUND" means Bruckmann, Rosser, Sherrill & Co., L.P., a Delaware limited partnership. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date hereof. "GLOBAL NOTES" means the Regulation S Global Notes and the Rule 144A Global Notes. "GOVERNMENT SECURITIES" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. 7 "HOLDER" means a Person in whose name a Note is registered. "INCUR" means, with respect to any Indebtedness, to incur, create, issue, assume, guarantee or otherwise become liable for or with respect to the payment of, contingently or otherwise, such Indebtedness; PROVIDED that neither the accrual of interest nor the accretion of original issue discount shall be considered an incurrence of Indebtedness. "INDEBTEDNESS" means, with respect to any Person and without duplication, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. "INDENTURE" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "INDIRECT PARTICIPANT" means a Person who holds an interest through a Participant. "INITIAL PURCHASERS" means Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston. "INSOLVENCY OR LIQUIDATION PROCEEDINGS" means (i) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding, relative to the Company or to the creditors of the Company, as such, or to the assets of the Company, or (ii) any liquidation, dissolution, reorganization or winding up of the Company, whether voluntary or involuntary and involving insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company. "INSTITUTIONAL ACCREDITED INVESTOR" means an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including Guarantees), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; PROVIDED that an acquisition of assets, Equity Interests or other securities by the Company for consideration consisting of common equity securities of the Company shall not be deemed to be an Investment. "IRB INDEBTEDNESS" means that certain Indebtedness of McCarty-Holman Co., Inc. pursuant to the Industrial Revenue Bond Issue with the City of Jackson, Mississippi, dated December 1, 1985, evidenced by the Lease recorded in Book 3166 at Page 443 of the Land Records of Hinds County, First Judicial District, Mississippi, including all agreements and documents related thereto. 8 "LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no additional interest shall accrue for the intervening period. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement (other than with respect to a lease that does not create a Capital Lease Obligation) under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "LIQUIDATED DAMAGES" means, at any time of determination, all liquidated damages then owing pursuant to the terms of the Registration Rights Agreement. "MANAGEMENT AGREEMENT" means that certain Management Agreement, dated March 19, 1980, between McCarty-Holman Co., L.P. and the Company, concerning the management of leased properties. "NET INCOME" means, with respect to any Person, the net income (loss) of such Person and its Restricted Subsidiaries, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness (other than Indebtedness described in clause (i) of the second paragraph under Section 4.10) secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) and (b) is directly or indirectly liable (as a guarantor or otherwise); and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. 9 "NOTE CUSTODIAN" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto, as provided in Section 2.01. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFERING" means the offering of Notes pursuant to the Offering Memorandum. "OFFERING MEMORANDUM" means the offering memorandum, dated September 10, 1997, relating to the offering of the Senior Subordinated Notes. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer or the principal accounting officer of the Company, that meets the requirements of Section 13.05 hereof. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "PARI PASSU INDEBTEDNESS" means Indebtedness of the Company or any of its Restricted Subsidiaries that ranks PARI PASSU in right of payment to the Notes or any Guarantee thereof. "PARTICIPANT" means, with respect to DTC, Euroclear or Cedel, a Person who has an account with DTC, Euroclear or Cedel, respectively (and, with respect to DTC, shall include Euroclear and Cedel). "PAYMENT IN FULL" (together with any correlative phrases E.G. "PAID IN FULL" and "PAY IN FULL") means (i) with respect to any Senior Debt other than Senior Debt under or in respect of the Senior Credit Facility, payment in full thereof or due provision for payment thereof (x) in accordance with the terms of the agreement or instrument pursuant to which such Senior Debt was issued or is governed or (y) otherwise to the reasonable satisfaction of the holders of such Senior Debt, which shall include, in any Insolvency or Liquidation Proceeding, approval by such holders, individually or as a class, of the provision for payment thereof, and (ii) with respect to Senior Debt under or in respect of the Senior Credit Facility, payment in full thereof in cash or Cash Equivalents. "PERMITTED BUSINESS" means any of the businesses and any other businesses related to the businesses engaged in by the Company and its Restricted Subsidiaries on the date hereof. "PERMITTED INVESTMENTS" means (a) any Investments in the Company or in a Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (b) any Investments in Cash Equivalents; (c) Investments by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary of the Company and a Subsidiary Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (d) Restricted Investments made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; and (e) other Investments in any Person that do not exceed $1.5 million at any time outstanding. 10 "PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company and debt securities of the Company or any Subsidiary Guarantor that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt of the Company or such Subsidiary Guarantor) to substantially the same extent as, or to a greater extent than, the Notes or Subsidiary Guarantees, as applicable, are subordinated to Senior Debt pursuant to the subordination provisions of this Indenture. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries that is permitted to be incurred by the provisions of this Indenture; PROVIDED, that, except with respect to Capital Lease Obligations, (i) the principal amount (or accreted value, as applicable) of, or (with respect to revolving credit Indebtedness) maximum commitment under, such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, as applicable) of, or (with respect to revolving credit Indebtedness) maximum commitment under, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of premiums and reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and (other than with respect to revolving credit Indebtedness) has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company and/or by a Subsidiary Guarantor. "PERSON" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "PREFERRED STOCK" means the Class A Preferred Stock, the Class B Preferred Stock and the Class C Preferred Stock. "PRINCIPALS" means (i) the Fund and any of its Affiliates and (ii) Messrs. W. H. Holman, Jr., W. H. Holman III, Essary, Friou, Bruckmann, Rosser, Sherrill and Edwards. "PRIVATE PLACEMENT LEGEND" means the legend initially set forth on the Senior Subordinated Notes in the form set forth in Section 2.06(g) hereof. "PUBLIC EQUITY OFFERING" means a public offering of common stock of the Company. "QIB" means a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. "REDEMPTION DATE" with respect to any Notes, means the date on which such Notes are redeemed by the Company pursuant to Section 3.07 of this Indenture. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of September 15, 1997, by and among the Company and the Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time. 11 "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL NOTES" means the Regulation S Temporary Global Notes or the Regulation S Permanent Global Notes as applicable. "REGULATION S PERMANENT GLOBAL NOTES" means the permanent global notes that do not contain the paragraphs referred to in footnote 1 to the form of the Note attached hereto as EXHIBIT A-2, and that are deposited with and registered in the name of the Depositary or its nominee, representing a series of Notes sold in reliance on Regulation S. "REGULATION S TEMPORARY GLOBAL NOTES" means the temporary global notes that contain the paragraphs referred to in footnote 1 to the form of the Note attached hereto as EXHIBIT A-2, and that are deposited with and registered in the name of the Depositary or its nominee, representing a series of Notes sold in reliance on Regulation S. "RELATED PARTY" means (i) any controlling stockholder, general partner, 80% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of any Principal or (ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons holding an 80% or more controlling interest of which consist solely of one or more Principals and/or such other Persons referred to in the immediately preceding clause (i). "REPRESENTATIVE" means the trustee with respect to the Senior Notes, the agent with respect to the Senior Credit Facility, or any Person performing a similar function with respect to other Senior Debt. "RESPONSIBLE OFFICER" means any officer within the Corporate Trust Department of the Trustee (or any successor group of the Trustee) with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED BENEFICIAL INTEREST" means any beneficial interest of a Participant or Indirect Participant in the Rule 144A Global Note or the Regulation S Global Note. "RESTRICTED BROKER DEALER" has the meaning set forth in the Registration Rights Agreement. "RESTRICTED GLOBAL NOTES" means the Regulation S Global Notes and the Rule 144A Global Notes, all of which shall bear the Private Placement Legend. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED PERIOD" means the 40-day restricted period as defined in Regulation S. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 144A GLOBAL NOTES" means the permanent global notes that contain the paragraph referred to in footnote 1 and the additional schedule referred to in footnote 3 to the form of the Note attached hereto as EXHIBIT A-1, and that is deposited with and registered in the name of the Depositary or its nominee, representing Notes initially sold in reliance on Rule 144A. 12 "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated under the Securities Act. "SEC" or "COMMISSION" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SENIOR CREDIT FACILITY" means that certain revolving credit agreement, dated as of March 5, 1996, as amended and restated on or prior to the date hereof, by and among the Company, each of the Subsidiary Guarantors and the lenders named therein, and Fleet Capital Corporation, as successor agent to Fleet Bank, N.A., including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, as it may from time to time be amended, renewed, supplemented or otherwise modified at the option of the parties thereto and any other agreement pursuant to which any of the Indebtedness, commitments, Obligations, costs, expenses, fees, reimbursements and other indemnities payable or owing thereunder may be refinanced, restructured, renewed, extended, increased, replaced or refunded, as any such other agreements may from time to time at the option of the parties thereto be amended, supplemented, renewed or otherwise modified, in each case, whether or not with the same agent or lenders. "SENIOR DEBT" means (i) Indebtedness pursuant to the Senior Credit Facility, (ii) Indebtedness pursuant to the Senior Notes or guarantees thereof, as applicable, (iii) the IRB Indebtedness, (iv) any other Indebtedness permitted to be incurred by the Company or a Restricted Subsidiary under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or the Subsidiary Guarantees, as applicable, and (v) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (w) any liability for federal, state, local or other taxes owed or owing by the Company or any Subsidiary Guarantor, (x) any Indebtedness of the Company or any Subsidiary Guarantor to any of their respective Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of this Indenture. "SENIOR NOTES" means the 12% Senior Notes of the Company due 2006. "SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "SIGNIFICANT RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries which is by its terms expressly subordinated in right of payment to the Notes, any Subsidiary Guarantee or any other Indebtedness that is subordinated in right of payment to the Notes or any Subsidiary Guarantee. 13 "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "SUBSIDIARY GUARANTORS" means each of (i) Interstate; (b) McCarty-Holman; (c) Southern; (d) Pump And Save; (e) DAC; (f) SCSI and (g) Delchamps and (ii) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the Trust Indenture Act of 1939; provided, however, that in the event that the Trust Indenture Act of 1939 is amended after such date, "TIA" means, to the extent required by such amendment, the Trust Indenture Act of 1939 as so amended. "TRANSFER RESTRICTED SECURITIES" means Notes or beneficial interests therein that bear or are required to bear the Private Placement Legend. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UNRESTRICTED GLOBAL NOTES" means one or more Global Notes that do not and are not required to bear the Private Placement Legend. "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company (other than Interstate, McCarty-Holman, Southern, Pump And Save, DAC, SCSI and Delchamps, or any successor to any of them) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution and (ii) any Subsidiary of an Unrestricted Subsidiary; but, in each case, only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee the Board Resolution giving effect to such designation and an Officers' Certificate indicating that such designation complied with the foregoing conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the 14 Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.09 hereof, (ii) no Default or Event of Default would be in existence immediately following such designation and (iii) the Company shall have delivered to the Trustee an Officers' Certificate indicating that such designation complied with the foregoing conditions. "VOTING STOCK" means, with respect to any Person, any class or series of capital stock of such Person that is ordinarily entitled to vote in the election of directors thereof at a meeting of stockholders called for such purpose, without the occurrence of any additional event or contingency. "WARRANTS" means the warrants to purchase up to 15% (on a fully diluted basis) of the common stock, par value $0.01 per share, of the Company dated March 5, 1996. "WARRANT SHARES" means the shares of Common Stock issuable upon the exercise of the Warrants. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person, or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. SECTION 1.02. OTHER DEFINITIONS. DEFINED IN TERM SECTION "AFFILIATE TRANSACTION"................................................4.11 "ASSET SALE OFFER".....................................................4.10 "CHANGE OF CONTROL OFFER"..............................................4.14 "CHANGE OF CONTROL PAYMENT"............................................4.14 "CHANGE OF CONTROL PAYMENT DATE".......................................4.14 "COVENANT DEFEASANCE"..................................................8.03 "CUSTODIAN"............................................................6.01 "DTC"..................................................................2.03 "EVENT OF DEFAULT".....................................................6.01 "EXCESS PROCEEDS"......................................................4.10 "INCUR"................................................................4.09 "LEGAL DEFEASANCE".....................................................8.02 "OFFER AMOUNT".........................................................3.09 15 "OFFER PERIOD".........................................................3.09 "PAYING AGENT".........................................................2.03 "PAYMENT DEFAULT"......................................................6.01 "PERMITTED DEBT".......................................................4.09 "PURCHASE DATE"........................................................3.09 "REGISTRAR"............................................................2.03 "REPURCHASE OFFER".....................................................3.09 "RESTRICTED PAYMENTS"..................................................4.07 "SUBSIDIARY GUARANTEES"...............................................11.01 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 Notes; "INDENTURE SECURITY HOLDER" means a Holder of a Note; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; "OBLIGOR" on the Notes means the Company, each Subsidiary Guarantor and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by the Commission rule under the TIA have the meanings so assigned to them therein. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it herein; (2) an accounting term not otherwise defined herein has the meaning assigned to it in accordance with GAAP; (3) "OR" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the Commission from time to time. 16 ARTICLE 2 THE NOTES SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form of EXHIBIT A-1 or EXHIBIT A-2 attached hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes initially shall be issued in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. (a) GLOBAL NOTES. Notes offered and sold to QIBs in reliance on Rule 144A shall be issued initially in the form of Rule 144A Global Notes, which shall be deposited on behalf of the purchasers of the Notes represented thereby with a custodian of the Depositary, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Rule 144A Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Cedel, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The "40-DAY RESTRICTED PERIOD" (as defined in Regulation S) shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Cedel certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Notes (except to the extent of any beneficial owners thereof who acquired an interest therein pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a Rule 144A Global Note, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company certifying as to the same matters covered in clause (i) above. Following the termination of the 40-day restricted period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Notes. The aggregate principal amount of the Regulation S Temporary Global Notes and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Notes from time to time endorsed thereon and that the aggregate amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and transfers 17 of interests. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "Management Regulations" and "Instructions to Participants" of Cedel shall be applicable to interests in the Regulation S Temporary Global Notes and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Cedel. The Trustee shall have no obligation to notify Holders of any such procedures or to monitor or enforce compliance with the same. Except as set forth in Section 2.06 hereof, the Global Notes may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. (b) BOOK-ENTRY PROVISIONS. This Section 2.01(b) shall apply only to Rule 144A Global Notes and Regulation S Permanent Global Notes deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(b), authenticate and deliver the Global Notes that (i) shall be registered in the name of the Depositary or the nominee of the Depositary and (ii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions or held by the Trustee as custodian for the Depositary. Participants shall have no rights either under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Note Custodian as custodian for the Depositary or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Participants, the operation of customary practices of such Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. (c) DEFINITIVE NOTES. Notes issued in certificated form shall be substantially in the form of EXHIBIT A-1 attached hereto (but without including the text referred to in footnotes 1 and 3 thereto). SECTION 2.02. EXECUTION AND AUTHENTICATION. An Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The form of Trustee's certificate of authentication to be borne by the Notes shall be substantially as set forth in EXHIBIT A-1 or EXHIBIT A-2 hereto. 18 The Trustee shall, upon a written order of the Company signed by an Officer directing the Trustee to authenticate the Notes, authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The Trustee shall, upon written order of the Company signed by an Officer, authenticate New Senior Subordinated Notes for original issuance in exchange for a like principal amount of Senior Subordinated Notes exchanged in the Exchange Offer or otherwise exchanged for New Senior Subordinated Notes pursuant to the terms of the Registration Rights Agreement. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount stated in paragraph 4 of the Notes, except as provided in Section 2.07 hereof. The Trustee may (at the Company's expense) appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain (i) an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and (ii) an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent with respect to the Definitive Notes. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon the occurrence of events specified in Section 6.01(h) and (i) hereof, the Trustee shall serve as Paying Agent for the Notes. 19 SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company and/or the Subsidiary Guarantors shall furnish to the Trustee at least seven (7) Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company and the Subsidiary Guarantors shall otherwise comply with TIA Section 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN GLOBAL NOTES. The transfer and exchange of beneficial interests in Global Notes shall be effected through the Depositary, in accordance with this Indenture and the procedures of the Depositary therefor, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Beneficial interests in a Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note in accordance with the transfer restrictions set forth in subsection (g) of this Section 2.06 or in an Unrestricted Global Note in accordance with subsection (g)(iv). Transfers of beneficial interests in the Global Notes to Persons required to take delivery thereof in the form of an interest in another Global Note shall be permitted as follows: (i) RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE. If, at any time, an owner of a beneficial interest in a Rule 144A Global Note deposited with the Depositary (or the Trustee as custodian for the Depositary) wishes to transfer its beneficial interest in such Rule 144A Global Note to a Person who is required or permitted to take delivery thereof in the form of an interest in a Regulation S Global Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in a Regulation S Global Note as provided in this Section 2.06(a)(i). Upon receipt by the Trustee of (1) instructions given in accordance with the Applicable Procedures from a Participant directing the Trustee to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the Rule 144A Global Note to be exchanged, (2) a written order given in accordance with the Applicable Procedures containing information regarding the Participant account of the Depositary and the Euroclear or Cedel account to be credited with such increase, and (3) a certificate in the form of EXHIBIT B-1 hereto given by the owner of such beneficial interest stating that the transfer of such interest has been made in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S, then the Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be reduced the aggregate principal amount at maturity of the applicable Rule 144A Global Note and to increase or cause to be increased the aggregate principal amount at maturity of the applicable Regulation S Global Note by the principal amount at maturity of the beneficial interest in the Rule 144A Global Note to be exchanged or transferred, to credit or cause to be credited to the account of the Person specified in such instructions, a beneficial interest in the Regulation S Global Note equal to the reduction in the aggregate principal amount at maturity of the Rule 144A Global Note, and to debit, or 20 cause to be debited, from the account of the Person making such exchange or transfer the beneficial interest in the Rule 144A Global Note that is being exchanged or transferred. (ii) REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE. If, at any time, after the expiration of the 40-day restricted period, an owner of a beneficial interest in a Regulation S Global Note deposited with the Depositary or with the Trustee as custodian for the Depositary wishes to transfer its beneficial interest in such Regulation S Global Note to a Person who is required or permitted to take delivery thereof in the form of an interest in a Rule 144A Global Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in a Rule 144A Global Note as provided in this Section 2.06(a)(ii). Upon receipt by the Trustee of (1) instructions from Euroclear or Cedel, if applicable, and the Depositary, directing the Trustee, as Registrar, to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged, such instructions to contain information regarding the Participant account with the Depositary to be credited with such increase, (2) a written order given in accordance with the Applicable Procedures containing information regarding the participant account of the Depositary and (3) a certificate in the form of EXHIBIT B-2 attached hereto given by the owner of such beneficial interest stating (A) if the transfer is pursuant to Rule 144A, that the Person transferring such interest in a Regulation S Global Note reasonably believes that the Person acquiring such interest in a Rule 144A Global Note is a QIB and is obtaining such beneficial interest in a transaction meeting the requirements of Rule 144A and any applicable blue sky or securities laws of any state of the United States, (B) that the transfer complies with the requirements of Rule 144 under the Securities Act, (C) if the transfer is to an Institutional Accredited Investor that such transfer is in compliance with the Securities Act and a certificate in the form of EXHIBIT C attached hereto and, if such transfer is in respect of an aggregate principal amount of less than $250,000, an Opinion of Counsel acceptable to the Company that such transfer is in compliance with the Securities Act or (D) if the transfer is pursuant to any other exemption from the registration requirements of the Securities Act, that the transfer of such interest has been made in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the requirements of the exemption claimed, such statement to be supported by an Opinion of Counsel from the transferee or the transferor in form reasonably acceptable to the Company and to the Registrar and in each case, in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction, then the Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be reduced the aggregate principal amount at maturity of such Regulation S Global Note and to increase or cause to be increased the aggregate principal amount at maturity of the applicable Rule 144A Global Note by the principal amount at maturity of the beneficial interest in the Regulation S Global Note to be exchanged or transferred, and the Trustee, as Registrar, shall instruct the Depositary, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the applicable Rule 144A Global Note equal to the reduction in the aggregate principal amount at maturity of such Regulation 21 S Global Note and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Regulation S Global Note that is being exchanged or transferred. (b) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive Notes are presented by a Holder to the Registrar with a request to register the transfer of the Definitive Notes or to exchange such Definitive Notes for an equal principal amount of Definitive Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested only if: (i) the Definitive Notes are presented or surrendered for registration of transfer or exchange, endorsed and containing a signature guarantee or accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney and contains a signature guarantee, duly authorized in writing; and (ii) in the case of Definitive Notes that are Transfer Restricted Securities, the Registrar has received the following documentation, as applicable (all of which may be submitted by facsimile): (A) if such Transfer Restricted Security is being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, or such Transfer Restricted Security is being transferred to the Company or any of its Subsidiaries, a certification to that effect from such Holder (in substantially the form of EXHIBIT B-3 hereto); or (B) if such Transfer Restricted Security is being transferred to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of EXHIBIT B-3 hereto); or (C) if such Transfer Restricted Security is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 904 under the Securities Act, a certification to that effect from such Holder (in substantially the form of EXHIBIT B-3 hereto); (D) if such Transfer Restricted Security is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) and (C) above, a certification to that effect from such Holder (in substantially the form of EXHIBIT B-3 hereto), a certification substantially in the form of EXHIBIT C hereto, and, if such transfer is in respect of an aggregate principal amount of Notes of less than $250,000, an Opinion of Counsel acceptable to the Company that such transfer is in compliance with the Securities Act; or (E) if such Transfer Restricted Security is being transferred in reliance on any other exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the 22 form of EXHIBIT B-3 hereto) and an Opinion of Counsel from such Holder or the transferee reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act. (c) TRANSFER OF A BENEFICIAL INTEREST IN A RULE 144A GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE FOR A DEFINITIVE NOTE. (i) Any Person having a beneficial interest in a Rule 144A Global Note or Regulation S Permanent Global Note may upon request, subject to the Applicable Procedures, exchange such beneficial interest for a Definitive Note. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depositary (or Euroclear or Cedel, if applicable), from the Depositary or its nominee on behalf of any Person having a beneficial interest in a Rule 144A Global Note or Regulation S Permanent Global Note, and, in the case of a Transfer Restricted Security, the following additional information and documents (all of which may be submitted by facsimile): (A) if such beneficial interest is being transferred to the Person designated by the Depositary as being the beneficial owner, a certification to that effect from such Person (in substantially the form of EXHIBIT B-4 hereto); (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from the transferor (in substantially the form of EXHIBIT B-4 hereto); (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 904 under the Securities Act, a certification to that effect from the transferor (in substantially the form of EXHIBIT B-4 hereto); (D) if such beneficial interest is being transferred to an Institutional Accredited Investor, pursuant to a private placement exemption from the registration requirements of the Securities Act (and based on an Opinion of Counsel if the Company so requests), a certification to that effect from such Holder (in substantially the form of EXHIBIT B-4 hereto) and a certificate from the applicable transferee (in substantially the form of EXHIBIT C hereto); or (E) if such beneficial interest is being transferred in reliance on any other exemption from the registration requirements of the Securities Act, a certification to that effect from the transferor (in substantially the form of EXHIBIT B-4 hereto) and an Opinion of Counsel from the transferee or the transferor reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act, in which case the Trustee or the Note Custodian, at the direction of the Trustee, shall, in accordance with the standing 23 instructions and procedures existing between the Depositary and the Note Custodian, cause the aggregate principal amount of Rule 144A Global Notes or Regulation S Permanent Global Notes, as applicable, to be reduced accordingly and, following such reduction, the Company shall execute and, the Trustee shall authenticate and deliver to the transferee a Definitive Note in the appropriate principal amount. (ii) Definitive Notes issued in exchange for a beneficial interest in a Rule 144A Global Note or Regulation S Permanent Global Note, as applicable, pursuant to this Section 2.06(c) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or Indirect Participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Following any such issuance of Definitive Notes, the Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be reduced the aggregate principal amount at maturity of the applicable Global Note to reflect the transfer. (d) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES. Notwithstanding any other provision of this Indenture (other than the provisions set forth in subsection (f) of this Section 2.06), a Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (e) TRANSFER AND EXCHANGE OF A DEFINITIVE NOTE FOR A BENEFICIAL INTEREST IN A GLOBAL NOTE. When a Definitive Note is presented by a Holder to the Registrar with a request to register the transfer of the Definitive Note to a Person who is required or permitted to take delivery thereof in the form of an interest in a Global Note, or to exchange such Definitive Note for an equal interest in a Global Note, the Registrar shall register the transfer or make the exchange as requested only if (i) the Definitive Note is presented or surrendered for registration of transfer or exchange, endorsed and containing a signature guarantee or accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney and contains a signature guarantee, duly authorized in writing and (ii) in the case of Definitive Notes that are Transfer Restricted Securities (other than Transfer Restricted Securities that are being exchanged or transferred in accordance with the transfer restrictions set forth in subsection (g)(iv) of this Section 2.06), the Registrar has received the following documentation, as applicable (all of which may be submitted by facsimile): (A) if such Transfer Restricted Security is being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, or such Transfer Restricted Security is being transferred to the Company or any of its Subsidiaries, a certification to that effect from such Holder (in substantially the form of EXHIBIT B-3 hereto); or (B) if such Transfer Restricted Security is being transferred to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of EXHIBIT B-3 hereto); or 24 (C) if such Transfer Restricted Security is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 904 under the Securities Act, a certification to that effect from such Holder (in substantially the form of EXHIBIT B-3 hereto); (D) if such Transfer Restricted Security is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) and (C) above, a certification to that effect from such Holder (in substantially the form of EXHIBIT B-3 hereto), a certification substantially in the form of EXHIBIT C hereto, and, if such transfer is in respect of an aggregate principal amount of Notes of less than $250,000, an Opinion of Counsel acceptable to the Company that such transfer is in compliance with the Securities Act; or (E) if such Transfer Restricted Security is being transferred in reliance on any other exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of EXHIBIT B-3 hereto) and an Opinion of Counsel from such Holder or the transferee reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act. The Trustee shall (or, if at any time the Trustee ceases to be the Registrar, shall upon receipt from the Registrar of written notification that the foregoing documentation has been received by the Registrar) cancel the Definitive Note, increase or cause to be increased the aggregate principal amount of the appropriate Global Note. (f) AUTHENTICATION OF DEFINITIVE NOTES IN ABSENCE OF DEPOSITARY. If at any time: (i) the Depositary for the Notes notifies the Company that the Depositary is unwilling or unable to continue as Depositary for the Global Notes and a successor Depositary for the Global Notes is not appointed by the Company within 90 days after delivery of such notice; or (ii) the Company, at its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Notes under this Indenture, then the Company shall execute, and the Trustee shall, upon receipt of an authentication order in accordance with Section 2.02 hereof, authenticate and deliver, Definitive Notes in an aggregate principal amount equal to the principal amount of the Global Notes in exchange for such Global Notes. (g) LEGENDS. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Note certificate evidencing Global Notes and Definitive Notes (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: 25 "THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IS OTHERWISE PERMITTED TO PURCHASE THE NOTES PURSUANT TO THE REQUIREMENTS OF CLAUSE (2) BELOW, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Note) pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act: 26 (A) in the case of any Transfer Restricted Security that is a Definitive Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Note that does not bear the legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Security upon receipt of a certification from the transferring holder substantially in the form of EXHIBIT B-4 hereto, indicating paragraph number three or four; and (B) in the case of any Transfer Restricted Security represented by a Global Note, such Transfer Restricted Security shall not be required to bear the legend set forth in (i) above, but shall continue to be subject to the provisions of Section 2.06(a) and (b) hereof; PROVIDED, HOWEVER, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Note for a Definitive Note that does not bear the legend set forth in (i) above, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Registrar that such request is being made pursuant to Rule 144 (such certification to be substantially in the form of EXHIBIT B-4 hereto, indicating paragraph number three or four). (iii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Note) in reliance on any exemption from the registration requirements of the Securities Act (other than exemptions pursuant to Rule 144A or Rule 144 under the Securities Act) in which the Holder or the transferee provides an Opinion of Counsel to the Company and the Registrar in form and substance reasonably acceptable to the Company and the Registrar (which Opinion of Counsel shall also state that the transfer restrictions contained in the legend are no longer applicable): (A) in the case of any Transfer Restricted Security that is a Definitive Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Note that does not bear the legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security represented by a Global Note, such Transfer Restricted Security shall not be required to bear the legend set forth in (i) above, but shall continue to be subject to the provisions of Section 2.06(a) and (b) hereof. (iv) Notwithstanding the foregoing, upon the consummation of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in aggregate principal amount equal to the principal amount of the Restricted Beneficial Interests tendered for acceptance by Persons that certify in the applicable letter of transmittal that they (x) are acquiring the Notes in the ordinary course of business, (y) are not participating in the distribution of the Notes and (z) are not affiliates (as defined in Rule 144) of the Company and accepted for exchange in the Exchange Offer and (ii) Definitive Notes that do not 27 bear the Private Placement Legend in an aggregate principal amount equal to the principal amount of the Definitive Notes accepted for exchange in the Exchange Offer, subject to delivery by such Person of the certification described in clause (i). Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in any Global Note has been exchanged for Definitive Notes, redeemed, repurchased or cancelled, such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Definitive Notes, redeemed, repurchased or cancelled, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee or the Notes Custodian, at the direction of the Trustee, to reflect such reduction. (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes at the Registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any stamp or transfer tax or similar governmental charge payable in connection therewith (other than any such stamp or transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.10, 4.14 and 9.05 hereto). (iii) All Global Notes and Definitive Notes issued upon anyregistration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (iv) The Registrar shall not be required:(A) to issue, to register the transfer of or to exchange Notes during a period beginning at the opening of fifteen (15) Business Days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part, or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. 28 (v) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and neither the Trustee, any Agent nor the Company shall be affected by notice to the contrary. (vi) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. SECTION 2.07. REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee receives evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by an Officer of the Company, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge for their expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or any Subsidiary Guarantor or an Affiliate of the Company or any Subsidiary Guarantor holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or any Subsidiary Guarantor, or by any Affiliate of the Company or any Subsidiary Guarantor, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes a Responsible Officer of the Trustee knows are so owned shall 29 be so disregarded. Notwithstanding the foregoing, Notes that are to be acquired by the Company or any Subsidiary Guarantor or an Affiliate of the Company or any Subsidiary Guarantor pursuant to an exchange offer, tender offer or other agreement shall not be deemed to be owned by such entity until legal title to such Notes passes to such entity. SECTION 2.10. TEMPORARY NOTES. Until Definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon a written order of the Company signed by an Officer of the Company. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall upon receipt of a written order of the Company signed by an Officer authenticate Definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Company at any time may deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder or which the Company may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Trustee. All Notes surrendered for registration of transfer, exchange or payment, if surrendered to any Person other than the Trustee, shall be delivered to the Trustee. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation. Subject to Section 2.07 hereof, the Company may not issue new Notes to replace Notes that it has redeemed or paid or that have been delivered to the Trustee for cancellation. All cancelled Notes held by the Trustee shall be destroyed and certification of their destruction delivered to the Company, unless by a written order, signed by an Officer of the Company, the Company shall direct that cancelled Notes be returned to it. SECTION 2.12. DEFAULTED INTEREST. If the Company or any Subsidiary Guarantor defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, which date shall be at the earliest practicable date but in all events at least five (5) Business Days prior to the payment date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall fix or cause to be fixed each such special record date and payment date, and shall promptly thereafter, notify the Trustee of any such date. At least fifteen (15) days before the special record date, the Company (or the Trustee, in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. RECORD DATE. The record date for purposes of determining the identity of Holders of the Notes entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture shall be determined as provided for in TIA Section 316 (c). 30 SECTION 2.14. COMPUTATION OF INTEREST. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. SECTION 2.15. CUSIP NUMBER. The Company in issuing the Notes may use a "CUSIP" number, and if it does so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; PROVIDED that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any change in the CUSIP number. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before a redemption date (unless a shorter period is acceptable to the Trustee) an Officers' Certificate setting forth (i) the Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. If the Company is required to make an offer to purchase Notes pursuant to Section 4.10 or 4.14 hereof, it shall furnish to the Trustee, at least 45 days before the scheduled purchase date, an Officers' Certificate setting forth (i) the section of this Indenture pursuant to which the offer to purchase shall occur, (ii) the terms of the offer, (iii) the principal amount of Notes to be purchased, (iv) the purchase price, (v) the purchase date and (vi) and further setting forth a statement to the effect that (a) the Company or one its Subsidiaries has affected an Asset Sale and there are Excess Proceeds aggregating more than $15.0 million or (b) a Change of Control has occurred, as applicable. SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate; PROVIDED that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption. 31 SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed. The notice shall identify the Notes to be redeemed and shall state: (1) the redemption date; (2) the redemption price for the Notes and accrued interest, and Liquidated Damages, if any; (3) if any Note is being redeemed in part, the portion of the principal amount of such Notes to be redeemed and that, after the redemption date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon surrender of the original Note; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that, unless the Company defaults in making such redemption payment, interest and Liquidated Damages, if any, on Notes called for redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense; PROVIDED, HOWEVER, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date (or such shorter period as shall be acceptable to the Trustee), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in the notice as provided in the preceding paragraph. The notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note shall not affect the validity of the proceeding for the redemption of any other Note. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price plus accrued and unpaid interest and Liquidated Damages, if any, to such date. A notice of redemption may not be conditional. 32 SECTION 3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE. On or before 10:00 a.m. (New York City time) on each redemption date or the date on which Notes must be accepted for purchase pursuant to Section 4.10 or 4.14, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued and unpaid interest and Liquidated Damages, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent shall promptly return to the Company upon its written request any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of (including any applicable premium), accrued interest and Liquidated Damages, if any, on all Notes to be redeemed or purchased. If Notes called for redemption or tendered in an Asset Sale Offer or Change of Control Offer are paid or if the Company has deposited with the Trustee or Paying Agent money sufficient to pay the redemption or purchase price of, unpaid and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed or purchased, on and after the redemption or purchase date interest and Liquidated Damages, if any, shall cease to accrue on the Notes or the portions of Notes called for redemption or tendered and not withdrawn in an Asset Sale Offer or Change of Control Offer (regardless of whether certificates for such securities are actually surrendered). If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest and Liquidated Damages, if any, shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal and Liquidated Damages, if any, from the redemption or purchase date until such principal and Liquidated Damages, if any, is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case, at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION. (a) Except as provided in the following paragraph, the Notes will not be redeemable at the Company's option prior to September 15, 2002. Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of the years indicated below: YEAR PERCENTAGE 2002..........................................................105.188% 2003..........................................................103.458% 2004..........................................................101.729% 2005 and thereafter...........................................100.000% 33 (b) Notwithstanding the foregoing, at any time prior to September 15, 2000 the Company may on any one or more occasions redeem up to 33 1 3% of the aggregate principal amount of Notes originally issued in the Offering at a redemption price of 110.375% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date, with the net proceeds of one or more Public Equity Offerings; PROVIDED that at least 66 2 3% of the original aggregate principal amount of Notes remains outstanding immediately after the occurrence of each such redemption; and PROVIDED, further, that each such redemption shall occur within 120 days of the date of the closing of the Public Equity Offering to which it relates. SECTION 3.08. MANDATORY REDEMPTION. Except as set forth under Sections 3.09, 4.10 and 4.14 hereof, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. SECTION 3.09. REPURCHASE OFFERS. In the event that the Company shall be required to commence an offer to all Holders to repurchase Notes (a "Repurchase Offer") pursuant to Section 4.10 hereof, an Asset Sale Offer, or pursuant to Section 4.14 hereof, a Change of Control Offer, the Company shall follow the procedures specified below. A Repurchase Offer shall commence no earlier than 30 days and no later than 60 days after a Change of Control (unless the Company is not required to make such offer pursuant to Section 4.14(c) hereof) or an Asset Sale Offer shall be required to be made pursuant to Section 4.10, as the case may be, and remain open for a period of twenty (20) Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). On a date specified in the notice of such Repurchase Offer, which shall be no later than five (5) Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof, in the case of an Asset Sale Offer, or 4.14 hereof, in the case of a Change of Control Offer (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Repurchase Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest and Liquidated Damages, if any, shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest or Liquidated Damages, if any, shall be payable to Holders who tender Notes pursuant to the Repurchase Offer. Upon the commencement of a Repurchase Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to such Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice, which shall govern the terms of the Repurchase Offer, shall describe the transaction or transactions that constitute the Change of Control or Asset Sale Offer, as the case may be, and shall state: (a) that the Repurchase Offer is being made pursuant to this Section 3.09 and Section 4.10 or 4.14 hereof, as the case may be, and the length of time the Repurchase Offer shall remain open; 34 (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered and accepted for payment shall continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Repurchase Offer shall cease to accrue interest and Liquidated Damages, if any, after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to a Repurchase Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note, duly completed, or to transfer their interest in such Note by book-entry transfer, to the Company, the Depositary, or the Paying Agent at the address specified in the notice not later than the close of business on the last day of the Offer Period; (f) that Holders shall be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (g) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a PRO RATA basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (h) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before 10:00 a.m. (New York City time) on each Purchase Date, the Company shall irrevocably deposit with the Trustee or Paying Agent in immediately available funds the aggregate purchase price with respect to a principal amount of Notes equal to the Offer Amount, together with accrued and unpaid interest and Liquidated Damages, if any, thereon, to be held for payment in accordance with the terms of this Section 3.09. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment, on a PRO RATA basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Repurchase Offer, or if less than the Offer Amount has been tendered, all Notes tendered, (ii) deliver or cause the Paying Agent or depository, as the case may be, to deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than three (3) Business Days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, plus any accrued and unpaid interest and Liquidated Damages, if any, thereon, and the Company shall promptly issue a new Note, and the Trustee, shall authenticate and mail or deliver such new Note, to such Holder, equal in principal amount to any unpurchased portion of such Holder's Notes surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce in a newspaper of general circulation or in a press release provided to a nationally recognized financial wire service the results of the Repurchase Offer on the Purchase Date. 35 Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01, 3.02, 3.05 and 3.06 hereof. ARTICLE 4 COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. Principal, premium and Liquidated Damages, if any, and interest, shall be considered paid for all purposes hereunder on the date the Paying Agent (if other than the Company or a Subsidiary thereof) holds, as of 10:00 a.m. (New York City time) money deposited by the Company in immediately available funds and designated for and sufficient to pay all such principal, premium and Liquidated Damages, if any, and interest, then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York an office or agency (which may be an office of the Trustee or an affiliate of the Trustee or Registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. 36 SECTION 4.03. COMMISSION REPORTS. So long as required to do so under the Exchange Act, the Company shall file with the Commission and distribute to the Holders copies of the quarterly and annual financial information required to be filed with the Commission pursuant to the Exchange Act. All such financial information shall include consolidated financial statements (including footnotes) prepared in accordance with GAAP. Such annual financial information shall also include an opinion thereon expressed by an independent accounting firm of established national reputation. All such consolidated financial statements shall be accompanied by a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Restricted Subsidiaries. In addition, whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company shall furnish to the Holders (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that complies with the rules and regulations of the Commission and that describes the financial condition and results of operations of the Company and its Restricted Subsidiaries and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will submit a copy of all such information and reports to the Commission for public availability (unless the Commission will not accept such materials) and make such information available to prospective investors upon written request. In addition, during any period in which the Company is not subject to the reporting requirements of the Exchange Act, the Company shall furnish to Holders and prospective purchasers of the Notes the information required by Rule 144A(d)(4) under the Securities Act. The Company and each Subsidiary Guarantor shall at all times comply with TIA Section 314(a). The financial information to be distributed to Holders of Notes shall be filed with the Trustee and mailed to the Holders at their addresses appearing in the register of Notes maintained by the Registrar, within 120 days after the end of the Company's fiscal years and within 60 days after the end of each of the first three quarters of each such fiscal year. The Company shall provide the Trustee with a sufficient number of copies of all reports and other documents and information and, if requested by the Company, the Trustee will deliver such reports to the Holders under this Section 4.03. SECTION 4.04. COMPLIANCE CERTIFICATE. The Company and each Subsidiary Guarantor shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company (which shall be the Saturday nearest April 30 unless the Company otherwise notifies the Trustee in writing), an Officers' Certificate stating (i)(A) that, in the course of the performance by the signatories thereto of their duties as Officers of the Company, they would normally have knowledge of any Default or Event of Default, (B) whether or not such signatories know of any Default or Event of Default that occurred during such period and (C) if any Default or Event of Default has occurred during such period, the nature of such Default or Event of Default, its status and what action the Company is taking or proposes to take in respect thereto and (ii) that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes are prohibited or if such event has occurred, 37 a description of the event and what action the Company is taking or proposes to take with respect thereto. So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, in connection with the year-end financial statements delivered pursuant to Section 4.03 hereof, the Company shall use its best efforts to deliver a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four or Section 5.01 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. In the event that such written statement of the Company's independent public accountants cannot be obtained, the Company shall deliver an Officers' Certificate certifying that it has used its best efforts to obtain such statements and was unable to do so. The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. TAXES. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency all material taxes, assessments and governmental levies, except such as are contested in good faith and by appropriate proceedings and with respect to which appropriate reserves have been taken in accordance with GAAP. SECTION 4.06. STAY, EXTENSION AND USURY LAWS. The Company and each Subsidiary Guarantor 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 and each Subsidiary Guarantor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07. RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or dividends or distributions payable to the Company or any Restricted Subsidiary of the Company that is a Subsidiary Guarantor) on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including in connection with a merger or consolidation); (ii) purchase, redeem or otherwise acquire or retire for value any outstanding Equity Interests of the Company or any Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary Guarantor); (iii) make any principal payment on, or purchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, any sinking fund date or its 38 scheduled maturity date, any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees; (iv) make any Restricted Investment or (v) make any payment pursuant to the BRS Management Agreement (all such payments and other actions set forth in clauses (i) through (v) above being collectively referred to as "Restricted Payments"), unless: (a) at the time of and after giving effect to such Restricted Payment, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date hereof (excluding Restricted Payments permitted by clauses (o), (s)(ii), (x) and (y) of the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date hereof to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds (or non-cash proceeds when converted into cash) received by the Company in the form of capital contributions or from the issue, sale or exercise since the date hereof of Equity Interests of the Company or of debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after the date hereof is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment, plus (iv) 50% of the excess, if any, of the cash received upon the sale or other disposition of a Restricted Investment over the amount described in clause (iii) above. The foregoing provisions shall not prohibit: (o) any repurchase, redemption or retirement for value of Capital Stock of a Restricted Subsidiary of the Company deemed to occur upon the merger of such Restricted Subsidiary with or into the Company or another Wholly Owned Restricted Subsidiary of the Company within one year following the date on which such merged Restricted Subsidiary became a Restricted Subsidiary of the Company; (p) acquisition and retirement by the Company of any Class B Preferred Stock in satisfaction of any claim by the Company for indemnity pursuant to the 1996 Merger Agreement; (q) retirement of the Class A Preferred Stock in connection with the issuance by the Company of the Exchange Debentures; (r) the payment of cash in lieu of the issuance of (A) fractional shares of common stock upon exercise of the Warrants and (B) any Exchange Debenture that is not an integral multiple of $1,000 upon any exchange of Class A Preferred Stock for Exchange Debentures; (s) the amendment of the BRS Management Agreement to permit the payment of, and the payment of, fees to BRS or any Affiliate of BRS (i) under the BRS Management Agreement after the end of each fiscal quarter in an amount not to exceed the greater of (a) $250,000 or (b) 1.0% of the Company's EBITDA for such fiscal quarter (PROVIDED, that the total amount of all such payments shall not exceed in any fiscal year the greater of (x) $1.0 million or (y) one percent of the Company's EBITDA for such fiscal year) 39 and (ii) in connection with the Delchamps Acquisition in an amount not to exceed $5.0 million in the aggregate; (t) the payment of dividends on the Company's capital stock, following the first Public Equity Offering after the date hereof, of up to 6.0% of the aggregate proceeds to the Company in such Public Equity Offering, other than a public offering with respect to the Company's common stock registered on Form S-8; (u) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions hereof; (v) the repurchase of the Class A Preferred Stock in accordance with the terms thereof upon the occurrence of a Change of Control; (w) the redemption of Exchange Debentures in accordance with the terms thereof upon the occurrence of a Change of Control; (x) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests of the Company (other than any Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (y) the defeasance, redemption, repurchase, retirement or other acquisition of Subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness or the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of Equity Interests of the Company (other than Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, defeasance, retirement or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; and (z) the repurchase, redemption, defeasance or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement or stock option agreement in effect as of the date hereof or any other option plan adopted by the Board of Directors of the Company; PROVIDED that the aggregate price paid for all such repurchased, redeemed, defeased, acquired or retired Equity Interests shall not exceed $2.0 million in any twelve-month period plus (i) the aggregate cash proceeds received by the Company during such twelve-month period from any issuance of Equity Interests by the Company to members of management of the Company and its Restricted Subsidiaries and (ii) the proceeds of any insurance policy to the extent applied toward such repurchase, redemption, defeasance or other acquisition or retirement for value of such Equity Interests; PROVIDED, that with respect to clause (z) above, no Default or Event of Default shall have occurred and be continuing immediately after such transaction. As of the date hereof, all of the Company's Subsidiaries shall be Restricted Subsidiaries. The Board of Directors may designate any Restricted Subsidiary (other than Interstate, McCarty-Holman, Southern, Pump And Save, DAC, Delchamps and SCSI) to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greater of (x) the net book value of such Investments at the time of such designation and (y) the fair market value of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value (evidenced by a Board Resolution delivered to the Trustee) on the date of the Restricted Payment of the asset(s) proposed to be transferred by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting 40 forth the basis upon which the calculations required by this Section 4.07 were computed, which calculations may be based upon the Company's latest available internal financial statements. SECTION 4.08. DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries on its Capital Stock or (b) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (ii) make loans or advances to the Company or any of its Restricted Subsidiaries; or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except (in each case) for such encumbrances or restrictions existing under or by reason of: (a) the Existing Indebtedness as in effect on the date hereof; (b) the Senior Credit Facility, as in effect as of the date hereof, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof; PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are no more restrictive in the aggregate than those contained in the Senior Credit Facility, as in effect on the date hereof; (c) this Indenture, the Subsidiary Guarantees and the Notes; (d) applicable law; (e) any instrument governing Capital Stock or Indebtedness of any Person acquired by the Company or any of its Restricted Subsidiaries, as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with, or in contemplation of, such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the properties or assets of the Person, so acquired; (f) customary non-assignment and subletting provisions in leases and other contracts entered into in the ordinary course of business and consistent with past practices; (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired; (h) Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more 41 restrictive in the aggregate than those contained in the agreements governing the Indebtedness being refinanced; (i) contractual encumbrances or restrictions in effect on the date hereof; (j) mortgage or construction financing that imposes restrictions on the real property acquired or improved; (k) contracts for the sale of assets that include customary restrictions concerning the disposition of property; (l) secured Indebtedness permitted by this Indenture that limits the right to dispose of the assets securing the Indebtedness; and (m) encumbrances or restrictions imposed by any amendments to the contracts, agreements or obligations referred to in clauses (a) through (l) above if not more restrictive in the aggregate than under existing contracts. SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, Guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Indebtedness) and the Company shall not issue and shall not permit any of its Restricted Subsidiaries to issue any Disqualified Stock (other than the Preferred Stock); PROVIDED, however, that the Company or its Restricted Subsidiaries may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been (A) at least 2.25 to 1.0 if such date is prior to September 15, 2000 and (B) 2.50 to 1.0 if such date is on or after September 15, 2000, in each case determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The foregoing provisions will not apply to: (i) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness and reimbursement obligations in respect of letters of credit pursuant to the Senior Credit Facility (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) in an aggregate principal amount not to exceed an amount equal to (x) the greater of (1) the amount of the Borrowing Base and (2) $150.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied to permanently reduce the total commitments with respect to such Indebtedness pursuant to Section 4.10 hereof plus (y) $50.0 million less any outstanding Indebtedness incurred pursuant to clause (viii) below; (ii) the incurrence by the Company or any of its Restricted Subsidiaries of the Existing Indebtedness; 42 (iii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by the Notes and the Subsidiary Guarantees; (iv) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage or construction financing or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount not to exceed $30.0 million in any fiscal year; PROVIDED that the principal amount (or, in the case of a Capital Lease Obligation, the amount required to be capitalized on a balance sheet under GAAP) of such Indebtedness when incurred shall not exceed the purchase price and/or actual cost of construction or improvement, as the case may be, to which such incurrence relates; (v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, Indebtedness that was permitted by this Indenture to be incurred; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries; PROVIDED, however, that (i) any subsequent issuance or transfer (other than for security purposes) of Equity Interests that results in any such Indebtedness being held by a Person other than a Wholly Owned Restricted Subsidiary and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding; (viii) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any other clause of this paragraph) in an aggregate principal amount at any time outstanding not to exceed $50.0 million less the amount of any Indebtedness incurred pursuant to clause (i)(y) of this paragraph; (ix) the incurrence by the Company or any of its Restricted Subsidiaries of Acquired Indebtedness, PROVIDED that such Indebtedness (A) is not incurred in contemplation of the acquisition to which it relates and (B) is nonrecourse to the Company and its Restricted Subsidiaries, or to any of their respective assets (other than the acquired Subsidiary and its Subsidiaries, or the acquired assets, as applicable); (x) the incurrence by the Company of Indebtedness pursuant to Exchange Debentures described under clause (2) of the definition of Exchange Debentures; (xi) the Guarantee of any Indebtedness otherwise permitted to be incurred pursuant to this Indenture; and (xii) Obligations in respect of performance and surety bonds. 43 SECTION 4.10. ASSETS SALES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a Board Resolution delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of; and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets and (y) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision and PROVIDED further that (1) the 75% limitation referred to above shall not apply to any Asset Sale in which the cash or Cash Equivalents portion of the consideration received therefor, determined in accordance with the foregoing proviso, is equal to or greater than what the net after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation and (2) the provisions of clauses (i) and (ii) above shall not apply to any sale or other disposition of assets required pursuant to a consent order or other agreement entered into by the Company with the Federal Trade Commission or the Department of Justice in connection with the Delchamps Acquisition. Within 435 days after the receipt of any Net Proceeds from an Asset Sale, the Company or its Restricted Subsidiary, as the case may be, may apply such Net Proceeds by (i) permanently reducing Indebtedness under the Senior Credit Facility (and correspondingly reducing commitments with respect thereto) or other Senior Debt, (ii) investing (or entering into a binding commitment to invest) in any one or more business, capital expenditure or other tangible asset, in each case in the same line of business as the Company or its Restricted Subsidiaries was engaged in on the date hereof or a line of business reasonably related thereto, (iii) investing (or entering into a binding commitment to invest) in properties or assets that replace the properties and assets that are the subject of such Asset Sale and (iv) in the case of a sale of a store or stores, deeming such Net Proceeds to have been applied to the extent of any capital expenditures made to acquire or construct another store within 435 days preceding the date of the Asset Sale; PROVIDED that if such Net Proceeds are applied by entering into a binding commitment under clause (ii) or (iii) above, then the investment contemplated by such commitment shall be made no later than 45 days following the end of such 435 day period. Pending the final application of any such Net Proceeds, the Company or its Restricted Subsidiary, as the case may be, may temporarily reduce Indebtedness under the Senior Credit Facility or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company shall be required to make an offer to all Holders (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at a price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in this Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the aggregate amount of Excess Proceeds, the Company or its Restricted Subsidiary, as the case may be, may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the aggregate amount of Excess Proceeds, the Trustee shall select the Notes to be purchased in accordance with the terms of this Indenture. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. 44 SECTION 4.11. TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make any contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a Board Resolution certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with clause (i) above and that such Affiliate Transaction or series of related Affiliate Transactions has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million (other than Affiliate Transactions in the ordinary course of business of the Company and its Restricted Subsidiaries between or among the Company or any Restricted Subsidiary of the Company and any Person providing goods and/or services to the Company or any Restricted Subsidiary in the ordinary course of business that is an Affiliate of the Company or such Restricted Subsidiary solely by virtue of the fact that the Fund, or any Person controlling the Fund, directly or indirectly controls both the Company or such Restricted Subsidiary and such Affiliate; PROVIDED, however, that such Affiliate Transaction shall comply with clause (i) above), an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an independent nationally recognized investment banking or appraisal firm experienced in the appraisal or similar review of similar types of transactions (or if an opinion is unavailable as to the fairness from a financial point of view of any transaction for which a fairness opinion is not customarily rendered then an opinion that such transaction meets the requirements of clause (i) above); PROVIDED that (u) payments by Delchamps pursuant to change of control agreements with certain employees of Delchamps in an amount not to exceed $13.0 million, (v) payments to McCarty-Holman Co., L.P. in accordance with the terms of the Management Agreement in an amount not to exceed $100,000 in each fiscal year, (w) the 18 leases described in the Offering Memorandum under the caption "Certain Transactions--Leases of Certain Stores and Facilities," (x)(1) any employment agreement entered into by the Company or any of its Restricted Subsidiaries and (2) payment of employee benefits, including bonuses, retirement plans and stock options, in each case, in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, (y) transactions between or among the Company and/or its Restricted Subsidiaries and (z) transactions permitted by the provisions of Section 4.07 hereof, in each case, shall not be deemed Affiliate Transactions. SECTION 4.12. LIENS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated Indebtedness on any asset now owned or hereafter acquired by the Company or any of its Restricted Subsidiaries, or any income or profits therefrom, or assign or convey any right to receive income therefrom; PROVIDED, however that the Company and its Restricted Subsidiaries may create, incur, assume or suffer to exist a Lien securing Pari Passu Indebtedness if the Notes are equally and ratably secured with the obligations so secured until such time as such obligations are no longer secured by a Lien. 45 SECTION 4.13. SALE AND LEASEBACK TRANSACTIONS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction (other than the sale and leaseback of newly constructed grocery stores as part of the development of grocery store sites); PROVIDED that the Company and its Restricted Subsidiaries may enter into a sale and leaseback transaction if (i) the Company or such Restricted Subsidiary could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction pursuant to Section 4.09 hereof and (b) incurred a Lien to secure such Indebtedness pursuant to Section 4.12 hereof, (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Company's Board of Directors and set forth in an Officers' Certificate delivered to the Trustee) of the property that is the subject of such sale and leaseback transaction and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the Company or such Restricted Subsidiary applies the proceeds of such transaction in compliance with, Section 4.10 hereof. SECTION 4.14. OFFER TO PURCHASE UPON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail or cause to be mailed a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes pursuant to the procedures required by Section 3.09 hereof and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described herein by virtue thereof. Prior to complying with the provisions of this Section 4.14, but in any event within 30 days following a Change of Control, the Company will either repay all outstanding Senior Debt, or offer to repay in full all outstanding Senior Debt and repay the Senior Debt with respect to which such offer has been accepted, or obtain the requisite consents, if any, under all outstanding Senior Debt to permit the repurchase of the Notes required by this Section 4.14. On the payment date set forth in the Change of Control Offer (the "Change of Control Payment Date"), the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Trustee or with the Paying Agent (or, if the Company or any of its Subsidiaries is the Paying Agent, separate and hold in trust) an amount in same-day funds equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee for cancellation the Notes so accepted together with an Officers' Certificate stating that such Notes or portions thereof have been tendered to and purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED that each such 46 new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. Except as described above with respect to a Change of Control, this Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar restructuring. SECTION 4.15. CORPORATE EXISTENCE. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (a) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (b) the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; PROVIDED 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 Restricted 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 Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders. SECTION 4.16. LIMITATION ON ISSUANCES OF CAPITAL STOCK OF WHOLLY OWNED RESTRICTED SUBSIDIARIES. Notwithstanding any other provisions in this Indenture, except with respect to the pledge of Capital Stock of its Subsidiaries pursuant to the Senior Credit Facility, the Company (a) shall not, and shall not permit any Wholly Owned Restricted Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Subsidiary Guarantor to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary Guarantor), unless (i) such transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Subsidiary Guarantor and (ii) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 4.10 hereof and (b) will not permit any Subsidiary Guarantor to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or another Subsidiary Guarantor. SECTION 4.17. BUSINESS ACTIVITIES. The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than (i) the retail and wholesale grocery business and such business activities as are incidental or reasonably related thereto, including the sale of liquor and the retail gasoline business, and (ii) such other businesses as the Company or its Restricted Subsidiaries are engaged in on the date hereof. SECTION 4.18. ADDITIONAL GUARANTEES. If the Company or any of its Restricted Subsidiaries shall, after the date of this Indenture, transfer or cause to be transferred, in one transaction or a series of related transactions, any assets, businesses, 47 divisions, real property or equipment having an aggregate fair market value (as determined in good faith by the Board of Directors) in excess of $1.0 million to any Subsidiary that is not a Subsidiary Guarantor, or if the Company or any of its Restricted Subsidiaries shall acquire another Subsidiary having total assets with a fair market value (as determined in good faith by the Board of Directors) in excess of $1.0 million, then such transferee or acquired Subsidiary shall (a) execute a Guarantee in substantially the form of EXHIBIT D hereto, (b) execute and deliver to the Trustee a supplemental indenture in the form of EXHIBIT E hereto pursuant to which such transferee or acquired Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes and this Indenture on the terms set forth in such supplemental indenture and (c) deliver to the Trustee an Opinion of Counsel satisfactory to the Trustee that such Guarantee and such supplemental indenture have been duly executed and delivered by such transferee or acquired Subsidiary. Notwithstanding the foregoing, if such transferee or acquired Subsidiary has been properly designated as an Unrestricted Subsidiary in accordance with this Indenture, then for so long as it continues to constitute an Unrestricted Subsidiary that transferee or acquired Subsidiary shall not be required to execute a Guarantee or supplemental indenture or deliver to the Trustee an Opinion of Counsel in accordance with clause (c) above. SECTION 4.19. PAYMENT FOR CONSENTS. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions hereof or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. SECTION 4.20. NO SENIOR SUBORDINATED DEBT. The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes. No Subsidiary Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Subsidiary Guarantor and senior in any respect in right of payment to the Subsidiary Guarantees. For purposes of this Section 4.20, no Indebtedness shall be deemed to be subordinated in right of payment to any other Indebtedness solely by reason of the fact that such other Indebtedness is secured by a Lien or is subject to a Guarantee. SECTION 4.21. NO RESTRICTIONS ON CONSUMMATION OF DELCHAMPS ACQUISITION. Notwithstanding any provision contained herein to the contrary, this Indenture shall not prohibit the consummation of the Delchamps Acquisition and the transactions related thereto in accordance with the terms set forth in this Offering Memorandum and in the tender offer statement on Schedule 14D-1, as filed with the Commission on July 14, 1997 and as subsequently amended or supplemented, naming Delchamps, Inc. as the subject company. 48 ARTICLE 5 SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS. Except as otherwise provided in Section 4.21, the Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another Person unless (a) the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (the "SUCCESSOR") is a corporation organized or existing under the laws of the United States, any state thereof, the District of Columbia or a territory thereof; (b) the Successor assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (c) immediately after such transaction no Default or Event of Default exists; (d) the Successor will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof and (e) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to such transaction have been complied with. The foregoing will not prohibit (i) any consolidation or merger of, or transfer of all or part of the property and assets of, any Restricted Subsidiary with or to the Company or any Subsidiary Guarantor or (ii) the Delchamps Merger. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and shall exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; PROVIDED, that, (i) solely for the purposes of computing Consolidated Net Income for purposes of clause (b) of the first paragraph of Section 4.07 hereof, the Consolidated Net Income of any Person other than the Company and its Subsidiaries shall be included only for periods subsequent to the effective time of such merger, consolidation, combination or transfer of assets; and (ii) in the case of any sale, assignment, transfer, lease, conveyance, or other disposition of less than all of the assets of the predecessor Company, the predecessor Company shall not be released or discharged from the obligation to pay the principal of or interest and Liquidated Damages, if any, on the Notes. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. Each of the following constitutes an Event of Default: 49 (a) default for 30 days in the payment when due, upon redemption, acceleration or otherwise, of interest on, or Liquidated Damages with respect to, the Notes; (b) default in payment when due of the principal of or premium, if any, on the Notes; (c) failure by the Company for 30 days after receipt of written notice from the Trustee or from Holders of at least 25% of the aggregate principal amount of the Notes then outstanding to comply with the provisions described under Sections 4.07, 4.09, 4.10 or 4.14 hereof; (d) failure by the Company for 60 days after receipt of written notice from the Trustee or from Holders of at least 25% of the aggregate principal amount of the Notes then outstanding to comply with any of its other agreements in this Indenture or the Notes; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries (other than Indebtedness owed to the Company or its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date hereof, if both (a) such default either (1) results from the failure to pay any such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or (2) relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $15.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final judgments (other than any judgments as to which a reputable insurance company has accepted liability) aggregating in excess of $15.0 million, which judgments are not paid, discharged, bonded or stayed for a period of 60 days after their entry; (g) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (h) the Company or any Significant Restricted Subsidiary or group of Restricted Subsidiaries that, together, would constitute a Significant Restricted Subsidiary, pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, 50 (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) admits in writing its inability generally to pay its debts as they become due; or (i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Significant Restricted Subsidiary or group of Restricted Subsidiaries that, together, would constitute a Significant Restricted Subsidiary in an involuntary case in which any of them is the debtor, (ii) appoints a Custodian of the Company or any Significant Restricted Subsidiary or group of Restricted Subsidiaries that, together, would constitute a Significant Restricted Subsidiary or for all or substantially all of the property of any of the foregoing, or (iii) orders the liquidation of the Company or any Significant Restricted Subsidiary or group of Restricted Subsidiaries that, together, would constitute a Significant Restricted Subsidiary, and the order or decree remains unstayed and in effect for 60 consecutive days. SECTION 6.02. ACCELERATION. If any Event of Default occurs and is continuing, the Trustee by notice to the Company or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes by notice to the Company and the Trustee may declare all the Notes to be due and payable immediately; PROVIDED, however, that, so long as any Designated Senior Debt shall be outstanding, no such acceleration shall be effective until the earlier of (i) acceleration of any such Designated Senior Debt or (ii) five Business Days after the giving of written notice to the Company and the Representatives under the Designated Senior Debt of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default specified in clauses (h) or (i) of Section 6.01, all outstanding Notes will become due and payable without further action or notice. In the event of any Event of Default specified in clause (e) of Section 6.01, such Event of Default and all consequences thereof (including, without limitation, any acceleration or resulting payment default) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders of the Notes, if within 20 days after such Event of Default arose (x) the Indebtedness or Guarantee that is the basis for such Event of Default has been discharged in a manner that does not violate the terms of this Indenture or (y) the holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default. The Trustee will have no obligation to accelerate the Notes if, in the best judgment of the Trustee, acceleration is not in the best interests of the Holders. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant 51 to the optional redemption provisions of Section 3.07(a) hereof, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to September 15, 2002 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to September 15, 2002, then the amount payable in respect of such Notes for purposes of this paragraph for each of the twelve-month periods beginning on September 15 of the years indicated below shall be set forth below, expressed as percentages of the principal amount that would otherwise be due but for the provisions of this sentence, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of payment: YEAR PERCENTAGE ---- ---------- 1997.....................................................110.375% 1998.....................................................109.338% 1999.....................................................108.300% 2000.....................................................107.263% 2001.....................................................106.225% SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, interest and Liquidated Damages, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences hereunder except a continuing Default or Event of Default in the payment of the principal of or interest on any Note held by a non-consenting Holder (including in connection with an offer to purchase); PROVIDED that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. 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. 52 SECTION 6.05. CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of other Holders or that may involve the Trustee in personal liability. The Trustee may take any other action which it deems proper which is not inconsistent with any such direction. Notwithstanding any provision to the contrary in this Indenture, the Trustee shall not be obligated to take any action with respect to the provisions of the last paragraph of Section 6.02 hereof unless directed to do so pursuant to this Section 6.05. SECTION 6.06. LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture, the Subsidiary Guarantees or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default or the Trustee receives such notice from the Company; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, interest, and Liquidated Damages, if any, on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and 53 such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other securities or property payable or deliverable upon the conversion or exchange of the Notes or on any such claims and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee, for amounts due under Section 7.07 hereof; SECOND: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, interest, and Liquidated Damages, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, interest, and Liquidated Damages, if any, 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 of Notes pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party 54 litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture or the TIA and the Trustee need perform only those duties that are specifically set forth in this Indenture or the TIA and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon Officers' Certificates or Opinions of Counsel furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, including, without limitation, the provisions of Section 6.05 hereof, unless such Holders shall have offered to the Trustee security and indemnity reasonably satisfactory to it against any loss, liability or expense that might be incurred by it in complying with such request. 55 (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture; PROVIDED that the Trustee's conduct does not constitute willful misconduct or negligence. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. A permissive right granted to the Trustee hereunder shall not be deemed an obligation to act. (f) The Trustee shall not be charged with knowledge of any Default or Event of Default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge of such Default or Event of Default or (ii) written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any Holder. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the TIA) it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Notes or any Subsidiary Guarantee, shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in 56 connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to all Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders. The Trustee shall not be deemed to have actual knowledge of a Default or an Event of Default hereunder, except in the case of a Default or an Event of Default under Section 6.01(a) (other than with respect to the payment of Liquidated Damages) or 6.01(b) at such time as the Trustee is also the Paying Agent, until a Responsible Officer of the Trustee receives written notice thereof from the Company or any Holders that such a Default or an Event of Default has occurred. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each May 1 beginning with the May 1 first following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder as the Trustee and the Company may agree in writing. 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 promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against, and hold it harmless from, any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the 57 reasonable fees and expenses of such counsel not to exceed one law firm. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or 6.01(i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, 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 Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become 58 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 all Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, PROVIDED, that all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of the predecessor trustee or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a Board Resolution, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. 59 SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and its Subsidiaries shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their respective obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such outstanding Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.17, 4.18, 4.19, 11.03 and Article 5 hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company and its Subsidiaries may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(f), 6.01(g), 6.01(h) and 6.01(i) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: 60 (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (b) the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (c) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (1) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (2) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (d) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (e) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit or the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (f) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound (including, without limitation, any agreement or instrument pursuant to which any Senior Debt was incurred); (g) on or prior to the 91st day following the deposit, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that, subject to customary assumptions and exclusions, after the 91st day following the deposit, the trust funds will not be subject to any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (h) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders 61 over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (i) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that, subject to customary assumptions and exclusions, all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. SECTION 8.06. REPAYMENT TO COMPANY. (a) Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. (b) The Trustee shall promptly pay to the Company, after written request therefor, any money held at such time in excess of the amounts required to pay any of the Company's Obligations then owing with respect to the Notes. (c) Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal, or premium, if any, or interest that remains unclaimed for two years after such principal or premium, if any, or interest became due and payable and any such money held by the Company in trust shall be discharged from such trust, and, thereafter, Holders entitled to the money must look to the Company for payment of such money as secured creditors and all liability of the Trustee and the Paying Agent with respect to such money shall cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, shall, at the expense of the Company, cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of 62 such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees or the Notes without notice to or the consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's obligations to the Holders in the case of a merger, consolidation or sale of assets pursuant to this Indenture; (d) to add Subsidiary Guarantees with respect to the Notes; (e) to provide security for the Notes; (f) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights hereunder of any Holder; or (g) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company and the Subsidiary Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. 63 SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence reasonably satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company and the Subsidiary Guarantors in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture, Subsidiary Guarantee or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive any existing Default or compliance in a particular instance by the Company or any Subsidiary Guarantor with any provision of this Indenture, the Subsidiary Guarantees or the Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to Sections 4.10 and 4.14 hereof); (c) reduce the rate of or change the time for payment of interest or Liquidated Damages on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest or Liquidated Damages on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); 64 (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest or Liquidated Damages on the Notes; (g) waive a redemption payment with respect to any Note (other than a payment required by Section 4.10 and/or 4.14 hereof); or (h) make any change in Section 6.04 or 6.07 hereof or in this Section 9.02 or in Section 9.01 hereof. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent to any amendment, supplement or waiver or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent to such amendment, supplement or waiver or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. Alternatively, if the Company or the Trustee so determines, the Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. 65 SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive, and (subject to Section 7.01) shall be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBORDINATION SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and each Holder of Notes by accepting a Note agrees, that the Indebtedness evidenced by the Note is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all Senior Debt of the Company, whether outstanding on the date hereof or hereafter incurred, that the subordination is for the benefit of, and shall be enforceable directly by, the holders of the Senior Debt and that each holder of Senior Debt, whether now outstanding or hereafter created, incurred assumed or guaranteed shall be deemed to have acquired Senior Debt in reliance upon the covenants and provisions contained in this Indenture and the Notes. SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities, the holders of Senior Debt of the Company will be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before the Holders will be entitled to receive any payment with respect to the Notes, and until all Obligations with respect to Senior Debt are paid in full in cash, any distribution to which the Holders would be entitled shall be made to the holders of Senior Debt (except that Holders may receive Permitted Junior Securities and payments made from the trust described under Article 8 hereof). SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT. The Company shall not make any payment upon or in respect of the Notes (except in Permitted Junior Securities or from the trust described under Article 8 hereof) if (i) a default in the payment of the principal of, premium, if any, or interest on Designated Senior Debt occurs and is continuing beyond any applicable period of grace or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of such Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Representative of the holders of such Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived in writing and (b) in case of a nonpayment default, the earlier of (x) the date on which such nonpayment default is cured or waived in writing, (y) 179 days after the date on which the applicable Payment Blockage Notice is received, in each 66 case, unless the maturity of any Designated Senior Debt has been accelerated or (z) the date on which such Payment Blockage Period (as defined below) shall have been terminated by written notice to the Trustee from the Representative of the holders of Designated Senior Debt initiating such Payment Blockage Period. During any consecutive 360-day period, the aggregate number of days in which payments due on the Notes may not be made as a result of nonpayment defaults on Designated Senior Debt (a "Payment Blockage Period") shall not exceed 179 days, and there shall be a period of at least 181 consecutive days in each consecutive 360-day period during which no Payment Blockage Period is in effect. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived in writing for a period of not less than 90 days (it being acknowledged that any subsequent action, or any breach of any financial covenant for a period commencing after the date of commencement of such Payment Blockage Period that, in either case, would give rise to a default pursuant to any provisions under which a default previously existed or was continuing, shall constitute a new default for this purpose). SECTION 10.04. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder of a Note receives any payment of any Obligations with respect to the Notes at a time when such payment is prohibited by Section 10.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt of the Company remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of the Company. With respect to the holders of Senior Debt of the Company, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of the Company. SECTION 10.06. NOTICE BY THE COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article, which notice shall specifically refer to this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt of the Company as provided in this Article. SECTION 10.07. SUBROGATION. After all Senior Debt of the Company is paid in full and until the Notes are paid in full, Holders of the Notes shall be subrogated (equally and ratably with all other PARI PASSU indebtedness) to the rights of holders of Senior Debt of the Company to receive distributions applicable to Senior Debt of the 67 Company to the extent that distributions otherwise payable to the Holders of the Notes have been applied to the payment of Senior Debt of the Company. A distribution made under this Article to holders of Senior Debt of the Company that otherwise would have been made to Holders of the Notes is not, as between the Company and Holders of the Notes, a payment by the Company on the Notes. SECTION 10.08. RELATIVE RIGHTS. This Article defines the relative rights of Holders of the Notes and holders of Senior Debt of the Company. Nothing in this Indenture shall: (1) impair, as between the Company and Holders of the Notes, the obligations of the Company, which are absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders of the Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of the Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of the Notes. If the Company fails because of this Article to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY THE COMPANY. No right of any holder of Senior Debt of the Company to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt of the Company, or any of them, may, at any time and from time to time, without the consent of or notice to the Holders of the Notes, without incurring any liabilities to any Holder of any Notes and without impairing or releasing the subordination and other benefits provided in this Indenture or the obligations of the Holders of the Notes to the holders of the Senior Debt of the Company, even if any right of reimbursement or subrogation or other right or remedy of any Holder of Notes is affected, impaired or extinguished thereby, do any one or more of the following: (1) change the manner, place or terms of payment or change or extend the time of payment of, or renew, exchange, amend, increase or alter, the terms of any Senior Debt, any security therefor or guaranty thereof or any liability of any obligor thereon (including any guarantor) to such holder, or any liability incurred directly or indirectly in respect thereof or otherwise amend, renew, exchange, extend, modify, increase or supplement in any manner any Senior Debt or any instrument evidencing or guaranteeing or securing the same or any agreement under which Senior Debt is outstanding; (2) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any property pledged, mortgaged or otherwise securing Senior Debt or any liability of any obligor thereon to such holder, or any liability incurred directly or indirectly in respect thereof; 68 (3) settle or compromise any Senior Debt or any other liability of any obligor of the Senior Debt to such holder or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including, without limitation, Senior Debt) in any manner or order; and (4) fail to take or to record or to otherwise perfect, for any reason or for no reason, any lien or security interest securing Senior Debt by whomsoever granted, exercise or delay in or refrain from exercising any right or remedy against any obligor or any guarantor or any other person, elect any remedy and otherwise deal freely with any obligor and any security for the Senior Debt or any liability of any obligor to such holder or any liability incurred directly or indirectly in respect thereof. SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt of the Company, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of the Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction so long as such order or decree recognizes the provisions of this Article 10 or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of the Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least three Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article, which notice shall specifically refer to this Article 10 (provided that, notwithstanding the foregoing, the making of any such payments shall otherwise be subject to the provisions of Sections 10.02, 10.03 and 10.05 hereof). Only the Company or a Representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes, including without limitation the timely filing of a claim for the unpaid balance of the Notes held by such Holder in the form required in any Insolvency or Liquidation Proceeding and causing such claim to be approved. If the Trustee does not file a proper proof of claim or proof of debt in the 69 form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time of such claim, the Representatives of the Designated Senior Debt, including debt under the Senior Credit Facility, are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 10.13. AMENDMENTS. Any amendment to the provisions of this Article 10 shall require the consent of the Holders of at least 75% in aggregate amount of Notes then outstanding if such amendment would adversely affect the legal rights of Holders. ARTICLE 11 GUARANTEE OF NOTES SECTION 11.01. SUBSIDIARY GUARANTEE. Subject to Section 11.05 hereof, each of the Subsidiary Guarantors hereby, on a full, unconditional, joint and several, unsecured basis guarantees (the "Subsidiary Guarantees") to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes and the Obligations of the Company hereunder and thereunder, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal, premium, if any, (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes, and all other payment Obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full and performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed for whatever reason the Subsidiary Guarantors will be jointly and severally obligated to pay the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under the Subsidiary Guarantees, and shall entitle the Holders to accelerate the Obligations of the Subsidiary Guarantors hereunder in the same manner and to the same extent as the Obligations of the Company. The Subsidiary Guarantors hereby agree that their Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Subsidiary Guarantee will not be discharged except by complete performance of the Obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Subsidiary Guarantors, or any Custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Subsidiary Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each 70 Subsidiary Guarantor agrees that it shall not be entitled to, and hereby waives, any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby. Each Subsidiary Guarantor further agrees that, as between the Subsidiary Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of the Subsidiary Guarantees, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article 6 hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purpose of the Subsidiary Guarantees. The Subsidiary Guarantors shall have the right to seek contribution from any non-paying Subsidiary Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantees. SECTION 11.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE. To evidence its Subsidiary Guarantee set forth in Section 11.01, each Subsidiary Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of EXHIBIT D shall be endorsed by an Officer of such Subsidiary Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Subsidiary Guarantor, by manual or facsimile signature, by an Officer of such Subsidiary Guarantor. Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Subsidiary Guarantors. SECTION 11.03. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS (a) Except as set forth in Articles 4 and 5, nothing contained in this Indenture or in the Notes shall prevent (i) any consolidation or merger of a Subsidiary Guarantor with or into the Company or any other Subsidiary Guarantor, (ii) any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety, to the Company or any other Subsidiary Guarantor or (iii) the Merger. (b) Except as set forth in Article 4, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into a Person or Persons other than the Company or any other Subsidiary Guarantor (in each case, whether or not affiliated with the Subsidiary Guarantor), or successive consolidations or mergers in which a Subsidiary Guarantor or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety, to a Person other than the Company or any other Subsidiary Guarantor (in each case, whether or not affiliated with the Subsidiary Guarantor) authorized to acquire and operate the same; PROVIDED, HOWEVER, that each Subsidiary Guarantor hereby covenants and agrees that: (i) upon any such consolidation, merger, sale or conveyance, the Subsidiary Guarantee endorsed on the Notes, and the due and punctual performance and 71 observance of all of the covenants and conditions of this Indenture to be performed by such Subsidiary Guarantor, shall be expressly assumed (in the event that the Subsidiary Guarantor is not the surviving Person in the merger), by supplemental indenture substantially in the form of EXHIBIT E hereto, executed and delivered to the Trustee, by the Person formed by such consolidation, or into which the Subsidiary Guarantor shall have been merged, or by the Person which shall have acquired such property; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Company would be permitted, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09. The foregoing will not prohibit (i) any consolidation or merger of a Guarantor with or into the Company or any other Guarantor, (ii) any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety, to the Company or any other Subsidiary Guarantor or (iii) the Merger. (c) In the case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and substantially in the form of EXHIBIT E hereto, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Subsidiary Guarantor, such successor Person shall succeed to and be substituted for the Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All of the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such guarantees had been issued at the date of the execution hereof. SECTION 11.04. RELEASES FOLLOWING SALE OF ASSETS, MERGER, SALE OF CAPITAL STOCK ETC.. Concurrently with any sale of assets (including, if applicable, all of the Capital Stock of any Subsidiary Guarantor by merger or otherwise), any Liens in favor of the Trustee in the assets sold thereby shall be released; PROVIDED that, in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 hereof. If the assets sold in such sale or other disposition include all or substantially all of the assets of any Subsidiary Guarantor or all of the Capital Stock of any Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or other disposition of all of the Capital Stock of such Subsidiary Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of a Subsidiary Guarantor) shall be released from and relieved of its Obligations under its Subsidiary Guarantee or Section 11.03 hereof, as the case may be; PROVIDED that (i) in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 hereof and (ii) the Company is in compliance with all other provisions of this Indenture applicable to such disposition. Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect of the foregoing, together with the documents required by Section 13.04 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of any Subsidiary Guarantor from its Obligation under its Subsidiary Guarantee. Any Subsidiary Guarantor not released from its Obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of, premium, if any, and interest on the Notes and for the other Obligations of such Subsidiary Guarantor under this Indenture as provided in this Article 11. 72 SECTION 11.05. LIMITATION ON SUBSIDIARY GUARANTOR LIABILITY. For purposes hereof, the obligations of each Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and this Indenture and (ii) the amount, if any, which would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such term is defined in the United States Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or (B) left such Subsidiary Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into; PROVIDED that it will be a presumption in any lawsuit or other proceeding in which a Subsidiary Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Subsidiary Guarantor, or debtor in possession or trustee in bankruptcy of the Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the Subsidiary Guarantor is the amount set forth in clause (ii) above. In making any determination as to solvency or sufficiency of capital of a Subsidiary Guarantor in accordance with the previous sentence, the right of such Subsidiary Guarantor to contribution from other Subsidiary Guarantors, and any other rights such Subsidiary Guarantor may have, shall be taken into account. SECTION 11.06. "TRUSTEE" TO INCLUDE PAYING AGENT. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article 11 shall in each case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully and for all intents and purposes as if such Paying Agent were named in this Article 11 in place of the Trustee. ARTICLE 12 SUBORDINATION OF SUBSIDIARY GUARANTEE SECTION 12.01. AGREEMENT TO SUBORDINATE. The Subsidiary Guarantors agree, and each Holder by accepting a Note agrees, that all Obligations under the Subsidiary Guarantees shall be subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment in full of all Senior Debt of the Subsidiary Guarantors, whether outstanding on the date hereof or thereafter incurred, that the subordination is for the benefit of, and shall be enforceable directly by, the holders of the Senior Debt of the Subsidiary Guarantors and that each holder of Senior Debt of the Subsidiary Guarantors, whether now outstanding or hereafter created, incurred assumed or guaranteed shall be deemed to have acquired Senior Debt in reliance upon the covenants and provisions contained in this Indenture and the Subsidiary Guarantees. SECTION 12.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Subsidiary Guarantors in a liquidation or dissolution of the Subsidiary Guarantors or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Subsidiary Guarantors or their respective property, an assignment for the benefit of creditors or any marshalling of the Subsidiary Guarantors' assets and liabilities, the holders of Senior Debt of the Subsidiary Guarantors will be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before the Holders will be entitled to 73 receive any payment with respect to the Subsidiary Guarantees, and until all Obligations with respect to Senior Debt are paid in full in cash, any distribution to which the Holders would be entitled shall be made to the holders of Senior Debt of the Subsidiary Guarantors (except that Holders may receive Permitted Junior Securities and payments made from the trust described under Article 8 hereof). SECTION 12.03. DEFAULT ON DESIGNATED SENIOR DEBT. The Subsidiary Guarantors shall not make any payment upon or in respect of the Subsidiary Guarantees (except in Permitted Junior Securities or from the trust described under Article 8 hereof) if (i) a default in the payment of the principal of, premium, if any, or interest on Designated Senior Debt occurs and is continuing beyond any applicable period of grace or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of such Designated Senior Debt to accelerate its maturity and the Trustee receives a Payment Blockage Notice from the Representative of the holders of such Designated Senior Debt. Payments on the Subsidiary Guarantees may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived in writing and (b) in case of a nonpayment default, the earlier of (x) the date on which such nonpayment default is cured or waived in writing, (y) 179 days after the date on which the applicable Payment Blockage Notice is received, in each case, unless the maturity of any Designated Senior Debt has been accelerated or (z) the date on which such Payment Blockage Period shall have been terminated by written notice to the Trustee from the Representative of the holders of Designated Senior Debt initiating such Payment Blockage Period. During any consecutive 360-day period, the aggregate number of days in which payments due on the Notes may not be made as a result of nonpayment defaults on Designated Senior Debt shall not exceed 179 days, and there shall be a period of at least 181 consecutive days in each consecutive 360-day period during which no Payment Blockage Period is in effect. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived in writing for a period of not less than 90 days (it being acknowledged that any subsequent action, or any breach of any financial covenant for a period commencing after the date of commencement of such Payment Blockage Period that, in either case, would give rise to a default pursuant to any provisions under which a default previously existed or was continuing, shall constitute a new default for this purpose). SECTION 12.04. ACCELERATION OF SUBSIDIARY GUARANTEES. If payment of the Subsidiary Guarantees is accelerated because of an Event of Default, the Subsidiary Guarantor shall promptly notify the Representatives of Senior Debt of the acceleration. SECTION 12.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder of a Subsidiary Guarantee receives any payment of any Obligations with respect to the Subsidiary Guarantees at a time when such payment is prohibited by Section 12.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt of the Subsidiary Guarantors remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of the Subsidiary Guarantors. 74 With respect to the holders of Senior Debt of the Subsidiary Guarantors, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 12, and no implied covenants or obligations with respect to the holders of Senior Debt of the Subsidiary Guarantors shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of the Subsidiary Guarantors. SECTION 12.06. NOTICE BY SUBSIDIARY GUARANTOR. The Subsidiary Guarantors shall promptly notify the Trustee and the Paying Agent of any facts known to the Subsidiary Guarantors that would cause a payment of any Obligations with respect to the Subsidiary Guarantees to violate this Article, which notice shall specifically refer to this Article 12, but failure to give such notice shall not affect the subordination of the Subsidiary Guarantees to the Senior Debt of the Subsidiary Guarantors as provided in this Article. SECTION 12.07. SUBROGATION. After all Senior Debt of the Subsidiary Guarantors is paid in full and until the Notes are paid in full, Holders of the Subsidiary Guarantees shall be subrogated (equally and ratably with all PARI PASSU indebtedness) to the rights of holders of Senior Debt of the Subsidiary Guarantors to receive distributions applicable to Senior Debt of the Subsidiary Guarantors to the extent that distributions otherwise payable to the Holders of the Subsidiary Guarantees have been applied to the payment of Senior Debt of the Subsidiary Guarantors. A distribution made under this Article to holders of Senior Debt of the Subsidiary Guarantors that otherwise would have been made to Holders of the Subsidiary Guarantees is not, as between the Subsidiary Guarantors and Holders of the Subsidiary Guarantees, a payment by the Subsidiary Guarantors on the Subsidiary Guarantees. SECTION 12.08. RELATIVE RIGHTS. This Article defines the relative rights of Holders of the Subsidiary Guarantees and holders of Senior Debt of the Subsidiary Guarantors. Nothing in this Indenture shall: (1) impair, as between the Subsidiary Guarantors and Holders of the Subsidiary Guarantees, the obligations of the Subsidiary Guarantors, which are absolute and unconditional, to pay principal of and interest on the Notes in accordance with the terms of the Subsidiary Guarantees; (2) affect the relative rights of Holders of the Subsidiary Guarantees and creditors of the Subsidiary Guarantors other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of the Subsidiary Guarantees from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of the Subsidiary Guarantees. If the Subsidiary Guarantors fail because of this Article to pay principal of or interest on a Note on the due date in accordance with the terms of the Subsidiary Guarantees, the failure is still a Default or Event of Default. 75 SECTION 12.09. SUBORDINATION MAY NOT BE IMPAIRED BY SUBSIDIARY GUARANTOR. No right of any holder of Senior Debt of the Subsidiary Guarantors to enforce the subordination of the Indebtedness evidenced by the Subsidiary Guarantees shall be impaired by any act or failure to act by the Subsidiary Guarantors or any Holder or by the failure of the Subsidiary Guarantors or any Holder to comply with this Indenture. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt of the Subsidiary Guarantors, or any of them, may, at any time and from time to time, without the consent of or notice to the Holders of the Subsidiary Guarantees, without incurring any liabilities to any Holder of any Subsidiary Guarantees and without impairing or releasing the subordination and other benefits provided in this Indenture or the obligations of the Holders of the Subsidiary Guarantees to the holders of the Senior Debt of the Subsidiary Guarantors, even if any right of reimbursement or subrogation or other right or remedy of any Holder of Subsidiary Guarantees is affected, impaired or extinguished thereby, do any one or more of the following: (1) change the manner, place or terms of payment or change or extend the time of payment of, or renew, exchange, amend, increase or alter, the terms of any Senior Debt, any security therefor or guaranty thereof or any liability of any obligor thereon (including any guarantor) to such holder, or any liability incurred directly or indirectly in respect thereof or otherwise amend, renew, exchange, extend, modify, increase or supplement in any manner any Senior Debt or any instrument evidencing or guaranteeing or securing the same or any agreement under which Senior Debt is outstanding; (2) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any property pledged, mortgaged or otherwise securing Senior Debt or any liability of any obligor thereon, to such holder, or any liability incurred directly or indirectly in respect thereof; (3) settle or compromise any Senior Debt or any other liability of any obligor of the Senior Debt to such holder or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including, without limitation, Senior Debt) in any manner or order; and (4) fail to take or to record or to otherwise perfect, for any reason or for no reason, any lien or security interest securing Senior Debt by whomsoever granted, exercise or delay in or refrain from exercising any right or remedy against any obligor or any guarantor or any other person, elect any remedy and otherwise deal freely with any obligor and any security for the Senior Debt or any liability of any obligor to such holder or any liability incurred directly or indirectly in respect thereof. SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt of the Subsidiary Guarantors, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of any Subsidiary Guarantor referred to in this Article 12, the Trustee and the Holders of the Subsidiary Guarantees shall be entitled to rely upon any order or decree made by any court of competent jurisdiction so long as such order or decree recognizes the provisions of this Article 12 or upon any certificate of such Representative or of the liquidating trustee 76 or agent or other Person making any distribution to the Trustee or to the Holders of the Subsidiary Guarantees for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt of the Subsidiary Guarantors and other Indebtedness of the Company or any Subsidiary Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. SECTION 12.11. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 12 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes or the Subsidiary Guarantees, unless the Trustee shall have received at its Corporate Trust Office at least three Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes or the Subsidiary Guarantees to violate this Article, which notice shall specifically refer to this Article 12 (provided that, notwithstanding the foregoing, the making of any such payments shall otherwise be subject to the provisions of Sections 12.02, 12.03 and 12.05 hereof). Only the Company, the Subsidiary Guarantors or a Representative may give the notice. Nothing in this Article 12 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt of the Subsidiary Guarantors with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 12.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 12, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes, including without limitation the timely filing of a claim for the unpaid balance of the Notes held by such Holder in the form required in any Insolvency or Liquidation Proceeding and causing such claim to be approved. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time of such claim, the Representatives of the Designated Senior Debt, including debt under the Senior Credit Facility, are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 12.13. AMENDMENTS. Any amendment to the provisions of this Article 12 shall require the consent of the Holders of at least 75% in aggregate amount of Notes then outstanding if such amendment would adversely affect the rights of the Holders of Subsidiary Guarantees. 77 ARTICLE 13 MISCELLANEOUS SECTION 13.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 13.02. NOTICES. Any notice or communication by the Company, the Subsidiary Guarantors or the Trustee to the others is duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Subsidiary Guarantor: Jitney-Jungle Stores of America, Inc. 1770 Ellis Avenue Suite 200 Jackson, Mississippi 39204 Telecopier No.: (601) 371-8665 Attention: Chief Financial Officer With a copy to: Dechert Price & Rhoads 30 Rockefeller Plaza New York, New York 10112 Telecopier No.: (212) 698-3599 Attention: Bruce B. Wood If to the Trustee: Marine Midland Bank 140 Broadway, 12th Floor New York, NY 10005-1180 Telecopier No.: (212) 658-6425 Attention: Corporate Trust Administration The Company, the Subsidiary Guarantors or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier promising next Business Day delivery. 78 Any notice or communication to a Holder shall be mailed by first class mail or by overnight air courier promising next Business Day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it; PROVIDED that notice to the Trustee shall not be deemed to have been given until receipt by the Trustee of such notice. 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. SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company or the Subsidiary Guarantors to the Trustee to take any action under this Indenture (other than the initial issuance of the Senior Subordinated Notes), the Company or Subsidiary Guarantor shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and 79 (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 13.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company under the Notes, any Subsidiary Guarantee or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Subsidiary Guarantees. SECTION 13.08. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF, SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.10. SUCCESSORS. All agreements of the Company and the Subsidiary Guarantors in this Indenture, the Notes and the Subsidiary Guarantees shall bind their respective successors and assigns. All agreements of the Trustee in this Indenture shall bind its successors and assigns. SECTION 13.11. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 13.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 80 SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 81 SIGNATURES Dated as of September 15, 1997 JITNEY-JUNGLE STORES OF AMERICA, INC. By: ----------------------------------- Name: Title: INTERSTATE JITNEY-JUNGLE STORES, INC. By: ----------------------------------- Name: Title: MCCARTY-HOLMAN CO., INC. By: ----------------------------------- Name: Title: SOUTHERN JITNEY JUNGLE COMPANY By: ----------------------------------- Name: Title: PUMP AND SAVE, INC. By: ----------------------------------- Name: Title: DELTA ACQUISITION CORPORATION By: ----------------------------------- Name: Title: DELCHAMPS, INC. By: ----------------------------------- Name: Title: SUPERMARKET CIGARETTE SALES, INC. By: ----------------------------------- Name: Title: MARINE MIDLAND BANK, as Trustee By: ----------------------------- Name: Title: EXHIBIT A-1 ----------- (Face of Note) 103/8% Senior Subordinated Notes due 2007 No. ___ $_______________ CUSIP NO. JITNEY-JUNGLE STORES OF AMERICA, INC. promises to pay to _____________ or registered assigns, the principal sum of ___________ Dollars on September 15, 2007. Interest Payment Dates: March 15 and September 15 Record Dates: March 1 and September 1 JITNEY-JUNGLE STORES OF AMERICA, INC. By: ----------------------------------- Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: Dated: ___________ MARINE MIDLAND BANK, as Trustee By: ---------------------------- (Back of Note) 103/8% Senior Subordinated Notes due 2007 [Unless and until it is exchanged in whole or in part for Notes in definitive form, this Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner hereof, Cede & Co., has an interest herein.] (1) [THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IS OTHERWISE PERMITTED TO PURCHASE THE NOTES PURSUANT TO THE REQUIREMENTS OF CLAUSE (2) BELOW, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.] (2) - -------------------------- (1) This paragraph should be included only if the Senior Subordinated Note is issued in global form. (2) This paragraph should be removed upon the exchange of Senior Subordinated Notes for New Subordinated Notes in the Exchange Offer or upon the registration of the Senior Subordinated Notes pursuant to the terms of the Registration Rights Agreement. A-1-2 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Jitney-Jungle Stores of America, Inc., a Mississippi corporation, or its successor (the "Company"), promises to pay interest on the principal amount of this Note at the rate of 103/8% per annum and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages, if any, in United States dollars (except as otherwise provided herein) semi-annually in arrears on March 15 and September 15, commencing on March 15, 1998, (each an "Interest Payment Date") or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; PROVIDED that if there is no existing Default or Event of Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date, except in the case of the original issuance of Notes, in which case interest shall accrue from the date of authentication. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, on the applicable Interest Payment Date to the Persons who are registered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; PROVIDED that payment by wire transfer of immediately available funds shall be required with respect to principal of, premium and Liquidated Damages, if any, and interest on, all Global Notes and all other Notes the Holders of which shall have provided written wire transfer instructions to the Company and the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of September 15, 1997 ("Indenture") among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made a part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the A-1-3 "TIA"). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are general unsecured Obligations of the Company limited to $200,000,000 in aggregate principal amount, plus amounts, if any, sufficient to pay premium or Liquidated Damages, if any, and interest on outstanding Notes as set forth in Paragraph 2 hereof. 5. OPTIONAL REDEMPTION. Except as provided in the following paragraph, the Notes will not be redeemable at the Company's option prior to September 15, 2002. Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of the years indicated below: YEAR PERCENTAGE 2002.................................................... 105.188% 2003.................................................... 103.458% 2004.................................................... 101.729% 2005 and thereafter..................................... 100.000% Notwithstanding the foregoing, at any time prior to September 15, 2000 the Company may on any one or more occasions redeem up to 33 1 3% of the aggregate principal amount of Notes originally issued in the Offering at a redemption price of 110.375% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date, with the net proceeds of one or more Public Equity Offerings; PROVIDED that at least 66 2 3% of the original aggregate principal amount of Notes remains outstanding immediately after the occurrence of each such redemption; and PROVIDED, further, that each such redemption shall occur within 120 days of the date of the closing of the Public Equity Offering to which it relates. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail or cause to be mailed a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes pursuant to the procedures required by the Indenture. A-1-4 (b) When the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company shall be required to make an offer to all Holders (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at a price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the aggregate amount of Excess Proceeds, the Company or its Restricted Subsidiary, as the case may be, may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the aggregate amount of Excess Proceeds, the Trustee shall select the Notes to be purchased in accordance with the terms of the Indenture. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. (c) Holders of the Notes that are the subject of an offer to purchase will receive a Change of Control Offer or Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form titled "Option of Holder to Elect Purchase" appearing below. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date, interest and Liquidated Damages, if any, ceases to accrue on the Notes or portions thereof called for redemption. 9. SUBORDINATION. The payment of principal, premium, if any, and interest and Liquidated Damages on the Notes is subordinated in right of payment, as set forth in the Indenture, to the prior payment in full of all Senior Debt, which is (i) Indebtedness pursuant to the Senior Credit Facility, (ii) Indebtedness pursuant to the Senior Notes or guarantees thereof, as applicable, (iii) the IRB Indebtedness, (iv) any other Indebtedness permitted to be incurred by the Company or a Restricted Subsidiary under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or the Subsidiary Guarantees, as applicable, and (v) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (w) any liability for federal, state, local or other taxes owed or owing by the Company or any Subsidiary Guarantor, (x) any Indebtedness of the Company or any Subsidiary Guarantor to any of their respective Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of the Indenture. To the extent provided in the Indenture, Senior Debt must be paid before the Notes may be paid. The Company agrees and each Holder of Notes by accepting a Note consents and agrees to the subordination provided in the Indenture and authorizes the Trustee to give it effect. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in initial denominations of $1,000 and integral multiples of $1,000. The transfer of the Notes may be registered and the Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder 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 Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any A-1-5 Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following paragraphs, the Indenture, the Notes and the Subsidiary Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of or, tender offer or exchange offer for Notes), and any existing Default or Event of Default or compliance with any provision of the Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture, the Subsidiary Guarantees or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or a Subsidiary Guarantor's obligations to Holders of Notes in the case of a merger, consolidation or sale of assets, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. Any amendments with respect to subordination provisions of the Notes or the Subsidiary Guarantees would require the consent of the Holders of at least 75% in aggregate amount of Notes then outstanding if such amendment would adversely affect the rights of the Holders of Notes. 13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due, upon redemption, acceleration or otherwise, of interest on, or Liquidated Damages with respect to, the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes; (iii) failure by the Company for 30 days after receipt of written notice from the Trustee or from Holders of at least 25% of the aggregate principal amount of the Notes then outstanding to comply with the provisions described under Sections 4.07, 4.09, 4.10 or 4.14 of the Indenture; (iv) failure by the Company for 60 days after receipt of written notice from the Trustee or from Holders of at least 25% of the aggregate principal amount of the Notes then outstanding to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries (other than Indebtedness owed to the Company or its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date hereof, if both (a) such default either (1) results from the failure to pay any such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or (2) relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $15.0 million or more; A-1-6 (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments (other than any judgments as to which a reputable insurance company has accepted liability) aggregating in excess of $15.0 million, which judgments are not paid, discharged, bonded or stayed for a period of 60 days after their entry; (vii) except as permitted by the Indenture, any Subsidiary Guarantee will be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, will deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company, any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Restricted Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; PROVIDED, however, that, so long as any Designated Senior Debt shall be outstanding, no such acceleration shall be effective until the earlier of (i) acceleration of any such Designated Senior Debt or (ii) five Business Days after the giving of written notice to the Company and the Representatives under the Designated Senior Debt of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, any Significant Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Restricted Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. In the event of any Event of Default specified in clause (v) above, such Event of Default and all consequences thereof (including, without limitation, any acceleration or resulting payment default) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders of the Notes, if within 20 days after such Event of Default arose (x) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged in a manner that does not violate the terms of the Indenture or (y) the holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, interest or Liquidated Damages) if it determines that withholding notice is in their interest. In addition, the Trustee shall have no obligation to accelerate the Notes if, in the best judgment of the Trustee, acceleration is not in the best interests of the Holders. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company, the Subsidiary Guarantors or their respective Affiliates, and may otherwise deal with the Company, the Subsidiary Guarantors or their respective Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company under the Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Subsidiary Guarantees. A-1-7 Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transferred Restricted Securities (as defined in the Registration Rights Agreement) shall have all the rights set forth in the Registration Rights Agreement, dated as of the date hereof, among the Company, the Subsidiary Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to the Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Jitney-Jungle Stores of America, Inc. 1770 Ellis Avenue Suite 200 Jackson, Mississippi 39204 Telecopier No.: (601) 371-8665 Attention: Chief Financial Officer A-1-8 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint_______________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date:_____________________ Your Signature:______________________________ (Sign exactly as your name appearson the face of this Note) Signature Guarantee: A-1-9 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box below: / / Section 4.10 / / Section 4.14 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $___________ Date:_____________________ Your Signature:______________________________ (Sign exactly as your name appearson the face of this Note) Tax Identification No.:______________________ Signature Guarantee. A-1-10 SCHEDULE OF EXCHANGES OF NOTES (3)
THE FOLLOWING EXCHANGES OF A PART OF THIS GLOBAL NOTE FOR OTHER NOTES HAVE BEEN MADE: - ---------------------------------------------------------------------------------------------------------------------- Principal Amount of Amount of decrease in Amount of increase in this Global Note Signature of authorized Principal Amount of Principal Amount of following such decrease officer of Trustee or Date of Exchange this Global Note this Global Note (or increase) Note Custodian - ----------------------------------------------------------------------------------------------------------------------
- ------------------------ (3) This should be included only if the Senior Subordinated Note is issued in global form. A-1-11 EXHIBIT A-2 ----------- (Face of Regulation S Temporary Global Note) 103/8% Senior Subordinated Notes due 2007 No. _____ $_______________ CIN NO. JITNEY-JUNGLE STORES OF AMERICA, INC. promises to pay to ________________ or registered assigns, the principal sum of ________ Dollars on September 15, 2007. Interest Payment Dates: March 15 and September 15 Record Dates: March 1 and September 1 JITNEY-JUNGLE STORES OF AMERICA, INC. By:______________________________ Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: Dated: _________________________ MARINE MIDLAND BANK, as Trustee By:_____________________________ A-2-1 (Back of Regulation S Temporary Global Note) 103/8% Senior Subordinated Notes due 2007 UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"),TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. [THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IS OTHERWISE PERMITTED TO PURCHASE THE NOTES PURSUANT TO THE REQUIREMENTS OF CLAUSE (2) BELOW, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. A-2-2 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON PRIOR TO THE EXCHANGE OF THIS NOTE FOR A REGULATION S TEMPORARY GLOBAL NOTE AS CONTEMPLATED BY THE INDENTURE.](1) [Until this Regulation S Temporary Global Note is exchanged for Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest or Liquidated Damages, if any, hereon although interest and Liquidated Damages, if any, will continue to accrue; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture. This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Regulation S Permanent Global Notes or Rule 144A Global Notes only (i) on or after the termination of the 40-day restricted period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Regulation S Permanent Global Notes or Rule 144A Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. This Regulation S Temporary Global Note shall not become valid or obligatory until the certificate of authentication hereon shall have been duly manually signed by the Trustee in accordance with the Indenture. This Regulation S Temporary Global Note shall be governed by and construed in accordance with the laws of the State of the New York.](2) All references to "$," "Dollars," "dollars" or "U.S. $" are to such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts therein. Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Jitney-Jungle Stores of America, Inc., a Mississippi corporation, or its successor (the "Company"), promises to pay interest on the principal amount of this Note at the rate of 103/8% per annum and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages, if any, in United States dollars (except as otherwise provided herein) semi-annually in arrears on March 15 and September 15, commencing on March 15, 1998 (each an "Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day. Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; PROVIDED that if there is no existing Default or Event of Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest - ----------------------- (1) These paragraphs should be removed upon the exchange of Senior Subordinated Notes for New Senior Subordinated Notes in the Exchange Offer or upon the registration of the Senior Subordinated Notes pursuant to the terms of the Registration Rights Agreement. (2) These paragraphs should be removed upon the exchange of the Regulation S Temporary Global Notes for Regulation S Permanent Global Notes pursuant to the Indenture. A-2-3 Payment Date, interest shall accrue from such next succeeding Interest Payment Date, except in the case of the original issuance of Notes, in which case interest shall accrue from the date of authentication. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, on the applicable Interest Payment Date to the Persons who are registered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes shall be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; PROVIDED that payment by wire transfer of immediately available funds shall be required with respect to principal of, premium and Liquidated Damages, if any, and interest on, all Global Notes and all other Notes the Holders of which shall have provided written wire transfer instructions to the Company and the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of September 15, 1997 ("Indenture") among the Company, the Subsidiary Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made a part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Notes are general unsecured Obligations of the Company limited to $200,000,000 in aggregate principal amount, plus amounts, if any, sufficient to pay premium or Liquidated Damages, if any, and interest on outstanding Notes as set forth in Paragraph 2 hereof. 5. OPTIONAL REDEMPTION. Except as provided in the following paragraph, the Notes will not be redeemable at the Company's option prior to September 15, 2002. Thereafter, the Notes will be subject to redemption at the option of the Company, in whole or in part, upon not less A-2-4 than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of the years indicated below: YEAR PERCENTAGE 2002.................................................... 105.188% 2003.................................................... 103.458% 2004.................................................... 101.729% 2005 and thereafter..................................... 100.000% Notwithstanding the foregoing, at any time prior to September 15, 2000 the Company may on any one or more occasions redeem up to 33 1 3% of the aggregate principal amount of Notes originally issued in the Offering at a redemption price of 110.375% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the redemption date, with the net proceeds of one or more Public Equity Offerings; PROVIDED that at least 66 2 3% of the original aggregate principal amount of Notes remains outstanding immediately after the occurrence of each such redemption; and PROVIDED, further, that each such redemption shall occur within 120 days of the date of the closing of the Public Equity Offering to which it relates. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) Upon the occurrence of a Change of Control, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail or cause to be mailed a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes pursuant to the procedures required by the Indenture. (b) When the aggregate amount of Excess Proceeds exceeds $15.0 million, the Company shall be required to make an offer to all Holders (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at a price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the aggregate amount of Excess Proceeds, the Company or its Restricted Subsidiary, as the case may be, may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the aggregate amount of Excess Proceeds, the Trustee shall select the Notes to be purchased A-2-5 in accordance with the terms of the Indenture. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. (c) Holders of the Notes that are the subject of an offer to purchase will receive a Change of Control Offer or Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form titled "Option of Holder to Elect Purchase" appearing below. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date, interest and Liquidated Damages, if any, ceases to accrue on the Notes or portions thereof called for redemption. 9. SUBORDINATION. The payment of principal, premium, if any, and interest and Liquidated Damages on the notes is subordinated in right of payment, as set forth in the Indenture, to the prior payment in full of all Senior Debt, which is (i) Indebtedness pursuant to the Senior Credit Facility, (ii) Indebtedness pursuant to the Senior Notes or guarantees thereof, as applicable, (iii) the IRB Indebtedness, (iv) any other Indebtedness permitted to be incurred by the Company or a Restricted Subsidiary under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or the Subsidiary Guarantees, as applicable, and (v) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (w) any liability for federal, state, local or other taxes owed or owing by the Company or any Subsidiary Guarantor, (x) any Indebtedness of the Company or any Subsidiary Guarantor to any of their respective Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of the Indenture. To the extent provided in the Indenture, Senior Debt must be paid before the Notes may be paid. The Company agrees and each Holder of Notes by accepting a Note consents and agrees to the subordination provided in the Indenture and authorizes the Trustee to give it effect. 10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in initial denominations of $1,000 and integral multiples of $1,000. The transfer of the Notes may be registered and the Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder 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 Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. A-2-6 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following paragraphs, the Indenture, the Notes and the Subsidiary Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of or, tender offer or exchange offer for Notes), and any existing Default or Event of Default or compliance with any provision of the Indenture, the Notes or the Subsidiary Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture, the Subsidiary Guarantees or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or a Subsidiary Guarantor's obligations to Holders of Notes in the case of a merger, consolidation or sale of assets, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. Any amendments with respect to subordination provisions of the Notes or the Subsidiary Guarantees would require the consent of the Holders of at least 75% in aggregate amount of Notes then outstanding if such amendment would adversely affect the rights of the Holders of Notes. 13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due, upon redemption, acceleration or otherwise, of interest on, or Liquidated Damages with respect to, the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes; (iii) failure by the Company for 30 days after receipt of written notice from the Trustee or from Holders of at least 25% of the aggregate principal amount of the Notes then outstanding to comply with the provisions described under Sections 4.07, 4.09, 4.10 or 4.14 of the Indenture; (iv) failure by the Company for 60 days after receipt of written notice from the Trustee or from Holders of at least 25% of the aggregate principal amount of the Notes then outstanding to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries (other than Indebtedness owed to the Company or its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date hereof, if both (a) such default either (1) results from the failure to pay any such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or (2) relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity and (b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $15.0 million or more; (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments (other than any judgments as to which a reputable insurance company has accepted liability) aggregating A-2-7 in excess of $15.0 million, which judgments are not paid, discharged, bonded or stayed for a period of 60 days after their entry; (vii) except as permitted by the Indenture, any Subsidiary Guarantee will be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, will deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company, any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Restricted Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately; PROVIDED, however, that, so long as any Designated Senior Debt shall be outstanding, no such acceleration shall be effective until the earlier of (i) acceleration of any such Designated Senior Debt or (ii) five Business Days after the giving of written notice to the Company and the Representatives under the Designated Senior Debt of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, any Significant Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Restricted Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. In the event of any Event of Default specified in clause (v) above, such Event of Default and all consequences thereof (including, without limitation, any acceleration or resulting payment default) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders of the Notes, if within 20 days after such Event of Default arose (x) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged in a manner that does not violate the terms of the Indenture or (y) the holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, interest or Liquidated Damages) if it determines that withholding notice is in their interest. In addition, the Trustee shall have no obligation to accelerate the Notes if, in the best judgment of the Trustee, acceleration is not in the best interests of the Holders. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company, the Subsidiary Guarantors or their respective Affiliates, and may otherwise deal with the Company, the Subsidiary Guarantors or their respective Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company under the Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for A-2-8 issuance of the Notes and the Subsidiary Guarantees. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 16. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of the Notes under the Indenture, Holders of Transferred Restricted Securities (as defined in the Registration Rights Agreement) shall have all the rights set forth in the Registration Rights Agreement, dated as of the date hereof, among the Company, the Subsidiary Guarantors and the Initial Purchaser (the "Registration Rights Agreement"). 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to the Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Jitney-Jungle Stores of America, Inc. 1770 Ellis Avenue Suite 200 Jackson, Mississippi 39204 Telecopier No.: (601) 371-8665 Attention: Chief Financial Officer A-2-9 SCHEDULE OF EXCHANGES FOR GLOBAL NOTES The following exchanges of a part of this Regulation S Temporary Global Note for other Global Notes have been made:
Principal Amount of Amount of decrease in Amount of increase in this Global Note Signature of authorized Principal Amount of Principal Amount of following such decrease officer of Trustee or Date of Exchange this Global Note this Global Note (or increase) Note Custodian - ---------------- --------------------- --------------------- ----------------------- -----------------------
A-2-10 EXHIBIT B-1 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE (Pursuant to Section 2.06(a)(1) of the Indenture) Marine Midland Bank 140 Broadway, 12th Floor New York, NY 10005 Re: 103/8% Senior Subordinated Notes due 2007 of Jitney-Jungle Stores of America, Inc. Reference is hereby made to the Indenture, dated as of September 15, 1997 (the "Indenture"), among Jitney-Jungle Stores of America, Inc., a Mississippi corporation (the "COMPANY"), Interstate Jitney-Jungle Stores, Inc., an Alabama corporation ("INTERSTATE"), McCarty-Holman Co., Inc., a Mississippi corporation ("MCCARTY-HOLMAN"), Southern Jitney Jungle Company, a Mississippi corporation ("SOUTHERN"), Pump And Save, Inc., a Mississippi corporation ("PUMP AND SAVE"), Delta Acquisition Corporation, an Alabama corporation ("DAC"), Delchamps, Inc., an Alabama corporation ("DELCHAMPS") and Supermarket Cigarette Sales, Inc., a Louisiana corporation ("SCSI") (each of Interstate, McCarty-Holman, Southern, Pump And Save, DAC, Delchamps and SCSI a "SUBSIDIARY GUARANTOR" and together with any Subsidiary of the Company that executes a Subsidiary Guarantee substantially in the form of EXHIBIT D to the Indenture, the "SUBSIDIARY GUARANTORS") and Marine Midland Bank, as trustee (the "TRUSTEE"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. This letter relates to $ _______________ principal amount of Senior Subordinated Notes which are evidenced by one or more Rule 144A Global Notes and held with the Depositary in the name of ______________________ (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Senior Subordinated Notes to a Person who will take delivery thereof in the form of an equal principal amount of Senior Subordinated Notes evidenced by one or more Regulation S Global Notes, which amount, immediately after such transfer, is to be held with the Depositary through Euroclear or Cedel or both. In connection with such request and in respect of such Senior Subordinated Notes, the Transferor hereby certifies that such transfer has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with Rule 903 or Rule 904 under the United States Securities Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor hereby further certifies that: (1) The offer of the Senior Subordinated Notes was not made to a person in the United States; (2) either: B-1-1 (a) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed and believes that the transferee was outside the United States; or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was prearranged with a buyer in the United States; (3) no directed selling efforts have been made in contravention of the requirements of Rule 904(b) of Regulation S; (4) the transaction is not part of a plan or scheme to evade the registration provisions of the Securities Act; and (5) upon completion of the transaction, the beneficial interest being transferred as described above is to be held with the Depositary through Euroclear or Cedel or both. Upon giving effect to this request to exchange a beneficial interest in a Rule 144A Global Note for a beneficial interest in a Regulation S Global Note, the resulting beneficial interest shall be subject to the restrictions on transfer applicable to Regulation S Global Notes pursuant to the Indenture and the Securities Act and, if such transfer occurs prior to the end of the 40-day restricted period associated with the initial offering of Senior Subordinated Notes, the additional restrictions applicable to transfers of interest in the Regulation S Temporary Global Note. This certificate and the statements contained herein are made for your benefit and the benefit of the Company, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston, the initial purchasers of such Senior Subordinated Notes being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By: -------------------------------------- Name: Title: Dated: cc: Jitney-Jungle Stores of America, Inc. Donaldson, Lufkin & Jenrette Securities Corporation Credit Suisse First Boston B-1-2 EXHIBIT B-2 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE (Pursuant to Section 2.06(a)(ii) of the Indenture) Marine Midland Bank 140 Broadway, 12th Floor New York, NY 10005 Re: 103/8% Senior Subordinated Notes due 2007 of Jitney-Jungle Stores of America, Inc. Reference is hereby made to the Indenture, dated as of September 15, 1997 (the "Indenture"), among Jitney-Jungle Stores of America, Inc., a Mississippi corporation (the "COMPANY"), Interstate Jitney-Jungle Stores, Inc., an Alabama corporation ("INTERSTATE"), McCarty-Holman Co., Inc., a Mississippi corporation ("MCCARTY-HOLMAN"), Southern Jitney Jungle Company, a Mississippi corporation ("SOUTHERN"), Pump And Save, Inc., a Mississippi corporation ("PUMP AND SAVE"), Delta Acquisition Corporation, an Alabama corporation ("DAC"), Delchamps, Inc., an Alabama corporation ("DELCHAMPS") and Supermarket Cigarette Sales, Inc., a Louisiana corporation ("SCSI") (each of Interstate, McCarty-Holman, Southern, Pump And Save, DAC, Delchamps and SCSI a "SUBSIDIARY GUARANTOR" and together with any Subsidiary of the Company that executes a Subsidiary Guarantee substantially in the form of EXHIBIT D to the Indenture, the "SUBSIDIARY GUARANTORS") and Marine Midland Bank, as trustee (the "TRUSTEE"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. This letter relates to $_________ principal amount of Senior Subordinated Notes which are evidenced by one or more Regulation S Global Notes and held with the Depositary through Euroclear or Cedel in the name of __________________________________ (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Senior Subordinated Notes to a Person who will take delivery thereof in the form of an equal principal amount of Senior Subordinated Notes evidenced by one or more Rule 144A Global Notes, to be held with the Depositary. In connection with such request and in respect of such Senior Subordinated Notes, the Transferor hereby certifies that: [CHECK ONE] / / such transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Senior Subordinated Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Senior Subordinated Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A; B-2-1 or / / such transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or / / such transfer is being effected pursuant to an exemption under the Securities Act other than Rule 144A or Rule 144 and the Transferor further certifies that the Transfer complies with the transfer restrictions applicable to beneficial interests in Global Notes and Definitive Senior Subordinated Notes bearing the Private Placement Legend and the requirements of the exemption claimed, which certification is supported by (x) if such transfer is in respect of a principal amount of Senior Subordinated Notes at the time of Transfer of $250,000 or more, a certificate executed by the Transferee in the form of EXHIBIT C to the Indenture, or (y) if such Transfer is in respect of a principal amount of Senior Subordinated Notes at the time of transfer of less than $250,000, (1) a certificate executed in the form of EXHIBIT C to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that (1) such Transfer is in compliance with the Securities Act and (2) such Transfer complies with any applicable blue sky securities laws of any state of the United States; or / / such transfer is being effected pursuant to an effective registration statement under the Securities Act; or / / such transfer is being effected pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A or Rule 144, and the Transferor hereby further certifies that the Senior Subordinated Notes are being transferred in compliance with the transfer restrictions applicable to the Global Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and such Senior Subordinated Notes are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. Upon giving effect to this request to exchange a beneficial interest in Regulation S Global Notes for a beneficial interest in 144A Global Senior Subordinated Notes, the resulting beneficial interest shall be subject to the restrictions on transfer applicable to Rule 144A Global Notes pursuant to the Indenture and the Securities Act. B-2-2 This certificate and the statements contained herein are made for your benefit and the benefit of the Company, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation, and Credit Suisse First Boston, the initial purchasers of such Senior Subordinated Notes being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By: -------------------------------- Name: Title: Dated: cc: Jitney-Jungle Stores of America, Inc. Donaldson, Lufkin & Jenrette Securities Corporation Credit Suisse First Boston B-2-3 EXHIBIT B-3 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER OF DEFINITIVE SENIOR SUBORDINATED NOTES FOR OTHER DEFINITIVE SENIOR SUBORDINATED NOTES OR BENEFICIAL INTERESTS IN GLOBAL NOTES (Pursuant to Section 2.06(b) or (e) of the Indenture) Marine Midland Bank 140 Broadway, 12th Floor New York, NY 10005 Re: 103/8% Senior Subordinated Notes due 2007 of Jitney-Jungle Stores of America, Inc. Reference is hereby made to the Indenture, dated as of September 15, 1997 (the "Indenture"), among Jitney-Jungle Stores of America, Inc., a Mississippi corporation (the "COMPANY"), Interstate Jitney-Jungle Stores, Inc., an Alabama corporation ("INTERSTATE"), McCarty-Holman Co., Inc., a Mississippi corporation ("MCCARTY-HOLMAN"), Southern Jitney Jungle Company, a Mississippi corporation ("SOUTHERN"), Pump And Save, Inc., a Mississippi corporation ("PUMP AND SAVE"), Delta Acquisition Corporation, an Alabama corporation ("DAC"), Delchamps, Inc., an Alabama corporation ("DELCHAMPS") and Supermarket Cigarette Sales, Inc., a Louisiana corporation ("SCSI") (each of Interstate, McCarty-Holman, Southern, Pump And Save, DAC, Delchamps and SCSI a "SUBSIDIARY GUARANTOR" and together with any Subsidiary of the Company that executes a Subsidiary Guarantee substantially in the form of EXHIBIT D to the Indenture, the "SUBSIDIARY GUARANTORS") and Marine Midland Bank, as trustee (the "TRUSTEE"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. This relates to $ principal amount of Senior Subordinated Notes which are evidenced by one or more Definitive Senior Subordinated Notes in the name of (the "Transferor"). The Transferor has requested an exchange or transfer of such Definitive Senior Subordinated Note(s) in the form of an equal principal amount of Senior Subordinated Notes evidenced by (a) one or more Definitive Senior Subordinated Notes, to be delivered to the Transferor or, in the case of a transfer of such Senior Subordinated Notes, to such Person as the Transferor instructs the Trustee or (b) a beneficial interest in one or more Global Notes. In connection with such request and in respect of the Senior Subordinated Notes surrendered to the Trustee herewith for exchange (the "Surrendered Senior Subordinated Notes"), the Holder of such Surrendered Senior Subordinated Notes hereby certifies that: [CHECK ONE] / / 1. the Surrendered Senior Subordinated Notes are being acquired for the Transferor's own account, without transfer; or / / 2. the Surrendered Senior Subordinated Notes are being transferred to the Company; B-3-1 or / / 3. the Surrendered Senior Subordinated Notes are being transferred pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Surrendered Senior Subordinated Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Senior Subordinated Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A; or / / 4. the Surrendered Senior Subordinated Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act; or / / 5. the Surrendered Senior Subordinated Notes are being transferred in a transaction permitted by Rule 903 or Rule 904 under the Securities Act; or / / 6. the Surrendered Senior Subordinated Notes are being transferred pursuant to an exemption under the Securities Act other than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies that the Transfer complies with the transfer restrictions applicable to beneficial interests in Global Notes and Definitive Senior Subordinated Notes bearing the Private Placement Legend and the requirements of the exemption claimed, which certification is supported by (x) if such transfer is in respect of a principal amount of Senior Subordinated Notes at the time of Transfer of $250,000 or more, a certificate executed by the Transferee in the form of EXHIBIT C to the Indenture, or (y) if such Transfer is in respect of a principal amount of Senior Subordinated Notes at the time of transfer of less than $250,000, (1) a certificate executed in the form of EXHIBIT C to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that (1) such Transfer is in compliance with the Securities Act and (2) such Transfer complies with any applicable blue sky securities laws of any state of the United States; or / / 7. the Surrendered Senior Subordinated Notes are being transferred pursuant to an effective registration statement under the Securities Act; or / / 8. such transfer is being effected pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A or Rule 144, and the Transferor hereby further certifies that the Senior Subordinated Notes are being transferred in compliance with the transfer restrictions applicable to the Global Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an B-3-2 Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and the Surrendered Senior Subordinated Notes are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. This certificate and the statements contained herein are made for your benefit and the benefit of the Company, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston, the initial purchasers of such Senior Subordinated Notes being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By: -------------------------------- Name: Title: Dated: cc: Jitney-Jungle Stores of America, Inc. Donaldson, Lufkin & Jenrette Securities Corporation Credit Suisse First Boston B-3-3 EXHIBIT B-4 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM RULE 144A GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE TO DEFINITIVE SENIOR SUBORDINATED NOTE (Pursuant to Section 2.06(c) of the Indenture) Marine Midland Bank 140 Broadway, 12th Floor New York, NY 10005 Re: 103/8% Senior Subordinated Notes due 2007 of Jitney-Jungle Stores of America, Inc. Reference is hereby made to the Indenture, dated as of September 15, 1997 (the "Indenture"), among Jitney-Jungle Stores of America, Inc., a Mississippi corporation (the "COMPANY"), Interstate Jitney-Jungle Stores, Inc., an Alabama corporation ("INTERSTATE"), McCarty-Holman Co., Inc., a Mississippi corporation ("MCCARTY-HOLMAN"), Southern Jitney Jungle Company, a Mississippi corporation ("SOUTHERN"), Pump And Save, Inc., a Mississippi corporation ("PUMP AND SAVE"), Delta Acquisition Corporation, an Alabama corporation ("DAC"), Delchamps, Inc., an Alabama corporation ("DELCHAMPS") and Supermarket Cigarette Sales, Inc., a Louisiana corporation ("SCSI") (each of Interstate, McCarty-Holman, Southern, Pump And Save, DAC, Delchamps and SCSI a "SUBSIDIARY GUARANTOR" and together with any Subsidiary of the Company that executes a Subsidiary Guarantee substantially in the form of EXHIBIT D to the Indenture, the "SUBSIDIARY GUARANTORS") and Marine Midland Bank, as trustee (the "TRUSTEE"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. This letter relates to $__________ principal amount of Senior Subordinated Notes which are evidenced by a beneficial interest in one or more Rule 144A Global Notes or Regulation S Permanent Global Notes in the name of (the "Transferor"). The Transferor has requested an exchange or transfer of such beneficial interest in the form of an equal principal amount of Senior Subordinated Notes evidenced by one or more Definitive Senior Subordinated Notes, to be delivered to the Transferor or, in the case of a transfer of such Senior Subordinated Notes, to such Person as the Transferor instructs the Trustee. In connection with such request and in respect of the Senior Subordinated Notes surrendered to the Trustee herewith for exchange (the "Surrendered Senior Subordinated Notes"), the Holder of such Surrendered Senior Subordinated Notes hereby certifies that: [CHECK ONE] / / 1. the Surrendered Senior Subordinated Notes are being transferred to the beneficial owner of such Senior Subordinated Notes; or / / 2. the Surrendered Senior Subordinated Notes are being transferred pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended B-4-1 (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Surrendered Senior Subordinated Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Senior Subordinated Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting they requirements of Rule 144A; or / / 3. the Surrendered Senior Subordinated Notes are being transferred in a transaction permitted by Rule 144 under the Securities Act; or / / 4. the Surrendered Senior Subordinated Notes are being transferred pursuant to an effective registration statement under the Securities Act; or / / 5. the Surrendered Senior Subordinated Notes are being transferred in a transaction permitted by Rule 903 or Rule 904 under the Securities Act; or / / 6. the Surrendered Senior Subordinated Notes are being transferred pursuant to an exemption under the Securities Act other than Rule 144A, Rule 144 or Rule 904 and the Transferor further certifies that the Transfer complies with the transfer restrictions applicable to beneficial interests in Global Notes and Definitive Senior Subordinated Notes bearing the Private Placement Legend and the requirements of the exemption claimed, which certification is supported by (x) if such transfer is in respect of a principal amount of Senior Subordinated Notes at the time of Transfer of $250,000 or more, a certificate executed by the Transferee in the form of EXHIBIT C to the Indenture, or (y) if such Transfer is in respect of a principal amount of Senior Subordinated Notes at the time of transfer of less than $250,000, (1) a certificate executed in the form of EXHIBIT C to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that (1) such Transfer is in compliance with the Securities Act and (2) such Transfer complies with any applicable blue sky securities laws of any state of the United States; or / / 7. such transfer is being effected pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A or Rule 144, and the Transferor hereby further certifies that the Senior Subordinated Notes are being transferred in compliance with the transfer restrictions applicable to the Global Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the B-4-2 Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and the Surrendered Senior Subordinated Notes are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. B-4-3 This certificate and the statements contained herein are made for your benefit and the benefit of the Company, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston, the initial purchasers of such Senior Subordinated Notes being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. [Insert Name of Transferor] By: ------------------------------- Name: Title: Dated: cc: Jitney-Jungle Stores of America, Inc. Donaldson, Lufkin & Jenrette Securities Corporation Credit Suisse First Boston B-4-4 EXHIBIT C --------- FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Marine Midland Bank 140 Broadway, 12th Floor New York, NY 10005 Re: 103/8% Senior Subordinated Notes due 2007 of Jitney-Jungle Stores of America, Inc. Reference is hereby made to the Indenture, dated as of September 15, 1997 (the "Indenture"), among Jitney-Jungle Stores of America, Inc., a Mississippi corporation (the "COMPANY"), Interstate Jitney-Jungle Stores, Inc., an Alabama corporation ("INTERSTATE"), McCarty-Holman Co., Inc., a Mississippi corporation ("MCCARTY-HOLMAN"), Southern Jitney Jungle Company, a Mississippi corporation ("SOUTHERN"), Pump And Save, Inc., a Mississippi corporation ("PUMP AND SAVE"), Delta Acquisition Corporation, an Alabama corporation ("DAC"), Delchamps, Inc., an Alabama corporation ("DELCHAMPS") and Supermarket Cigarette Sales, Inc., a Louisiana corporation ("SCSI") (each of Interstate, McCarty-Holman, Southern, Pump And Save, DAC, Delchamps and SCSI a "SUBSIDIARY GUARANTOR" and together with any Subsidiary of the Company that executes a Subsidiary Guarantee substantially in the form of EXHIBIT D to the Indenture, the "SUBSIDIARY GUARANTORS") and Marine Midland Bank, as trustee (the "TRUSTEE"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $__________ aggregate principal amount of: (a) / / Beneficial interests, or (b) / / Definitive Senior Subordinated Notes, we confirm that: 1. We understand that any subsequent transfer of the Senior Subordinated Notes of any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Senior Subordinated Notes or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "SECURITIES ACT"). 2. We understand that the offer and sale of the Senior Subordinated Notes have not been registered under the Securities Act, and that the Senior Subordinated Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Senior Subordinated Notes or any interest therein, (A) we will do so only (1)(a) to a person who we reasonably believe is a qualified institutional buyer (as defined in Rule 144A under the Securities Act) in a transaction meeting the requirements of 144A, (b) in a transaction meeting the requirements of Rule 144 under the Securities Act, (c) outside the United States to a foreign person in a transaction meeting C-1 the requirements of Rule 904 of the Securities Act, (d) to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act who prior to the consummation of such sale furnishes you with a signed certificate substantially in the form hereof or (e) in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel), (2) to the Company or any of its subsidiaries or (3) pursuant to an effective registration statement and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction and (B) we will, and each subsequent holder will be required to, notify any purchaser from it of the security evidenced hereby of the resale restrictions set forth in (A) above." 3. We understand that, on any proposed resale of the Senior Subordinated Notes or beneficial interests, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Senior Subordinated Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Senior Subordinated Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Senior Subordinated Notes or beneficial interests therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. 6. We are not acquiring the Senior Subordinated Notes with a view to any distribution thereof that would violate the Securities Act or the securities laws of any State of the United States. C-2 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ______________________________ [Insert Name of Accredited Investor] By:___________________________ Name: Title: Dated: ______________, ____ C-3 EXHIBIT D --------- SUBSIDIARY GUARANTEE Subject to Section 11.05 of the Indenture, each Subsidiary Guarantor hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes and the Obligations of the Company under the Notes or under the Indenture, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other payment Obligations of the Company to the Holders or the Trustee under the Indenture or under the Notes will be promptly paid in full and performed, all in accordance with the terms thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other payment Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Subsidiary Guarantors will be jointly and severally obligated to pay the same immediately. The obligations of the Subsidiary Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are (a) expressly set forth in Article 11 of the Indenture and (b) subordinated to Senior Debt as set forth in the Indenture, and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The terms of Article 11 of the Indenture are incorporated herein by reference. This Subsidiary Guarantee is subject to release as and to the extent provided in Section 11.04 of the Indenture. This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each Subsidiary Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guarantee of payment and not a guarantee of collection. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. For purposes hereof, each Subsidiary Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture and (ii) the amount, if any, which would not have (A) rendered such Subsidiary Guarantor "insolvent" (as such term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or (B) left such Subsidiary Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into; PROVIDED that, it will be a presumption in any lawsuit or other proceeding in which a Subsidiary Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Subsidiary Guarantor, or debtor in possession or trustee in bankruptcy of such Subsidiary Guarantor, D-1 otherwise proves in such a lawsuit that the aggregate liability of the Subsidiary Guarantor is limited to the amount set forth in clause (ii) above. The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a Subsidiary Guarantor in accordance with the previous sentence, the right of such Subsidiary Guarantors to contribution from other Subsidiary Guarantors and any other rights such Subsidiary Guarantors may have, contractual or otherwise, shall be taken into account. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. Dated as of ___________________ [NAME OF GUARANTOR] By: ----------------------------------- Name: Title: D-2 EXHIBIT E --------- FORM OF SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ___________, between Subsidiary Guarantor (the "New Subsidiary Guarantor"), a subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi corporation (the "Company"), and Marine Midland Bank, as trustee under the indenture referred to below (the "Trustee"). Capitalized terms used herein and not defined herein shall have the meaning ascribed to them in the Indenture (as defined below). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of September 15, 1997, providing for the issuance of an aggregate principal amount of $200,000,000 of 103/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes"); WHEREAS, Sections 4.18 and 11.03 of the Indenture provide that under certain circumstances the Company is required to cause certain of its Subsidiaries to execute and deliver to the Trustee a supplemental indenture pursuant to which such Subsidiaries shall unconditionally guarantee all of the Company's Obligations under the Senior Subordinated Notes pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Senior Subordinated Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO SUBSIDIARY GUARANTEE. The New Subsidiary Guarantor hereby agrees, jointly and severally with all other Subsidiary Guarantors, to guarantee the Company's Obligations under the Senior Subordinated Notes and the Indenture on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture. E-1 3. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, shareholder or agent of any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company or any Subsidiary Guarantor under the Senior Subordinated Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Senior Subordinated Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Senior Subordinated Notes. 4. NEW YORK LAW TO GOVERN. The internal law of the State of New York shall govern and be used to construe this Supplemental Indenture. 5. COUNTERPARTS The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 7. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the correctness of the recitals of fact contained herein, all of which recitals are made solely by the New Subsidiary Guarantor. E-2 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: ________________ [NAME OF NEW SUBSIDIARY GUARANTOR] By: ____________________________ Name: Title: Dated: ________________ MARINE MIDLAND BANK, as Trustee By: ____________________________ Name: Title: E-3 CROSS-REFERENCE TABLE* TRUST INDENTURE ACT Section INDENTURE SECTION 310 (a)(1)...................................................... 7.10 (a)(2)...................................................... 7.10 (a)(3)...................................................... N.A. (a)(4)...................................................... N.A. (a)(5)...................................................... 7.10 (b)......................................................... 7.03; 7.10 (c)......................................................... N.A. 311 (a) ........................................................ 7.11 (b)......................................................... 7.11 (c)......................................................... N.A. 312 (a)......................................................... 2.05 (b)......................................................... 13.03 (c)......................................................... 13.03 313 (a)......................................................... 7.06 (b)(1)...................................................... 7.06 (b)(2)...................................................... 7.06; 7.07 (c)......................................................... 7.06;13.02 (d)......................................................... 7.06 314 (a)......................................................... 4.03;13.05 (b)......................................................... N.A. (c)(1)...................................................... 13.04 (c)(2)...................................................... 13.04 (c)(3)...................................................... N.A. (d)......................................................... N.A. (e)......................................................... 13.05 (f)......................................................... N.A. 315 (a)......................................................... 7.01 (b)......................................................... 7.05,13.02 (c)......................................................... 7.01 (d)......................................................... 7.01 (e)......................................................... 6.11 316 (a)(last sentence).......................................... 2.09 (a)(1)(A)................................................... 6.05 (a)(1)(B)................................................... 6.04 (a)(2)...................................................... N.A. (b)......................................................... 6.07 (c)......................................................... 2.13 317 (a)(1)...................................................... 6.08 (a)(2)...................................................... 6.09 (b)......................................................... 2.04 318 (a)......................................................... 13.01 (b)......................................................... N.A. (c)......................................................... 13.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions................................................ 1 Section 1.02. Other Definitions.......................................... 15 Section 1.03. Incorporation by Reference of Trust Indenture Act.......... 16 Section 1.04. Rules of Construction...................................... 16 ARTICLE 2 THE NOTES Section 2.01. Form and Dating............................................ 17 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 Notes.......................................... 29 Section 2.08. Outstanding Notes.......................................... 29 Section 2.09. Treasury Notes............................................. 29 Section 2.10. Temporary Notes............................................ 30 Section 2.11. Cancellation............................................... 30 Section 2.12. Defaulted Interest......................................... 30 Section 2.13. Record Date................................................ 30 Section 2.14. Computation of Interest.................................... 31 Section 2.15. CUSIP Number............................................... 31 ARTICLE 3 REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee......................................... 31 Section 3.02. Selection of Notes to be Redeemed.......................... 31 Section 3.03. Notice of Redemption....................................... 32 Section 3.04. Effect of Notice of Redemption............................. 32 Section 3.05. Deposit of Redemption or Purchase Price.................... 33 Section 3.06. Notes Redeemed in Part..................................... 33 Section 3.07. Optional Redemption........................................ 33 Section 3.08. Mandatory Redemption....................................... 34 Section 3.09. Repurchase Offers.......................................... 34 ARTICLE 4 COVENANTS Section 4.01. Payment of Notes........................................... 36 Section 4.02. Maintenance of Office or Agency............................ 36 i Section 4.03. Commission Reports......................................... 37 Section 4.04. Compliance Certificate..................................... 37 Section 4.05. Taxes...................................................... 38 Section 4.06. Stay, Extension and Usury Laws............................. 38 Section 4.07. Restricted Payments........................................ 38 Section 4.08. Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries.................................... 41 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock...................................................... 42 Section 4.10. Assets Sales............................................... 44 Section 4.11. Transactions With Affiliates............................... 45 Section 4.12. Liens...................................................... 45 Section 4.13. Sale and Leaseback Transactions............................ 46 Section 4.14. Offer to Purchase Upon Change of Control................... 46 Section 4.15. Corporate Existence........................................ 47 Section 4.16. Limitation on Issuances of Capital Stock of Wholly Owned Restricted Subsidiaries.................................... 47 Section 4.17. Business Activities........................................ 47 Section 4.18. Additional Guarantees...................................... 47 Section 4.19. Payment for Consents....................................... 48 Section 4.20. No Senior Subordinated Debt................................ 48 Section 4.21. No Restrictions on Consummation of Delchamps Acquisition... 48 ARTICLE 5 SUCCESSORS Section 5.01. Merger, Consolidation or Sale of Assets.................... 49 Section 5.02. Successor Corporation Substituted.......................... 49 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01. Events of Default.......................................... 49 Section 6.02. Acceleration............................................... 51 Section 6.03. Other Remedies............................................. 52 Section 6.04. Waiver of Past Defaults.................................... 52 Section 6.05. Control by Majority........................................ 53 Section 6.06. Limitation on Suits........................................ 53 Section 6.07. Rights of Holders of Notes to Receive Payment.............. 53 Section 6.08. Collection Suit by Trustee................................. 53 Section 6.09. Trustee May File Proofs of Claim........................... 54 Section 6.10. Priorities................................................. 54 Section 6.11. Undertaking for Costs...................................... 54 ARTICLE 7 TRUSTEE Section 7.01. Duties of Trustee.......................................... 55 Section 7.02. Rights of Trustee.......................................... 56 ii PAGE Section 7.03. Individual Rights of Trustee............................... 56 Section 7.04. Trustee's Disclaimer....................................... 56 Section 7.05. Notice of Defaults......................................... 57 Section 7.06. Reports by Trustee to Holders of the Notes................. 57 Section 7.07. Compensation and Indemnity................................. 57 Section 7.08. Replacement of Trustee..................................... 58 Section 7.09. Successor Trustee by Merger, etc........................... 59 Section 7.10. Eligibility; Disqualification.............................. 59 Section 7.11. Preferential Collection of Claims Against Company.......... 59 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance... 59 Section 8.02. Legal Defeasance and Discharge............................. 60 Section 8.03. Covenant Defeasance........................................ 60 Section 8.04. Conditions to Legal or Covenant Defeasance................. 60 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions...................... 62 Section 8.06. Repayment to Company....................................... 62 Section 8.07. Reinstatement.............................................. 63 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes........................ 63 Section 9.02. With Consent of Holders of Notes........................... 64 Section 9.03. Compliance with Trust Indenture Act........................ 65 Section 9.04. Revocation and Effect of Consents.......................... 65 Section 9.05. Notation on or Exchange of Notes........................... 65 Section 9.06. Trustee to Sign Amendments, etc............................ 66 ARTICLE 10 SUBORDINATION Section 10.01. Agreement to Subordinate.................................. 66 Section 10.02. Liquidation; Dissolution; Bankruptcy...................... 66 Section 10.03. Default on Designated Senior Debt......................... 66 Section 10.04. Acceleration of Notes..................................... 67 Section 10.05. When Distribution Must Be Paid Over....................... 67 Section 10.06. Notice by the Company..................................... 67 Section 10.07. Subrogation............................................... 67 Section 10.08. Relative Rights........................................... 68 Section 10.09. Subordination May Not Be Impaired by the Company.......... 68 Section 10.10. Distribution or Notice to Representative.................. 69 Section 10.11. Rights of Trustee and Paying Agent........................ 69 Section 10.12. Authorization to Effect Subordination..................... 69 Section 10.13. Amendments................................................ 70 iii PAGE ARTICLE 11 GUARANTEE OF NOTES Section 11.01. Subsidiary Guarantee........................................ 70 Section 11.02. Execution and Delivery of Subsidiary Guarantee.............. 71 Section 11.03. Subsidiary Guarantors May Consolidate, etc., on Certain Terms............................................... 71 Section 11.04. Releases Following Sale of Assets, Merger, Sale of Capital Stock Etc........................................... 72 Section 11.05. Limitation on Subsidiary Guarantor Liability................ 73 Section 11.06. "Trustee" to Include Paying Agent........................... 73 ARTICLE 12 SUBORDINATION OF SUBSIDIARY GUARANTEE Section 12.01. Agreement to Subordinate.................................... 73 Section 12.02. Liquidation; Dissolution; Bankruptcy........................ 73 Section 12.03. Default on Designated Senior Debt........................... 74 Section 12.04. Acceleration of Subsidiary Guarantees....................... 74 Section 12.05. When Distribution Must Be Paid Over......................... 74 Section 12.06. Notice by Subsidiary Guarantor.............................. 75 Section 12.07. Subrogation................................................. 75 Section 12.08. Relative Rights............................................. 75 Section 12.09. Subordination May Not Be Impaired by Subsidiary Guarantor... 76 Section 12.10. Distribution or Notice to Representative.................... 76 Section 12.11. Rights of Trustee and Paying Agent.......................... 77 Section 12.12. Authorization to Effect Subordination....................... 77 Section 12.13. Amendments.................................................. 77 ARTICLE 13 MISCELLANEOUS Section 13.01. Trust Indenture Act Controls................................ 78 Section 13.02. Notices..................................................... 78 Section 13.03. Communication by Holders of Notes with Other Holders of Notes.................................................... 79 Section 13.04. Certificate and Opinion as to Conditions Precedent.......... 79 Section 13.05. Statements Required in Certificate or Opinion............... 79 Section 13.06. Rules by Trustee and Agents................................. 80 Section 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders................................................ 80 Section 13.08. Governing Law............................................... 80 Section 13.09. No Adverse Interpretation of Other Agreements............... 80 Section 13.10. Successors.................................................. 80 Section 13.11. Severability................................................ 80 Section 13.12. Counterpart Originals....................................... 80 Section 13.13. Table of Contents, Headings, etc............................ 81 iv EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFEROR Exhibit C FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit D FORM OF SUBSIDIARY GUARANTEE Exhibit E FORM OF SUPPLEMENTAL INDENTURE v EX-4.2 3 REGISTRATION RIGHTS AGREEMENT Exhibit 4.2 EXECUTION COPY ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of September 15, 1997 by and among JITNEY-JUNGLE STORES OF AMERICA, INC. SOUTHERN JITNEY JUNGLE COMPANY MCCARTY-HOLMAN CO., INC. INTERSTATE JITNEY-JUNGLE STORES, INC. PUMP AND SAVE, INC. DELTA ACQUISITION CORPORATION DELCHAMPS, INC. SUPERMARKET CIGARETTE SALES, INC. and . . . . . . . . . . . . . . DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION CREDIT SUISSE FIRST BOSTON ================================================================================ This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of September 15, 1997, by and among Jitney-Jungle Stores of America, Inc., a Mississippi corporation (the "COMPANY"), Southern Jitney Jungle Company, a Mississippi corporation, McCarty-Holman Co., Inc., a Mississippi corporation, Interstate Jitney-Jungle Stores, Inc., an Alabama corporation, Pump and Save, Inc., a Mississippi corporation, Delta Acquisition Corporation, an Alabama corporation, Delchamps, Inc., an Alabama corporation ("DELCHAMPS"), and Supermarket Cigarette Sales, Inc., a Louisiana corporation ("SCSI") (each a "GUARANTOR" and, collectively, the "GUARANTORS"), and Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Credit Suisse First Boston (each an "INITIAL PURCHASER" and, collectively, the "INITIAL PURCHASERS"), each of whom has agreed to purchase the Company's 10-3/8% Senior Subordinated Notes due 2007 (the "SENIOR SUBORDINATED NOTES") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated September 10, 1997 (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Senior Subordinated Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement by each of the parties hereto (other than Delchamps and SCSI) is a condition to the obligations of the Initial Purchasers set forth in Section 3 of the Purchase Agreement. The parties acknowledge that the execution and delivery of this Agreement by Delchamps and SCSI is conditioned upon the Consummation (as that term is defined in the Purchase Agreement and not as otherwise defined in this Agreement) of the Delchamps Tender Offer (as defined in the Purchase Agreement). The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. AFFILIATE: As defined in Rule 144 under the Act. BUSINESS DAY: Any day except a Saturday, Sunday or other day in the City of New York, or in the city of the corporate trust office of the Trustee, on which banks are authorized to close. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. BROKER-DEALER TRANSFER RESTRICTED SECURITIES: New Senior Subordinated Notes that are acquired by a Broker-Dealer in the Exchange Offer in exchange for Senior Subordinated Notes that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Senior Subordinated Notes acquired directly from the Company or any of its affiliates). CERTIFICATED SECURITIES: As defined in the Indenture. CLOSING DATE: The date hereof. COMMISSION: The Securities and Exchange Commission. CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the New Senior Subordinated Notes to be issued in the Exchange Offer, (b) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof and (c) the delivery by the Company to the Registrar under the Indenture of New Senior Subordinated Notes in the same aggregate principal amount as the aggregate principal amount of Senior Subordinated Notes tendered and not withdrawn by Holders thereof pursuant to the Exchange Offer. DAMAGES PAYMENT DATE: With respect to the Senior Subordinated Notes, each Interest Payment Date. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE OFFER: The registration by the Company under the Act of the New Senior Subordinated Notes pursuant to the Exchange Offer Registration Statement pursuant to which the Company shall offer the Holders of all outstanding Senior Subordinated Notes the opportunity to exchange all such outstanding Senior Subordinated Notes for New Senior Subordinated Notes in an aggregate principal amount equal to the aggregate principal amount of the Senior Subordinated Notes tendered in such exchange offer by such Holders. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXEMPT RESALES: The transactions in which the Initial Purchasers propose to sell the Senior Subordinated Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act, and to persons permitted to purchase the Senior Subordinated Notes in offshore transactions in reliance upon Regulation S under the Act. GLOBAL NOTEHOLDER: As defined in the Indenture. HOLDERS: As defined in Section 2 hereof. INDEMNIFIED HOLDER: As defined in Section 8(a) hereof. INDENTURE: The Indenture, dated the Closing Date, among the Company, the Guarantors and Marine Midland Bank, as trustee (the "TRUSTEE"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. INTEREST PAYMENT DATE: As defined in the Indenture and the Notes. LIQUIDATED DAMAGES: As defined in Section 5. NASD: National Association of Securities Dealers, Inc. NEW SENIOR SUBORDINATED NOTES: The Company's new 10-3/8% Senior Subordinated Notes due 2007 to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) upon the request of any 2 Holder of Senior Subordinated Notes covered by a Shelf Registration Statement, in exchange for such Senior Subordinated Notes. NOTES: The Senior Subordinated Notes and the New Senior Subordinated Notes. PERSON: An individual, partnership, corporation, trust, unincorporated organization, or a government or agency or political subdivision thereof. PROSPECTUS: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. RECORD HOLDER: With respect to any Damages Payment Date, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Company and the Guarantors relating to (a) an offering of New Senior Subordinated Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) which is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. RESTRICTED BROKER-DEALER: Any Broker-Dealer which holds Broker-Dealer Transfer Restricted Securities. SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Note has been disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Note is disposed of by a Restricted Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein) or (d) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act. UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 3 Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Purchase Agreement. SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 45 days after the Closing Date, the Exchange Offer Registration Statement, (ii) use its reasonable best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 120 days after the Closing Date, (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause such Exchange Offer Registration Statement to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the New Senior Subordinated Notes to be made under the Blue Sky laws of such jurisdictions as are reasonably requested by the Holders and are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the New Senior Subordinated Notes to be offered in exchange for the Senior Subordinated Notes that are Transfer Restricted Securities and to permit sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers as contemplated by Section 3(c) below. (b) The Company and the Guarantors shall use their respective best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20 Business Days. The Company and the Guarantors shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Notes shall be included in the Exchange Offer Registration Statement. The Company and the Guarantors shall use their respective best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 Business Days thereafter. (c) The Company shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Restricted Broker-Dealer who holds Senior Subordinated Notes that are Transfer Restricted Securities and that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities, may exchange such Senior Subordinated Notes (other than Transfer Restricted Securities acquired directly from the Company or any Affiliate of the Company) pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver 4 a prospectus meeting the requirements of the Act in connection with its initial sale of each New Senior Subordinated Note received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. If requested by any Restricted Broker-Dealer, the Company and the Guarantors shall use their respective reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for sales of Broker-Dealer Transfer Restricted Securities by such Restricted Broker-Dealer, and to ensure that such Registration Statement conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days from the date on which the Exchange Offer is Consummated or such shorter period as will terminate when no Restricted Broker-Dealer holds Broker-Dealer Transfer Restricted Securities. The Company and the Guarantors shall promptly provide sufficient copies of the latest version of such Prospectus to such Restricted Broker-Dealer promptly upon request, and in no event later than one Business Day after such request, at any time during the period referred to in the immediately preceding paragraph in order to facilitate such sales. SECTION 4. SHELF REGISTRATION (a) SHELF REGISTRATION. If (i) the Company is not required to file an Exchange Offer Registration Statement with respect to the New Senior Subordinated Notes because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company within 20 days following the Consummation of the Exchange Offer that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the New Senior Subordinated Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Senior Subordinated Notes acquired directly from the Company or one of its Affiliates, then the Company and the Guarantors shall (x) cause to be filed on or prior to 45 days after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement pursuant to clause (i) above or 30 days after the date on which the Company receives the notice specified in clause (ii) above, a shelf registration statement pursuant to Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (in either event, the "SHELF REGISTRATION STATEMENT")), relating to all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof, and (y) use their best efforts to cause such Shelf Registration Statement to become effective on or prior to 120 days after the date on which the Company becomes obligated to file such Shelf Registration Statement. If, after the Company has filed an Exchange Offer Registration Statement which satisfies the requirements of Section 3(a) above, the Company is required to file and 5 make effective a Shelf Registration Statement solely because the Exchange Offer shall not be permitted under applicable federal law, then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above. Such an event shall have no effect on the requirements of clause (y) above. The Company and the Guarantors shall use their respective reasonable best efforts to keep the Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented and amended as required by and subject to the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the date on which such Shelf Registration Statement first becomes effective under the Act, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold. Notwithstanding the foregoing, following the date on which such Shelf Registration Statement first becomes effective under the Act, the Company may suspend the effectiveness of the Shelf Registration Statement by written notice to the Holders for a period not to exceed 45 days in any calendar year if (i) an event occurs and is continuing as a result of which the Shelf Registration Statement would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading and (ii) (A) the Company determines in good faith that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company and its subsidiaries, taken as a whole, or (B) the disclosure otherwise relates to a previously undisclosed pending material business transaction, the disclosure of which would impede the Company's ability to consummate such transaction. (b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 15 days after receipt of a request therefor, the information specified in Item 507 of Regulation S-K under the Act and such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all such information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement, (iii) the Exchange Offer has not been Consummated within 30 Business Days after the Exchange Offer Registration Statement is first declared effective by the Commission or (iv) any Registration Statement required by this Agreement is filed and declared effective but, except as permitted by Section 4(a) hereof, shall thereafter cease to be effective or fail to be usable in connection with resales of Transfer Restricted Securities during the periods specified herein and is not succeeded within 15 days by another effective Registration Statement or by a post-effective amendment to such Registration 6 Statement that is itself declared effective immediately, in either case, that cures such failure (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Company and the Guarantors hereby jointly and severally agree to pay liquidated damages (the "LIQUIDATED DAMAGES") to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the Liquidated Damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.40 per week per $1,000 principal amount of Transfer Restricted Securities; PROVIDED that the Company and the Guarantors shall in no event be required to pay Liquidated Damages for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the Liquidated Damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All accrued Liquidated Damages shall be paid to the Global Noteholder by wire transfer of immediately available funds or by federal funds check and to Holders of Certificated Securities on each Damages Payment Date by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. All accrued Liquidated Damages with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all applicable provisions of Section 6(c) below, shall use their respective best efforts to effect such exchange and to permit the sale of Broker-Dealer Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If, following the date hereof there has been published a change in Commission policy with respect to exchange offers such as the Exchange Offer, such that in the reasonable opinion of counsel to the Company there is a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Senior Subordinated Notes. The Company and the Guarantors hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable actions to effect a change in Commission policy. In connection with the foregoing, the Company and the Guarantors hereby agree to take all 7 such other reasonable actions as are requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation of the Exchange Offer, a written representation to the Company and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the New Senior Subordinated Notes to be issued in the Exchange Offer and (C) it is acquiring the New Senior Subordinated Notes in its ordinary course of business. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of New Senior Subordinated Notes obtained by such Holder in exchange for Senior Subordinated Notes acquired by such Holder directly from the Company or an Affiliate thereof. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the New Senior Subordinated Notes to be received in the Exchange Offer and that, to the best of the Company's and each Guarantor's information and belief, each Holder participating in the Exchange Offer is acquiring the New Senior Subordinated Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the New Senior Subordinated Notes received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. (b) SHELF REGISTRATION STATEMENT. In connection with any Shelf Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their respective best efforts to effect such registration to permit the sale of the Transfer Restricted 8 Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof. (c) GENERAL PROVISIONS. In connection with any Shelf Registration Statement and any related Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities or any Exchange Offer Registration Statement and the related Prospectus, to the extent, and only to the extent, that the same are required to be available to permit sales of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, the Company and the Guarantors shall: (i) use their respective reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company and the Guarantors shall file promptly an appropriate amendment to such Registration Statement, (1) in the case of clause (A), correcting any such misstatement or omission, and (2) in the case of clauses (A) and (B), use their respective best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter. (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep the applicable Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that requires the making of any additions to or changes in the Registration Statement in order to make 9 the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their respective reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to the Initial Purchaser(s), each selling Holder named in any Registration Statement or Prospectus and each of the underwriter(s) in connection with such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five Business Days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which the selling Holders of the Transfer Restricted Securities covered by such Registration Statement or the underwriter(s) in connection with such sale, if any, shall reasonably object within five Business Days after the receipt thereof. A selling Holder or underwriter, if any, shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission or fails to comply with the applicable requirements of the Act; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s) in connection with such sale, if any, make the Company's and the Guarantors' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) if (a) a Shelf Registration Statement is filed pursuant to Section 4 hereof or (b) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 3 hereof is required to be delivered under the Act by any Restricted Broker-Dealer who seeks to sell Broker-Dealer Transfer Restricted Securities during the period specified in Section 3(c) hereof, make available for inspection by any Holder of such Transfer Restricted Securities being sold, or each Restricted Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Transfer Restricted Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Restricted Broker-Dealer, as the case may be, or underwriter (collectively, the "INSPECTORS"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement and Prospectus. Each Inspector shall agree in writing that it will not disclose any records that the Company determines, in good faith, to be 10 confidential and that it notifies the Inspectors in writing are confidential unless (w) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or Prospectus, (x) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (y) disclosure of such information is necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, relating to or involving this Agreement or the Purchase Agreement, or any transactions contemplated hereby or thereby or arising hereunder or thereunder, or (z) the information in such Records has been made generally available to the public; PROVIDED, HOWEVER, that such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector. (vii) if requested by any selling Holders or the underwriter(s) in connection with such sale, if any, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be included in such Prospectus supplement or post-effective amendment; (viii) furnish to each selling Holder and each of the underwriter(s) in connection with such sale, if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (ix) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (x) in connection with any Underwritten Offering pursuant to a Shelf Registration Statement, enter into such agreements (including an underwriting agreement) and make such representations and warranties and take all such other actions in connection therewith as may be reasonably requested by the managing underwriter in connection with any sale or resale pursuant to any such Shelf Registration Statement contemplated by this Agreement, and in such connection, the Company and the Guarantors shall: (A) furnish (or in the case of paragraphs (2) and (3), use its best efforts to furnish) to each underwriter, at each closing under such underwriting or similar agreement, as and to the extent required thereunder: 11 (1) a certificate, dated the date of such closing, signed on behalf of the Company and each Guarantor by (x) the President or any Vice President and (y) a principal financial or accounting officer of the Company and such Guarantor, confirming, as of the date thereof, the matters set forth in paragraphs (a) through (c) of Section 9 of the Purchase Agreement and such other similar matters as the underwriter(s) may reasonably request; (2) an opinion, dated the date of such closing, of counsel for the Company and the Guarantors covering matters similar to those set forth in paragraphs (e), (f), (g) and (h) of Section 9 of the Purchase Agreement, and in any event including a statement (which may be provided separately from the opinion) to the effect that such counsel has no reason to believe that, as of the date of the Prospectus contained in the Shelf Registration Statement, such Prospectus, as amended or supplemented, if applicable (except for the financial statements and the notes related thereto and other financial, statistical and accounting data included therein, as to which such counsel need not express any belief) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In writing such letter with respect to such matters, such counsel may state that their belief is based upon their participation in the preparation of the Shelf Registration Statement and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification except as specified; and (3) a customary comfort letter, dated the date of such closing, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 9 of the Purchase Agreement, without exception; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, in connection with any sale or resale pursuant to any Shelf Registration Statement the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by the underwriter(s) to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company and the Guarantors pursuant to this clause (x). If at any time the representations and warranties of the Company and the Guarantors contemplated in (A)(1) above cease to be true and correct in any material respect, the Company and the Guarantors shall so advise the underwriter(s) promptly and if requested by such Persons, shall confirm such advice in writing; (xi) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s), if any, may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of 12 the Transfer Restricted Securities covered by the applicable Registration Statement; PROVIDED, HOWEVER, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would constitute general consent to service of process in suits or to taxation in any jurisdiction where it is not now so subject; (xii) issue, upon the request of any Holder of Senior Subordinated Notes covered by any Shelf Registration Statement contemplated by this Agreement, New Senior Subordinated Notes having an aggregate principal amount equal to the aggregate principal amount of Senior Subordinated Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such New Senior Subordinated Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Notes, as the case may be; in return, the Senior Subordinated Notes held by such Holder shall be surrendered to the Company for cancellation; (xiii) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the Holders or the underwriter(s), if any, may request at least two Business Days prior to such sale of Transfer Restricted Securities; (xiv) use their respective reasonable best efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xi) above; (xv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (xvi) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xvii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use their respective reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary 13 to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xviii) otherwise use their respective reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) covering a twelve-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); (xix) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xx) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act. (d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(i) or any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof, or until it is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (the "Advice"). If so directed by the Company, each Holder will 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 covering such Transfer Restricted Securities that was current at the time of receipt of either such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(i) or Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including fees and expenses with respect to filings with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel) that may be required by the rules and regulations 14 of the NASD); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the New Senior Subordinated Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Guarantors and, subject to paragraph 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company or the Guarantors. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company and the Guarantors will reimburse the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company and each of the Guarantors agrees, jointly and severally, to indemnify and hold harmless each Holder, its directors, its officers and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) such Holder, from and against any and all losses, claims, damages, liabilities and judgments (including, without limitation, any legal or other expenses reasonably incurred in connection with investigating or defending any matter, including any action, that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary Prospectus or Prospectus (or any amendment or supplement thereto) provided by the Company or any Guarantor to any Holder or prospective purchaser of Senior Subordinated Notes or caused by 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 under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities or judgments are (i) caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to a Holder furnished in writing to the Company by such Holder (and not with respect to the information provided by any other Holder) or (ii) caused by any untrue statement or omission, or any alleged untrue statement or omission, made in the any preliminary Prospectus or Prospectus, but eliminated or remedied in a final or amended Prospectus if (A) the Company shall have previously furnished copies thereof to the Holders in accordance with this Agreement, (B) a copy of the amended or final Prospectus was not sent or given to such person at or prior to the written confirmation of such sale, (C) the amended or final Prospectus would have completely corrected such untrue statement or omission and (D) such allegations are upheld by a final judgement. 15 (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors, and their respective directors and officers and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company or any Guarantor, to the same extent as the foregoing indemnity from the Company and the Guarantors to each Holder but only with reference to information relating to a Holder furnished in writing to the Company by such Holder (and not with respect to the information provided by any other Holder) expressly for use in any Registration Statement, preliminary Prospectus or Prospectus or any amendment or supplement thereto. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Holders shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holders). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one 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 fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any such action or proceeding effected without its prior written consent (not to be unreasonably withheld) and if settled with its written consent or if there is a final judgment for the plaintiff, the indemnifying party agrees to indemnify and hold harmless the indemnified party to the extent provided herein. Notwithstanding the immediately preceding sentence, if in any case where the fees and expenses of counsel are at the expense of the indemnifying party and an indemnified party shall have requested the indemnifying party to reimburse the indemnified party for such fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of any action effected without its written consent if (i) such settlement is entered into more than thirty business days after the receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall have failed to reimburse the indemnified party in accordance with such request for reimbursement prior to the date of such settlement (unless the reasonableness of such fees and expenses of counsel is being contested in good faith). No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry 16 of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action. (d) To the extent the indemnification provided for in this Section 8 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages, liabilities or judgments referred to herein, then each indemnifying party, in lieu 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 and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company and the Guarantors, on the one hand, and the indemnified Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors, on the one hand, and any Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantors, on the one hand, or such Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Guarantors, and the Holders, agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such indemnified party in connection with investigating or defending any matter, including any action, that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of its Transfer Restricted Securities pursuant to a Registration Statement exceeds the sum of (A) the amount paid by such Holder for such Transfer Restricted Securities PLUS (B) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Senior Subordinated Notes held by each of the Holders hereunder and not joint. (e) The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. SECTION 9. RULE 144A 17 The Company and each Guarantor hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company or such Guarantor is not subject to Section 13 or 15(d) of the Securities Exchange Act, to make available, upon request of any Holder of Transfer Restricted Securities, to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in customary underwriting arrangements entered into in connection therewith and (b) completes and executes all reasonable questionnaires, powers of attorney, and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS For any Underwritten Offering, the investment banker or investment bankers and manager or managers for any Underwritten Offering that will administer such offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; PROVIDED that such investment bankers and managers must be reasonably satisfactory to the Company. Such investment bankers and managers are referred to herein as the "underwriters." SECTION 12. MISCELLANEOUS (a) REMEDIES. Each Holder, in addition to being entitled to exercise all rights provided herein, in the Indenture or granted by law, including recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. The Company and the Guarantors agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by them of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Guarantor will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with rights granted to the holders of the Company's and the Guarantors' securities under any agreement in effect on the date hereof. (c) ADJUSTMENTS AFFECTING THE NOTES. Neither the Company nor any Guarantor will take any action, or voluntarily permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 12(d)(i), the Company has obtained 18 the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being transferred or exchanged pursuant to a Registration Statement and that does not affect directly or indirectly the rights of other Holders whose securities are not being transferred or exchanged pursuant to such Registration Statement may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being transferred or exchanged pursuant to such Registration Statement. (e) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company or the Guarantors: Jitney-Jungle Stores of America, Inc. 1770 Ellis Avenue Suite 200 Jackson, Mississippi 39204 Telecopier No.: (601) 371-8665 Attention: Chief Financial Officer With a copy to: Dechert Price & Rhoads 30 Rockefeller Plaza New York, New York 10112 Telecopier No.: (212) 698-3599 Attention: Bruce B. Wood All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED, HOWEVER, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless 19 and to the extent such successor or assign acquired Transfer Restricted Securities directly from such Holder. (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 20 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. JITNEY-JUNGLE STORES OF AMERICA, INC. By: ----------------------------------- Name: Title: SOUTHERN JITNEY JUNGLE COMPANY By: ----------------------------------- Name: Title: MCCARTY-HOLMAN CO., INC. By: ----------------------------------- Name: Title: INTERSTATE JITNEY-JUNGLE STORES, INC. By: ----------------------------------- Name: Title: PUMP AND SAVE, INC. By: ----------------------------------- Name: Title: DELTA ACQUISITION CORPORATION By: ----------------------------------- Name: Title: 21 DELCHAMPS, INC. By: ----------------------------------- Name: Title: SUPERMARKET CIGARETTE SALES, INC. By: ----------------------------------- Name: Title: The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written by Donaldson, Lufkin & Jenrette Securities Corporation on behalf of the Initial Purchasers. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: -------------------------------- Name: Title: 22 EX-4.4 4 REVOLVING CREDIT AGREEMENT [Execution Copy] AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT Dated as of September 15, 1997 Among JITNEY-JUNGLE STORES OF AMERICA, INC., SOUTHERN JITNEY JUNGLE COMPANY, McCARTY- HOLMAN CO., INC., JITNEY- JUNGLE BAKERY, INC., PUMP AND SAVE, INC., INTERSTATE JITNEY JUNGLE STORES, INC., DELTA ACQUISITION CORPORATION, DELCHAMPS, INC., THE GUARANTORS NAMED HEREIN, THE LENDERS NAMED HEREIN, DLJ CAPITAL FUNDING, INC., AS DOCUMENTATION AGENT and FLEET CAPITAL CORPORATION, AS AGENT AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of September 15, 1997, among JITNEY-JUNGLE STORES OF AMERICA, INC., a Mississippi corporation ("Jitney Jungle"), SOUTHERN JITNEY JUNGLE COMPANY, a Mississippi corporation and a wholly-owned subsidiary of Jitney Jungle ("Southern Jitney"), McCARTY-HOLMAN CO., INC., a Mississippi corporation and a wholly-owned subsidiary of Jitney Jungle ("McCarty-Holman"), JITNEY- JUNGLE BAKERY, INC., a Mississippi corporation and a wholly-owned subsidiary of Jitney Jungle ("Bakery"), PUMP AND SAVE, INC., a Mississippi corporation and a wholly-owned subsidiary of McCarty-Holman ("Pump And Save"), INTERSTATE JITNEY JUNGLE STORES, INC., an Alabama corporation and a wholly-owned subsidiary of Jitney Jungle ("Interstate"), DELTA ACQUISITION CORPORATION, an Alabama corporation and a wholly-owned subsidiary of Jitney Jungle ("Acquisition Corp."), DELCHAMPS, INC., an Alabama corporation and upon the purchase of the Tendered Securities on the date hereof and as contemplated hereby, a subsidiary of Acquisition Corp. ("Delchamps" and together with Jitney Jungle, Southern Jitney, McCarty-Holman, Bakery, Pump And Save, Interstate and Acquisition Corp., each a "Borrower" and collectively, the "Borrowers"), the Guarantors signatory hereto, the lenders named in Schedule 2.01 annexed hereto (collectively with their respective permitted successors and assigns, the "Lenders"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as documentation agent for the Lenders (in such capacity together with any successor thereto in such capacity, the "Documentation Agent") and FLEET CAPITAL CORPORATION ("Fleet"), as agent for the Lenders (in such capacity together with any successor thereto in such capacity, the "Agent"). Capitalized terms used in this paragraph shall have the respective meanings ascribed to such terms above or hereinafter. Certain of the Borrowers and the Guarantors, all or some of the Lenders (in such capacity, the "Existing Lenders"), and Fleet Bank, N.A. (formerly known as NatWest Bank N.A.), as agent (in such capacity, the "Existing Agent") are parties to the Revolving Credit Agreement, dated as of March 5, 1996 (as heretofore amended and in effect on the date hereof, together with the Exhibits and Schedules thereto, the "Existing Credit Agreement"), providing for loans to be made to, and letters of credit to be issued for the account of, the Borrowers in the aggregate principal and/or face amount not exceeding $96,250,000 at any one time outstanding. Immediately prior to the execution and delivery of this Agreement, (i) Fleet succeeded to the position of the Existing Agent as Agent under the Existing Credit Agreement and (ii) Fleet acquired from Fleet Bank, a Lender under the Existing Credit Agreement, an assignment of its Commitment and outstanding Loans thereunder. The Borrowers have informed the Agent and the Lenders that they desire to acquire the Target Stock of the Target Company upon the terms and conditions set forth herein and in the Merger Documents and the Tender Offer Documents. In connection therewith, the Borrowers have jointly and severally applied to the Lenders for Loans on a revolving basis up to an aggregate principal amount of $150,000,000 to be made at any time and from time to time prior to the Termination Date. The proceeds of the Loans shall be used by the Borrowers (i) to refinance the Indebtedness under the Existing Credit Agreement outstanding on the Initial Closing Date on the terms set forth herein, (ii) to provide a portion of the funds necessary (but not to exceed $0) for the tender offer consideration pursuant to the Tender Offer on the Initial Closing Date, (iii) to provide a portion of the funds necessary (but not to exceed $24,500,000) for the merger consideration payable under the Merger Agreement in connection with the merger of Acquisition Corp. with and into the Target Company on the Merger Closing Date, (iv) to repay certain Indebtedness of the Target Company and its subsidiaries outstanding on the Initial Closing Date (but not to exceed $16,225,000), (v) to pay fees and expenses in connection with the financing contemplated hereby and the transactions contemplated by the Merger Agreement (but not to exceed $27,000,000) and (vi) for the working capital and general corporate purposes of the Borrowers to the extent that such purposes are permitted hereunder. The Lenders are severally, and not jointly, willing to extend such Loans to the Borrowers subject to the terms and conditions hereinafter set forth. Accordingly, the Borrowers, the Guarantors, the Lenders and the Agent hereby agree to amend and restate the Existing Credit Agreement as follows: I. DEFINITIONS For purposes hereof, the following terms shall have the meanings specified below: "Acquisition" shall mean, collectively, the transactions contemplated under the Merger Agreement which will result in the Merger. "Acquisition Corp." shall have the meaning assigned to such term in the preamble to this Agreement. "Acquisition Securities" shall mean the Common Stock of Jitney Jungle, 15% Class A Senior Exchangeable Preferred Stock of Jitney Jungle, 10% Class B Compounding Cumulative Redeemable Preferred Stock of Jitney Jungle, 10% Class C Compounding Cumulative Redeemable Preferred Stock of Jitney Jungle, the Senior Notes and the Warrants to Purchase Common Stock of Jitney Jungle, each with such terms, rights and premiums as in effect on the Original Closing Date, except with respect to the Senior Notes, which shall be with such terms, rights and premiums as in effect on the Initial Closing Date. "Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Loan for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of (i) the LIBO Rate in effect for such Interest Period and (ii) Statutory Reserves. For purposes hereof, "Statutory Reserves" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including, without limitation, any marginal, special, emergency, or supplemental reserves) expressed as a decimal established by the Board and any other banking authority to which any Lender is subject with respect to the Adjusted LIBO Rate for Eurocurrency Liabilities (as defined in Regulation D). Such reserve percentages shall include, without limitation, those imposed under Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and as such shall be deemed to be subject to such reserve requirements without benefit of or credit for proration, exceptions or offsets which may be available from time to time to any Lender under Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Affiliate" of any person shall mean any other person which, directly or indirectly, controls or is controlled by or is under common control with such person and, without limiting the generality of the foregoing, includes (i) any other person which beneficially owns or holds 5% or more of any class of voting securities of such person or 5% or more of the equity interest in such person, (ii) any person of which such person beneficially owns or holds 5% or more of any class of voting securities or in which such person beneficially owns or holds 5% or more of the equity interest in such person and (iii) any director, officer or partner of such person. For the purposes of this definition, the term "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise. "Agent" shall have the meaning assigned to such term in the preamble to this Agreement. "Aircraft" shall have the meaning assigned to such term in the Chattel Mortgage. "Anticipated Reinvestment Amount" shall mean, with respect to any Reinvestment Election, the amount specified in the Reinvestment Notice delivered by the relevant Borrower in connection therewith as the amount of the Net Cash Proceeds from the related Asset Sale that such Borrower intends to use to purchase, construct or otherwise acquire Reinvestment Assets. "Applicable Lending Office" shall mean, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Loan and such Lender's Eurodollar Lending Office in the case of a Eurodollar Loan. "Applicable Margin" shall mean, from the Initial Closing Date through the Initial Adjustment Date, (i) in the case of Loans which are Base Rate Loans, three-quarters of one percent (0.75%), and (ii) in the case of Loans which are Eurodollar Loans, two percent (2.00%), and on and after the Initial Adjustment Date (x) in the case of Loans which are Base Rate Loans, one percent (1.00%), minus the then applicable Reduction Discount, if any, and (y) in the case of Loans which are Eurodollar Loans, two and one-quarter percent (2.25%), minus the then applicable Reduction Discount, if any. "Asset Sale" shall mean the sale, transfer or other disposition by any Borrower, any Guarantor or any subsidiary of any of them to any person other than a Borrower or a Guarantor of any asset of such Borrower, such Guarantor or such subsidiary (other than sales in the ordinary course of business of inventory). "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee and accepted by the Agent, in substantially the form of Exhibit E annexed hereto. "Assignment of Contract" shall mean the Assignment of Contract As Collateral Security, dated as of March 5, 1996, as heretofore amended and as amended and restated as of the date hereof among the Borrowers and the Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit G, annexed hereto, as amended, modified or supplemented from time to time. "Bakery" shall have the meaning assigned to this term in the preamble to this Agreement. "Base Rate" shall mean a variable rate of interest per annum equal to the higher of (i) the Prime Rate then in effect and (ii) the Federal Funds Effective Rate then in effect plus one-half of one percent (1/2%). Any change in the Base Rate shall be effective hereunder on the effective date of such change as determined by the Agent. "Base Rate Loan" shall mean a Loan bearing interest based on the Base Rate in accordance with Article II hereof. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States. "Borrower" shall have the meaning assigned to such term in the preamble to this Agreement. "Borrowers" shall refer to all of the Borrowers on a collective basis. "Borrowing Base" shall have the meaning assigned to such term in Section 2.01(a)(i) hereof. "BRS" shall mean Bruckmann, Rosser, Sherrill & Co., L.P., together with its successors and assigns. "Business Day" shall mean any day, other than a Saturday, Sunday or legal holiday in the State of New York, on which banks are open for substantially all their banking business in New York City, except that if any determination of a "Business Day" shall relate to a Eurodollar Loan, the term "Business Day" shall in addition exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Expenditures" shall mean the amount of all purchases made by the Borrowers or any of their respective subsidiaries directly or indirectly for the purpose of acquiring, constructing or maintaining fixed assets, real property or equipment which, in accordance with generally accepted accounting principles, would be added as a debit to the fixed asset account of any such Borrower or any such subsidiary (excluding fixed assets acquired relating to Capitalized Lease Obligations and fixed assets acquired pursuant to a financing permitted under Section 7.01(e) of this Agreement (other than with respect to the down payment for such fixed assets)) including the acquisition cost of assets of any kind (but not the acquisition cost paid for inventory) which are acquired in connection with an acquisition or purchase permitted by this Agreement. For purposes of this definition, the purchase price paid with respect to equipment, fixed assets or real property which is purchased simultaneously with the trade-in or sale of existing equipment, fixed assets, or real property owned by any Borrower or any of its subsidiaries or with insurance proceeds (regardless of whether such proceeds are first applied to prepay the Loans) or cash landlord/vendor allowances shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price paid less the credit granted by the seller of such equipment for the equipment being traded in at such time, the purchase price of such existing equipment or the amount of such proceeds or allowances, as the case may be. "Capitalization Documents" shall mean, collectively: (i) any or all of the stock certificates, notes or debentures representing Acquisition Securities; (ii) the other documents pursuant to which such Acquisition Securities are issued or to be issued; (iii) each document governing the issuance of, or setting forth the terms of such Acquisition Securities; and (iv) any stockholders or intercreditor agreement between or among the holders of such Acquisition Securities, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith, in each case as in effect on the Original Closing Date and as amended, modified or supplemented from time to time in accordance with the terms thereof and subject to the terms of Section 7.18 hereof. "Capitalized Lease Obligation" shall mean an obligation to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real and/or personal property which obligation is required to be classified and accounted for as a capital lease on a balance sheet prepared in accordance with generally accepted accounting principles, consistently applied, and for purposes hereof the amount of such obligation shall be the capitalized amount thereof determined in accordance with such principles. "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 a Borrower, a Guarantor or any subsidiary of any of them from such Asset Sale. "Change of Control" shall mean any of the following: (i) BRS shall fail to own, beneficially and of record all voting rights with respect to, at least 35% of all of the issued and outstanding shares of each class of voting stock of Jitney Jungle, or (ii) BRS shall cease to own capital stock of Jitney Jungle entitling it, at the time a determination is made hereunder, to cast the votes required to elect a majority of members of the Board of Directors of Jitney Jungle or (iii) Jitney Jungle shall fail to own, beneficially and all voting rights with respect to, 100% of all of the issued and outstanding shares of each class of capital stock of each of its subsidiaries (other than the Target Company following the Tender Offer for the Target Stock but prior to the Merger Closing Date), (iv) the occurrence of a "Change of Control" (as such term is defined in the Senior Indenture) under the Senior Indenture or (v) the occurrence of a "Change of Control" (as such term is defined in the Senior Subordinated Indenture) under the Senior Subordinated Indenture. "Chattel Mortgage" shall mean the Chattel Mortgage - Security Agreement, dated as of March 5, 1996, between the Grantor and the Agent, for the benefit of the Secured Parties, as amended, modified or supplemented from time to time. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral" shall mean all collateral and security as described in the Security Documents. "Commitment" shall mean, with respect to each Lender, the Commitment of such Lender as set forth in Schedule 2.01 annexed hereto, as it may be adjusted from time to time pursuant to Section 2.07. "Commitment Fee" shall mean, from the Initial Closing Date through the Initial Adjustment Date, 0.425 percent (0.425%) per annum, and on and after the Initial Adjustment Date, one-half of one percent (0.50%) per annum, minus the then applicable Reduction Discount, if any. "Commitment Letter" shall mean the letter agreement, dated July 7, 1997, by Fleet to Jitney Jungle, as in effect on the Initial Closing Date and as amended, supplemented or modified from time to time in writing by Fleet and Jitney Jungle. "Consolidated" shall mean, in respect of any person, as applied to any financial or accounting term, such term determined on a consolidated basis in accordance with generally accepted accounting principles (except as otherwise required herein) for the person and all consolidated subsidiaries thereof. "Credit Event" shall mean each borrowing of a Loan and each issuance of a Letter of Credit hereunder. "Default" shall mean any condition, act or event which, with notice or lapse of time or both, would constitute an Event of Default. "Delchamps" shall have the meaning assigned to this term in the preamble to this Agreement. "Documentation Agent" shall have the meaning assigned to this term in the preamble to this Agreement. "dollars" or the symbol "$" shall mean dollars in lawful currency of the United States of America. "Domestic Lending Office" shall mean, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name in Schedule 2.02 annexed hereto, or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Agent. "EBITDA" shall mean, for any period, the sum of (i) Net Income (before any (A) extraordinary and non-recurring non-cash gains, (B) extraordinary and non-recurring non-cash losses and (C) non-cash gains or losses from assets held for sale), (ii) Interest Expense to the extent deducted in determining Net Income for such period, (iii) depreciation and amortization expense to the extent deducted in determining Net Income for such period, (iv) cash federal, state and local income taxes to the extent deducted in determining Net Income for such period and (v) increases in LIFO reserves to the extent deducted in determining Net Income for such period, in each case of the Borrowers and their respective subsidiaries for such period determined on a Consolidated basis, computed and calculated in accordance with generally accepted accounting principles. "Eligible Assignee" shall mean a commercial bank, finance company, insurance company, fund or other financial institution acceptable to the Agent. "Eligible Inventory" shall mean inventory owned by a Borrower which is not, in the judgment of the Agent, obsolete or unmerchantable and is and at all times shall continue to be acceptable to the Agent in its good faith judgment in all respects but shall in any event include only finished goods and shall not in any event include liquor and other alcoholic beverages, delicatessen, produce, intercompany profit, print shop materials, gasoline and/or grocery warehouse supplies, such categories of inventory to be determined in a manner consistent in each case with the historical practices and procedures of Jitney Jungle and its subsidiaries as heretofore presented to the Agent and the Lenders. Standards of eligibility may be fixed and revised from time to time solely by the Agent in the Agent's exclusive judgment exercised in good faith. In determining eligibility, the Agent may, but need not, rely on reports and schedules furnished by any Borrower, but reliance by the Agent thereon from time to time shall not be deemed to limit the right of the Agent to revise standards of eligibility at any time as to both present and future inventory of such Borrower. "Environmental Claim" shall mean any written notice of violation, claim, demand, abatement or other order by any governmental authority or any person for personal injury (including sickness, disease or death), tangible or intangible property damage, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or deed or use restrictions, resulting from or based upon (i) the existence, or the continuation of the existence, of a Release (including, without limitation, sudden or non-sudden, accidental or nonaccidental Releases), of, or exposure to, any Hazardous Material in, into or onto the environment (including, without limitation, the air, ground, water or any surface) at, in, by or from any of the properties of a Borrower or its subsidiaries, (ii) the environmental aspects of the transportation, storage, treatment or disposal of Hazardous Materials in connection with the operation of any of the properties of a Borrower or its subsidiaries or (iii) the violation, or alleged violation by a Borrower or any of its subsidiaries, of any Environmental Laws relating to any of the properties of a Borrower or its subsidiaries. "Environmental Laws" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Oil Pollution Act of 1990 (P.L. 101-380), the Safe Drinking Water Act (42 U.S.C. Section 300(f), et seq.), the Clear Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), as such laws have been and hereafter may be amended or supplemented, and any related or analogous present or future Federal, state or local, statutes, rules, regulations, ordinances, licenses, permits and interpretations and orders of regulatory and administrative bodies. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) which together with any person or a subsidiary of such person would be treated as a single employer under the provisions of Title I or Title IV of ERISA. "Eurodollar Lending Office" shall mean, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name in Schedule 2.03 annexed hereto (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Agent. "Eurodollar Loan" shall mean a Loan bearing interest based on the Adjusted LIBO Rate in accordance with Article II hereof. "Event of Default" shall have the meaning assigned to such term in Article VIII hereof. "Excess Cash Flow" means, for any period, without duplication, (i) the sum for such period of (A) Net Income, (B) depreciation and amortization expenses of the Borrowers and their respective subsidiaries for such period, to the extent the same are deducted from net revenues in determining Net Income for such period, (C) the change (with such change being deemed to be a positive number in the event of an increase and such change being deemed to be a negative number in the event of a decrease) in deferred tax liabilities of the Borrowers and their respective subsidiaries during such period, (D) other non-cash items of the Borrowers and their respective subsidiaries properly deducted in arriving at Net Income for such period, and (E) the change (with such change being deemed to be a negative number to the extent that it shall have resulted in an increase in Net Income for such period and such change being deemed to be a positive number to the extent that it shall have resulted in a decrease in Net Income for such period) in deferred tax assets of the Borrowers and their respective subsidiaries during such period, minus (ii) the sum for such period of (A) the aggregate amount actually paid by the Borrowers and their respective subsidiaries in cash during such period on account of Capital Expenditures (including payments in respect of Capitalized Lease Obligations), (B) the aggregate amount actually distributed by the Borrowers and their respective subsidiaries in cash during such period in respect of dividends on or other distributions, redemptions or other retirements of capital stock of any Borrower or subsidiary thereof, in accordance with the provisions of this Agreement, (C) reserves taken and occasioned by the closing of store locations, and (D) the aggregate of principal payments (whether regularly scheduled payments, voluntary or mandatory prepayments (including, without limitation, by reason of any reduction of the Total Commitment and/or the Supplemental Availability) or occurring by reason of acceleration or otherwise) of all Indebtedness (including, without limitation, Capitalized Lease Obligations, Indebtedness issued under the Senior Indenture and Indebtedness issued under the Senior Subordinated Indenture) made or scheduled to have been made by the Borrowers and their respective subsidiaries during such period (other than principal payments on Loans except to the extent paid to permanently reduce the Total Commitment and/or the Supplemental Availability), determined on a Consolidated basis in accordance with generally accepted accounting principles. "Existing Credit Agreement" shall have the meaning assigned to such term in the introductory paragraphs to this Agreement. "Existing Lenders" shall have the meaning assigned to such term in the introductory paragraphs to this Agreement. "Existing Letters of Credit" shall mean the letters of credit issued under the Existing Credit Agreement and outstanding on the Initial Closing Date, all of which are listed on Schedule IV annexed hereto. "Existing Loans" shall mean the "Loans" outstanding on the Initial Closing Date under (and as defined in) the Existing Credit Agreement. "Existing Security Documents" shall mean the "Security Documents" as defined in the Existing Credit Agreement. "Federal Funds Effective Rate" shall mean, for any day, 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 on the next succeeding 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 for the quotations for the day of such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" shall mean that certain Fee Letter, dated July 7, 1997, by Fleet to Jitney Jungle and accepted by Jitney Jungle, as amended, modified or supplemented from time to time in writing by Fleet and Jitney Jungle. "Final Maturity Date" shall mean the six and one-half year anniversary of the Initial Closing Date. "Financial Officer" shall mean, with respect to any person, the chief financial officer, chief accounting officer or treasurer of such person. "FIRREA" shall mean the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended and supplemented from time to time. "fiscal month" shall mean each of the thirteen consecutive four-week periods of the Borrowers used for accounting purposes and ending on the dates designated as fiscal month-ends in Schedule II annexed hereto. "fiscal quarter" shall mean each of the four fiscal quarters of each fiscal year of the Borrowers used for accounting purposes and ending on the dates designated as fiscal quarter-ends in Schedule II annexed hereto. "Fiscal Year" shall mean the fiscal year of the Borrowers for accounting purposes which ends on the dates designated as fiscal year-ends in Schedule II annexed hereto. "Fixed Charge Coverage Ratio" shall mean, for any fiscal period, the ratio of (i) EBITDA of the Borrowers and their respective subsidiaries for the four most recent consecutive fiscal quarters ending on or prior to the date of determination to (ii) the sum of, without duplication, (A) Interest Expense, (B) Capital Expenditures, (C) cash dividends paid by, or other distributions, redemptions, repurchases or retirements of capital stock of, the Borrowers and their respective subsidiaries, (D) taxes actually paid by the Borrowers and their respective subsidiaries in cash and (E) the aggregate of principal payments (whether regularly scheduled payments, voluntary or mandatory prepayments (including, without limitation, by reason of any reduction of the Total Commitment and/or the Supplemental Availability) or occurring by reason of acceleration or otherwise) of all Indebtedness (including, without limitation, Capitalized Lease Obligations, Indebtedness issued under the Senior Indenture and under the Senior Subordinated Indenture) made or scheduled to have been made by the Borrowers and their respective subsidiaries (other than principal payments on Loans except to the extent paid to permanently reduce the Total Commitment and/or the Supplemental Availability), for such four-quarter period, in each case determined on a Consolidated basis in accordance with generally accepted accounting principles. "Fleet" shall have the meaning assigned to such term in the preamble to this Agreement. "Fleet Bank" shall mean Fleet Bank, N.A. "FTC Divestiture Stores" shall mean the Borrowers' stores required to be sold in connection with the Borrowers' divestiture plan with the Federal Trade Commission, as listed on Schedule V annexed hereto. "Grantor" shall mean any Assignor, Grantor, Pledgor, Mortgagor or Debtor, as such terms are defined in any of the Security Documents. "Guarantee" shall mean any obligation, contingent or otherwise, of any person guaranteeing or having the economic effect of guaranteeing any Indebtedness or obligation of any other person in any manner, whether directly or indirectly, and shall in any event include any guarantee under Article XII hereof, and shall include, without limitation, any obligation of such person, direct or indirect, to (i) purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or obligation, (ii) purchase property, securities or services for the purpose of assuring the owner of such Indebtedness or obligation of the payment of such Indebtedness or obligation, or (iii) maintain working capital, equity capital, available cash or other financial condition of the primary obligor so as to enable the primary obligor to pay such Indebtedness or obligation; provided, however, that the term Guarantee shall not include endorsements for collection or collections for deposit, in either case in the ordinary course of business. "Guarantor" shall mean, collectively, each Borrower and each subsidiary thereof or any subsidiary of any Borrower which becomes a guarantor of the Obligations after the date hereof. "Hazardous Material" shall mean any pollutant, contaminant, chemical, or industrial or hazardous, toxic or dangerous waste, substance or material, defined or regulated as such in (or for purposes of) any Environmental Law and any other toxic, reactive, or flammable chemicals, including (without limitation) any asbestos, any petroleum (including crude oil or any fraction), any radioactive substance and any polychlorinated biphenyls; provided, in the event that any Environmental Law is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment; provided, further, to the extent that the applicable laws of any state establish a meaning for "hazardous material," "hazardous substance," "hazardous waste," "solid waste" or "toxic substance" which is broader than that specified in any federal Environmental Law, such broader meaning shall apply. "Indebtedness" shall mean, with respect to any person, without duplication, (i) all obligations of such person for borrowed money or with respect to deposits or advances of any kind, (ii) all obligations of such person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such person for the deferred purchase price of property or services, except current accounts payable arising in the ordinary course of business and not overdue or being contested in good faith, (iv) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person, (v) all payment obligations of such person with respect to interest rate or currency protection agreements, (vi) all obligations of such person as an account party under any letter of credit or in respect of bankers' acceptances, (vii) all obligations of any third party secured by property or assets owned by such person (regardless of whether or not such person is liable for repayment of such obligations), (viii) all Guarantees of such person and (ix) all obligations of such person as lessee under leases the expenditures under which are Capitalized Lease Obligations. "Indemnitees" shall have the meaning assigned to such term in Section 11.04(c) hereof. "Information" shall have the meaning assigned to such term in Section 11.11 hereof. "Initial Adjustment Date" shall mean the date on which the Borrowers deliver to the Agent the financial statements with respect to the fiscal quarter ending January 10, 1998. "Initial Closing Date" shall mean the date of the first Loan, but in no event later than September 30, 1997. "Intercompany Indebtedness" shall mean, with respect to any Borrower, Indebtedness of such person to any subsidiary thereof or any other Borrower or any subsidiary thereof, incurred in the ordinary course of business. "Intercompany Loans" shall mean, with respect to any Borrower, loans made by such person to any subsidiary thereof or any other Borrower or any subsidiary thereof, in the ordinary course of such Borrower's business. "Interest Coverage Ratio" shall mean, for any fiscal period, the ratio of (i) EBITDA of the Borrowers and their respective subsidiaries for the four most recent consecutive fiscal quarters ending on or prior to the date of determination, to (ii) Interest Expense of the Borrowers and their respective subsidiaries for such four-quarter period. "Interest Expense" shall mean, for any fiscal period, the interest expense paid or payable in cash of the Borrowers and their respective subsidiaries during such fiscal period determined on a Consolidated basis in accordance with generally accepted accounting principles, and shall in any event include, without limitation, interest on Capitalized Lease Obligations for such fiscal period. "Interest Payment Date" shall mean (i) in the case of a Base Rate Loan, the last Business Day of each March, June, September and December, commencing September 30, 1997, and (ii) with respect to any Eurodollar Loan, the last day of the Interest Period applicable thereto, and, in addition, in respect of any Eurodollar Loan of more than three (3) months' duration, each earlier day which is three (3) months after the first day of such Interest Period. "Interest Period" shall mean, as to any Eurodollar Loan, the period commencing on the date of such Eurodollar Loan and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is one (1), two (2), three (3) or six (6) months thereafter, as the Borrowers may elect with respect to such Eurodollar Loan in accordance with the terms hereof; provided, however, that (x) if an Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, with respect to such Eurodollar Loan, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (y) no Interest Period shall end later than the Final Maturity Date and (z) interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "Interstate" shall have the meaning assigned to this term in the preamble to this Agreement. "Investor Group" shall mean BRS, DLJ Merchant Banking Partners L.P. and such other investors as are set forth on Schedule I annexed hereto. "IRB Indebtedness" shall mean the Indebtedness with respect to the City of Jackson, Mississippi Industrial Revenue Bonds (McCarty-Holman Co., Inc. Project), Series 1985, in the aggregate outstanding amount of $3,650,000. "IRB Trustee" shall mean SunTrust Bank, Atlanta, as trustee under the trust indenture relating to the IRB Indebtedness. "Landlord Waiver" shall mean a landlord's or bailee's agreement with respect to each property of a Borrower subject to a lease substantially in the form of Exhibit H hereto or as agreed to by Agent. "Lender" shall have the meaning assigned to such term in the preamble to this Agreement. "Letter of Credit" shall have the meaning assigned such term in Section 2A.01 hereof. "Letter of Credit Issuer" shall mean Fleet, Fleet Bank , Fleet National Bank or any other Lender which, with the consent of the Agent, agrees, in such Lender's sole discretion, to become a Letter of Credit Issuer for purposes of issuing Letters of Credit hereunder. "Letter of Credit Usage" shall mean at any time, (i) the aggregate undrawn amount of all outstanding Letters of Credit plus (ii) the unreimbursed drawing at such time under Letters of Credit. "Leverage Ratio" shall mean, at the end of any fiscal quarter, the ratio of (i) all Indebtedness of the Borrowers and their respective subsidiaries (including, without limitation, the amount of Obligations outstanding under this Agreement (whether for principal, interest or premium), the Indebtedness under the Senior Notes and Indebtedness under the Senior Subordinated Notes, but excluding Intercompany Indebtedness) as at the date of determination to (ii) EBITDA of the Borrowers and their respective subsidiaries for the four-quarter period ending at the date of determination, in each case determined on a Consolidated basis in accordance with generally accepted accounting principles. "LIBO Rate" shall mean, with respect to any Eurodollar Loan for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the rate at which dollar deposits approximately equal in principal amount to the corresponding Eurodollar Loan and for a maturity equal to the applicable Interest Period are offered in immediately available funds to Fleet National Bank by leading banks in the London interbank market for Eurodollars at approximately 11:00 A.M., London time, two (2) Business Days prior to the first day of such Interest Period. "Lien" shall mean, with respect to any asset, (i) any mortgage, lien, pledge, encumbrance, charge or security interest in or on such asset, (ii) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset, (iii) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities or (iv) any other right of or arrangement with any creditor to be entitled to receive any such mortgage, lien, pledge, encumbrance, charge or security interest on or to have such creditor's claim satisfied out of such assets, or the proceeds therefrom, prior to the general creditors of the owner thereof. "Loan" shall mean a Loan made pursuant to Sections 2.01(a) and 2.02 hereof. "Loan Documents" shall mean this Agreement, each Security Document, the Notes, any letter of credit applications with respect to Letters of Credit and each other document, instrument, or agreement now or hereafter delivered to the Agent, any Lender or the Letter of Credit Issuer in connection herewith or therewith. "Margin Stock" shall have the meaning assigned to such term in Regulation U. "Material Adverse Effect" shall mean a material adverse effect on (i) the business, assets, liabilities, properties, prospects, operations or financial condition of the Borrowers and their respective subsidiaries taken as a whole, (ii) the ability of any Borrower or any Guarantor to perform or pay the Obligations in accordance with the terms hereof or of any other Loan Document or to perform its other material obligations thereunder or (iii) the Agent's Lien on any Collateral (other than a de minimis portion of the Collateral) or the priority of such Lien. "Maximum Facility Amount" shall mean, with respect to any Borrower, at any date of determination, (A) the lesser of (i) the Total Commitment (as such amount may be reduced pursuant to Section 2.07 hereof) and (ii) the Borrowing Base of such Borrower (calculated for the purposes of this definition using only Eligible Inventory owned by such Borrower (and not any other Borrower) and deducting all Supplemental Availability Advances then outstanding to any Borrower other than such Borrower) minus (B) all Loans previously made to or on behalf of such Borrower and not repaid and all Letter of Credit Usage with respect to Letters of Credit previously issued for the account of such Borrower. "McCarty-Holman" shall have the meaning assigned to this term in the preamble to this Agreement. "Merger" shall have the meaning assigned to such term in the Merger Agreement. "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of July 8, 1997, among Jitney Jungle, Acquisition Corp. and the Target Company, as amended, modified or supplemented from time to time in accordance with the terms thereof and subject to the terms of Section 7.18 hereof. "Merger Closing Date" shall mean the date on which the conditions set forth in Section 5.03 are satisfied, but in no event later than March 13, 1998. "Merger Documents" shall mean the Merger Agreement, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith, in each case as in effect on the Initial Closing Date and as amended, modified or supplemented from time to time in accordance with the terms thereof and subject in each case to the terms of Section 7.18 hereof. "Minimum Percentage" shall have the meaning assigned to such term in Section 5.02(m)(ii) hereof. "Mortgages" shall have the meaning set forth in Section 3.03 hereof. "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA. "Net Amount of Eligible Inventory" of any Borrower shall mean, at any time, the aggregate value, computed at the lower of cost (on a FIFO basis) and current market value, of Eligible Inventory of such Borrower. "Net Cash Proceeds" shall mean, with respect to any Asset Sale, the Cash Proceeds resulting therefrom net of expenses of sale (including reasonable brokers and attorneys fees and payment of principal, premium and interest of Indebtedness secured by the assets the subject of the Asset Sale and 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 Income" shall mean, for any period, the aggregate income (or loss) of the Borrowers and their respective subsidiaries determined on a Consolidated basis for such period, all computed and calculated in accordance with generally accepted accounting principles consistently applied. "New Lenders" shall mean DLJ Capital Funding, Inc. "Non-Defaulting Lenders" shall have the meaning assigned to such term in Section 11.15(b) hereof. "Non-Ratable Loans" shall have the meaning assigned to such term in Section 2.17(c)(iii) hereof. "Notes" shall mean the revolving notes of the Borrowers, executed and delivered as provided in Section 2.04 hereof, in substantially the form of Exhibit A annexed hereto, as amended, modified or supplemented from time to time. "Obligations" shall mean all obligations, liabilities and Indebtedness of any Borrower and/or any Guarantor to the Lenders, the Agent and/or the Letter of Credit Issuer, whether now existing or hereafter created, direct or indirect, due or not, whether created directly or acquired by assignment, participation or otherwise, under or with respect to this Agreement, the Notes, the Security Documents and the other Loan Documents, including, without limitation, the principal of and interest on the Loans and the payment or performance of all other obligations, liabilities, and Indebtedness of any Borrower and/or any Guarantor to the Lenders, the Agent and/or the Letter of Credit Issuer hereunder, under or with respect to the Letters of Credit, under any one or more of the other Loan Documents or owing to Fleet under or with respect to interest rate protection agreements and other similar arrangements permitted by Section 7.03(iv) hereof, including but not limited to all fees, costs, expenses and indemnity obligations hereunder and thereunder. "Offer to Purchase" means Jitney Jungle's Offer to Purchase for Cash dated July 14, 1997 (including all exhibits and schedules thereto), as in effect on the date hereof, and filed by Jitney Jungle with the SEC in connection with the Tender Offer, as from time to time amended, modified or supplemented subject to the terms of Section 7.18 hereof. "Original Acquisition Documents" shall mean the "Acquisition Documents" as defined in the Existing Credit Agreement. "Original Closing Date" shall mean March 5, 1996. "Other Taxes" shall have the meaning assigned to such term in Section 2.15(b) hereof. "Partnership Pledge Agreement" shall mean the Partnership Pledge Agreement, among the Grantors party thereto and the Agent, for the benefit of the Secured Parties, in substantially the form of Exhibit C-2 annexed hereto, as amended, modified or supplemented from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation. "Pension Plan" shall mean any Plan which is subject to the provisions of Title IV of ERISA. "Permits" shall have the meaning assigned to such term in Section 4.18 hereof. "person" shall mean any natural person, corporation, business trust, association, company, joint venture, partnership or government or any agency or political subdivision thereof. "Plan" shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA and which is maintained (in whole or in part) for employees of any Borrower or any subsidiary thereof or any ERISA Affiliate thereof or for employees of the Target Company or any subsidiary thereof or any ERISA Affiliate thereof. "Pledge Agreement" shall mean the Pledge Agreement, dated as of March 5, 1996, as heretofore amended and as amended and restated as of the date hereof, among the Borrowers, the Guarantors and the Agent, for the benefit of the Secured Parties, in substantially the form of Exhibit C-1 annexed hereto, as amended, modified or supplemented from time to time. "Pledged Stock" shall have the meaning assigned to such term in the Pledge Agreement. "Prime Rate" shall mean the rate which Fleet National Bank announces from time to time as its prime lending rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Fleet National Bank and any Affiliate thereof may make commercial loans or offer loans at, above or below the Prime Rate. Any change in the Prime Rate shall be effective hereunder on the effective date of such change announced by Fleet National Bank. "Prior Indebtedness" shall mean the Indebtedness of Jitney Jungle and/or its subsidiaries outstanding on the Initial Closing Date, other than (i) the IRB Indebtedness, (ii) Capitalized Lease Obligations existing on the date hereof and secured by Liens permitted under Section 7.01, (iii) the Senior Notes and (iv) reimbursement obligations under letters of credit issued for the account of Delchamps in an approximate amount of $750,000. "Reduction Discount" shall mean initially zero and from and after the first day of each fiscal quarter, commencing with the first fiscal quarter ending after the Initial Adjustment Date, immediately following the date of delivery by the Borrowers to the Agent of the financial statements with respect to the immediately preceding fiscal quarter (a "Test Period") of the Borrowers and their respective subsidiaries (the "Financials") as required under Section 6.05(b)(i) of this Agreement, together with calculations in form and substance reasonably satisfactory to the Agent supporting the calculation of the Leverage Ratio as at the end of such fiscal quarter and a written certification from the Financial Officer of Jitney Jungle to such effect, the Reduction Discount shall be as specified in clauses (i) through (v) below, when, and for so long as, the Leverage Ratio set forth in such clause has been satisfied as at the end of the then Test Period: (i) for purposes of calculating the Applicable Margin and the Commitment Fee, the Reduction Discount shall be zero in the event that, as of the end of the Test Period, the Leverage Ratio for the four consecutive fiscal quarters ending on the last day of such Test Period is greater than or equal to 5.00; or (ii) for purposes of calculating the Applicable Margin, the Reduction Discount shall be .25 and for purposes of calculating the Commitment Fee, the Reduction Discount shall be .075 in the event that, as of the end of the Test Period, the Leverage Ratio for the four consecutive fiscal quarters ending on the last day of such Test Period is greater than or equal to 4.25 but less than 5.00; or (iii) for purposes of calculating the Applicable Margin, the Reduction Discount shall be .50 and for purposes of calculating the Commitment Fee, the Reduction Discount shall be .125 in the event that, as of the end of the Test Period, the Leverage Ratio for the four consecutive fiscal quarters ending on the last day of such Test Period is greater than or equal to 3.75 but less than 4.25; or (iv) for purposes of calculating the Applicable Margin, the Reduction Discount shall be .75 and for purposes of calculating the Commitment Fee, the Reduction Discount shall be .25 in the event that, as of the end of the Test Period, the Leverage Ratio for the four consecutive fiscal quarters ending on the last day of such Test Period is greater than or equal to 3.25 but less than 3.75; or (v) for purposes of calculating the Applicable Margin, the Reduction Discount shall be 1.00 and for purposes of calculating the Commitment Fee, the Reduction Discount shall be .25 in the event that, as of the end of the Test Period the Leverage Ratio for the four consecutive fiscal quarters ending on the last day of such Test Period is less than 3.25; provided, that the entire Reduction Discount, if any, at any time in effect shall be reduced to zero at all times on and after the occurrence and during the continuance of an Event of Default; and provided, further, that in the event that the Leverage Ratio on the last day of any Test Period (the "New Test Period") is less than or greater than the ratio then in effect for the previous Test Period pursuant to clause (ii), (iii), (iv) or (v) above, the Reduction Discount specified in clause (ii), (iii), (iv) or (v) above shall be discontinued and the Reduction Discount shall be the Reduction Discount applicable to the Leverage Ratio for such New Test Period effective as of the first day of the fiscal quarter immediately following the date of delivery by the Borrowers to the Agent of such Financials. "Register" shall have the meaning assigned to such term in Section 11.03(e) hereof. "Regulation D" shall mean Regulation D of the Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Regulation G" shall mean Regulation G of the Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Regulation T" shall mean Regulation T of the Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Regulation U" shall mean Regulation U of the Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "Regulation X" shall mean Regulation X of the Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder. "Reinvestment Assets" shall mean, with respect to any Asset Sale, any properties or assets that replace the properties or assets that were the subject of such Asset Sale that will be employed in the business of the Borrowers and their respective subsidiaries as operated on the Initial Closing Date. "Reinvestment Election" shall have the meaning provided in Section 2.09(d)(i) hereof. "Reinvestment Notice" shall mean a written notice signed by an Responsible Officer of the relevant Borrower stating that such Borrower, in good faith, intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale 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 (i) the Anticipated Reinvestment Amount in respect of such Reinvestment Election exceeds (ii) the aggregate amount thereof expended by the relevant Borrower to acquire Reinvestment Assets. "Reinvestment Prepayment Date" shall mean, with respect to any Reinvestment Election, the earlier of (i) the date occurring one year after such Reinvestment Election and (ii) the date on which the Borrowers 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. "Related Transactions" shall mean the Acquisition, the Tender Offer, the Merger, the execution and delivery of the Merger Documents and the Tender Offer Documents, each borrowing of a Loan on the Initial Closing Date and the Merger Closing Date, the issuance of the Senior Subordinated Notes, the repayment of the Target Indebtedness and the payment of all fees, costs and expenses associated with all of the foregoing. "Release" shall mean any releasing, spilling, leaking, seeping, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping, in each case as defined in Environmental Law, and shall include any "Threatened Release," as defined in Environmental Law. "Remedial Work" shall mean any investigation, site monitoring, containment, cleanup, removal, restoration or other remedial work of any kind or nature with respect to any property of any Borrower or any of its subsidiaries (whether such property is owned, leased, subleased or used), including, without limitation, with respect to Hazardous Materials and the Release thereof. "Reportable Event" shall mean a Reportable Event as defined in Section 4043(b) of ERISA, but not including any such event as to which the PBGC, by applicable regulation, has waived the requirement of notice under Section 4043(a). "Required Lenders" shall mean Lenders having 51% of the Total Commitment. "Responsible Officer" shall mean, with respect to any person, the chief executive officer, chief financial officer, president, vice president, or treasurer, of such person. "SEC" shall mean the Securities and Exchange Commission. "Secured Parties" shall mean the Agent, the Lenders and the Letter of Credit Issuer. "Securities Purchase and Holders Agreement" shall mean the Securities Purchase and Holders Agreement, dated as of March 5, 1996, among Jitney Jungle, BRS, the individuals listed on Schedule I thereto and the Trust established under a Trust Agreement dated as of March 1, 1996 between Jitney Jungle as grantor and Trustmark National Bank, as trustee, as from time to time amended, supplemented or modified. "Security Agreement" shall mean each Security Agreement, dated as of March 5, 1996, as heretofore amended and as amended and restated as of the date hereof, between the Grantor(s) and the Agent, for the benefit of the Secured Parties, each substantially in the form of Exhibit D annexed hereto, as amended, modified or supplemented from time to time. "Security Agreement -- Patents and Trademarks" shall mean each Security Agreement -- Patents and Trademarks dated as of March 5, 1996, as heretofore amended and as amended and restated as of the date hereof, between the Grantor(s) and the Agent, for the benefit of the Secured Parties, each substantially in the form of Exhibit F annexed hereto, as amended, modified or supplemented from time to time. "Security Documents" shall mean the Assignment of Contract, the Pledge Agreement, the Partnership Pledge Agreement, the Security Agreement, the Security Agreement -- Patents and Trademarks, the Chattel Mortgage, the Mortgages and each other agreement now existing or hereafter created providing collateral security for the payment or performance of any Obligations. "Senior Indenture" shall mean the Indenture relating to the Senior Notes dated as of March 5, 1996, as amended and in effect on the Initial Closing Date, among the Borrowers and Marine Midland Bank, as trustee, as from time to time amended, supplemented or modified, subject to the terms of Section 7.18 hereof. "Senior Notes" shall mean the $200,000,000 minimum aggregate original principal amount of the Borrowers' senior unsecured promissory notes issued and delivered pursuant to the Senior Indenture. "Senior Subordinated Indenture" shall mean the Indenture relating to the Senior Subordinated Notes, dated as of September 15, 1997, by and among the Borrowers party thereto, the Subsidiary Guarantors (as defined therein) party thereto and Marine Midland Bank, as trustee, as from time to time as amended, modified or supplemented, subject to the terms of Section 7.18 hereof. "Senior Subordinated Notes" shall mean the $200,000,000 minimum aggregate original principal amount of the Borrowers' senior subordinated unsecured promissory notes issued and delivered pursuant to the Senior Subordinated Indenture. "Settlement Date" shall mean each Business Day after the Initial Closing Date selected by the Agent in its sole discretion subject to and in accordance with the provisions of Section 2.17(c) as of which a Settlement Report is delivered by the Agent and on which settlement is to be made among the Lenders in accordance with the provisions of Section 2.17 hereof. "Settlement Report" shall mean each report, substantially in the form attached hereto as Exhibit I hereto, prepared by the Agent and delivered to each Lender and setting forth, among other things, as of the Settlement Date indicated thereon and as of the next preceding Settlement Date, the aggregate principal balance of all Loans outstanding, each Lender's ratable portion thereof, each Lender's Loans and all Non-Ratable Loans made, and all payments of principal received by the Agent from or for the account of the Borrowers during the period beginning on such next preceding Settlement Date and ending on such Settlement Date. "Southern Jitney Jungle" shall have the meaning assigned to this term in the preamble to this Agreement. "Subordinated Indebtedness" shall mean, with respect to any Borrower or any subsidiary thereof, Indebtedness subordinated in right of payment to such person's monetary obligations under this Agreement and the other Loan Documents upon terms satisfactory to and approved in writing by the Agent, to the extent it does not by its terms (except as otherwise approved in writing by the Agent) mature or become subject to any mandatory prepayment or amortization of principal prior to the Final Maturity Date, and shall in any event include the Indebtedness of Jitney Jungle pursuant to the Senior Subordinated Indenture. "subsidiary" shall mean, with respect to any person, the parent of such person, any corporation, association or other business entity of which securities or other ownership interests representing more than 50% of the ordinary voting power are, at the time as of which any determination is being made, owned or controlled, directly or indirectly, by the parent or one or more subsidiaries of the parent. "SunTrust LC" shall mean the irrevocable letter of credit number F501212 issued by SunTrust Bank, Atlanta, in favor of the IRB Trustee. "Supplemental Availability" shall mean initially $53,000,000, as from time to time reduced pursuant to Section 2.07(b) hereof. "Supplemental Availability Advances" shall mean the aggregate amount of Loans and Letters of Credit Usage outstanding in excess of the amount set forth in Section 2.01(a)(1)(B)(i). "Syndication Date" shall mean the earlier of (x) the date which is 90 days after the Initial Closing Date and (y) the date upon which the Agent determines in its sole discretion (and notifies Jitney Jungle) that the primary syndication (and the resulting addition to institutions as Lenders pursuant to Section 11.03(c)) has been completed. "Target Company" shall mean Delchamps, Inc., an Alabama corporation. "Target Indebtedness" shall mean the Indebtedness of the Target Company and/or its subsidiaries outstanding on the Initial Closing Date under (x) a Loan Agreement, dated as of June 29, 1995, among the Target Company, the financial institutions from time to time party thereto and Hibernia National Bank, as agent, (y) a Promissory Note in the original principal amount of $937,521.00 dated March 1, 1993 by the Target Company in favor of Hibernia National Bank and (z) a Note Agreement dated as of June 30, 1993 between the Target Company and Great West Life & Annuity Insurance Company relating to the Target Company's 5.51% Senior Notes due July 1, 2000, in each case as from time to time amended and in effect on the Initial Closing Date. "Target Stock" shall mean shares of capital stock of the Target Company. "Taxes" shall have the meaning assigned to such term in Section 2.15(a) hereof. "Tender Offer" shall mean the public tender offer by Jitney Jungle to purchase for cash 100% of the outstanding shares of common stock, par value $.01 per share, of the Target Company, including associated preferred share purchase rights, at a price not to exceed $30.00 per share, all in accordance with the terms of the Offer to Purchase, as filed by Jitney Jungle with the SEC pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934. "Tender Offer Documents" shall mean the Offer to Purchase, the Schedule 14D-1 filed by Jitney Jungle, and all amendments, exhibits, proxy material and related documents and materials filed with the SEC or distributed to the stockholders of the Target Company. "Tendered Securities" shall mean and include the Target Stock deemed to have been accepted for payment (and thereby purchased) by Jitney Jungle pursuant to the Offer to Purchase. "Termination Date" shall mean the earlier to occur of (i) the Final Maturity Date and (ii) the date on which the Commitments shall terminate, expire or be canceled in accordance with the terms of this Agreement. "Total Commitment" shall mean the sum of the Lenders' Commitments. "Transactions" shall have the meaning assigned to such term in Section 4.02 hereof. "Undrawn Availability" shall mean, at any time, an amount equal to (A) the lesser of (i) the Total Commitment and (ii) the Borrowing Base, minus (B) the sum of (i) all Loans outstanding at such time, (ii) the Letter of Credit Usage at such time and (iii) reserves established pursuant to Section 2.01(c) below at such time. Unless otherwise expressly provided herein, each accounting term used herein shall have the meaning given it under generally accepted accounting principles in effect from time to time in the United States applied on a basis consistent with those used in preparing the financial statements referred to in Section 6.05 hereof; provided, however, that each reference in Article VII hereof, or in the definition of any term used in Article VII hereof, to generally accepted accounting principles shall mean generally accepted accounting principles as in effect on the date hereof. In calculating EBITDA, the Fixed Charge Coverage Ratio and Interest Expense for purposes of determining compliance with the financial covenants contained in Section 7.08 through 7.11 (inclusive) and the calculation of Applicable Margin (and the definitions contained herein to the extent utilized in determining such compliance) for each fiscal period ending on or prior to the fiscal quarter of the Borrowers and their respective subsidiaries ending on October 18, 1997 only, such calculations shall be made for each of Jitney Jungle and its subsidiaries (excluding Delchamps and its subsidiaries) and Delchamps and its subsidiaries, in each case on a Consolidated Basis for such period in accordance with generally accepted accounting principles, and then combined. IA. AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT SECTION 1A.01. (a) Existing Loans and Existing Letters of Credit. On the Initial Closing Date: (i) the Existing Loans held by each Existing Lender shall automatically, and without any action on the part of any person, be Loans of such Lender hereunder and any Notes (as defined in the Existing Credit Agreement) evidencing the same shall be returned to the Agent and marked "Replaced" (to be held until the Termination Date), with any Loans then outstanding to be reflected by the Agent on its books and records in accordance with the terms of this Agreement; (ii) the Existing Letters of Credit shall automatically, and without any action on the part of any person, be Letters of Credit issued hereunder; (iii) the "commitment" of each of the Existing Lenders to lend under the Existing Credit Agreement shall continue as, and be evidenced by, the Commitment of each such Lender under this Agreement, except that the Commitment of each such Lender shall be as set forth in Schedule 2.01 annexed hereto, and the Commitment of each New Lender shall be as set forth in Schedule 2.01 annexed hereto, in each case as reflected by the Agent on its books and records; and (iv) all interest and fees (other than the fee specified in Section 2.06(b)) accrued up to, but not including, the Initial Closing Date, under the Existing Credit Agreement shall be paid by the Borrowers to the Agent for disbursement to the Agent (under and as defined in the Existing Credit Agreement), the Existing Lenders and Fleet Bank, as letter of credit issuer thereunder, in accordance with the terms of the Existing Credit Agreement; all such interest and fees may be financed by the Lenders as a Loan to be made on the Initial Closing Date; in each case in such amounts (and the Lenders shall, through the Agent, make such additional adjustments among themselves as shall be necessary) so that after giving effect to such assignments, adjustments, revolving credit loans and letters of credit, the interests of the Lenders in the Loans and the Letters of Credit shall be pro rata in accordance with Section 2.13 hereof. (b) Interest Periods. On the Initial Closing Date, all "Interest Periods" under and as defined in the Existing Credit Agreement, if any, shall automatically be terminated. (c) Continuation of Indebtedness, Etc. Except as expressly provided herein, the indebtedness outstanding under the Existing Credit Agreement on the Initial Closing Date shall not be deemed to be repaid or prepaid by the amendment and restatement of the Existing Credit Agreement provided for hereby or the other transactions stated to occur on the Initial Closing Date, but such indebtedness shall continue to be outstanding hereunder on the terms and conditions hereof. Without limitation of the foregoing, upon the satisfaction of the conditions precedent set forth in Section 5.01 and 5.02 hereof, the Commitments and the Notes (if any) shall be in renewal of, and substitution and replacement for, the commitments (if any) of the Existing Lenders to lend under the Existing Credit Agreement (and each of the Notes as defined therein and delivered thereunder). (d) No Novation. The execution, delivery or effectiveness of this Agreement shall not extinguish the obligations for the payment of money outstanding under the Existing Credit Agreement or discharge or release the lien or priority of any security agreement or any other security therefor. Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Existing Credit Agreement or instruments securing the same, which shall remain in full force and effect, except as modified hereby or by instruments executed concurrently herewith. Nothing expressed or implied in this Agreement or any other document contemplated hereby or thereby shall be construed as a release or other discharge of any Borrower, any Guarantor, any Assignor, any Debtor, any Grantor, any Mortgagor or any Pledgor under the Existing Credit Agreement or any of the Loan Documents (as defined in the Existing Credit Agreement) from any of its obligations and liabilities as a "Guarantor", "Assignor", "Debtor", "Grantor", "Mortgagor" or "Pledgor", as the case may be, thereunder. Each of the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) shall remain in full force and effect, until and except as modified hereby or in connection herewith. Notwithstanding any provision of this Agreement that may be to the contrary, the provisions of Section 11.04 of the Existing Credit Agreement, including all defined terms used therein, will continue to be effective as to all matters arising out of or in any way related to facts or events existing or occurring prior to the Initial Closing Date. II. THE LOANS SECTION II.1. Commitments. (a) Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender, severally and not jointly, agrees to make Loans to the Borrowers, at any time and from time to time from the date hereof to the Termination Date, in an aggregate principal amount at any time outstanding not to exceed the amount of such Lender's Commitment set forth opposite its name in Schedule 2.01 annexed hereto, as such Commitment may be reduced from time to time in accordance with the provisions of this Agreement. Notwithstanding the foregoing and subject to Section 2.20 hereof, the aggregate principal amount of Loans outstanding at any time to the Borrowers shall not exceed (1) the lesser of (A) the Total Commitment (as such amount may be reduced pursuant to Section 2.07 hereof) and (B) an amount equal to the sum of (i) up to sixty-five percent (65%) of the aggregate Net Amount of Eligible Inventory of the Borrowers, plus (ii) subject to the terms of Sections 2.07(b) and 2.09(d) hereof, the Supplemental Availability then in effect (this clause (1) (B) referred to herein as the "Borrowing Base"), minus (2) the Letter of Credit Usage at such time (which Letter of Credit Usage shall not exceed $30,000,000 at any time), minus (3) reserves established pursuant to Section 2.01(c) below at such time. The Borrowing Base will be computed as provided in Section 2.20 hereof, and the Borrowing Base and other collateral reporting material will be delivered to the Agent in accordance with Section 6.05(g) and/or Section 6.05(h) hereof. In no event shall the aggregate outstanding Loans and Letters of Credit made to or for the account of any Borrower exceed the Maximum Facility Amount for such Borrower. (b) Subject to the foregoing and within the foregoing limits, and subject to all other applicable terms, provisions and limitations set forth in this Agreement, the Borrowers may borrow, repay (or, subject to the provisions of Section 2.09 hereof, prepay) and reborrow Loans, on and after the date hereof and prior to the Termination Date. (c) The Agent may from time to time decrease the Loans and Letters of Credit available to the Borrowers by an amount equal to the aggregate amount of all reserves which the Agent deems necessary or desirable to maintain hereunder, such reserves to be determined by the Agent in its judgment exercised in good faith and to include, without limitation, reserves instituted under Section 2.07(b) or Section 2.09(e) or reserves with respect to (i) rent payments past due and owing by any Borrower with respect to premises leased by any Borrower for which a Landlord Waiver has not been obtained, (ii) trust fund liabilities under the Perishable Agricultural Commodities Act and the Packers and Stockyards Act, (iii) environmental remediation and liability, (iv) Liens on Collateral (other than Liens in existence on the Initial Closing Date which are listed on Schedule 7.01 and other than encumbrances permitted under Section 7.01), (v) credit exposure of any Borrower with respect to interest rate protection arrangements, (vi) reserves contemplated by Section 5.02(i)(ii) and (vii) 103% of the face amount of letters of credit issued by persons other than the Letter of Credit Issuer for the account of any Borrower or any subsidiary thereof. SECTION II.2. Loans. (a) The Eurodollar Loans made by the Lenders on any date shall be in integral multiples of $1,000,000 and in a minimum aggregate principal amount of $1,000,000. (b) Subject to the provisions of Sections 2.17 and 2.18 hereof, Loans shall be made ratably by the Lenders in accordance with their respective Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder. The initial Loans shall be made by the Lenders against delivery of Notes, payable to the order of the Lenders, as referred to in Section 2.04 hereof. (c) Each Loan shall be either a Base Rate Loan or a Eurodollar Loan as the Borrowers may request pursuant to Section 2.03 hereof. Each Lender may fulfill its obligations under this Agreement by causing its Applicable Lending Office to make such Loan; provided, however, that the exercise of such option shall not affect the obligation of the Borrowers to repay such Loan in accordance with the term of the Notes. Not more than six (6) Eurodollar Loans may be outstanding at any one time. (d) Subject to the provisions of Sections 2.17 and 2.18 hereof, each Lender shall make its Loans on the proposed dates thereof by paying the amount required to the Agent in New York, New York in immediately available funds not later than 2:00 p.m., New York City time, and the Agent shall as soon as practicable, but in no event later than 3:00 p.m., New York City time, credit the amounts so received to the general deposit account of the applicable Borrower with the Agent in immediately available funds or, if Loans are not to be made on such date because any condition precedent to a borrowing herein specified is not met, return the amounts so received to the respective Lenders. (e) The Borrowers shall have the right at any time upon prior irrevocable written, telex or facsimile notice (promptly confirmed in writing) to the Agent given in the manner and at the times specified in Section 2.03 hereof with respect to the Loans into which conversion or continuation is to be made, to convert all or any portion of Eurodollar Loans into Base Rate Loans, to convert all or any portion of Base Rate Loans into Eurodollar Loans (specifying the Interest Period to be applicable thereto) and to continue all or any portion of any Eurodollar Loans into a subsequent Interest Period selected by the Borrowers in accordance with the terms hereof, in each instance subject to the terms and conditions of this Agreement (including the last sentence of Section 2.02(c) hereof) and to the following: (i) in the case of a conversion or continuation of fewer than all the Loans, the aggregate principal amount of Loans (A) converted shall not be less than $1,000,000 in the case of Base Rate Loans or (B) converted or continued shall not be less than $1,000,000 in the case of Eurodollar Loans and shall be an integral multiple of $1,000,000; (ii) accrued interest on a Loan (or portion thereof) being converted or continued shall be paid by the Borrowers at the time of conversion or continuation; (iii) if any Eurodollar Loan is converted at any time other than the end of an Interest Period applicable thereto, the Borrowers shall make such payments associated therewith as are required pursuant to Section 2.12 hereof; (iv) any portion of a Eurodollar Loan which is subject to an Interest Period ending on a date that is less than three (3) months prior to the Termination Date may not be converted into, or continued as, a Eurodollar Loan and shall be automatically converted at the end of such Interest Period into a Base Rate Loan; and (v) no Default or Event of Default shall have occurred and be continuing. The Interest Period applicable to any Eurodollar Loan resulting from a conversion or continuation shall be specified by Jitney Jungle in the irrevocable notice of conversion or continuation delivered pursuant to this Section; provided, however, that if no such Interest Period shall be specified, the Borrowers shall be deemed to have selected an Interest Period of one (1) month's duration. If the Borrowers shall not have given timely notice to continue any Eurodollar Loan into a subsequent Interest Period (and shall not otherwise have given notice to convert such Loan), such Loan (unless repaid or required to be repaid pursuant to the terms hereof) shall, subject to (iv) above, automatically be converted into a Base Rate Loan. SECTION II.3. Notice of Loans. Jitney Jungle shall, through a Responsible Officer, give the Agent irrevocable written, telex or facsimile notice (promptly confirmed in writing) of each borrowing (including, without limitation, a conversion as permitted by Section 2.02(e) hereof) (i) not later than 11:00 A.M., New York City time, three (3) Business Days before a proposed Eurodollar Loan borrowing or conversion and (ii) not later than 1:00 P.M., New York City time on the Business Day of the requested Base Rate Loan borrowing or conversion. Such notice shall specify (w) whether the Loans then being requested are to be Base Rate Loans or Eurodollar Loans, (x) the date of such borrowing (which shall be a Business Day) and amount thereof, (y) if such Loans are to be Eurodollar Loans, the Interest Period with respect thereto and (z) the Borrower for whose account such borrowing is being made. If no election as to the type of Loan is specified in any such notice, all such Loans shall be Base Rate Loans. If no Interest Period with respect to any Eurodollar Loan is specified in any such notice, then an Interest Period of one (1) month's duration shall be deemed to have been selected. The Agent shall promptly advise the Lenders of any notice given pursuant to this Section 2.03 and of each Lender's portion of the requested borrowing. SECTION II.4. Notes; Repayment of Loans. (a) All Loans made by a Lender to the Borrowers shall be evidenced by a single Note, duly executed on behalf of the Borrowers, dated the Initial Closing Date, in substantially the form of Exhibit A annexed hereto, delivered and payable to such Lender in a principal amount equal to its Commitment in respect of the Borrowers on such date. The outstanding balance of each Loan, as evidenced by any such Note, shall mature and be due and payable on the Termination Date. (b) Each Note shall bear interest from its date on the outstanding principal balance thereof, as provided in Section 2.05 hereof. (c) Each Lender, or the Agent on its behalf, shall, and is hereby authorized by the Borrowers to, endorse on the schedule attached to the Notes of such Lender (or on a continuation of such schedule attached to such Note and made a part thereof) an appropriate notation evidencing the date and amount of each Loan to the Borrowers from such Lender, as well as the date and amount of each payment and prepayment with respect thereto; provided, however, that the failure of any person to make such a notation on a Note shall not affect any obligations of the Borrowers under such Note. Any such notation shall be conclusive and binding as to the date and amount of such Loan or portion thereof, or payment or prepayment of principal or interest thereon, absent manifest error. (d) Each Borrower hereby irrevocably authorizes and directs the Agent on behalf of itself and the Lenders to charge the accounts of the Borrowers with the Agent for all amounts which may now or hereafter be due and payable by any Borrower and its subsidiaries hereunder or under any other Loan Document, including, without limitation, all amounts of principal and interest, fees and expenses. If at any time there is not sufficient availability to cover any of the payments referred to in the prior sentence, and, in any event, upon the occurrence and during the continuance of any Event of Default, the Borrowers shall make any such payments to the Agent on demand. SECTION II.5. Interest on Loans. (a) Subject to the provisions of Sections 2.05(c) and Section 2.08 hereof, each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. (b) Subject to the provisions of Section 2.05(c) and Section 2.08 hereof, each Eurodollar Loan shall bear interest at a rate per annum equal to the Adjusted LIBO Rate plus the Applicable Margin. (c) Interest on each Loan shall be payable in arrears on each applicable Interest Payment Date and on the maturity thereof (whether as scheduled, by acceleration or otherwise). Interest on each Base Rate Loan and each Eurodollar Loan shall be computed based on the number of days elapsed in a year of 365 days. The Agent shall determine each interest rate applicable to the Loans and shall promptly advise the Borrowers and the Lenders of the interest rate so determined (which determination shall be conclusive and binding on the Borrowers and the Lenders absent manifest error). SECTION II.6. Fees. (a) The Borrowers shall pay each Lender, through the Agent, (i) on the last Business Day of each March, June, September and December in arrears commencing on September 30, 1997, (ii) on the date of any reduction of the Commitment pursuant to Section 2.07 hereof and (iii) on the Termination Date, in immediately available funds, a Commitment Fee on the average amount, calculated on a daily basis, by which the Commitment of such Lender, during the calendar quarter (or shorter period commencing with the date hereof or ending with the Termination Date) ending on such date exceeds the aggregate outstanding principal amount of the Loans made by such Lender and such Lender's pro rata share of the aggregate undrawn amount of all outstanding Letters of Credit. The Commitment Fee due to each Lender under this Section 2.06 shall commence to accrue on the Initial Closing Date and cease to accrue on the earlier of (i) the Termination Date and (ii) the termination of the Commitment of such Lender pursuant to Section 2.07 hereof. The Commitment Fee shall be calculated on the basis of the actual number of days elapsed in a year of 365 days. (b) The Borrowers shall pay to the Agent and/or Fleet for their respective accounts the fees payable in the Fee Letter and other letters to be entered into when and as such fees are due and payable as therein provided. (c) All fees payable under or in connection with this Agreement shall be fully earned upon payment and shall be nonrefundable in all circumstances. SECTION II.7. Termination of Commitments and Commitment Reductions. (a) Upon at least ten (10) Business Days' prior irrevocable written notice (or facsimile notice promptly confirmed in writing) to the Agent, the Borrowers may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Total Commitment and/or the Supplemental Availability, ratably among the Lenders in accordance with the amounts of their respective Commitments; provided, however, that the Total Commitment shall not be reduced at any time to an amount less than the Loans outstanding under the Commitment and the Letter of Credit Usage at such time. Each partial reduction of the Total Commitment and/or the Supplemental Availability shall be in a minimum of $1,000,000 and an integral multiple of $500,000. (b) (i) The Supplemental Availability shall be permanently reduced on each of the dates set forth below by the amount set forth below opposite such date (such reduced amount being the Supplemental Availability in effect for the next succeeding calendar quarter), and on each such date, the Total Commitment shall be permanently reduced by an amount equal to such reduction: Supplemental Availability Reduction Date Amount September 30, 1998 $1,250,000 December 31, 1998 $1,250,000 March 31, 1999 $1,250,000 June 30, 1999 $1,250,000 September 30, 1999 $1,750,000 December 31, 1999 $1,750,000 March 31, 2000 $1,750,000 June 30, 2000 $1,750,000 September 30, 2000 $2,000,000 December 31, 2000 $2,000,000 March 31, 2001 $2,000,000 June 30, 2001 $2,000,000 September 30, 2001 $2,250,000 December 31, 2001 $2,250,000 March 31, 2002 $2,250,000 June 30, 2002 $2,250,000 September 30, 2002 $2,750,000 December 31, 2002 $2,750,000 March 31, 2003 $2,750,000 June 30, 2003 $2,750,000 September 30, 2003 $6,500,000 December 31, 2003 $6,500,000 (ii) (A) In addition, on each date that a prepayment of principal of the Loans is required pursuant to Section 2.09(d)(i), Section 2.09(d)(ii), Section 2.09(d)(iii) or Section 2.09(d)(iv), the Supplemental Availability under Section 2.01(a) and the Total Commitment shall each be permanently reduced by an amount equal to such prepayment. (B) Within ninety (90) days after the end of each Fiscal Year, beginning with the Fiscal Year ending on or about May 2, 1998, the Supplemental Availability and the Total Commitment shall each be permanently reduced in an amount equal to the lesser of (x) fifty percent (50%) of Excess Cash Flow for such Fiscal Year calculated on the basis of the audited financial statements for such Fiscal Year delivered to the Agent and the Lenders pursuant to Section 6.05(a) and (y) $7,000,000; provided, that if such financial statements shall duly reflect that the Leverage Ratio for the four consecutive fiscal quarters ending on the last day of such Fiscal Year shall have been equal to or less than 3.5 to 1.0, then no reduction shall be required by this clause (B). Concurrently with the making of any such reduction, the Borrowers shall deliver to the Agent and the Lenders a certificate of the Financial Officer of Jitney Jungle demonstrating the calculation of the amount required to be reduced hereunder. (C) The Commitment of each Lender shall automatically and permanently terminate on the Termination Date unless extended as herein provided, and all Loans still outstanding on such date shall be due and payable in full together with accrued interest thereon. (iii) In the event that a prepayment of principal of the Loans is required pursuant to or is made under Section 2.09(e) and (A) the aggregate amount of proceeds and awards received under Section 2.09(e) in such calendar year (including the proceeds received on the date of determination) is less than $2,000,000, then no reduction of Total Commitment or Supplemental Availability shall be required under this Section 2.07(b); and (B) the aggregate amount of proceeds and awards received under Section 2.09(e) in such calendar year (including the proceeds received on the date of determination) is greater than $2,000,000, then the Total Commitment and the Supplemental Availability shall be reduced by the amount of the prepayment required by or made under Section 2.09(e). (iv) Each prepayment of principal of the Loans required to be made in reduction of the Total Commitment and the Supplemental Availability pursuant to Section 2.07(ii)(A) or 2.07(ii)(B) above shall be applied to prepay (or reduce) the scheduled reductions of the Total Commitment and the Supplemental Availability pursuant to Section 2.07(b)(i) above on a pro rata basis (based upon the then remaining principal amount of the scheduled reductions thereto pursuant to Section 2.07(b)(i)) until the Supplemental Availability shall have been reduced to zero, with each such prepayment (or reduction) being prepaid (or reduced) by an amount equal to the product of the prepayment or reduction amount applicable to the Supplemental Availability, multiplied by a fraction the numerator of which is the scheduled reduction pursuant to Section 2.07(b)(i) (as reduced by prepayments previously made) and the denominator of which shall be the remaining Supplemental Availability. (c) Simultaneously with any termination of the Total Commitment pursuant to paragraph (a) or (b) of this Section 2.07, the Borrowers shall pay to each Lender, through the Agent, the Commitment Fee due and owing through and including the date of such termination or reduction on the amount of the Commitment of such Lender so terminated or reduced. SECTION II.8. Interest on Overdue Amounts. (a) If there shall occur and be continuing any Event of Default, the Borrowers shall on demand from time to time pay interest, to the extent permitted by law, on principal, interest, fees and any other amount which is payable hereunder or under any other Loan Document (whether then due and payable or not) (after as well as before judgment) at a rate per annum equal to two percent (2%) in excess of the rates otherwise applicable thereto (or if no rate is applicable thereto, at a rate per annum equal to four percent (4%) in excess of the Prime Rate). (b) In the event, and on each occasion, that on the day two (2) Business Days prior to the commencement of any Interest Period for a Eurodollar Loan the Agent shall have determined that dollar deposits in the amount of each Eurodollar Loan are not generally available in the London interbank market, or that the rate at which dollar deposits are being offered will not reflect adequately and fairly the cost to one or more Lenders of making or maintaining such Eurodollar Loan during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Agent shall as soon as practicable thereafter give written notice (or facsimile notice promptly confirmed in writing) of such determination to the Borrowers and the Lenders, and any request by any Borrower for the making of a Eurodollar Loan pursuant to Section 2.03 hereof or conversion or continuation of any Loan into a Eurodollar Loan pursuant to Section 2.02 hereof shall, until the circumstances giving rise to such notice no longer exist, be deemed to be a request for a Base Rate Loan. Each determination by the Agent made hereunder shall be conclusive absent manifest error. Notwithstanding any other provisions of this Section 2.08, no Lender shall apply or request that the Agent apply the provisions of subsection (b) of this Section 2.08 with respect to the Borrower if it shall not at the time be the general policy or practice of such Lender to apply the provisions of subsection (b) of this Section 2.08 to other borrowers in substantially similar circumstances under substantially comparable provisions of other credit agreements. SECTION II.9. Prepayment of Loans. (a) Subject to the terms and conditions contained in this Section 2.09 and elsewhere in this Agreement, the Borrowers shall have the right to prepay any Loan at any time in whole or from time to time in part (except in the case of a Eurodollar Loan, only on the last day of an Interest Period therefor) without penalty (except as otherwise provided for herein); provided, however, that each such partial prepayment of a Eurodollar Loan shall be in an integral multiple of $1,000,000. (b) On the date of any termination of the Total Commitment pursuant to Section 2.07(a) hereof or elsewhere in this Agreement, the Borrowers shall pay the aggregate principal amount of all Loans then outstanding, together with interest to the date of such payment and all fees and other amounts due under this Agreement and deposit in a cash collateral account with the Agent on terms satisfactory to the Agent an amount equal to 103% of the amount of the Letter of Credit Usage. Any prepayments required by this paragraph (b) shall be applied to outstanding Base Rate Loans up to the full amount thereof before they are applied to outstanding Eurodollar Loans; provided, however, that the Borrowers shall not be required to make any prepayment of any Eurodollar Loan pursuant to this Section until the last day of the Interest Period with respect thereto so long as an amount equal to such prepayment is deposited by the Borrowers in a cash collateral account with the Agent to be held in such account on terms satisfactory to the Agent. (c) The Borrowers shall make prepayments of the Loans from time to time (including without limitation prepayments required by any reduction of Total Commitment and/or the Supplemental Availability) such that the outstanding principal balance of the Loans plus the Letter of Credit Usage plus the reserves then in effect under Section 2.01(c) hereof do not exceed the lesser of (i) the Total Commitment and (ii) the Borrowing Base at such time. Any prepayments required by this paragraph (c) shall be applied to outstanding Base Rate Loans up to the full amount thereof before they are applied to outstanding Eurodollar Loans; provided, however, that the Borrowers shall not be required to make any prepayment of any Eurodollar Loan pursuant to this Section until the last day of the Interest Period with respect thereto so long as an amount equal to such prepayment is deposited by the Borrowers in a cash collateral account with the Agent to be held in such account on terms satisfactory to the Agent. In the event that after the prepayment in full (or cash collateralization thereof as provided above) of the Loans, the Letter of Credit Usage plus the reserves then in effect under Section 2.01(c) hereof shall still exceed the lesser of (i) the Total Commitment and (ii) the Borrowing Base, the Borrowers shall deposit cash in the amount of such excess with the Agent in a cash collateral account with the Agent to be held in such account on terms satisfactory to the Agent. (d) (i) Within five Business Days of the receipt thereof by any Borrower, any Grantor, any Guarantor or any subsidiary of any of them of Cash Proceeds from any Asset Sale (other than an Asset Sale of an FTC Divestiture Store), the Borrowers shall make a mandatory prepayment of the Loans in an amount equal to 100% of the Net Cash Proceeds thereof, which proceeds shall be applied as set forth in paragraph (f) below; provided, that up to an aggregate of $1,000,000 per fiscal year but not to exceed $5,000,000 of Net Cash Proceeds from Asset Sales from the Initial Closing Date through the Final Maturity Date shall not be required to be used to so repay Loans to the extent the Borrowers elect, as hereinafter provided, to cause such Net Cash Proceeds to be reinvested in Reinvestment Assets (a "Reinvestment Election"). The Borrowers may exercise their Reinvestment Election (within the parameters specified in the preceding sentence) with respect to an Asset Sale if (x) at the time of such election there is continuing no Default or Event of Default and (y) the Borrowers deliver a Reinvestment Notice to the Agent no later than the fifteenth Business Day following the date of the consummation of the respective Asset Sale, with such Reinvestment Election being effective with respect to the Net Cash Proceeds of such Asset Sale equal to the Anticipated Reinvestment Amount specified in such Reinvestment Notice. The Borrowers agree to grant a first priority security interest (subject only to Liens permitted by clause (a), (b), (c), (d), (f), (h), (i) or (j) of Section 7.01) in such Reinvestment Assets in favor of the Agent, such security interest to be granted on the date of acquisition of such Reinvestment Assets by any Borrower. Nothing contained in this paragraph shall constitute, or be deemed to constitute, a consent to any such Asset Sale. (ii) Within five Business Days of (A) the sale, issuance or other disposition by any Borrower, any Guarantor or any subsidiary of either thereof of any of its capital stock or other equity interests in such person or any option, warrant or similar right to acquire any of same (except pursuant to the Original Acquisition Documents and the Merger Documents and except sales by Jitney Jungle of its capital stock to employees of the Borrowers following purchases thereof in an aggregate amount not in excess of $1,000,000 during the term of this Agreement as permitted by Section 7.04(ii)), (B) the consummation of the issuance of any debt securities of any Borrower, any Guarantor or any of their respective subsidiaries (except the Senior Notes and the Senior Subordinated Notes), (C) the receipt by any Borrower of any monies in accordance with the Original Acquisition Documents or the Merger Agreement (other than indemnification payments made under any Original Acquisition Document or the Merger Agreement on account of third-party claims against the Borrowers or any subsidiary thereof), or (D) the incurrence by any Borrower of any Subordinated Indebtedness (other than pursuant to the Senior Subordinated Indenture), the Borrower who is the recipient of such amounts shall make a mandatory prepayment of the Loans in an amount equal to 100% of the proceeds received (net of taxes due and any reasonable expenses of sale), which proceeds shall be applied as set forth in paragraph (f) below. Nothing contained in this paragraph shall constitute, or be deemed to constitute, a consent to any sale of assets or stock or other equity interests or the issuance or incurrence of any Indebtedness. (iii) On the Reinvestment Prepayment Date with respect to a Reinvestment Election, the Borrowers shall make a mandatory prepayment of the Loans in an amount equal to the Reinvestment Prepayment Amount, if any, for such Reinvestment Election, which proceeds shall be applied as set forth in paragraph (f) below. (iv) In the event that by virtue of an Asset Sale of an FTC Divestiture Store, a payment would become due and owing under the Senior Indenture or the Senior Subordinated Indenture in connection therewith, the Borrowers shall make a mandatory prepayment of the Loans in an amount equal to 100% of the Net Cash Proceeds thereof such that the Borrowers shall have no obligation to make a prepayment under the Senior Indenture or the Senior Subordinated Indenture (as applicable), which prepayment shall be applied as set forth in paragraph (f) below. (e) (i) Except as provided in clause (ii) below, not later than the fifth Business Day following the receipt by the Agent or any Borrower, any Guarantor or any of their respective subsidiaries (x) of any net proceeds of any insurance required to be maintained pursuant to Section 6.03 hereof on account of any loss, damage or injury to any asset of any Borrower, any Guarantor or such subsidiary (including, without limitation, any Collateral) or of any condemnation or eminent domain awards with respect to any real property or improvements thereon owned by any Borrower, any Guarantor or any of their respective subsidiaries, or (y) of any net proceeds of any business interruption insurance required to be maintained pursuant to Section 6.03 hereof, such Borrower, such Guarantor or such subsidiary shall notify the Agent of such receipt in writing or by telephone promptly confirmed in writing, and not later than the fifth Business Day following receipt by the Agent or such Borrower, such Guarantor or such subsidiary of any such proceeds or awards, there shall become due and payable a prepayment of the Loans in an amount equal to 100% of such proceeds or award. Prepayments from such net proceeds or award shall be applied as set forth in paragraph (f) below. (ii) In the case of the receipt of net proceeds or awards described in clause (i) above with respect to the loss, damage or injury to any asset of any Borrower, any Guarantor or any of their respective subsidiaries or the condemnation or taking by eminent domain of any real property or improvements thereon owned by any Borrower, any Guarantor or any of their respective subsidiaries (other than net proceeds of any business interruption insurance), such Borrower, such Guarantor or such subsidiary may elect, by written notice delivered to the Agent not later than the day on which a prepayment would otherwise be required under clause (i), to apply all or a portion of such net proceeds or award for the purpose of replacing, repairing, restoring or rebuilding the relevant tangible property, and, in such event, any required prepayment under clause (i) above shall be reduced dollar for dollar by the amount of such election. An election under this clause (ii) shall not be effective unless: (x) at the time of such election there is continuing no Default or Event of Default; (y) the Borrowers shall have certified to the Agent that: (1) the net proceeds of the insurance adjustment for such loss, damage or injury or the amount of such award, together with other funds available to the Borrowers, shall be substantially sufficient to complete such replacement, repair, restoration or rebuilding in accordance with all applicable laws, regulations and ordinances; and (2) to the best knowledge of the Borrowers, no Default or Event of Default has arisen or will arise as a result of such loss, damage, injury, condemnation, taking, replacement, repair or rebuilding; and (z) if the amount of net proceeds or awards in all such cases is equal to or greater than $1,500,000 in the aggregate in any calendar year (including the proceeds received on the date of determination), the Borrowers shall have obtained the written consent of the Agent to such election. In the event that any net proceeds or awards described in clause (i) above are received with respect to any equipment or other personal property and are not applied within 90 days of receipt thereof as provided in this clause (ii), then the full amount of such proceeds and awards shall be applied as a prepayment of the Loans. In the event that any net proceeds or awards described in clause (i) above are received with respect to any real property or improvements thereon, (x) within 90 days of such loss, damage or injury thereto or the condemnation or taking thereof, the Borrowers shall deliver plans, specifications and other relevant particulars to the Agent with respect to the replacement, repair, restoration or rebuilding thereof, in form and substance reasonably satisfactory to the Agent, (y) the Agent, at its option, shall be entitled to institute a reserve pursuant to Section 2.01(c) in an amount equal to the amount of the prepayment required under clause (i) above with respect to such loss, damage, injury, condemnation or taking and (z) if such proceeds or awards are not applied within one year of receipt thereof as provided in this clause (ii) and in accordance with the foregoing plans, specifications and other relevant particulars, then the full amount of such proceeds and awards shall be applied as a prepayment of the Loans. The Borrowers agree to grant a first priority security interest (subject only to Liens permitted by clause (a), (b), (c), (d), (f), (h), (i) or (j) of Section 7.01) in such replacement assets in favor of the Agent, such security interest to be granted on the date of acquisition of such replacement assets by any Borrower. (iii) In the event of an election under clause (ii) above, pending application of the net proceeds or award to the required replacement, repairs, restoration or rebuilding, such Borrower, such Guarantor or such subsidiary shall not later than the time at which prepayment would have been, in the absence of such election, required under clause (i) above, apply such net proceeds or award to the prepayment of the outstanding principal balance, if any, of the Loans (not in permanent reduction of the Commitment), and deposit (the "Special Deposit") with the Agent, the balance, if any, of such net proceeds or award remaining after such application, pursuant to agreements in form, scope and substance reasonably satisfactory to the Agent. The Special Deposit, together with all earnings on such Special Deposit, shall be available to the Borrowers solely for the replacement, repair, rebuilding or restoration of the tangible property suffering the injury, loss, damage condemnation or taking by eminent domain in respect of which such prepayment and Special Deposit were made or to such other purpose as to which the Agent may consent in writing; provided, however, that at such time as a Default or Event of Default shall occur, the balance of the Special Deposit and earnings thereon may be applied by the Agent to repay the Obligations in such order as the Agent shall elect. The Agent shall be entitled to require proof, as a condition to the making of any withdrawal from the Special Deposit, that the proceeds of such withdrawal are being applied for the purposes permitted hereunder. (iv) Subject to the provisions of this paragraph (e), promptly upon the receipt by the Agent or any Borrower, any Guarantor or any of their respective subsidiaries of any net proceeds of any insurance referred to in Section 6.03 hereof, there shall become due and payable a prepayment of principal in respect of the Obligations in an amount equal to 100% of such net proceeds. All prepayments made pursuant to this clause (iv) shall be applied in the manner set forth in paragraph (f) below. (f) When making a prepayment, whether mandatory or otherwise, pursuant to paragraph (a), (b), (c), (d) or (e) above, the applicable Borrower shall furnish to the Agent, not later than 12:00 noon (New York City time) (i) five (5) Business Days prior to the date of such prepayment of Base Rate Loans and (ii) five (5) Business Days prior to the date of such prepayment of Eurodollar Loans, written, telex or facsimile notice (promptly confirmed in writing) of prepayment which shall specify the prepayment date and the principal amount of each Loan (or portion thereof) to be prepaid, which notice shall be irrevocable and shall commit the Borrowers to prepay such Loan by the amount stated therein on the date stated therein. All prepayments shall be accompanied by accrued interest on the principal amount being prepaid to the date of prepayment. Prepayments made pursuant to paragraph (d) or (e) above shall be applied to outstanding Base Rate Loans up to the full amount thereof and then to Eurodollar Loans up to the full amount thereof; provided, however, that if at the time of the making of any such prepayment, a Default or an Event of Default is in existence and there are undrawn Letters of Credit outstanding, then in the discretion of the Agent, all or a portion of any such prepayment (not to exceed an amount equal to the aggregate undrawn amount of all such outstanding Letters of Credit) shall be deposited by the Borrower in a cash collateral account to be held by the Agent for the benefit of the Lenders for application by the Agent to the payment of any drawing made under any such Letters of Credit (the foregoing requirement to be in addition to any other cash collateral requirements under this Agreement); and, provided, further, that the Borrowers shall not be required to make any prepayment of any Eurodollar Loan required pursuant to this Section 2.09(f) until the last day of the Interest Period with respect thereto so long as an amount equal to such prepayment is deposited by the Borrowers into a cash collateral account with the Agent to be held in such account pursuant to terms satisfactory to the Agent. All payments made by a Borrower as described in this clause (f) shall be first deemed to be a repayment of a Loan (or collateral for Letter of Credit Usage) made for the account of such Borrower, and to the extent that the Loans and Letter of Credit Usage for the account of such Borrower is reduced to zero, such payments shall be deemed to be applied to such Loans and Letter of Credit Usage as the Agent shall determine in its sole discretion. (g) All prepayments under this Section 2.09 shall be subject to Section 2.12 hereof. (h) Except as otherwise expressly provided in this Section 2.09, payments with respect to any paragraph of this Section 2.09 are in addition to payments made or required to be made under any other paragraph of this Section 2.09. SECTION II.10. Reserve Requirements; Change in Circumstances. (a) Notwithstanding any other provision herein, if after the date of this Agreement (or in the case of any assignee of any Lender, the date such assignee becomes a Lender hereunder) any change in applicable law or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) shall (i) subject the Agent or any Lender (which shall for the purpose of this Section 2.10 include any assignee or lending office or branch of the Agent or any Lender) to any tax with respect to any amount paid or to be paid by either the Agent or any Lender with respect to any Eurodollar Loans made by a Lender to a Borrower (other than (x) taxes imposed on the overall net income of the Agent or such Lender and (y) franchise taxes imposed on the Agent or such Lender, in either case by the jurisdiction in which such Lender or the Agent has its principal office or its lending office with respect to such Eurodollar Loan or any political subdivision or taxing authority of either thereof); (ii) change the basis of taxation of payments to any Lender or the Agent of the principal of or interest on any Eurodollar Loan or any other fees or amounts payable hereunder (other than taxes imposed on the overall net income of such Lender or the Agent by the jurisdiction in which such Lender or the Agent has its principal office or by any political subdivision or taxing authority therein); (iii) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or loans or loan commitments extended by, such Lender; or (iv) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to any such Lender of making or maintaining any Eurodollar Loan, or to reduce the amount of any payment (whether of principal, interest or otherwise) receivable by such Lender or to require such Lender to make any payment in respect of any Eurodollar Loan, then the Borrowers shall pay to such Lender or the Agent, as the case may be, upon such Lender's or the Agent's demand, such additional amount or amounts as will compensate such Lender or the Agent for such additional costs or reduction. The Agent and each Lender agree to give notice to the Borrowers of any such change in law, regulation, interpretation or administration with reasonable promptness after becoming actually aware thereof and of the applicability thereof to the Transactions and, at the request of the Borrowers, shall set out in reasonable detail the calculations used in determining such additional amounts. Notwithstanding anything contained herein to the contrary, nothing in clause (i) or (ii) of this Section 2.10(a) shall be deemed to (x) permit the Agent or any Lender to recover any amount thereunder which would not be recoverable under Section 2.15 hereof or (y) require the Borrowers to make any payment of any amount to the extent that such payment would duplicate any payment made by the Borrowers pursuant to Section 2.15 hereof. Notwithstanding any other provision of this Section 2.10, no Lender shall demand any payment referred to above if it shall not at the time be the general policy or practice of such Lender to demand such compensation in substantially similar circumstances under substantially comparable provisions of other credit agreements. (b) If at any time and from time to time after the date of this Agreement, any Lender shall determine that the adoption of any applicable law, rule, regulation or guideline regarding capital adequacy, or any change in any applicable law, rule, regulation or guideline regarding capital adequacy, or any change in the interpretation or administration of any thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender (or its lending office or an affiliate) 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 will have the effect of reducing the rate of return on such Lender's or its affiliate's capital as a consequence of such Lender's obligations hereunder to a level below that which such Lender or affiliate could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or its affiliate's policies with respect to capital adequacy), then from time to time the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender or its affiliate for such reduction. Notwithstanding any other provision of this Section 2.10, no Lender shall demand any payment referred to above if it shall not at the time be the general policy or practice of such Lender to demand such compensation in substantially similar circumstances under substantially comparable provisions of other credit agreements. (c) A statement of any Lender or the Agent setting forth such amount or amounts, supported by calculations in reasonable detail, as shall be necessary to compensate such Lender or its affiliate (or the Agent) as specified in paragraphs (a) and (b) above shall be delivered to the Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay each Lender or the Agent the amount shown as due on any such statement within ten (10) days after its receipt of the same. (d) Failure on the part of any Lender or the Agent to demand compensation for any increased costs, reduction in amounts received or receivable with respect to any Interest Period or reduction in the rate of return earned on such Lender's or its affiliate's capital, shall not constitute a waiver of such Lender's or the Agent's rights to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in rate of return in such Interest Period or in any other Interest Period. The protection under this Section 2.10 shall be available to each Lender and the Agent regardless of any possible contention of the invalidity or inapplicability of any law, regulation or other condition which shall give rise to any demand by such Lender or the Agent for compensation. (e) Any Lender claiming any additional amounts payable pursuant to this Section 2.10 agrees to use reasonable efforts (consistent with legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, any such additional amounts and would not, in the sole judgment of such Lender, be otherwise disadvantageous to such Lender. SECTION II.11. Change in Legality. (a) Notwithstanding anything to the contrary herein contained, if any change in any law or regulation or in the interpretation thereof by any governmental authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations to make Eurodollar Loans as contemplated hereby, then, by written notice to Borrowers and to the Agent, such Lender may: (i) declare that Eurodollar Loans will not thereafter be made by such Lender hereunder, whereupon the Borrowers shall be prohibited from requesting Eurodollar Loans from such Lender hereunder unless such declaration is subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to Base Rate Loans, in which event (A) all such Eurodollar Loans shall be automatically converted to Base Rate Loans as of the effective date of such notice as provided in paragraph (b) below and (B) all payments of principal which would otherwise have been applied to repay the converted Eurodollar Loans shall instead be applied to repay the Base Rate Loans resulting from the conversion of such Eurodollar Loans. (b) For purposes of Section 2.11(a) hereof, a notice to the Borrowers by any Lender shall be effective, if lawful, on the last day of the then current Interest Period or, if there are then two or more current Interest Periods, on the last day of each such Interest Period, respectively; otherwise, such notice shall be effective with respect to the Borrowers on the date of receipt by the Borrowers. SECTION II.12. Indemnity. Each Borrower shall indemnify each Lender against any loss (including, without limitation, loss of anticipated profits) or expense (including, but not limited to, any loss or expense sustained or incurred or to be sustained or incurred in liquidating or employing deposits from third parties acquired to affect or maintain any Loan or part thereof as a Eurodollar Loan) which such Lender may sustain or incur as a consequence of the following events (regardless of whether such events occur as a result of the occurrence of an Event of Default or the exercise of any right or remedy of the Agent or the Lenders under this Agreement or any other agreement, or at law): any failure of any Borrower to fulfill on the date of any borrowing of a Eurodollar Loan hereunder (including, without limitation, any conversion to or continuation of a Eurodollar Loan or portion thereof) the applicable conditions set forth in Article V hereof applicable to it; any failure of any Borrower to borrow a Eurodollar Loan hereunder (including, without limitation, to convert to or continue a Eurodollar Loan) after irrevocable notice of borrowing pursuant to Section 2.03 hereof has been given; any payment, prepayment or conversion of a Eurodollar Loan on a date other than the last day of the relevant Interest Period; any default in payment or prepayment of the principal amount of any Eurodollar Loan or any part thereof or interest accrued thereon, as and when due and payable (at the due date thereof, by irrevocable notice of prepayment or otherwise); or the occurrence of an Event of Default. Such loss or expense shall include, without limitation, an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the principal amount so paid, prepaid or converted or not borrowed for the period from the date of such payment, prepayment or conversion or failure to borrow to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow, the Interest Period for such Loan which would have commenced on the date of such failure to borrow), at the applicable rate of interest for such Loan provided for herein over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying the funds so paid, prepaid or converted or not borrowed in United States Treasury obligations with comparable maturities for comparable periods. Any such Lender shall provide to the Borrowers a statement, signed by an officer of such Lender, explaining any loss or expense and setting forth, if applicable, the computation pursuant to the preceding sentence, and such statement shall be conclusive absent manifest error. The Borrowers shall pay such Lender the amount shown as due on any such statement within three (3) Business Days after the receipt of the same. SECTION II.13. Pro Rata Treatment. Except as otherwise provided hereunder and subject to the provisions of Sections 2.17 and 2.18 hereof, each borrowing, each payment or prepayment of principal of the Notes, each payment of interest on the Notes, each payment of any fee or other amount payable hereunder and each reduction of the Total Commitment and/or the Supplemental Availability shall be made pro rata among the Lenders in the proportions that their respective Commitments bear to the Total Commitment and/or the Supplemental Availability, as applicable. SECTION II.14. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against any Borrower, any Guarantor or any of their respective subsidiaries, including, but not limited to, a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, obtain payment (voluntary or involuntary) in respect of a Note held by it as a result of which the unpaid principal portion of the Notes held by it shall be proportionately less than the unpaid principal portion of the Notes held by any other Lender, it shall be deemed to have simultaneously purchased from such other Lender a participation in the Notes held by such other Lender, so that the aggregate unpaid principal amount of the Notes and participations in Notes held by it shall be in the same proportion to the aggregate unpaid principal amount of all Notes then outstanding as the principal amount of the Notes held by it prior to such exercise of banker's lien, setoff or counterclaim was to the principal amount of all Notes outstanding prior to such exercise of banker's lien, setoff or counterclaim; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.14 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustments restored without interest. Each Borrower and each Guarantor expressly consents to the foregoing arrangements and agrees that any Lender holding a participation in a Note deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing to such Lender as fully as if such Lender held a Note in the amount of such participation. SECTION II.15. Taxes. (a) Any and all payments by the Borrowers and/or Guarantors hereunder shall be made, in accordance with Section 2.16 hereof, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings in any such case imposed by the United States or any political subdivision thereof, excluding: (i) in the case of the Agent and each Lender, taxes imposed or based on its net income, and franchise or capital taxes imposed on it, (A) if the Agent or such Lender is organized under the laws of the United States or any political subdivision thereof and (B) if the Agent or such Lender is not organized under the laws of the United States or any political subdivision thereof, and its principal office or Applicable Lending Office is located in the United States, and in the case of both (A) and (B), withholding taxes payable with respect to payments to the Agent or such Lender at its principal office or Applicable Lending Office under laws (including, without limitation, any treaty, ruling, determination or regulation) in effect on the date hereof, but not any increase in withholding tax resulting from any subsequent change in such laws (other than withholding with respect to taxes imposed or based on its net income or with respect to franchise or capital taxes), and (ii) taxes (including withholding taxes) imposed by reason of the failure of the Agent or any Lender, in either case that is organized outside the United States, to comply with Section 2.15(f) hereof (or the inaccuracy at any time of the certificates, documents and other evidence delivered thereunder) (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Borrower or any Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Lenders or the Agent, (x) the sum payable shall be increased by the amount necessary so that after making all required deductions (including without limitation deductions applicable to additional sums payable under this Section 2.15) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (y) such Borrower and/or such Guarantor shall make such deductions and (z) such Borrower and/or such Guarantor shall pay the full amount deducted to the relevant tax authority or other authority in accordance with applicable law. (b) In addition, each Borrower and each Guarantor agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement (hereinafter referred to as "Other Taxes"). (c) The Borrowers will indemnify each Lender and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction (except as specified in clauses (a)(i) and (ii)) on amounts payable under this Section 2.15) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. If any Lender receives a refund in respect of any Taxes or Other Taxes for which such Lender has received payment from the Borrowers hereunder, such Lender shall promptly notify the Borrowers of such refund and such Lender shall, within 30 days of receipt of a request by the Borrowers, repay such refund to the Borrowers (or if there shall at such time be continuing a Default or Event of Default, pay the same to the Agent to be applied to the Obligations in such order and manner as the Agent shall choose in its discretion); provided, that the Borrowers, upon the request of such Lender, agree to return such refund (whether returned to the Borrowers or applied to the Obligations) (plus any penalties, interest or other charges) to such Lender in the event such Lender is required to repay such refund. (d) Within 30 days after the date of any payment of Taxes or Other Taxes withheld by any Borrower or any Guarantor in respect of any payment to any Lender, the Borrowers will furnish to the Agent, at its address referred to in Section 11.01 hereof, such certificates, receipts and other documents as may be reasonably required to evidence payment thereof. (e) Without prejudice to the survival of any other agreement hereunder, the agreements and obligations contained in this Section 2.15 shall survive the payment in full of principal and interest hereunder. (f) Each Lender that is organized outside of the United States shall deliver to the Borrowers on the date hereof (or, in the case of an assignee, on the date of the assignment) and from time to time as required for renewal under applicable law duly completed copies of United States Internal Revenue Service Form 1001 or 4224 (or any successor or additional forms), as appropriate, indicating in each case that such Lender is entitled to receive payments under this Agreement without any deduction or withholding of any United States federal income taxes. The Agent (if the Agent is an entity organized outside the United States) and each Lender that is organized outside the United States shall promptly notify the Borrowers and the Agent of any change in its Applicable Lending Office and such Lender shall, prior to the immediately following due date of any payment by the Borrowers hereunder, deliver to the Borrowers (with copies to the Agent), such certificates, documents or other evidence, as required by the Code or Treasury Regulations issued pursuant thereto, including without limitation Internal Revenue Service Form 4224, Form 1001 and any other certificate or statement of exemption required by Treasury Regulation Section 1.1441-4(a) or Section 1.1441-6(c) or any subsequent version thereof, properly completed and duly executed by such Lender establishing that such payment is (i) not subject to withholding under the Code because such payment is effectively connected with the conduct by such Lender of a trade or business in the United States or (ii) totally exempt from United States tax under a provision of an applicable tax treaty. The Borrowers shall be entitled to rely on such forms in their possession until receipt of any revised or successor form pursuant to this Section 2.15(f). If the Agent or a Lender fails to provide a certificate, document or other evidence required pursuant to this Section 2.15(f), then (i) the Borrowers shall be entitled to deduct or withhold on payments to the Agent or such Lender as a result of such failure, as required by law, and (ii) the Borrowers shall not be required to make payments of additional amounts with respect to such withheld Taxes pursuant to clause (x) of Section 2.15(a) to the extent such withholding is required by reason of the failure of the Agent or such Lender to provide the necessary certificate, document or other evidence. SECTION II.16. Payments and Computations. The Borrowers shall make each payment hereunder and under any instrument delivered hereunder not later than 12:00 noon (New York City time) on the day when due in lawful money of the United States (in freely transferable dollars) to the Agent, at its offices at 60 East 42nd Street, New York, New York 10017, Account No. 2-550-00-5458, for the account of the Lenders, in immediately available funds. The Agent may charge, when due and payable, Jitney Jungle's account with the Agent (Account No. 2-550-00-5458) for all interest, principal and Commitment Fees or other fees owing to the Agent, the Lenders or the Letter of Credit Issuer on or with respect to this Agreement and/or the Loans and Letters of Credit and other Loan Documents. SECTION II.17. Settlement Among Lenders. (a) The Agent shall pay to each Lender not later than one (1) Business Day after each Interest Payment Date, its ratable portion, based on the principal amount of the Loans owing to such Lender, of all interest payments and any other fees received by the Agent hereunder in respect of the Loans, net of any amounts payable by such Lender to the Agent, by wire transfer. (b) It is agreed that each Lender's Loans are intended by the Lenders to be equal at all times to such Lender's ratable portion (as determined in accordance with the percentage amounts set forth in Schedule 2.01 hereto) of the aggregate principal amount of all Loans outstanding. Notwithstanding such agreement, the Lenders agree that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among them shall, subject to the provisions of clause (d) below, take place on a periodic basis in accordance with the provisions of clause (c) below. (c) (i) To the extent and in the manner hereinafter provided in this Section 2.17, settlement among the Lenders as to Loans shall occur periodically on Settlement Dates determined from time to time by the Agent, which may occur before or after the occurrence or during the continuance of a Default or Event of Default and whether or not all of the conditions to the making of Loans set forth in Section 5.01 have been met. On each Settlement Date, payments shall be made to the Agent for the account of the Lenders in the manner provided in this Section 2.17 in accordance with the Settlement Report delivered by the Agent pursuant to the provisions of this Section 2.17 in respect of such Settlement Date so that as of each Settlement Date, and after giving effect to the transactions on such Settlement Date, each Lender's Loans shall equal such Lender's ratable portion of the Loans outstanding as determined in accordance with the percentage amounts set forth in Schedule 2.01 hereto. (ii) The Agent shall designate periodic Settlement Dates which may occur on any Business Day after the Initial Closing Date; provided, however, that Settlement Dates shall occur on the closest Business Day to the 10th and 25th day of each calendar month or more frequently as determined by the Agent in its discretion (including, without limitation, under clause (d)(i) hereof). The Agent shall designate a Settlement Date by delivering to each Lender a Settlement Report not later than 10:00 a.m. (New York City time) on the proposed Settlement Date, which Settlement Report shall be with respect to the period beginning on the next preceding Settlement Date and ending on such designated Settlement Date. (iii) Between Settlement Dates, the Agent shall request and Fleet as a Lender shall, subject to the provisions of clause (d) below, advance to the Borrowers out of Fleet's own funds, the entire principal amount of any Loan requested or deemed requested pursuant to Section 2.03 (any such Loan being referred to as a "Non-Ratable Loan"). The making of each Non-Ratable Loan by Fleet shall be deemed to be a purchase by Fleet of a 100% participation in each other Lender's ratable portion of the amount of such Non-Ratable Loan. All payments of principal, interest and any other amount with respect to such Non-Ratable Loan shall be payable to and received by the Agent for the account of Fleet. Any payments received by the Agent between Settlement Dates which in accordance with the terms of this Agreement are to be applied to the reduction of the outstanding principal balance of Loans, shall be paid over to and retained by Fleet for such application, and such payment to and retention by Fleet shall be deemed, to the extent of each other Lender's ratable portion of such payment, to be a purchase by each such other Lender of a participation in the Loans (including the repurchase of participations in Non-Ratable Loans) held by Fleet immediately prior to the receipt and application of such payment. (iv) If on any Settlement Date the decrease, if any, in the dollar amount of any Lender's Loans which is required to comply with the first sentence of Section 2.17(b) is more than such Lender's ratable portion of amounts received by the Agent and paid only to Fleet since the next preceding Settlement Date, such Lender and the Agent, in their respective records, shall apply such Lender's ratable portion of such amounts to the decrease in such Lender's Loans, and Fleet shall pay to the Agent, for the account of such Lender, the excess. (v) If on any Settlement Date the increase, if any, in the dollar amount of any Lender's Loans which is required to comply with the first sentence of Section 2.17(b) exceeds such Lender's ratable portion of amounts received by the Agent and paid only to Fleet since the next preceding Settlement Date, such Lender and the Agent, in their respective records, shall apply such Lender's ratable portion of such amounts to the increase in such Lender's Loans, and such Lender shall pay to the Agent, for the account of Fleet, the excess. (vi) If a Settlement Report indicates that no Loans have been made during the period since the next preceding Settlement Date, then such Lender's ratable portion of any amounts received by the Agent but paid only to Fleet shall be paid by Fleet to the Agent, for the account of such Lender. If a Settlement Report indicates that the increase in the dollar amount of a Lender's Loans which is required to comply with the first sentence of Section 2.17(b) is exactly equal to such Lender's ratable portion of amounts received by the Agent but paid only to Fleet since the next preceding Settlement Date, such Lender and the Agent, in their respective records, shall apply such Lender's ratable portion of such amounts to the increase in such Lender's Loans. (vii) If any amounts received by Fleet in respect of the Obligations are later required to be returned or repaid by Fleet to the Borrowers or any other obligor or their respective representatives or successors in interest, whether by court order, settlement or otherwise, and such amounts repaid or returned by Fleet are in excess of Fleet's ratable portion of all such amounts required to be returned by all Lenders, each other Lender shall, upon demand by Fleet with notice to the Agent, pay to the Agent for the account of Fleet, an amount equal to the excess of such Lender's ratable portion of all such amounts required to be returned by all Lenders over the amount, if any, returned directly by such Lender. (viii) (x) Payment by any Lender to the Agent shall be made not later than 1:00 p.m. (New York City time) on the Business Day such payment is due, provided that if such payment is due on written demand by another Lender, including pursuant to clause (d) below, such written demand shall be made on the paying Lender not later than 10:00 a.m. (New York City time) on such Business Day. Payment by the Agent to any Lender shall be made by wire transfer, promptly following the Agent's receipt of funds for the account of such Lender and in the type of funds received by the Agent, provided that if the Agent receives such funds at or prior to 1:00 p.m. (New York City time), the Agent shall pay such funds to such Lender by 3:00 p.m. (New York City time) on such Business Day. If a demand for payment is made after the applicable time set forth above, the payment due shall be made by 3:00 p.m. (New York City time) on the first Business Day following the date of such demand. (y) If a Lender shall, at any time, fail to make any payment to the Agent required hereunder, the Agent may, but shall not be required to, retain payments that would otherwise be made to such Lender hereunder and apply such payments to such Lender's defaulted obligations hereunder, at such time, and in such order, as the Agent may elect in its sole discretion. (z) With respect to the payment of any funds under this Section 2.17(c), whether from the Agent to a Lender or from a Lender to the Agent, the party failing to make full payment when due pursuant to the terms hereof shall, upon written demand by the other party, pay such amount together with interest on such amount at the Federal Funds Effective Rate. (d) (i) The Agent shall have the right at any time to require, by notice to each Lender, that all settlements in respect of advances and repayments of Loans be made on a daily basis. From and after the giving of such notice (and until such time, if any, as the Agent notifies the Lenders of its determination to return to a periodic settlement basis), each Lender shall pay to the Agent such Lender's ratable portion of the amount of each Loan on the date such Loan is made in accordance with the provisions of clause (c)(viii) above and the Agent shall pay to each Lender by wire transfer by 5:00 p.m. (New York City time) funds received before 1:00 p.m. (New York City time) on such Business Day by the Agent from the Borrowers and by 3:00 p.m. (New York City time) funds received after 1:00 p.m. (New York City time) of the preceding Business Day by the Agent from the Borrowers, by wire transfer, such Lender's ratable portion of the net amount of all payments received by the Agent hereunder in respect of the principal of the Loans (after deducting the principal amount of Loans made on such day) or in respect of interest on the Loans. Any amount payable pursuant to this subsection which is not paid when due shall bear interest, payable by the Agent, for each day until paid in full at the Federal Funds Effective Rate in effect on such day. (ii) In addition to, and without limiting the right of the Agent to require daily settlement pursuant to clause (i), upon written demand by Fleet with notice thereof to the Agent, each other Lender shall pay to the Agent, for the account of Fleet, as the repurchase of Fleet's participation interest in such Lender's Loans, an amount equal to 100% of such Lender's ratable portion of the unpaid principal amount of all Non-Ratable Loans. Payments made pursuant to this clause (ii) shall be made not later than 5:00 p.m. (New York City time) on any Business Day if demand for such payment is received by such Lender not later than 10:00 a.m. (New York City time) on such Business Day; otherwise, any such payment shall be made on the next Business Day after demand is received therefor. SECTION II.18. Making of Loans. (a) Unless the Agent has been notified in writing to the contrary before 2:00 p.m. New York time on the date of any borrowing, the Agent may assume that each Lender will make its ratable portion of any amount to be borrowed available to the Agent in accordance with Section 2.02(b) hereof, and the Agent may in its discretion, in reliance upon such assumption, make available to the Borrowers on such date a corresponding amount. If and to the extent such Lender shall not make such ratable portion available to the Agent, such Lender and the Borrowers severally agree to repay to the Agent forthwith on demand such corresponding amount, together with interest thereon for each day from the date such amount is made available to the Borrowers until the date such amount is repaid to the Agent, as to the Borrowers, at the rate of interest applicable to Loans hereunder, and as to such other Lender, at the Federal Funds Effective Rate and until so repaid such amount shall be deemed to constitute a Loan by the Agent to the Borrowers hereunder entitled to the benefits of the Collateral and the other provisions hereof applicable to the Loans. If such Lender shall repay to the Agent such corresponding amount, the amount so repaid shall constitute such Lender's ratable portion of the Loans made on such borrowing date for purposes of this Agreement. No Lender shall be responsible for the failure of any other Lender to make its ratable portion of such Loans available on the borrowing date. (b) Without limiting the generality of Article IX, each Lender expressly authorizes the Agent to determine on behalf of such Lender (i) whether to make Loans requested or deemed requested by the Borrowers on any borrowing date (unless the Agent has been notified in writing to the contrary before 2:00 p.m. New York time on such borrowing date), (ii) the creation of any reserves against the Borrowing Base, (iii) any reduction of advance rates applicable to the Borrowing Base and (iv) whether specific items of inventory constitute "Eligible Inventory" in accordance with the definition of such term set forth in Article I. The Agent shall give prompt notice to the Lenders of any determinations made pursuant to clause (ii) or (iii) above. SECTION II.19. Joint and Several Borrowers. The parties hereto agree and confirm that the obligations of the Borrowers under and/or in connection with this Agreement and the other Loan Documents (including, without limitation, with respect to payments of principal, interest, fees and all other amounts with respect to the Loans) are the joint and several undertaking of each Borrower. SECTION II.20. Individual Borrowing and Letter of Credit Limit. Notwithstanding any provision in this Agreement to the contrary, none of the Borrowers shall be entitled to request Loans, receive Loan advances or request the issuance of Letters of Credit unless the Maximum Facility Amount of the applicable Borrower shall be greater than the amount of Loans requested by such Borrower and not repaid and all Letter of Credit Usage with respect to Letters of Credit previously issued for the account of such Borrower. In furtherance of this Section 2.20, (i) all borrowing base and other collateral reporting material described in Section 6.05(g) and/or Section 6.05(h) of this Agreement shall be presented on a Borrower by Borrower basis in a manner consistent with this Section 2.20 and (ii) on the date of delivery of the borrowing base and other collateral reporting material described in Section 6.05(g) and/or Section 6.05(h) (or at such later date as the Agent shall request), each Borrower shall repay Loans to the extent that the principal amount of Loans and Letters of Credit requested by such Borrower shall exceed the Maximum Facility Amount of such Borrower. Nothing contained in this Section 2.20 shall permit Loans to be made or Letters of Credit to be issued unless the Borrowers are in compliance with the other provisions of this Agreement (including, without limitation, Section 2.01(a)). IIA. LETTERS OF CREDIT SECTION 2A.01. Issuance of Letters of Credit. Upon the request of Jitney Jungle, and subject to the conditions set forth in Article V hereof and such other conditions to the opening of Letters of Credit as the Letter of Credit Issuer requires of its customers generally, the Agent shall cause the Letter of Credit Issuer from time to time to open trade or standby letters of credit (each, a "Letter of Credit") for the account of the Borrowers; provided that the Letter of Credit Usage shall not at any time exceed $30,000,000; and provided, further, that the face amount of any Letter of Credit that Jitney Jungle may request to be opened at any time shall not exceed an amount equal to (A) the lesser of (i) the Total Commitment at such time and (ii) the Borrowing Base at such time minus (B) the sum of (i) the unpaid principal amount of all Loans outstanding at such time, (ii) the Letter of Credit Usage at such time and (iii) the reserves then in effect under Section 2.01(c) hereof. The issuance of each Letter of Credit shall be made on at least four Business Days' prior written notice from Jitney Jungle to the Agent, at its Domestic Lending Office, which written notice shall be an application for a Letter of Credit on the Letter of Credit Issuer's customary form and shall indicate the Borrower for whose account the Letter of Credit is to be issued. The expiration date of any trade Letter of Credit shall not be later than 180 days from the date of issuance thereof and the expiration date of any standby Letter of Credit shall not be later than 365 days from the date of issuance thereof and, in any event, no Letter of Credit shall have an expiration date later than the Termination Date. The Letters of Credit shall be issued with respect of transactions occurring in the ordinary course of business of the Borrowers. SECTION 2A.02. Payment; Reimbursement. Upon the issuance of any Letter of Credit, the Agent shall notify each Lender of the principal amount, the number, and the expiration date thereof and the amount of such Lender's participation therein. By the issuance of a Letter of Credit hereunder and without further action on the part of the Agent, the Letter of Credit Issuer or the Lenders, each Lender hereby accepts from the Letter of Credit Issuer a participation (which participation shall be nonrecourse to the Letter of Credit Issuer) in such Letter of Credit equal to such Lender's pro rata (based on its Commitment) share of such Letter of Credit, effective upon the issuance of such Letter of Credit. Each Lender hereby absolutely and unconditionally assumes, as primary obligor and not as a surety, and agrees to pay and discharge, and to indemnify and hold the Letter of Credit Issuer harmless from liability in respect of, such Lender's pro rata share of the amount of any drawing under a Letter of Credit. Each Lender acknowledges and agrees that its obligation to acquire participations in each Letter of Credit issued by the Letter of Credit Issuer and its obligation to make the payments specified herein, and the right of the Letter of Credit Issuer to receive the same, in the manner specified herein, are absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or an Event of Default hereunder, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. The Agent and/or the Letter of Credit Issuer shall review, on behalf of the Lenders, each draft and any accompanying documents presented under a Letter of Credit and shall notify each Lender of any such presentment. Promptly after the Agent and/or the Letter of Credit Issuer shall have ascertained that any draft and any accompanying documents presented under such Letter of Credit appear on their face to be in substantial conformity with the terms and conditions of the Letter of Credit, the Agent shall give telephonic or facsimile notice to the Lenders and the Borrowers of the receipt and amount of such draft and the date on which payment thereon will be made, and the Lenders shall, by 11:00 a.m., New York City time on the date such payment is to be made, pay the amounts required to the Agent on behalf of the Letter of Credit Issuer in New York, New York in immediately available funds, and the Letter of Credit Issuer, not later than 3:00 p.m. on such day, shall make the appropriate payment to the beneficiary of such Letter of Credit. If the Letter of Credit Issuer shall pay any draft presented under a Letter of Credit, then the Agent and/or the Letter of Credit Issuer, on behalf of the Lenders, shall charge the general deposit account of the Borrowers with the Agent and/or the Letter of Credit Issuer, as the case may be, for the amount thereof, together with the Agent's or the Letter of Credit Issuer's customary overdraft fee in the event the funds available in such account shall not be sufficient to reimburse the Lenders for such payment and the Borrowers shall not otherwise have discharged such reimbursement obligation by 12:00 noon, New York City time, on the date of such payment. If the Lenders have not been reimbursed with respect to such drawing as provided above, the Borrowers shall pay to the Agent, for the account of the Lenders, the amount of the drawing together with interest on such amount at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 days) equal to the Prime Rate plus 4%, payable on demand. The obligation of the Borrowers under this Section 2A.02 to reimburse the Lenders and the Letter of Credit Issuer for all drawings under Letters of Credit shall be absolute, unconditional and irrevocable and shall be satisfied strictly in accordance with their terms, irrespective of: (a) any lack of validity or enforceability of any Letter of Credit; (b) the existence of any claim, setoff, defense or other right which any Borrower or any other person may at any time have against the beneficiary under any Letter of Credit, the Agent, the Letter of Credit Issuer or any Lender (other than the defense of payment in accordance with the terms of this Agreement or a defense based on the gross negligence, bad faith or willful misconduct of the Agent, the Letter of Credit Issuer or any Lender) or any other person in connection with this Agreement or any other transaction; (c) any draft or other document presented under any 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; (d) payment by the Agent, the Letter of Credit Issuer or any Lender under any Letter of Credit against presentation of a draft or other document which does not comply with the terms of such Letter of Credit; and (e) any other circumstance or event whatsoever, whether or not similar to any of the foregoing. It is understood that in making any payment under any Letter of Credit (x) the Agent's, the Letter of Credit Issuer's and any Lender's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including, without limitation, reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (y) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, not be deemed willful misconduct or bad faith of the Agent, the Letter of Credit Issuer or any Lender. SECTION 2A.03. The Letter of Credit Issuer's Actions. Any Letter of Credit may, in the discretion of the Letter of Credit Issuer or its correspondents, be interpreted by them (to the extent not inconsistent with such Letter of Credit) in accordance with the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce, as adopted or amended from time to time, or any other rules, regulations and customs prevailing at the place where any Letter of Credit is available or the drafts are drawn or negotiated. The Letter of Credit Issuer and its correspondents may accept and act upon the name, signature, or act of any party purporting to be the executor, administrator, receiver, trustee in bankruptcy, or other legal representative of any party designated in any Letter of Credit in the place of the name, signature, or act of such party. SECTION 2A.04. Payments in Respect of Increased Costs. (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) or any change in generally accepted accounting principles or regulatory accounting principles applicable to the Agent, the Letter of Credit Issuer or any Lender shall (i) impose, modify or make applicable to the Agent, the Letter of Credit Issuer or any Lender any reserve, special deposit or similar requirement with respect to its obligations under this Article IIA or any Letter of Credit, (ii) impose on the Agent, the Letter of Credit Issuer or any Lender any other condition with respect to its obligations under this Article IIA or any Letter of Credit, or (iii) subject the Agent, the Letter of Credit Issuer or any Lender to any tax (other than (x) taxes imposed on the overall net income of the Agent, the Letter of Credit Issuer or such Lender and (y) franchise taxes imposed on the Agent, the Letter of Credit Issuer or such Lender, in either case by the jurisdiction in which the Agent, the Letter of Credit Issuer or such Lender, as appropriate, has its principal office or lending office or any political subdivision or taxing authority of any such jurisdiction), charge, fee, deduction or withholding of any kind whatsoever, and the result of any of the foregoing shall be to increase the cost to the Agent, the Letter of Credit Issuer or such Lender of maintaining such Letter of Credit or making any payment under such Letter of Credit or this Article IIA or to reduce the amount of principal, interest or any fee or compensation receivable by the Agent, the Letter of Credit Issuer or such Lender in respect of this Article IIA or such Letter of Credit, then such additional amount or amounts as will compensate the Agent, the Letter of Credit Issuer or such Lender for such additional costs or reduction shall be paid to the Agent for its benefit or the benefit of the Letter of Credit Issuer or such Lender by the Borrowers. Each Lender agrees to give notice to the Borrowers and the Agent of any such change in law, regulation, interpretation or administration with reasonable promptness after becoming actually aware thereof and of the applicability thereof to the transactions contemplated in this Article IIA. (b) If, after the date of this Agreement, any Lender or the Letter of Credit Issuer shall have determined that the adoption of any applicable law, rule, regulation or guideline 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 compliance by any Lender or the Letter of Credit Issuer (or its lending office) 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 reducing the rate of return on such Lender's or the Letter of Credit Issuer's capital as a consequence of its obligations under this Article IIA or with respect to a Letter of Credit to a level below that which such Lender or the Letter of Credit Issuer could have achieved but for such adoption, change or compliance (taking into consideration such Lender's and the Letter of Credit Issuer's policies with respect to capital adequacy) then from time to time, the Borrowers shall pay to such Lender or the Agent on behalf of the Letter of Credit Issuer such additional amount or amounts as will compensate the Letter of Credit Issuer or such Lender for such reduction. Each Lender agrees to give notice to the Borrowers and the Agent of any adoption of, change in, or change in interpretation or administration of, any such law, rule, regulation or guideline with reasonable promptness after becoming actually aware thereof and of the applicability thereof to the transactions contemplated hereby. (c) A certificate of the Agent, the Letter of Credit Issuer or a Lender setting forth such amount or amounts, supported by calculations in reasonable detail, as shall be necessary to compensate the Agent, the Letter of Credit Issuer or such Lender, as appropriate, as specified in paragraphs (a) and (b) above shall be delivered to the Borrowers and shall be conclusive and binding upon the Borrowers absent manifest error. The Borrowers shall pay the Agent on behalf of the Letter of Credit Issuer or such Lender the amount shown as due on any such certificate within five (5) Business Days after its receipt of the same. (d) Failure on the part of any Lender, the Letter of Credit Issuer or the Agent to demand compensation for any increased costs, reduction in amounts received or receivable with respect to this Article IIA or any Letter of Credit or reduction in the rate of return earned on such Lender's or the Letter of Credit Issuer's capital, in each case pursuant to paragraph (a) or (b) above, shall not constitute a waiver of the Agent's, the Letter of Credit Issuer's or such Lender's rights to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in rate of return pursuant to paragraph (a) or (b) above. The protection under this Section 2A.04 shall be available to each Lender, the Letter of Credit Issuer and the Agent regardless of any possible contention of the invalidity or inapplicability of any law, regulation or other condition which shall give rise to any demand by such Lender, the Letter of Credit Issuer or the Agent for compensation (but if such law, regulation or other condition is finally determined to be invalid or inapplicable, the Agent on its behalf and on behalf of the Letter of Credit Issuer or Lenders shall promptly refund (without interest) all amounts paid under this Section 2A.04 arising from such invalid or inapplicable law, regulation or other condition). (e) Notwithstanding any other provision of this Section 2A.04, no Lender shall demand any payment referred to above if it shall not at the time be the general policy or practice of such Lender to demand such compensation in substantially similar circumstances under substantially comparable provisions of other credit agreements. SECTION 2A.05. Indemnity as to Letters of Credit. Each Borrower and each Guarantor hereby agrees to indemnify and hold harmless the Agent, the Letter of Credit Issuer and the Lenders from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever which the Agent, the Letter of Credit Issuer or the Lenders may incur or suffer by reason of or in connection with the execution and delivery or assignment of, or payment under, any Letter of Credit, except only if and to the extent that any such claim, damage, loss, liability, cost or expense shall be caused by the gross negligence, willful misconduct or bad faith of the Agent, the Letter of Credit Issuer or any Lender performing its obligations under this Agreement. Without limiting the foregoing, each Borrower and each Guarantor further agrees to indemnify and hold harmless the Agent, the Letter of Credit Issuer, their respective officers and directors, each person who controls the Agent or the Letter of Credit Issuer within the meaning of Section 15 of the Securities Act of 1933 or any applicable state securities law and their respective successors from and against any and all claims, damages, losses, liabilities, costs or expenses, joint or several, to which they or any of them may become subject under any Federal or state securities law, rule or regulation, at common law or otherwise, insofar as such claims, damages, losses, liabilities, costs or expenses arise out of or are based upon the execution and delivery by the Letter of Credit Issuer of any Letters of Credit or the execution and delivery of any other document in connection therewith (but not including any claims, damages, losses, liabilities, costs or expenses arising from the gross negligence, bad faith or willful misconduct of the Letter of Credit Issuer). The Borrowers, upon demand by the Agent or the Letter of Credit Issuer at any time, shall reimburse the Agent and the Letter of Credit Issuer for any reasonable legal or other expenses incurred in connection with investigating or defending against any of the foregoing. The indemnities contained herein shall survive the expiration or termination of the Letters of Credit and this Agreement. SECTION 2A.06. Letter of Credit Fees. The Borrowers agree to pay to the Agent (a) for the ratable benefit of the Lenders, with respect to any Letter of Credit, on the last business day of each March, June, September and December and on the date of the full drawing, cancellation, termination or expiration of such Letter of Credit, a letter of credit fee for such calendar quarter or shorter period equal to the then Applicable Margin on Eurodollar Loans on the average daily undrawn amount thereof for such calendar quarter or shorter period, payable to the Agent at its Domestic Lending Office in immediately available funds and (b) for the sole benefit of the Letter of Credit Issuer, with respect to any Letter of Credit, on the same dates as the Letter of Credit fee with respect to such Letter of Credit is payable under clause (a) above, a fronting fee for such calendar quarter or shorter period equal to one-quarter of one percent (1/4%) per annum on the average daily undrawn amount thereof for such calendar quarter or shorter period, payable to the Agent on behalf of the Letter of Credit Issuer at the Agent's Domestic Lending Office in immediately available funds. The foregoing fees shall be computed on the basis of the actual number of days elapsed over a year of 365 days. Additionally, the Borrowers shall pay to the Agent at its Domestic Lending Office for the sole account of the Letter of Credit Issuer upon demand by the Agent or the Letter of Credit Issuer all of the Letter of Credit Issuer's customary fees and expenses with respect to the opening, drawing upon, extending, amending, transferring, canceling or administration of Letters of Credit from time to time in effect. The Agent shall disburse to each Lender such Lender's pro rata share of any payment of the letter of credit fees referred to in clause (a) of the first sentence of this Section 2A.06 in immediately available funds within one (1) Business Day of the Agent's receipt of such payment. III. COLLATERAL SECURITY SECTION III.1. Security Documents. The Obligations shall be secured by the Collateral described in the Security Documents and are entitled to the benefits thereof. The Borrowers shall, and shall cause the other Grantors to, duly execute and deliver the Security Documents, all consents of third parties necessary to permit the effective granting of the Liens created in such agreements, financing statements pursuant to the Uniform Commercial Code and other documents, all in form and substance satisfactory to the Agent, as may be reasonably required by the Agent to grant to the Agent for the benefit of the Secured Parties a valid, perfected and enforceable first priority Lien on and security interest in (subject only to the Liens permitted under Section 7.01 hereof) the Collateral. SECTION III.2. Filing and Recording. The Borrowers shall, at their sole cost and expense, cause all instruments and documents given as evidence of security pursuant to this Agreement to be duly recorded and/or filed or otherwise perfected in all places necessary, in the opinion of the Agent, and take such other actions as the Agent may reasonably request, in order to perfect and protect the Liens of the Agent and the Secured Parties in the Collateral. Each Borrower and each Guarantor, to the extent permitted by law, hereby authorizes the Agent to file any financing statement in respect of any Lien created pursuant to the Security Documents which may at any time be required or which, in the opinion of the Agent, may at any time be desirable although the same may have been executed only by the Agent or, at the option of the Agent, to sign such financing statement on behalf of such Borrower or such Guarantor, as the case may be, and file the same, and each Borrower and each Guarantor hereby irrevocably designates the Agent, its agents, representatives and designees as its agent and attorney-in-fact for this purpose. In the event that any re-recording or refiling thereof (or the filing of any statements of continuation or assignment of any financing statement) is required to protect and preserve such Lien, each Borrower shall, at the Borrowers' cost and expense, cause the same to be recorded and/or refiled at the time and in the manner requested by the Agent. SECTION III.3. Real Property; Mortgages; Title Insurance. (a) To the extent requested prior to the Initial Closing Date by the Agent: (i) each Borrower and each Guarantor shall duly execute and deliver to the Agent mortgages or deeds of trust (each such mortgage or deed of trust, as it may be amended, modified or supplemented from time to time in accordance with its terms, a "Mortgage") in respect of real property owned or leased by such Borrower or such Guarantor, together with consents of third parties to the Mortgages executed and delivered by it, and such title searches, non-disturbance agreements, lease amendments and/or consents, landlord's waivers, estoppel certificates and waivers, as the Agent shall request (in each case in form and substance satisfactory to the Agent) so as to create in the Agent's favor, for the benefit of the Secured Parties, upon recordation thereof, a valid, perfected and enforceable first priority Lien (subject to Liens permitted under Section 7.01 hereof) on the real property and improvements described therein, such Mortgages to be in form and substance satisfactory to the Agent; and (ii) each Borrower and each Guarantor shall cause the Mortgages executed and delivered to be duly recorded in the appropriate recording office or offices and shall pay all fees and taxes payable in connection therewith. (b) Each Borrower and each Guarantor shall furnish to the Agent for the benefit of the Secured Parties, at the Borrowers' cost and expense, one or more policies of mortgagee title insurance, in form, substance and amount reasonably satisfactory to the Agent, insuring that each of the Mortgages executed and delivered by it pursuant hereto is a valid and perfected first priority Lien (except for the Liens permitted by Section 7.01) in favor of the Agent, for the benefit of the Secured Parties, on the fee or leasehold interest of such Borrower or such Guarantor, in the real property and improvements described therein, and that such Borrower or such Guarantor has good and marketable title thereto, issued by a title insurance company reasonably satisfactory to the Agent, together with satisfactory evidence that all title insurance premiums have been fully paid. The Borrowers shall furnish to the Agent certified surveys of real property and such other certificates and documents as the Agent may reasonably request and which are customary in financing of this type. Each Borrower and each Guarantor shall also provide to each Lender with respect to any real property to be subject to a Mortgage, on or prior to the taking of such Mortgage, such appraisals of such real property as shall be reasonably requested by the Agent. If requested by the Agent, each Borrower and each Guarantor shall, at the Borrowers' cost and expense, furnish to the Agent, for the benefit of the Secured Parties, flood insurance with respect to any real property subject to any Mortgage to the extent such flood insurance can be obtained by such Borrower and such Guarantor on commercially reasonable terms; provided, however, that, at the Borrowers' cost and expense, each Borrower and each Guarantor shall in any event maintain and shall furnish to the Agent flood insurance with respect to any owned or leased real property subject to any Mortgage to the extent flood insurance with respect to such real property is required to be maintained by applicable law (whether such law is applicable to any Lender (including, without limitation, by reason of such Mortgage), any Borrower, any Guarantor or otherwise). (c) Upon any Borrower or any Guarantor acquiring any real property (whether owned or leased) after the Initial Closing Date (including, without limitation, on the Merger Closing Date) in accordance with the provisions of this Agreement, such Borrower or such Guarantor shall, to the extent requested by the Agent, execute and deliver a Mortgage with respect to such real property and such other documents as may be reasonably requested by the Lenders with respect thereto and shall, to the extent requested by the Agent, deliver or cause to be delivered to the Agent each of the documents described in clause (b) above. This Section 3.03 shall not be deemed to allow any Borrower or any Guarantor to acquire any property if otherwise prohibited by this Agreement. Notwithstanding the foregoing, the Borrowers and Guarantors shall only be obligated to exercise reasonable efforts to comply with the requirements of this Section 3.03 with respect to the granting of mortgages on leaseholds. SECTION III.4. Post-Initial Closing Date Real Property; Further Assurances. Not later than 60 days after the Initial Closing Date with respect to any fee property (except with respect to the Alabama fee properties of Delchamps which shall be not later than 10 days after the Initial Closing Date) and 90 days after the Initial Closing Date with respect to any leasehold property, the Agent shall have received (to the extent requested by the Agent, whether before or after the Initial Closing Date): (a) fully executed counterparts of Mortgages in respect of real property owned or leased by such Borrower or such Guarantor (and identified on Schedule 3.04 annexed hereto), together with consents of third parties to the Mortgages executed and delivered by it, and such title searches, non-disturbance agreements, lease amendments and/or consents, landlord's waivers, estoppel certificates and waivers, as the Agent shall request (in each case in form and substance satisfactory to the Agent) so as to create in the Agent's favor, for the benefit of the Secured Parties, upon recordation thereof, a valid, perfected and enforceable first priority Lien (subject to Liens permitted under Section 7.01 hereof) on the real property and improvements described therein, such Mortgages to be in form and substance satisfactory to the Agent; (b) each Borrower and each Guarantor shall cause the Mortgages executed and delivered to be duly recorded in the appropriate recording office or offices and shall pay all fees and taxes payable in connection therewith; (c) mortgagee title insurance (and, as applicable, endorsements to existing title insurance policies), in form, substance and amount reasonably satisfactory to the Agent, insuring that each of the Mortgages executed and delivered by it pursuant hereto is a valid and perfected first priority Lien (except for the Liens permitted by Section 7.01) in favor of the Agent, for the benefit of the Secured Parties, on the fee or leasehold interest of such Borrower or such Guarantor, in the real property and improvements described therein, and that such Borrower or such Guarantor has good and marketable title thereto, together with such other endorsements reasonably requested by the Agent, issued by a title insurance company reasonably satisfactory to the Agent, together with satisfactory evidence that all title insurance premiums have been fully paid; and (d) a survey, in form and substance satisfactory to the Agent, to each Mortgaged Property, each certified by a licensed professional surveyor satisfactory to the Agent and revealing no facts which would materially interfere with the use of such properties by the Borrower and its Subsidiaries, or an update of an existing survey provided the title company will delete the exception for existing facts which a current survey would disclose. Notwithstanding the foregoing, the Borrowers and Guarantors shall only be obligated to exercise reasonable efforts to comply with the requirements of this Section with respect to the granting of Mortgages on leaseholds. SECTION III.5. Additional Collateral. Each Borrower and each Guarantor acknowledges that it is its intention to provide the Agent with a Lien on all the property (excluding automobiles, but including, without limitation, any property acquired in connection with the Related Transactions) of the Borrowers, the Guarantors and their respective subsidiaries (personal, real and mixed), whether now owned or hereafter acquired (other than as agreed to in writing by the Agent), subject only to Liens permitted hereunder. Without limitation of Section 3.03(c) hereof, each Borrower and each Guarantor shall from time to time promptly notify the Agent of the acquisition by any of them or any of their respective subsidiaries of any material property in which the Agent does not then hold a perfected Lien (other than as agreed to in writing by the Agent), or the creation or existence of any such property, and such person shall, upon request by the Agent, promptly execute and deliver to the Agent or cause to be executed and delivered to the Agent pledge agreements, security agreements, mortgages or other like agreements with respect to such property, together with such other documents, certificates, opinions of counsel and the like as the Agent shall reasonably request in connection therewith, in form and substance satisfactory to the Agent, such that the Agent shall receive valid and perfected first priority Liens (subject to Liens permitted hereby) on all such property (including property which, on the Initial Closing Date, is not subject to a Lien in favor of the Agent). In addition, in the event that any Borrower, any Guarantor or any of their respective subsidiaries acquires or owns any material trademarks, copyrights, patents or other intellectual property, the Borrowers shall notify the Agent promptly in writing and shall execute, or cause the execution of a security agreement and other documents with respect thereto in form and substance reasonably satisfactory to the Agent. Notwithstanding the foregoing, the Borrowers and Guarantors shall only be obligated to exercise reasonable efforts to comply with the requirements of this Section with respect to the granting of mortgages on leaseholds. IV. REPRESENTATIONS AND WARRANTIES Each of the Borrowers and each of the Guarantors jointly and severally represents and warrants to each of the Lenders that: SECTION IV.1. Organization, Legal Existence. Each Borrower, each Guarantor and each of their respective subsidiaries is a legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction of their respective organization, has the requisite power and authority to own their property and assets and to carry on their business as now conducted and as currently proposed to be conducted and is qualified to do business in each jurisdiction where the failure to so qualify would not have a Material Adverse Effect (all such jurisdictions being listed in Schedule 4.01 annexed hereto). Prior to the Initial Closing Date, Acquisition Corp. has not engaged in any business or incurred any liabilities except for activities, expenses and liabilities incident to its organization and to the consummation of the Transactions and the Related Transactions. Each Borrower and each Guarantor has the corporate power to execute, deliver and perform its obligations under this Agreement and the other Loan Documents to which it is a party, and, with respect to each Borrower, to borrow hereunder and to execute and deliver the Notes. SECTION IV.2. Authorization. The execution, delivery and performance by each Borrower and each Guarantor of this Agreement and each of the other Loan Documents to which it is a party, the borrowings hereunder by each Borrower, the execution and delivery by each Borrower of the Notes and the grant of security interests in the Collateral created by the Security Documents (collectively, the "Transactions") and the consummation by each Borrower, each Guarantor and each of their respective subsidiaries of the Related Transactions (a) have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) violate (A) any provision of law, statute, rule or regulation applicable to any Borrower, any Guarantor or any of their respective subsidiaries or the certificate or articles of incorporation or other applicable constitutive documents or the by-laws of any Borrower, any Guarantor or any of their respective subsidiaries, as the case may be, (B) any order of any court, or any rule, regulation or order of any other agency of government binding upon any Borrower, any Guarantor or any of their respective subsidiaries, or (C) any provisions of any indenture, agreement or other instrument to which any Borrower, any Guarantor or any of their respective subsidiaries, or any of their respective properties or assets are or may be bound (which violation would reasonably be expected to have a Material Adverse Effect), (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in (b)(i)(C) above which will remain in effect following the Initial Closing Date or (iii) result in the creation or imposition of any Lien of any nature whatsoever (other than in favor of the Agent, for the benefit of the Secured Parties, as contemplated by this Agreement and the Security Documents) upon any property or assets of any Borrower, any Guarantor or any of their respective subsidiaries. SECTION IV.3. Governmental Approvals. No registration or filing (other than the filings necessary to perfect the Liens created by the Security Documents) with, consent or approval of, or other action by, any Federal, state or other governmental agency, authority or regulatory body is or will be required on behalf of any Borrower or any Guarantor or any subsidiary of any of them in connection with the Transactions and the Related Transactions, other than any which have been made or obtained on the Initial Closing Date and with respect to the Merger, other than any which will have been made or obtained no later than the Merger Closing Date, as the case may be, in each case as set forth on Schedule 4.03. SECTION IV.4. Binding Effect. This Agreement and each of the other Loan Documents to which it is a party constitutes, and each of the Notes when duly executed and delivered will constitute, a legal, valid and binding obligation of each Borrower and each Guarantor, as appropriate, enforceable in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law). SECTION IV.5. Material Adverse Change. Since the date of its corporate formation (in the case of the Acquisition Corp.), and since May 3, 1997 (in the case of the Borrowers and their respective subsidiaries), there has been no change, event or facts that would reasonably be expected to have a Material Adverse Effect. SECTION IV.6. Litigation; Compliance with Laws; etc. (a) There are not any actions, suits or proceedings at law or in equity or by or before any governmental instrumentality or other agency or regulatory authority now pending or, to the knowledge of any Responsible Officer of any Borrower, any Guarantor or any of their respective subsidiaries, threatened, against or affecting any Borrower, any Guarantor or any of their respective subsidiaries or the businesses, assets or rights of any Borrower, any Guarantor or any of their respective subsidiaries (i) which involve any of the Transactions or the Related Transactions or (ii) as to which it is probable (within the meaning of Statement of Financial Accounting Standards No. 5) that there will be an adverse determination and which, if adversely determined, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (b) None of the Borrowers, any Guarantor or any of their respective subsidiaries is in violation of any law in any material respect, or in default with respect to any judgment, writ, injunction, decree, rule or regulation of any court or governmental agency or instrumentality which would reasonably be expected to have a Material Adverse Effect. SECTION IV.7. Financial Statements. (a) The Borrowers have heretofore furnished to the Lenders Consolidated balance sheets and statements of income and cash flows of Jitney Jungle and its Consolidated subsidiaries dated as of May 3, 1997 audited by and accompanied by the opinion of Deloitte & Touche, its independent public accountants. Such balance sheets and statements of income and cash flows present fairly the Consolidated financial condition and results of operations of Jitney Jungle and its subsidiaries as of the dates and for the periods indicated, and such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of Jitney Jungle and its subsidiaries, as of the dates thereof to the extent such material liabilities are required to be disclosed under generally accepted accounting principles. The Borrowers have heretofore furnished to the Lenders unaudited Consolidated balance sheets and statements of income and cash flows of Jitney Jungle and its Consolidated subsidiaries dated as of July 26, 1997, for the twelve-week fiscal period of Jitney Jungle ending on such date. Such unaudited balance sheets and statements of income and cash flows present fairly the Consolidated financial condition and results of operations of Jitney Jungle and its subsidiaries as of the dates and for the periods indicated, and such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of Jitney Jungle and its subsidiaries as of the dates thereof. The financial statements referred to in this Section 4.07(a) have been prepared in accordance with generally accepted accounting principles consistently applied (with respect to the twelve-week financial statements only, subject to year-end adjustments). (b) The Borrowers have, on or about August 21, 1997, furnished to the Lenders projected income statements, balance sheets, cash flows, Undrawn Availability forecasts and forecasts as to Excess Cash Flow and as to compliance with the covenants contained in Sections 7.07, 7.08, 7.09, 7.10 and 7.11 hereof, in each case of the Borrowers on a Consolidated basis for the period initially ending May 2, 1998 and for each fiscal year ending thereafter prior to the Final Maturity Date (which projections shall be on a fiscal month by fiscal month basis for the fiscal period ending May 2, 1998 and on a yearly basis thereafter), together with a schedule demonstrating prospective compliance with all financial covenants contained in this Agreement, such projections disclosing all material assumptions made by Jitney Jungle and its subsidiaries in formulating such projections and both before and after giving effect to the Related Transactions and the Transactions, as applicable. The projections are based upon reasonable estimates and assumptions, all of which are reasonable in light of the conditions which existed at the time the projections were made, have been prepared on the basis of the assumptions stated therein, and reflect as of the Initial Closing Date the reasonable estimate of Jitney Jungle and its subsidiaries of the results of operations and other information projected therein. (c) The Borrowers have, on or about the Initial Closing Date, furnished to the Lenders a Consolidated pro forma balance sheet and a statement of income and cash flows of Jitney Jungle and its subsidiaries, which are consistent with the previous balance sheets, statements of income and cash flows of Jitney Jungle and its subsidiaries in all material respects, and which sets forth information before and after giving effect to the Transactions and the Related Transactions. (d) The Borrowers have heretofore furnished to the Lenders Consolidated balance sheets and statements of income and cash flows of the Target Company and its Consolidated subsidiaries dated as of June 28,1997 audited by and accompanied by the opinion of KPMG Peat Marwick LLP, its independent public accountants. Such balance sheets and statements of income and cash flows present fairly the Consolidated financial condition and results of operations of the Target Company and its subsidiaries as of the dates and for the periods indicated, and such balance sheets and the notes thereto disclose all material liabilities, direct or contingent, of the Target Company and its subsidiaries, as of the dates thereof to the extent such material liabilities are required to be disclosed under generally accepted accounting principles. The financial statements referred to in this Section 4.07(d) have been prepared in accordance with generally accepted accounting principles consistently applied. SECTION IV.8. Federal Reserve Regulations. (a) None of any Borrower, any Guarantor or any of their respective subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. (b) No part of the proceeds of the Loans will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock in violation of Regulation G, T, U or X or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose which entails a violation of, or which is inconsistent with, the provisions of the Regulations of the Board, including, without limitation, Regulation G, T, U or X thereof. If requested by any Lender, the Borrowers or any of their respective subsidiaries shall furnish to such Lender a statement on Federal Reserve Form U-1 referred to in said Regulation U. SECTION IV.9. Taxes. The Borrowers, the Guarantors and each of their respective subsidiaries have each filed or caused to be filed all Federal, state, local and foreign tax returns which are required to be filed by them, other than tax returns in respect of taxes that (x) are not franchise, capital or income taxes, (y) in the aggregate are not material and (z) would not, if unpaid, result in the imposition of any material Lien on any property or assets of any Borrower, any Guarantor or any of their respective subsidiaries. The Borrowers, the Guarantors and their respective subsidiaries have paid or caused to be paid all taxes shown to be due and payable on such filed returns or on any assessments received by them, other than any taxes or assessments the validity of which the Borrowers, the Guarantors or any of their respective subsidiaries is contesting in good faith by appropriate proceedings, and with respect to which the Borrowers, the Guarantors or any of their respective subsidiaries shall, to the extent required by generally accepted accounting principles consistently applied, have set aside on its books adequate reserves. As of the Initial Closing Date, no Federal income tax returns of the Borrowers, the Guarantors or any of their respective subsidiaries are currently being audited by the United States Internal Revenue Service. All deficiencies which have been asserted against the Borrowers, the Guarantors or any of their respective subsidiaries as a result of such completed examinations have been fully paid or finally settled and no issue has been raised in any such examination which, by application of similar principles, reasonably can be expected to result in assertion of a material deficiency for any other year not so examined which has not been reserved for in any financial statement of the Borrowers, the Guarantors or any of their respective subsidiaries delivered to the Lenders. None of the Borrowers, the Guarantors or any of their respective subsidiaries has taken any reporting positions for which they do not have a reasonable basis and none of the Borrowers, the Guarantors or any of their respective subsidiaries anticipates any further material tax liability with respect to the years which have not been closed. None of the Borrowers, the Guarantors or any of their respective subsidiaries has as of the date hereof requested or been granted any extension of time to file any Federal, state, local or foreign tax return. None of the Borrowers, the Guarantors or any of their respective subsidiaries is party to or has any obligation under any tax sharing agreement. SECTION IV.10. Employee Benefit Plans. With respect to the provisions of ERISA: (i) No Reportable Event has occurred or is continuing with respect to any Pension Plan. (ii) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any Plan subject to Part 4 of Subtitle B of Title I of ERISA that could subject any Borrower or any ERISA Affiliate thereof to a material civil penalty assessed pursuant to the provisions of Section 502 of ERISA or a material tax imposed under the provisions of Section 4975 of the Code. (iii) None of any Borrower or any ERISA Affiliate thereof is now, or has been during the preceding five years, obligated to contribute to a Pension Plan or a Multiemployer Plan. None of any Borrower or any ERISA Affiliate thereof has (A) ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA, (B) withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA, (C) ceased making contributions to any Pension Plan subject to the provisions of Section 4064(a) of ERISA to which any Borrower, any subsidiary thereof or any ERISA Affiliate thereof made contributions, (D) incurred or caused to occur a "complete withdrawal" (within the meaning of Section 4203 of ERISA) or a "partial withdrawal" (within the meaning of Section 4205 of ERISA) from a Multiemployer Plan that is a Pension Plan so as to incur withdrawal liability under Section 4201 of ERISA (without regard to subsequent reduction or waiver of such liability under Section 4207 or 4208 of ERISA), or (E) been a party to any transaction or agreement under which the provisions of Section 4204 of ERISA were applicable, in each case, which would result in a Material Adverse Effect. (iv) No notice of intent to terminate a Pension Plan (other than a Multiemployer Plan) has been filed, nor has any Plan been terminated pursuant to the provisions of Section 4041(e) of ERISA which would result in a Material Adverse Effect. (v) The PBGC has not instituted proceedings to terminate (or appoint a trustee to administer) a Pension Plan and no event has occurred or condition exists which might constitute grounds under the provisions of Section 4042 of ERISA for the termination of (or the appointment of a trustee to administer) any such Plan. (vi) With respect to each Pension Plan (other than a Multiemployer Plan) that is subject to the provisions of Title I, Subtitle B, Part 3 of ERISA, the funding method used in connection with such Plan is acceptable under ERISA, and the actuarial assumptions and methods used in connection with funding such Pension Plan satisfy the requirements of Section 302 of ERISA. The assets of each such Pension Plan (other than the Multiemployer Plans) are at least equal to the present value of the greater of (i) accrued benefits (both vested and non-vested) under such Plan, or (ii) "benefit liabilities" (within the meaning of Section 4001(a)(16) of ERISA) under such Plan, in each case as of the latest actuarial valuation date for such Plan (determined in accordance with the same actuarial assumptions and methods as those used by the Plan's actuary in its valuation of such Plan as of such valuation date). No such Pension Plan has incurred any "accumulated funding deficiency" (as defined in Section 412 of the Code), whether or not waived, which would result in a Material Adverse Effect. (vii) There are no actions, suits or claims pending (other than routine claims for benefits) or, to the knowledge of any Borrower or any ERISA Affiliate thereof, which could reasonably be expected to be asserted, against any Plan (other than a Multiemployer Plan) or the assets of any such Plan which would cause a Material Adverse Effect. No civil or criminal action brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is pending or threatened against any fiduciary or any Plan (other than a Multiemployer Plan) which would have a Material Adverse Effect. None of the Plans or any fiduciary thereof (in its capacity as such) has been the direct or indirect subject of any audit, investigation or examination by any governmental or quasi-governmental agency which would have a Material Adverse Effect. (viii) All of the Plans substantially comply currently, and have substantially complied in the past, both as to form and operation, with their terms and with the provisions of ERISA and the Code, and all other applicable laws, rules and regulations; all necessary governmental approvals for the Plans have been obtained and a favorable determination as to the qualification under Section 401(a) of the Code of each of the Plans which is an employee pension benefit plan (within the meaning of Section 3(2) of ERISA) has been made by the Internal Revenue Service and a recognition of exemption from federal income taxation under Section 501(a) of the Code of each of the funded employee welfare benefit plans (within the meaning of Section 3(1) of ERISA) has been made by the Internal Revenue Service, and nothing has occurred since the date of each such determination or recognition letter that would adversely affect such qualification. SECTION IV.11. No Material Misstatements. No information, report, financial statement, exhibit or schedule prepared or furnished by or on behalf of any Borrower or any Guarantor or any subsidiary of any of them to the Agent or any Lender in connection with any of the Transactions, the Related Transactions or this Agreement, the Security Documents, the Notes or any other Loan Documents or included therein at the time it was prepared contained any material misstatement of fact or omitted to state any material fact necessary to make the statements therein, taken together with all other such statements made to the Agent or any Lender, in the light of the circumstances under which they were made, not misleading. SECTION IV.12. Investment Company Act; Public Utility Holding Company Act. None of the Borrowers, the Guarantors or any of their respective subsidiaries is an "investment company" as defined in, or is otherwise subject to regulation under, the Investment Company Act of 1940. None of the Borrowers, the Guarantors or any of their respective subsidiaries is a "holding company" as that term is defined in or is otherwise subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION IV.13. Security Interest. The Agent has (and each of the Borrowers confirms the pledge and grant to the Agent, for the benefit of the Secured Parties, under the Existing Security Documents of a security interest in the collateral therein described) a legal, valid and perfected security interest in and Lien on all of such collateral. Without limitation of the foregoing, each of the Security Documents creates and grants to the Agent, for the benefit of the Secured Parties, a valid and perfected first (except as permitted pursuant to Section 7.01 hereof) priority security interest in the collateral identified therein. Such collateral is not subject to any other Liens whatsoever, except Liens permitted by Section 7.01 hereof. Schedule 4.13 annexed hereto lists the jurisdictions in which financing statements or mortgages have been filed as of the Initial Closing Date. SECTION IV.14. Bank Accounts. Schedule 4.14 hereto sets forth as of the Initial Closing Date a list of all bank accounts of the Borrowers. SECTION IV.15. Capitalization. (a) As of the Initial Closing Date, the authorized capital stock of Jitney Jungle consists of (i) 5,000,000 shares of common stock, $0.01 par value per share, of which 425,000 shares shall be issued and outstanding and (ii) 600,000 shares of preferred stock, par value $0.01 per share, consisting of (A) 225,000 shares of the Series A Preferred Stock of which 225,000 shall be issued and outstanding, (B) 275,000 shares of the Series B Preferred Stock of which 274,460.24 shall be issued and outstanding and (C) 100,000 shares of the Series C Preferred Stock of which 100,000 shall be issued and outstanding. The owners of the capital stock of Jitney Jungle and the number of shares of capital stock owned by each such owner on the Initial Closing Date and after consummation of the Transactions and the Related Transactions (other than the Merger) is set forth on Schedule 4.15(a) annexed hereto. On the Initial Closing Date and after consummation of the Transactions and the Related Transactions (other than the Merger), except as set forth in Schedule 4.15(a), Jitney Jungle will have no subsidiaries. Except as set forth on Schedule 4.15(a), upon issuance thereof and payment therefor, all such Acquisition Securities have been or shall be duly authorized and validly issued, are or shall be fully paid and nonassessable and are or shall be free of preemptive rights. The issuance and sale of the Acquisition Securities either have been registered or qualified under applicable federal and state securities laws or are exempt therefrom. (b) As of the Initial Closing Date and after consummation of the Transactions and the Related Transactions (other than the Merger), Schedule 4.15(b) annexed hereto sets forth, with respect to each Borrower and each Guarantor (other than Jitney Jungle), its jurisdiction of incorporation, its capitalization and the ownership of capital stock of each such Borrower or Guarantor. None of such Borrowers or Guarantors has any subsidiaries, except as set forth on Schedule 4.15(b) annexed hereto. SECTION IV.16. Title to Properties; Possession Under Leases; Trademarks. (a) Each Borrower, each Guarantor and each of their respective subsidiaries owns good and marketable, indefeasible fee simple title to all of the real estate described on Schedule 4.16(a-1) annexed hereto as owned by it and has a valid leasehold interest in all of the real estate described on Schedule 4.16(a-2) annexed hereto as leased by it, in each case (to the best of Borrowers' knowledge with respect to leases) free and clear of all Liens or other encumbrances of any kind, except as described in Schedule 4.16(a-2) annexed hereto and except Liens permitted under Section 7.01 hereof. Schedules 4.16(a-1) and 4.16(a-2) annexed hereto correctly identify as of the Initial Closing Date, (x) each parcel of real property owned by such Borrower, such Guarantor or such subsidiary, together in each case with an accurate street address and description of the use of such parcel, (y) each parcel of real property leased by or to such Borrower, such Guarantor or such subsidiary, together in each case with an accurate street address and description of the use of such parcel, and (z) each other interest in real property owned, leased or granted to or held by such Borrower, such Guarantor or such subsidiary. Except as set forth on Schedules 4.16(a-1) and 4.16(a-2): (i) no structure owned or leased by any Borrower, any Guarantor or any of their respective subsidiaries fails to conform in any material respect with applicable ordinances, regulations, zoning laws and restrictive covenants (including in any such case and without limitation those relating to environmental protection) nor encroaches upon property of others, nor is any such real property encroached upon by structures of others in any case in any manner that would have or would be reasonably likely to have a Material Adverse Effect on the Agent's or Lenders' interest in any Collateral located on the premises or otherwise would have or would be reasonably likely to have a Material Adverse Effect; (ii) no charges or violations have been filed, served, made or threatened, to the knowledge of such Borrower or Guarantor, against or relating to any such property or structure or any of the operations conducted at any such property or structure, as a result of any violation or alleged violation of any applicable ordinances, requirements, regulations, zoning laws or restrictive covenants (including in any such case and without limitation those relating to environmental protection) or as a result of any encroachment on the property of others where the effect of same would have or would be reasonably likely to have a Material Adverse Effect on the Agent's or Lenders' interest in any Collateral located on the premises or otherwise would have or would be reasonably likely have a Material Adverse Effect; (iii) other than pursuant to applicable laws, rules, regulations or ordinances, covenants that run with the land or provisions in the applicable leases, there exists no restriction on the use, transfer or mortgaging of any such property; (iv) such Borrower, such Guarantor and/or such subsidiary each have adequate permanent rights of ingress to and egress from any such property used by it for the operations conducted thereon; (v) there are no developments affecting any of the real property or interests therein pending or (to the best of Borrowers' knowledge) threatened which might reasonably be expected to curtail or interfere in any material respect with the use of such property for the purposes for which it is now used; and (vi) as of the Initial Closing Date, none of the Borrowers, the Guarantors or any of their respective subsidiaries has any obligation to acquire any interest in, any real property. (b) Except as set forth in Schedule 4.16(a-2), each Borrower, each Guarantor and each of their respective subsidiaries owns and has good and marketable title to all the owned properties and assets reflected on its most recent balance sheet and valid leasehold interests in the property it leases subject to no Liens except Liens permitted under Section 7.01, and all such leases are in full force and effect and each Borrower, each Guarantor and each of their respective subsidiaries enjoys peaceful and undisturbed possession under all such leases, other than assets permitted to be sold under this Agreement, leases terminated in the ordinary course of business and disputes with lessors being pursued in good faith. (c) Each Borrower, each Guarantor and each of their respective subsidiaries own or control or have the right to use all trademarks, trademark rights, trade names, trade name rights, copyrights, patents, patent rights and licenses which are material to the conduct of the business of such Borrower, such Guarantor or such subsidiary. To the best of such Borrower's or such Guarantor's knowledge, as applicable, none of such Borrower, such Guarantor or any of their respective subsidiaries is infringing upon or otherwise acting adversely to any of such trademarks, trademark rights, trade names, trade name rights, copyrights, patent rights or licenses owned by any other person or persons. There is no claim or action by any such other person pending, or to the knowledge of any Responsible Officer of such Borrower or such Guarantor, as applicable, threatened against such Borrower or such Guarantor, or any of their respective subsidiaries with respect to any of the rights or property referred to in this Section 4.16(c), except as would not reasonably be expected to have a Material Adverse Effect. SECTION IV.17. Solvency. Both before and after giving effect to the Related Transactions, (a) The fair salable value of the assets of each of Jitney Jungle and each of its Consolidated subsidiaries is not less than the amount that will be required to be paid on or in respect of the probable liability on the existing debts and other liabilities (including contingent liabilities) of Jitney Jungle and each such Consolidated subsidiary, as they become absolute and mature. (b) The assets of each of Jitney Jungle and each of its Consolidated subsidiaries do not constitute unreasonably small capital for Jitney Jungle and such Consolidated subsidiaries to carry out their respective businesses as now conducted and as proposed to be conducted including the capital needs of Jitney Jungle and such Consolidated subsidiaries, taking into account the particular capital requirements of the business conducted by Jitney Jungle and each such Consolidated subsidiary and projected capital requirements and capital availability thereof. (c) None of the Borrowers or any of their respective subsidiaries intends to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be received by the Target Company and its subsidiaries, and of amounts to be payable on or in respect of debt of the Target Company and its subsidiaries). The cash flow of each of Jitney Jungle and its Consolidated subsidiaries, after taking into account all anticipated uses of the cash of Jitney Jungle and its Consolidated subsidiaries, will at all times be sufficient to pay all such amounts on or in respect of debt of Jitney Jungle and its Consolidated subsidiaries when such amounts are required to be paid. (d) None of the Borrowers nor any of their respective subsidiaries believes that final judgments against them in actions for money damages presently pending will be rendered at a time when, or in an amount such that, they will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum reasonable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered). The cash flow of each of Jitney Jungle and each of its Consolidated subsidiaries, after taking into account all other anticipated uses of the cash of Jitney Jungle and its Consolidated subsidiaries (including the payments on or in respect of debt referred to in paragraph (c) of this Section), will at all times be sufficient to pay all such judgments promptly in accordance with their terms. SECTION IV.18. Permits, etc. Each Borrower, each Guarantor and each of their respective subsidiaries possesses all licenses, permits, approvals and consents, including, without limitation, all environmental, health and safety licenses, permits, approvals and consents of all Federal, state and local governmental authorities which are required under Environmental Law and are material to the conduct of its business (collectively, "Permits"), other than as set forth on Schedule 4.18; each such Permit is and will be in full force and effect; each Borrower, each Guarantor and each of their respective subsidiaries is in compliance in all material respects with all such Permits, and, to its knowledge, no event (including, without limitation, any material violation of any law, rule or regulation) has occurred which would be likely to lead to the revocation or termination of any such Permit or any additional restriction thereon, except as such Permits expire and must be reissued due to the passage of time. SECTION IV.19. Compliance with Environmental Laws. (i) The operations of each Borrower, each Guarantor and their respective subsidiaries comply in all material respects with all applicable Environmental Laws; (ii) none of any Borrower, any Guarantor or any of their respective subsidiaries and all of their present facilities or operations, as well as to their knowledge, their past facilities or operations, are subject to any judicial proceeding, administrative proceeding or written order or agreement with any governmental authority or private party respecting (a) any Environmental Law, (b) any Remedial Work, or (c) any Environmental Claims arising from the Release of a Hazardous Material into the environment, except as would not reasonably be expected to have a Material Adverse Effect; (iii) none of the operations of any Borrower, any Guarantor or any of their respective subsidiaries are the subject of any Federal or state investigation evaluating whether any Remedial Work is needed to respond to a Release of any Hazardous Material into the environment in violation of any Environmental Law, except as would not reasonably be expected to have a Material Adverse Effect; (iv) none of any Borrower, any Guarantor or any of their respective subsidiaries or any predecessor of any Borrower, any Guarantor or any of their respective subsidiaries have filed any notice under any Environmental Law indicating past or present treatment, storage, or disposal of a Hazardous Material in material violation of any Environmental Law or reporting a material spill or Release of a Hazardous Material into the environment in violation of any Environmental Law, except for spills the responses to which would not collectively reasonably be expected to have a Material Adverse Effect; (v) to the best of Borrowers' knowledge, none of any Borrower, any Guarantor or any of their respective subsidiaries have any contingent liability in connection with any Release of any Hazardous Material into the environment, except as would not reasonably be expected to have a Material Adverse Effect; (vi) none of the operations of any Borrower, any Guarantor or any of their respective subsidiaries involve the generation, transportation, treatment or disposal of Hazardous Materials except in compliance with all Environmental Laws, except as would not reasonably be expected to have a Material Adverse Effect; (vii) none of any Borrower, any Guarantor or any of their respective subsidiaries has disposed of any Hazardous Material by placing it in or on the ground or waters of any premises owned, leased or used by any of them and to the knowledge of such Borrower, such Guarantor and such subsidiaries, neither has any lessee, prior owner or other person, except as would not reasonably be expected to have a Material Adverse Effect; (viii) no underground storage tanks or surface impoundments are on any property of any Borrower, any Guarantor or any of their respective subsidiaries, except as would not reasonably be expected to have a Material Adverse Effect; and (ix) no Lien in favor of any governmental authority for (A) any liability under any Environmental Law or regulation, or (B) damages arising from or costs incurred by such governmental authority in response to a Release of a Hazardous Material into the environment, has been filed or attached to the property of any Borrower, any Guarantor or any of their respective subsidiaries. SECTION IV.20. Material Agreements. Schedule 4.20 hereto sets forth as of the Initial Closing Date a list of all material agreements, contracts and instruments to which each Borrower, each Guarantor and each of their respective subsidiaries is a party or by which any of such persons is bound and all amendments, modifications and supplements to each of the foregoing. With respect to Delchamps, the foregoing representation is being made to the best of the Borrowers' knowledge. SECTION IV.21. Acquisition. (a) (i) The execution, delivery and performance by each party to the Merger Documents have been duly authorized by all necessary action on the part of each such party, and with respect to each party other than Acquisition Corp. or any Borrower, (ii) the Merger Documents constitute the valid, binding and enforceable obligation of each party thereto, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, and are in full force and effect without default or waiver of any of the conditions thereunder, and (iii) there are no governmental consents, filings, approvals or notices required to be made or obtained in connection with the execution, delivery and performance of the Merger Documents, except such as have been duly made, obtained or delivered or will on the Initial Closing Date and on the Merger Closing Date, be duly made, obtained or delivered. (b) Each of the representations and warranties made by each party to the Merger Documents is true and correct in all material respects, except with respect to each party other than Acquisition Corp. or Jitney Jungle, any which would not reasonably be expected to have a Material Adverse Effect, and such representations and warranties are hereby incorporated herein by reference with the same effect as though made by each of Acquisition Corp. and Jitney Jungle and set forth herein in their entirety. SECTION IV.22. The Tender Offer and Merger. (a) The Tender Offer complies with all provisions of all applicable laws and regulations of the United States and each applicable state thereof, including without limitation the State of Alabama (including, without limitation, anti-takeover statutes and regulations). (b) All consents and approvals of, filings, notices and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required to be obtained, given, filed or taken by the Borrowers in order to make or consummate the Tender Offer, to purchase Tendered Securities pursuant thereto or to consummate the Merger have been or, prior to the time when required, will have been, obtained, given, filed or taken and are or will be in full force and effect, and all applicable waiting periods have, or prior to the time when required, will have expired without, in all cases, any action being taken which restrains, prevents, imposes or threatens adverse conditions upon or hinders the consummation of the Tender Offer or the purchase of Tendered Securities thereunder or the consummation of the Merger. There does not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraints pending or noticed with respect to any of the transactions contemplated by the Merger Documents and the Tender Offer Documents, including without limitation, with respect to the consummation of the Tender Offer or the Merger. (c) At the time of their dissemination to the public, the Offer to Purchase and any other Tender Offer Documents and any amendments or supplements thereto, copies of which have been delivered to the Agent and the Lenders, did not and will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. SECTION IV.23. Broker's Fees. Except as set forth in Schedule 4.23 annexed hereto, no broker's or finder's fee, commission or similar compensation has been or will be payable with respect to the issuance and sale of the Senior Subordinated Notes or any of the Transactions or the Related Transactions. No other similar fees or commissions will be payable by any Person for any other services rendered to the Target Company or any Borrower ancillary to the Transactions or the Related Transactions. V. CONDITIONS OF CREDIT EVENTS The obligation of each Lender to make Loans and provide other Credit Events hereunder shall be subject to the following conditions precedent: SECTION V.1. All Credit Events. On each date on which a Credit Event is to occur: (a) The Agent shall have received a notice of borrowing as required by Section 2.03 hereof or a notice of the issuance of a Letter of Credit as required by Section 2A.01 hereof, as appropriate. (b) The representations and warranties set forth in Article IV hereof and in any documents delivered herewith, including, without limitation, the Loan Documents, shall be true and correct in all material respects with the same effect as though made on and as of such date (except insofar as such representations and warranties relate expressly to an earlier date). (c) The Borrowers shall be in compliance with all the terms and provisions contained herein on their part to be observed or performed, and at the time of and immediately after such Credit Event, no Default or Event of Default shall have occurred and be continuing. (d) The Agent shall have received a certificate signed by the Financial Officer of the Borrowers (i) as to the compliance with (b) and (c) above and (ii) with respect to each Loan and each Letter of Credit, demonstrating that after giving effect thereto the Undrawn Availability is zero or greater and Section 2.20 has been complied with. In the absence of delivery of the certificate set forth in this Section 5.01(d), each notice of borrowing and/or notice of issuance of Letter of Credit under Section 5.01(a) shall be deemed to include the certification described in this Section 5.01(d). SECTION V.2. Initial Closing Date. The obligations of the Lenders in respect of the first Credit Event hereunder are subject to the following additional conditions precedent: (a) The Agent and the Lenders shall have received the favorable written opinion(s) of (i) counsel for each of the Borrowers, the Guarantors and the Grantors, substantially in the forms of Exhibit B annexed hereto, dated the Initial Closing Date, addressing such matters and from such jurisdictions as shall be requested by the Agent (including, without limitation, opinions from Alabama, Louisiana and Mississippi counsel to the Borrowers, opinions from counsel licensed in the relevant jurisdictions of incorporation of each of the Borrowers and the Guarantors and the Grantors), addressed to the Agent and the Lenders and satisfactory to the Agent, and (ii) counsel for the Target Company and its subsidiaries, dated the Initial Closing Date, addressing such matters as shall be requested by the Agent, addressed to the Agent and the Lenders and satisfactory to the Agent. (b) The Agent and the Lenders shall have received (i) a copy of the certificate or articles of incorporation or constitutive documents, in each case as amended to date, of each of the Borrowers, the Grantors and the Guarantors, certified as of a recent date by the Secretary of State or other appropriate official of the state of its organization, and a certificate as to the good standing of each from such Secretary of State or other official, in each case dated as of a recent date; (ii) a certificate of the Secretary of each of the Borrowers, Grantors and Guarantors, dated the Initial Closing Date and certifying (A) that attached thereto is a true and complete copy of such person's By-laws as in effect on the date of such certificate and at all times since a date prior to the date of the resolution described in item (B) below, (B) that attached thereto is a true and complete copy of a resolution adopted by such person's Board of Directors authorizing the execution, delivery and performance of this Agreement, the Security Documents, the Notes, the other Loan Documents, the Credit Events hereunder and the consummation of the Related Transactions, as applicable, and that such resolution has not been modified, rescinded or amended and is in full force and effect, (C) that such person's certificate or articles of incorporation or constitutive documents has not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to (i) above, and (D) as to the incumbency and specimen signature of each of such person's officers executing this Agreement, the Notes, each Security Document or any other Loan Document delivered in connection herewith or therewith, as applicable; (iii) a certificate of another of such person's officers as to incumbency and signature of its Secretary; and (iv) such other documents as the Agent or any Lender may reasonably request. (c) The Agent shall have received a certificate, dated the Initial Closing Date and signed by the Financial Officer of each of the Borrowers, confirming compliance with the conditions precedent set forth in paragraphs (b) and (c) of Section 5.01 hereof and the conditions set forth in this Section 5.02. (d) Each Lender shall have received its Note, each duly executed by the Borrowers, payable to its order and otherwise complying with the provisions of Section 2.04 hereof. (e) The Agent shall have received the Security Documents (other than the Partnership Pledge Agreement), certificates evidencing the Pledged Stock (including, without limitation, the capital stock of Acquisition Corp. and the Tendered Securities (other than with respect to those Tendered Securities which are subject to guaranteed delivery procedures and which shall be subsequently delivered to the Agent)), together with undated stock powers executed in blank, each duly executed by the applicable Grantors, and each of the other documents, instruments, insurance policies and agreements requested by the Agent. (f) The Agent shall have received certified copies of requests for copies or information on Form UCC-11 or certificates satisfactory to the Lenders of a UCC Reporter Service, listing all effective financing statements which name as debtor any Borrower, any Guarantor or any Grantor and which are filed in the appropriate offices in the States in which are located the chief executive office and other operating offices of such person or where Collateral is located, together with copies of such financing statements. With respect to any Liens not permitted pursuant to Section 7.01 hereof, the Agent shall have received termination statements, and/or payoff letters which provide further assurances regarding the provision of termination statements, in form and substance satisfactory to it. (g) Each document (including, without limitation, each Uniform Commercial Code financing statement) required by law or requested by the Agent to be filed, registered or recorded in order to create in favor of the Agent for the benefit of the Secured Parties a first priority perfected security interest in the Collateral shall have been properly filed, registered or recorded in each jurisdiction in which the filing, registration or recordation thereof is so required or requested. The Agent shall have received an acknowledgment copy, or other evidence satisfactory to it, of each such filing, registration or recordation. (h) The Agent shall have received the results of a search of the Uniform Commercial Code filings made with respect to each Borrower and each Grantor and Guarantor in the jurisdictions in which Uniform Commercial Code filings have been made against each Borrower, each Guarantor and each Grantor pursuant to paragraph (g) above, and such results shall be satisfactory to the Agent. (i) The Lenders and the Agent shall have received and determined to be in form and substance satisfactory to them: (i) the most recent (dated within thirty (30) days of the Initial Closing Date) schedule of inventory designations of the Borrowers together with sales and other financial information requested by the Agent, in the form attached hereto as Exhibit J; (ii) evidence that, (A) immediately after giving effect to the consummation of the Related Transactions on a pro forma basis (including, without limitation, payment of the aggregate consideration payable to acquire 100% of the Target Stock on a fully diluted basis pursuant to the Tender Offer and the Merger) and after the payment of all anticipated fees, costs and expenses in connection with the Related Transactions, and with all trade payables aged in accordance with normal terms, the Borrowers will have Undrawn Availability plus cash on hand on the Initial Closing Date in an amount not less than $35,000,000, and (B) at all times prior to the consummation of the Merger, the Borrowers will have Undrawn Availability plus cash on hand in an amount sufficient to acquire all shares of capital stock of the Target Company (except those Tendered Securities previously acquired by Jitney Jungle or Acquisition Corp.) and the Agent may reserve from the Undrawn Availability an amount solely for such purpose and not otherwise available to the Borrowers; (iii) copies of the Senior Subordinated Indenture and the Senior Subordinated Notes, each certified by a Responsible Officer of Jitney Jungle. The Senior Subordinated Notes shall be issued pursuant to terms and conditions satisfactory to the Agent and the Lenders in all respects, and the Agent and the Lenders shall have received evidence satisfactory to the Agent and the Lenders of the receipt by the Borrowers of gross cash proceeds of not less than $200,000,000 thereunder. The entire proceeds of the Senior Subordinated Notes shall be applied by Acquisition Corp. towards payment of the purchase price of the Tendered Securities and the consummation of the Related Transactions (other than the Merger) on the Initial Closing Date. The aggregate consideration payable under the Merger Agreement (including cash and all other consideration) paid by Acquisition Corp. in connection with the Related Transactions (other than the initial borrowings under the Commitment on the Initial Closing Date) shall not exceed $24,500,000; (iv) a copy of a field examination of the books and records of Jitney Jungle and its subsidiaries; (v) evidence of the compliance by the Borrowers with Section 6.03 hereof; (vi) the financial statements described in Section 4.07 hereof, and with respect to the financial statements delivered pursuant to Section 4.07(c), a certificate dated the Initial Closing Date signed by the Financial Officer of Jitney Jungle, to the effect that such financial statements have been prepared by such Financial Officer in accordance with generally accepted accounting principles consistently applied, and satisfactory in all respects to the Agent, and confirming that such statements are consistent with drafts thereof previously delivered to the Agent; (vii) evidence that the Transactions and the Related Transactions are in compliance with all applicable laws and regulations; (viii) evidence of payment of all fees owed to the Agent and the Lenders by the Borrowers under this Agreement, the Commitment Letter, the Fee Letter or otherwise; (ix) the results of an environmental analysis with respect to the Target Company and its subsidiaries' properties and operations conducted by a firm satisfactory to the Agent and the Lenders, and the scope, methodology and results of such environmental analysis shall be satisfactory to the Agent and the Lenders in all respects; (x) the results of surveys and appraisals of the Target Company's and its subsidiaries' machinery, equipment and real property (in any event complying with any applicable law, including, without limitation, FIRREA), conducted by a firm satisfactory to the Agent and the Lenders, and satisfactory to the Agent and the Lenders in all respects; (xi) copies of all major customer and supplier contracts with respect to the Target Company and its subsidiaries and each Borrower; (xii) evidence that all requisite third party consents and waivers (including, without limitation, consents from the holders of the Senior Notes) to the Transactions and the Related Transactions, have been received; (xiii) evidence that there has been no material adverse change in the business, assets, liabilities, properties, prospects, operations or financial or other condition of (i) (A) Jitney Jungle and its subsidiaries, taken as a whole, since May 3, 1997 or (B) the Target Company and its subsidiaries, taken as a whole, since March 29, 1997 or (ii) (A) Jitney Jungle and its subsidiaries, taken as a whole, or (B) the Target Company and its subsidiaries, taken as a whole, in each case, from that described in the Pre-Commitment Information (as defined in the Commitment Letter); (xiv) evidence that all of the Pre-Commitment Information (as defined in the Commitment Letter) shall be true and correct in all material aspects; and no development or change shall have occurred (A) which has resulted in or could reasonably be expected to result in a material adverse change in, or material adverse deviation from, the Pre-Commitment Information or (B) which has had or could reasonably be expected to have a Material Adverse Effect or a material adverse effect on the business, assets, liabilities, properties, prospects, operations or financial condition of the Target Company and its subsidiaries taken as a whole; (xv) evidence that there are no actions, suits or proceedings at law or in equity or by or before any governmental instrumentality or other agency or regulatory authority now pending or threatened against or affecting the Target Company, any Borrower, any Guarantor, any Grantor, any of their respective subsidiaries, businesses, assets or rights, any of the Collateral, the Agent or any Lender (A) which could reasonably be expected to have a Material Adverse Effect or a material adverse effect on the business, assets, liabilities, properties, prospects, operations or financial condition of the Target Company and its subsidiaries taken as a whole or which may materially impair the ability of any Borrower, any Grantor or any Guarantor to perform its obligations under any Loan Document to which it is a party or the rights and remedies of the Agent and the Lenders under this Agreement and the Security Documents or (B) which purport to adversely affect any of the Transactions or the Related Transactions; and (xvi) evidence that (A) immediately prior to the Credit Events on the Initial Closing Date, the Target Indebtedness shall not exceed $16,225,000 and (B) there shall be no outstanding Indebtedness (other than Indebtedness outstanding hereunder and the Prior Indebtedness), or that such Indebtedness (other than Indebtedness outstanding hereunder and the Prior Indebtedness) shall be concurrently with the Credit Events on the Initial Closing Date, satisfied in full and that all Liens securing any obligations arising thereunder shall have been released. (j) The Agent and the Lenders shall have had the opportunity, if they so choose, to examine the books of account and other records and files of the Target Company, Acquisition Corp., the Borrowers, the Grantors and the Guarantors and their respective subsidiaries to make copies thereof, and to conduct a pre-closing audit or perform other due diligence which shall include, without limitation, verification of payment of payroll taxes and accounts payable, formulation of an opening Borrowing Base and review of tax, environmental, employee benefit and labor issues, and the results of such examination, audit and due diligence shall have been reasonably satisfactory to the Agent and Lenders in all respects. None of the information submitted prior to the Initial Closing Date shall have been or become, taken together with all other such information submitted prior to the Initial Closing Date, false, incomplete or inaccurate in any material and adverse respect, and none of the conditions represented or indicated by BRS, Acquisition Corp., the Target Company, any Borrower or any of their respective subsidiaries to exist shall change in any material and adverse respect. (k) The Agent shall have received and had the opportunity to review and determine to be in form and substance satisfactory to it: (i) copies of all lease agreements entered into by the Target Company, any Borrower, any Guarantor, any Grantor and/or any of their respective subsidiaries; and (ii) copies of all loan agreements, notes and other documentation evidencing Indebtedness for borrowed money of the Target Company, any Borrower, any Guarantor, any Grantor and/or any of their respective subsidiaries (including, without limitation, certified copies of any amendments to or consents under the Senior Indenture, together with all exhibits and schedules thereto, and all certificates, documents and opinions delivered in connection therewith) and of all other material agreements of any of them. (l) Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to the Agent, shall have received payment in full for all legal fees charged, and all costs and expenses incurred, by such counsel through the Initial Closing Date in connection with the transactions contemplated under this Agreement, the Security Documents and the other Loan Documents and instruments in connection herewith and therewith. (m) The Agent and the Lenders shall have: (i) received copies of each of the Merger Documents and the Tender Offer Documents, including all amendments and schedules thereto, each certified by a Responsible Officer of Jitney Jungle; (ii) received evidence that Acquisition Corp. shall have acquired and shall hold the unrestricted right to vote such percentage of the Target Stock on a fully diluted basis, free and clear of all Liens (other than the Lien in favor of the Agent), as may be necessary for shareholder approval by the shareholders of the Target Company of the Merger (the "Minimum Percentage") and, to the extent such Target Stock shall have been acquired pursuant to the Tender Offer, such acquisition shall have occurred upon full satisfaction, without waiver, of the conditions to purchase contained in the Offer to Purchase. For purposes of the preceding sentence, shares acquired which were tendered pursuant to guaranteed delivery procedures shall not be considered as acquired in calculating the Minimum Percentage; (iii) received evidence that the Merger Agreement is in full force and effect without default thereunder by any party thereto and all consents, filings and approvals required by applicable law in connection therewith shall have been obtained and made, except as set forth on Schedule 4.03 annexed hereto; (iv) received evidence that (A) the Related Transactions shall (x) have been duly approved by the Boards of Directors of each of Acquisition Corp., Jitney Jungle, the Target Company and their respective subsidiaries, (y) be in compliance in all respects with the articles of incorporation and by-laws of Acquisition Corp., Jitney Jungle, the Target Company and each of their respective subsidiaries and all applicable laws and regulations of the United States, any state thereof and any subdivision of any such state and (z) have been duly approved by the vote of the requisite number of shareholders of Acquisition Corp., Jitney Jungle, the Target Company and each of their respective subsidiaries; (B) the Target Company's "poison pill" provisions, if any, shall be inapplicable to the Tender Offer and the Merger in a manner satisfactory in all respects to the Agent; and (C) all conditions precedent to the consummation of the Related Transactions shall have been satisfied, subject only to the conditions set forth in the Merger Agreement; (v) received a table setting forth the sources and uses of funds in connection with the acquisition of the Target Stock pursuant to the Tender Offer and the financing thereof and a table setting forth the capitalization of Jitney Jungle, giving effect to the acquisition of the Target Stock pursuant to the Tender Offer and the financing thereof, each of the foregoing to be satisfactory to the Agent in all respects; (vi) (A) determined that the terms of the Tender Offer as set forth in the Offer to Purchase shall be in form and substance reasonably satisfactory to the Agent in all respects and received evidence that none of the principal terms of the Offer to Purchase and none of the conditions contained therein shall have been modified, amended, supplemented or waived and none of the conditions to the Tender Offer contained therein shall remain unsatisfied, and (B) received evidence that the acceptance of the Tender Offer by the holders of the Target Stock shall have occurred in accordance with the terms thereof, without modification, amendment, supplement or waiver (except with the prior written consent of the Agent); (vii) (A) received evidence that the Transactions and the Related Transactions (including, without limitation, the purchases contemplated by the Tender Offer), shall comply with Regulations G, T, U and X (as the case may be) and all other regulations of the Board of Governors of the Federal Reserve System and shall comply with, and be permitted by, all laws, rules and regulations of the United States (including, without limitation, the Hart-Scott-Rodino Antitrust Improvements Act of 1976) or any State thereof (including, without limitation, environmental laws) and (B) received evidence that (1) all necessary United States or state governmental and third party consents in connection therewith shall have been obtained, and shall be in full force and effect, (2) all applicable waiting periods under applicable law shall have expired without action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Tender Offer or the Merger, and (3) no law or regulation shall be applicable in the judgement of the Agent and the Lenders which restrains, prevents or imposes materially adverse conditions upon any aspect of the Transactions or the Related Transactions; and (x) determined that the terms and provisions of all agreements and documents in connection with the Related Transactions, including, without limitation, the Merger Documents and the Tender Offer Documents, and the business, operations and assets being acquired thereunder and liabilities being assumed thereunder (including, without limitation, with respect to tax matters, environmental matters, employee benefit plans and labor plans and labor relations) are in each instance satisfactory in form and substance to the Agent and the Lenders and the Agent shall have received such legal opinions, certificates and copies of necessary governmental filings and consents as the Agent shall have requested in connection therewith, and shall have determined to its satisfaction that the consummation of the Related Transactions and other transactions contemplated by the Merger Documents and the Tender Offer Documents are in compliance with all applicable laws (including, without limitation, state anti-takeover laws) and regulations and will not violate any agreements, instruments or documents to which the Target Company, Acquisition Corp., Jitney Jungle, any member of the Investor Group or any of their respective subsidiaries is a party or may be bound. The final terms and conditions of the Related Transactions (including, without limitation, the terms and conditions of the Merger Agreement), including, without limitation, all legal and tax aspects thereof, shall be as described herein and otherwise consistent in all material respects with the description thereof received in writing as part of the Pre-Commitment Information (as defined in the Commitment Letter). (n) The Agent and the Lenders shall have received certificates from the chief financial officer of each Borrower and each Guarantor, in form and substance satisfactory to the Agent and the Lenders, attesting to the "solvency" of such Borrower and such Guarantors, as the case may be, in each case individually and together with its subsidiaries, taken as a whole, immediately before and immediately after giving effect to the Transaction, determined on in accordance with generally accepted accounting principles, consistently applied. As used herein, the term "solvency" of any person means (i) the fair value of the property of such person exceeds its total liabilities (including, without limitation, contingent liabilities), (ii) the present fair saleable value of the assets of such person is not less than the amount that will be required to pay its probable liability on its debts as they become absolute and matured, (iii) such person does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature and (iv) such person is not engaged, and is not about to engage, in business or a transaction for which its property would constitute an unreasonably small capital; (o) The corporate structure and capitalization of each Borrower, each Guarantor and each of their respective subsidiaries shall be reasonably satisfactory to the Agent and the Lenders in all respects. (p) All legal matters in connection with the Transactions and the Related Transactions shall be reasonably satisfactory to the Agent, the Lenders and their respective counsel in their sole discretion. (q) The Borrowers shall have executed and delivered to the Agent a disbursement authorization letter with respect to the disbursement of the proceeds of the Credit Events made on the Initial Closing Date, in form and substance satisfactory to the Agent. (r) The Borrowers shall have entered into blocked account and other cash management arrangements pursuant to documentation satisfactory in form and substance to the Agent as contemplated by Section 10.01 hereof. (s) The Agent shall have received such other documents as the Lenders or the Agent or Agent's counsel shall reasonably deem necessary. SECTION V.3. Merger Closing Date. The obligations of the Lenders on the Merger Closing Date are subject to the following additional conditions precedent: (a) The Agent and the Lenders shall have received the favorable written opinion(s) of counsel for each of the Borrowers, the Guarantors and the Grantors, dated the Merger Closing Date, from such jurisdictions and addressing such matters as shall be reasonably requested by the Agent, addressed to the Agent and the Lenders and satisfactory to the Agent. (b) The Agent and the Lenders shall have received (i) a copy of the certificate or articles of incorporation or constitutive documents, in each case as amended to date, of each of the Borrowers, the Acquisition Corp., the Target Company and their respective subsidiaries, certified as of a recent date by the Secretary of State or other appropriate official of the state of its organization (or, a certification to the effect set forth in clause (ii)(C) below), and to the extent requested by the Agent, a certificate as to the good standing of each from such Secretary of State or other official, in each case dated as of a recent date; (ii) a certificate of the Secretary of each of the Borrowers, Acquisition Corp., the Target Company and their respective subsidiaries, dated the Merger Closing Date and certifying (A) that attached thereto is a true and complete copy of such person's By-laws as in effect on the date of such certificate and at all times since a date prior to the date of the resolution described in item (B) below (or, that such By-laws have not been amended since the Initial Closing Date), (B) that attached thereto is a true and complete copy of a resolution adopted by such person's Board of Directors authorizing the consummation of the Related Transactions, as applicable, and that such resolution has not been modified, rescinded or amended and is in full force and effect, (C) that such person's certificate or articles of incorporation or constitutive documents has not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each of such person's officers executing any document delivered in connection herewith or contemplated hereby, as applicable (or, a certification to the effect that the officers authorized to execute documents in connection with the Initial Closing Date are still authorized and incumbent officers of such person); and (iii) a certificate of another of such person's officers as to incumbency and signature of its Secretary. (c) The Agent shall have received a certificate, dated the Merger Closing Date and signed by the Financial Officer of each of the Borrowers, confirming compliance with the conditions set forth in this Section 5.03. (d) The Lenders and the Agent shall have received and determined to be in form and substance satisfactory to them: (i) evidence that the Merger is in compliance with all applicable laws and regulations; and (ii) evidence that all requisite third party consents and waivers required to effect the Merger have been received. (e) The Agent and the Lenders shall have: (i) received copies (to the extent not previously delivered on the Initial Closing Date) of amendments or supplements, if any, to any of the Merger Documents and/or the Tender Offer Documents, each certified by a Responsible Officer of Jitney Jungle; and (ii) received evidence that the Merger Agreement is in full force and effect and all consents, filings and approvals required by applicable law in connection therewith (including, without limitation, from state liquor authorities) shall have been obtained and made, except as set forth on Schedule 4.03 annexed hereto. (f) All legal matters in connection with the Merger shall be reasonably satisfactory to the Agent, the Lenders and their respective counsel in their sole discretion. VI. AFFIRMATIVE COVENANTS Each Borrower covenants and agrees with Agent and each Lender that, so long as this Agreement shall remain in effect or the principal of or interest on any Note, any amount under or with respect to any Letter of Credit or any fee, expense or amount payable hereunder or in connection with any of the Transactions shall be unpaid, it will, and will cause each Guarantor and each of their respective subsidiaries and, with respect to Section 6.07 hereof, each ERISA Affiliate, to: SECTION VI.1. Legal Existence. Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except for the mergers and Asset Sales permitted under Section 7.05. SECTION VI.2. Businesses and Properties. (a) At all times do or cause to be done all things necessary to preserve, renew and keep in full force and effect the rights, licenses, Permits, franchises, patents, copyrights, trademarks and trade names material to the conduct of its businesses; (b) comply with all laws, rules, regulations and governmental orders (whether Federal, state or local) applicable to the operation of such businesses whether now in effect or hereafter enacted (including, without limitation, all applicable laws, rules, regulations and governmental orders relating to public and employee health and safety and all Environmental Laws) and with any and all other applicable laws, rules, regulations and governmental orders the lack of compliance with which would have a Material Adverse Effect; (c) take all actions which may be required to obtain, preserve, renew and extend all Permits and other authorizations which are material to the operation of such businesses; and (d) at all times maintain, preserve and protect all property material to the conduct of such businesses and keep such property in good repair, working order and condition, ordinary wear and tear excepted, and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times. Notwithstanding the foregoing, non-compliance with clauses (a) and (c) above shall not constitute an Event of Default unless such non-compliance is not cured within 15 days after the occurrence of such non-compliance. SECTION VI.3. Insurance. (a) Keep its insurable properties adequately insured at all times by financially sound and reputable insurers with a rating of "A-" or better, as established by Best's Rating Guide (or an equivalent rating with such other publications of a similar nature as shall be in current use), (b) maintain such other insurance, to such extent and against all risks, including fire and other risks insured against by extended coverage; provided, however, that such insurance shall insure the property of the Borrowers and their respective subsidiaries against all risk of physical damage, including, without limitation, loss by fire, explosion, theft, fraud and such other casualties as may be reasonably satisfactory to the Agent, but in no event at any time in an aggregate amount less than the replacement value of the Collateral, (c) maintain in full force and effect public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by the Borrowers or any of their respective subsidiaries, in such amount as the Agent shall reasonably deem necessary, and (d) maintain such other insurance as may be required by law and against loss or damage of the kinds customarily insured against by corporations of established reputation engaged in the same or similar businesses and similarly situated, in such type and in such amounts as is customarily maintained under similar circumstances by such other corporations; provided, that with respect to any insurance maintained with respect to Collateral located at a non-warehouse location owned, occupied or controlled by any Borrower or any of its subsidiaries, the Borrowers shall have 15 days to cure any non-compliance with this Section 6.03. All insurance covering tangible personal property subject to a Lien in favor of the Agent for the benefit of the Lenders granted pursuant to the Security Documents shall provide that, in the case of each separate loss, the full amount of insurance proceeds shall be payable to the Agent and shall further provide for at least 30 days' prior written notice to the Agent of the cancellation or substantial modification thereof. Unless a Default or an Event of Default has occurred and is continuing, all claims with respect to the foregoing insurance shall be settled by the Borrowers in the ordinary cause of its business. SECTION VI.4. Taxes. Pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise, which, if unpaid, would give rise to Liens upon such properties or any part thereof, except such taxes, assessments and governmental charges and levies which are diligently contested in good faith by appropriate proceedings and as to which adequate reserves have been established in accordance with generally accepted accounting principles. SECTION VI.5. Financial Statements, Reports, etc. Furnish to the Agent, with copies for each of the Lenders: (a) within 90 days after the end of each Fiscal Year, (i) Consolidated balance sheets and Consolidated income statements showing the financial condition of the Borrowers and their respective subsidiaries as of the close of such Fiscal Year and the results of their operations during such year, and (ii) a Consolidated statement of shareholders' equity and a Consolidated statement of cash flow, as of the close of such Fiscal Year, all the foregoing financial statements to be audited by a Big 6 or other independent public accountants reasonably acceptable to the Agent (which report shall not contain any qualification except with respect to new accounting principles mandated by the Financial Accounting Standards Board), and to be in form and substance reasonably acceptable to the Agent; (b)(i) within 45 days after the end of each fiscal quarter (except the fourth fiscal quarter), unaudited Consolidated balance sheets and Consolidated income statements showing the financial condition and results of operations of the Borrowers and their respective subsidiaries as of the end of each such quarter, a Consolidated statement of shareholders' equity and a Consolidated statement of cash flow as of the end of each such quarter, together with a statement comparing actual results for such quarter with the projections set forth in paragraph (f) below, certified by the Financial Officer of Jitney Jungle as presenting fairly the financial condition and results of operations of the Borrowers and their respective subsidiaries and as having been prepared in accordance with generally accepted accounting principles consistently applied, setting forth in each case in comparative form the corresponding figures for the corresponding quarter of the preceding year and corresponding figures for the period beginning with the first day of the relevant Fiscal Year and ending on the last day of the relevant fiscal quarter and the corresponding period for the previous Fiscal Year, in each case subject to normal year-end audit adjustments; and (ii) within 25 days after the end of each fiscal month, unaudited Consolidated balance sheets and Consolidated income statements showing the financial condition and results of operations of the Borrowers and their respective subsidiaries as of the end of such month, a Consolidated statement of shareholders' equity and a Consolidated statement of cash flow as of the end of each such month, together with a statement comparing actual results for such month with the projections set forth in (f) below, certified by the Financial Officer of Jitney Jungle as presenting fairly the financial condition and results of operations of the Borrowers and their respective subsidiaries and as having been prepared in accordance with generally accepted accounting principles consistently applied, setting forth in each case in comparative form the corresponding figures for the corresponding month of the preceding year and corresponding figures for the period beginning with the first day of the current Fiscal Year and ending on the last day of the relevant fiscal month and the corresponding period for the previous Fiscal Year, in each case subject to normal year-end audit adjustments; (c) promptly after the same become publicly available, copies of such registration statements, annual, periodic and other reports, and such proxy statements and other information, if any, as shall be filed by any Borrower or any of their respective subsidiaries with the SEC or any governmental authority that may be substituted therefor, or any national securities exchange (including, without limitation, amendments, modifications and supplements to the Offer to Purchase and any other Tender Offer Documents) and copies of all proxy statements submitted to its shareholders; (d) (i) concurrently with any delivery under (a) or (b) above, a certificate of the firm or person referred to therein (x) which certificate shall, in the case of the certificate of the Financial Officer of Jitney Jungle, certify that to the best of his or her knowledge no Default or Event of Default has occurred (including calculations demonstrating compliance, as of the dates of the financial statements being furnished, with the covenants set forth in Sections 7.07, 7.08, 7.09, 7.10 and 7.11 hereof and setting forth the computation of Excess Cash Flow for the relevant period) and, if such a Default or Event of Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (y) which certificate, in the case of the certificate furnished by the independent public accountants referred in paragraph (a) above, may be limited to accounting matters and disclaim responsibility for legal interpretations, but shall in any event certify that to the best of such accountants' knowledge based solely on normal audit procedures, as of the dates of the financial statements being furnished no Default or Event of Default has occurred under any of the covenants set forth in Sections 7.07, 7.08, 7.09, 7.10 and 7.11 hereof (such certificate to include calculations demonstrating compliance with such covenants and the computation of Excess Cash Flow) and, if such a Default or Event of Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, and shall in addition certify that in the course of preparing the audit and the certificate referred to herein, such accountants have not become aware of the occurrence of any other Default or Event of Default and, if such a Default or Event of Default has occurred, specifying the nature thereof; provided, however, that any certificate delivered concurrently with (a) above shall be signed by the Financial Officer of Jitney Jungle in addition to the independent public accountants; (e) concurrently with any delivery under (a) above, a management letter, if any, prepared by the independent public accountants who reported on the financial statements delivered under (a) above, with respect to the internal audit and financial controls of the Borrowers and their respective subsidiaries; (f) within 30 days after the beginning of each Fiscal Year, a summary of business plans and financial operation projections (including, without limitation, with respect to Excess Cash Flow and Capital Expenditures) for the Borrowers and their respective subsidiaries for such Fiscal Year (including fiscal month balance sheets, statements of income and of cash flow, an Undrawn Availability forecast, an Excess Cash Flow forecast and a forecast as to compliance with the covenants contained in Sections 7.07, 7.08, 7.09, 7.10 and 7.11 hereof), prepared by management and in form, substance and detail (including, without limitation, principal assumptions) reasonably satisfactory to the Agent; (g) (i) no later than 14 days after the end of each fiscal month, a certificate, in form, substance and detail reasonably satisfactory to the Agent, in substantially the form annexed hereto as Exhibit K-1, of the Financial Officer of each of the Borrowers on a consolidated and consolidating basis with respect to Jitney Jungle and on a consolidating basis with respect to each other Borrower, demonstrating compliance as at the close of business on the last Saturday of such fiscal month with the Borrowing Base of the Borrowers (including particulars as to the Loans made and the Letters of Credit Usage during such month with respect to each of the Borrowers), together with a reconciliation of all collections made with respect to the Borrowers and the Guarantors during such fiscal month, on a consolidated and an individual basis and (ii) no later than Monday of each week, a certificate in form, substance and detail reasonably satisfactory to the Agent, in substantially the form annexed hereto as Exhibit K-2, of the Financial Officer of each of the Borrowers on a consolidated and consolidating basis with respect to Jitney Jungle and on a consolidating basis with respect to each other Borrower (including, without limitation, the amount of inventory held by such Borrower), demonstrating compliance as at the close of business on Saturday of the preceding week with the individual Borrowing Base of such Borrower; (h) promptly upon the request of the Agent, a certificate, in form, substance and detail reasonably satisfactory to the Agent, of the Financial Officer of (i) each of the Borrowers demonstrating compliance with the individual Borrowing Base of such Borrower as at such previous date as Agent shall reasonably request, together with a reconciliation of all collections made with respect to the Borrowers and the Guarantors since the date of the most recent reconciliation delivered to the Agent under this clause (h) or clause (g) above through such date and (ii) Jitney Jungle on a consolidated basis demonstrating compliance with the Borrowing Base of the Borrowers as at such previous date as Agent shall reasonably request; (i) immediately upon becoming aware thereof, notice to the Agent of the breach beyond any applicable grace period by any party of any material agreement with any Borrower, any Guarantor or any of their respective subsidiaries; and (j) such other information as the Agent or any Lender may reasonably request, including, without limitation, profit and loss information on a store by store basis, as well as supplemental expense information. At the reasonable request of any Lender, the Agent agrees to promptly forward such request for information to the Borrowers. SECTION VI.6. Litigation and Other Notices. Give the Agent prompt written notice of the following: (a) the issuance by any court or governmental agency or authority of any injunction, order, decision or other restraint prohibiting, or having the effect of prohibiting, the making of the Loans or occurrence of other Credit Events, or invalidating, or having the effect of invalidating, any provision of this Agreement, the Notes or the other Loan Documents, or the initiation of any litigation or similar proceeding seeking any such injunction, order, decision or other restraint; (b) the filing or commencement of any action, suit or proceeding against any Borrower, any Guarantor or any of their respective subsidiaries, whether at law or in equity or by or before any court or any Federal, state, municipal or other governmental agency or authority, (i) which is material and is brought by or on behalf of any governmental agency or authority, or in which injunctive or other equitable relief is sought or (ii) as to which it is probable (within the meaning of Statement of Financial Accounting Standards No. 5) that there will be an adverse determination and which, if adversely determined, would (A) reasonably be expected to result in liability of any Borrower, any Guarantor or any of their respective subsidiaries thereof in an aggregate amount of $500,000 or more, not reimbursable by insurance, or (B) materially impair the right of any Borrower, any Guarantor or any of their respective subsidiaries to perform its obligations under this Agreement, any Note or any other Loan Document to which it is a party; (c) any Default or Event of Default or any "Default" or "Event of Default" under the Senior Indenture (as such terms are defined in the Senior Indenture) or the Senior Subordinated Indenture (as such terms are defined in the Senior Subordinated Indenture), specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; (d) upon the issuance, mailing or delivery thereof, (i) copies of notice of any redemption or other payment of the Senior Notes under the Senior Indenture or the Senior Subordinated Notes under the Senior Subordinated Indenture and copies of any written information, correspondence or communication under the Senior Indenture or the Senior Subordinated Indenture or with respect to the Senior Notes or the Senior Subordinated Notes not otherwise required to be delivered to the Agent or the Lenders hereunder; and (ii) copies of notice of any redemption, exchange or other payment with respect to any preferred stock of the Borrowers; provided, that this clause (d) shall not constitute the consent of the Agent or any Lender to any such redemption, exchange or other payment; and (e) any development in the business or affairs of any Borrower, any Guarantor or any of their respective subsidiaries which has had or which is likely, in the reasonable judgment of any Responsible Officer of any Borrower, to have, a Material Adverse Effect (including, without limitation, any actual or threatened strike, work stoppage or other labor action, whether or not authorized by labor unions). SECTION VI.7. ERISA. (a) Pay and discharge promptly any liability imposed upon it pursuant to the provisions of Title IV of ERISA; provided, however, that neither any Borrower nor any ERISA Affiliate thereof shall be required to pay any such liability if (1) the amount, applicability or validity thereof shall be diligently contested in good faith by appropriate proceedings, and (2) such person shall have set aside on its books reserves which are required by generally accepted accounting principles consistently applied. (b) Deliver to the Agent, promptly, and in any event within 30 days, after (i) the occurrence of any Reportable Event, a copy of the materials that are filed with the PBGC, (ii) any Borrower or any ERISA Affiliate thereof or an administrator of any Pension Plan files with participants, beneficiaries or the PBGC a notice of intent to terminate any such Plan, a copy of any such notice, (iii) the receipt of notice by any Borrower or any ERISA Affiliate thereof or an administrator of any Pension Plan from the PBGC of the PBGC's intention to terminate any Pension Plan or to appoint a trustee to administer any such Plan, a copy of such notice, (iv) the filing thereof with the Internal Revenue Service, copies of each annual report that is filed on Treasury Form 5500 with respect to any Plan, together with certified financial statements (if any) for the Plan and any actuarial statements on Schedule B to such Form 5500, (v) any Borrower or any ERISA Affiliate thereof knows or has reason to know of any event or condition which might constitute grounds under the provisions of Section 4042 of ERISA for the termination of (or the appointment of a trustee to administer) any Pension Plan, an explanation of such event or condition, (vi) the receipt by any Borrower or any ERISA Affiliate thereof of an assessment of withdrawal liability under Section 4201 of ERISA from a Multiemployer Plan, or any other notice from such Multiemployer Plan of any action or event involving or in connection with insolvency, reorganization or termination (each as defined in ERISA) a copy of such assessment, or notice, (vii) any Borrower or any ERISA Affiliate thereof knows or has reason to know of any event or condition which might cause any one of them to incur a liability under Section 4062, 4063, 4064 or 4069 of ERISA or Section 412(n) or 4971 of the Code, an explanation of such event or condition, and (viii) any Borrower or any ERISA Affiliate thereof knows or has reason to know that an application is to be, or has been, made to the Secretary of the Treasury for a waiver of the minimum funding standard under the provisions of Section 412 of the Code, a copy of such application, and in each case described in clauses (i) through (iii) and (v) through (vii) together with a statement signed by the Financial Officer of such Borrower setting forth details as to such Reportable Event, notice, event or condition and the action which such Borrower or such ERISA Affiliate thereof proposes to take with respect thereto which, whether individually or in the aggregate, would cause a Material Adverse Effect. (c) Within 30 days after the end of any fiscal quarter in which any Borrower becomes aware, directly or indirectly, of any fact or information that materially changes the status of such Borrower with respect to the Multiemployer Plans, give notice thereof to the Agent. SECTION VI.8. Maintaining Records; Access to Properties and Inspections; Right to Audit. Maintain financial records in accordance with accepted financial practices and, upon reasonable notice (which may be telephonic), at all reasonable times and as often as any Agent may request, permit any authorized representative designated by such Agent to visit and inspect the properties and financial records of each of the Borrowers and their respective subsidiaries and to make extracts from such financial records, at the Borrowers' cost and expense, and permit any authorized representative designated by such Agent to discuss the affairs, finances and condition of each of the Borrowers and their respective subsidiaries with the appropriate Financial Officer and such other officers as such Agent shall deem appropriate and the Borrowers' independent public accountants, as applicable. An authorized representative of each of the Lenders may accompany the Agent on such visits and inspections (and during such visit or inspection, discuss the affairs, finances and condition of each of the Borrowers and their respective subsidiaries with the appropriate Financial Officer, such other officer or the Borrowers' independent public accountants, as applicable). The Agent shall have the right to audit, as often as it may request, the existence and condition of the inventory, books and records of the Borrowers and their respective subsidiaries and to review their compliance with the terms and conditions of this Agreement and the other Loan Documents. The Borrowers shall pay Agent's customary per diem rates, all out-of-pocket expenses of Agent's auditors and all costs of Agent with respect to third-party examiners, but at all times prior to a Default or Event of Default, the obligations of the Borrowers with respect to this sentence shall be limited to $50,000 per calendar year. SECTION VI.9. Fiscal Year-End. Cause its Fiscal Year to end on the Saturday nearest to April 30 of each year. SECTION VI.10. Further Assurances. Promptly execute any and all further documents and take all further actions which may be required under applicable law, or which the Agent may reasonably request, to grant, preserve, protect and perfect the first priority security interest created by the Security Documents in the Collateral. SECTION VI.11. Additional Grantors and Guarantors. Promptly inform the Agent of the creation or acquisition of any direct or indirect subsidiary (subject to the provisions of Section 7.05 hereof) and cause each direct or indirect subsidiary not in existence on the date hereof to become a Guarantor hereunder pursuant to an agreement in form and substance reasonably satisfactory to the Agent, and to execute the Security Documents, as applicable, as a Grantor, and cause the direct parent of each such subsidiary to pledge all of the capital stock of such subsidiary pursuant to the Pledge Agreement and cause each such subsidiary to pledge its inventory and all other owned assets pursuant to the Security Agreement. SECTION VI.12. Environmental Laws. (a) Comply, and cause each of its subsidiaries to comply, in all material respects with the provisions of all Environmental Laws, and shall keep the properties which it and its subsidiaries own free of any Lien imposed pursuant to any Environmental Law, except where such Liens are being contested in good faith by appropriate proceedings in accordance with applicable law, and, with respect to any properties it or any of its subsidiaries occupies but does not own, it or its subsidiaries shall not conduct any activities or allow any condition to remain which would reasonably be expected to cause the imposition of any Lien under any Environmental Law. Each Borrower and each Guarantor shall not cause or suffer or permit, and shall not suffer or permit any of their respective subsidiaries to cause or suffer or permit, the property of such Borrower, such Guarantor or their respective subsidiaries to be used for the use, generation, production, processing, handling, storage, transporting or disposal of any Hazardous Material, except for the use, generation, handling, storage or transportation of fuel, raw materials and inventory held or generated in the ordinary course of operating its business, refrigerants, wastes and routine cleaning and maintenance products. (b) Supply to the Agent copies of all material submissions by each Borrower, each Guarantor or any of their respective subsidiaries to any governmental body and of the final reports of all environmental audits and of all other environmental tests, studies or assessments (including the data derived from any sampling or survey of asbestos, soil, or subsurface or other materials or conditions) that may be conducted or performed (by or on behalf of such Borrower, such Guarantor or any of their respective subsidiaries) on or regarding the properties owned, operated, leased or occupied by such Borrower, such Guarantor or any of their respective subsidiaries or regarding any conditions that might have been affected by Hazardous Materials on or Released or removed from such properties. Each Borrower and each Guarantor shall also permit and authorize, and shall cause its subsidiaries to permit and authorize, the consultants or other persons that prepare such submissions or reports or perform such audits, tests, studies or assessments to discuss such submissions, reports or audits with the Agent and the Lenders; provided, that attorneys for such Borrower, such Guarantor or such subsidiary or such consultants or other persons shall be entitled to participate in such discussions. (c) Promptly (and in no event more than ten Business Days after the applicable Borrower or the applicable Guarantor becomes aware or is otherwise informed of such event) provide written notice to the Agent upon the happening of any of the following: (i) such Borrower, such Guarantor or any of their respective subsidiaries, or any tenant or other occupant of any property of such Borrower, such Guarantor or any of their respective subsidiaries receives written notice of any claim, complaint, charge or notice of a violation or potential violation of any Environmental Law; (ii) there has been a Release of Hazardous Materials upon, under or about or affecting any of the properties owned, operated, leased or occupied by such Borrower, such Guarantor or any of their respective subsidiaries, or Hazardous Materials at levels or in amounts that may have to be reported, remedied or responded to under Environmental Law are detected on or in the soil or groundwater; (iii) such Borrower, such Guarantor or any of their respective subsidiaries is or may be liable for any material costs of cleaning up or otherwise responding to a Release of Hazardous Materials; (iv) any part of the properties owned, operated, leased or occupied by such Borrower, such Guarantor or any of their respective subsidiaries is or may be subject to a Lien under any Environmental Law; or (v) such Borrower, such Guarantor or any of their respective subsidiaries undertakes any material Remedial Work with respect to any Hazardous Materials. (d) Timely undertake and complete any Remedial Work required to be undertaken by such Borrower or such Guarantor by any Environmental Law, except to the extent that such requirement is being diligently contested in good faith by appropriate proceedings in accordance with applicable law. (e) Without in any way limiting the scope of Section 11.04(c) and in addition to any obligations thereunder, each Borrower hereby indemnifies and agrees to hold the Agent and the Lenders harmless from and against any liability, loss, damage, suit, action or proceeding arising out of its business or the business of its subsidiaries pertaining to Hazardous Materials, including, but not limited to, claims of any governmental body or any third person arising under any Environmental Law or under tort, contract or common law, except for any liability, loss, damage, suit or proceeding to the extent that it results from the gross negligence, bad faith or willful misconduct of the Agent or any Lender. To the extent laws of the United States or any state or local jurisdiction in which property owned, operated, leased or occupied by any Borrower, any Guarantor or any of their respective subsidiaries is located provide that a Lien upon such property of such Borrower, such Guarantor or such subsidiary may be obtained for the costs of removal by a governmental body of Hazardous Materials which have been Released and a Release has occurred with respect to which such Borrower, such Guarantor or such subsidiary is required to provide notice to the Agent pursuant to Section 6.12(c), no later than ninety days after notice is given by the Agent to such Borrower, such Guarantor or such subsidiary, such Borrower, such Guarantor or such subsidiary shall deliver to the Agent a report issued by a qualified third party engineer providing an assessment of such Hazardous Materials which were Released upon or beneath the specified property. To the extent any Hazardous Materials located therein or thereunder either subject the property to a Lien or require a response pursuant to any applicable Environmental Laws, the response specified in Section 6.12(f) shall be an affirmative covenant of the Borrowers hereunder. (f) In the event that any Remedial Work is required to be performed by any Borrower, any Guarantor or any of their respective subsidiaries under any applicable Environmental Law, any judicial order, or by any governmental entity, such Borrower, such Guarantor or such subsidiaries shall commence all such Remedial Work at or prior to the time required therefor under such Environmental Law or applicable judicial orders and thereafter diligently prosecute to completion all such Remedial Work in accordance with and within the time allowed under such applicable Environmental Laws or judicial orders, except to the extent that such requirement is being diligently contested in good faith by appropriate proceedings in accordance with applicable law. SECTION VI.13. Pay Obligations to Lenders and Perform Other Covenants. (a) Make full and timely payment of the Obligations, whether now existing or hereafter arising, (b) duly comply with all the terms and covenants contained in this Agreement (including, without limitation, the borrowing limitations and mandatory prepayments in accordance with Article II hereof) in each of the other Loan Documents, all at the times and places and in the manner set forth therein, and (c) except for the filing of continuation statements and the making of other filings by the Agent as secured party or assignee, at all times take all actions necessary to maintain the Liens and security interests provided for under or pursuant to this Agreement and the Security Documents as valid and perfected first Liens on the property intended to be covered thereby (subject only to Liens expressly permitted hereunder) and supply all requested information to the Agent necessary for such maintenance. SECTION VI.14. Maintain Operating Accounts. Maintain its principal disbursement accounts, operating accounts and other depository accounts as set forth on Schedule 4.14 annexed hereto or as otherwise contemplated by Section 10.01, and notify the Agent promptly of the closing of any account specified in Schedule 4.14 annexed hereto and the opening up of any new accounts, in detail satisfactory to the Agent and with respect to any such new account, provide the Agent with such agreements, in form and substance satisfactory to the Agent, as the Agent shall request. SECTION VI.15. Amendments. Promptly supply to the Agent certified copies of any amendments to the Original Acquisition Documents, the Merger Documents, the Tender Offer Documents, the Capitalization Documents, the Senior Indenture, the Senior Notes, the Senior Subordinated Indenture, the Senior Subordinated Notes or any Subordinated Indebtedness (subject to Section 7.18 hereof). SECTION VI.16. Use of Proceeds. Use all proceeds of the initial borrowing under the Commitment to refinance the outstanding Indebtedness under the Existing Credit Agreement on the Initial Closing Date, to consummate the Related Transactions, to refinance the outstanding Target Indebtedness on the Initial Closing Date and use all proceeds of each borrowing under the Commitment thereafter to provide for working capital requirements and the general corporate purposes of the Borrowers to the extent that such purposes are permitted hereunder. SECTION VI.17. Voting Control of Target Company; No Sale of Stock, Etc. At all times from and after the Initial Closing Date to but not including the Merger Closing Date, own at least the Minimum Percentage of the outstanding shares of capital stock of the Target Company. From and after the Initial Closing Date, none of the Borrowers, the Guarantors or any of their respective subsidiaries will sell, assign, transfer, convey or encumber any Target Stock except in accordance with the terms of the Pledge Agreement. SECTION VI.18. Merger. Use its best efforts to cause the Merger to be consummated as promptly as practical but in no event later than the 180th day from the Initial Closing Date. VII. NEGATIVE COVENANTS Each Borrower covenants and agrees with Agent and each Lender that, so long as this Agreement shall remain in effect or the principal of or interest on any Note, any amount under or with respect to any Letter of Credit, or any fee, expense or amount payable hereunder or in connection with any of the Transactions shall be unpaid, it will not and will not cause or permit any Guarantor or any of their respective subsidiaries and, in the case of Section 7.16 hereof, any ERISA Affiliate thereof to, either directly or indirectly: SECTION VII.1. Liens. Incur, create, assume or permit to exist any Lien on any of its property or assets (including the stock of any direct or indirect subsidiary), whether owned at the date hereof or hereafter acquired, or assign or convey any rights to or security interests in any future revenues, except: (a) Liens incurred and pledges and deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance, old-age pensions and other social security benefits (not including any lien described in Section 412(m) of the Code); (b) Liens imposed by law, such as landlord, carriers', warehousemen's, mechanics', materialmen's and vendors' liens and other similar liens, incurred in good faith in the ordinary course of business and securing obligations which are not overdue or which are being contested in good faith by appropriate proceedings as to which the applicable Borrower or any of its subsidiaries, as the case may be, shall, to the extent required by generally accepted accounting principles consistently applied, have set aside on its books adequate reserves; (c) Liens securing the payment of taxes, assessments and governmental charges or levies, that are not delinquent or are being diligently contested in good faith by appropriate proceedings and as to which adequate reserves have been established in accordance with generally accepted accounting principles; provided, however, that in no event shall the aggregate amount of such reserves be less than the aggregate amount secured by such Liens; (d) zoning restrictions, easements, licenses, reservations, provisions, covenants, conditions, waivers, restrictions on the use of real property or minor irregularities of title (and with respect to leasehold interests, mortgages, obligations, liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord, ground lessor or owner of the leased property, with or without consent of the lessee) which do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business or with respect to leasehold interests permitted to exist under any Mortgage, as permitted by such Mortgage or with respect to leasehold interests on real property not subject to any Mortgage, of the types permitted by, and containing the same general terms and limitations of, any of the Mortgages delivered on the Original Closing Date; (e) Liens upon any equipment acquired through the purchase or lease by any Borrower or any of its subsidiaries which are created or incurred by such Borrower as a condition to the financing of such acquisition to secure or provide for the payment of any part of the purchase price of, or lease payments on, such equipment (but no other amounts and not in excess of the purchase price or lease payments); provided, however, that any such Lien shall not apply to any other property of such Borrower or any of its subsidiaries; and provided, further, that after giving effect to such purchase or lease, compliance is maintained with Section 7.07 hereof; (f) Liens created in favor of the Letter of Credit Issuer for the benefit of the Secured Parties with respect to Letters of Credit; (g) Liens existing on the date of this Agreement and set forth in Schedule 7.01 annexed hereto or set forth in Schedule B to each of the title policies referred to in Section 3.03 hereof; (h) Liens created in favor of the Agent for the benefit of the Secured Parties (including, without limitation, Liens securing interest rate protection agreements and other similar arrangements entered into with Fleet); (i) Liens securing the performance of bids, tenders, leases, contracts (other than for the repayment of borrowed money), statutory obligations, surety, customs and appeal bonds and other obligations of like nature, incurred as an incident to and in the ordinary course of business; (j) Liens for judgments which would not result in an Event of Default under Article VIII (l); (k) Liens in respect of Capitalized Lease Obligations; (l) Liens in favor of A.I. Credit Corp. securing payment of amounts due under a Premium Finance Agreement, Disclosure Statement and Security Agreement dated as of May 29, 1997; provided, however, that compliance is maintained with Section 7.03(xii) hereof; or (m) Liens on property in connection with transactions permitted pursuant to Section 7.02 hereof. SECTION VII.2. Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any person whereby any Borrower, any Guarantor or any of their respective subsidiaries shall sell or transfer any property, real or personal, and used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which such Borrower, such Guarantor or such subsidiary intends to use for substantially the same purpose or purposes as the property being sold or transferred, except that so long as no Default or Event of Default exists at such time or immediately after giving effect thereto, upon thirty (30) days' prior written notice by the Borrowers to the Agent, the Borrowers may enter into such arrangements with respect to real property with the prior written consent of the Agent and the Required Lenders (such consent not to be unreasonably withheld). SECTION VII.3. Indebtedness. Incur, create, assume or permit to exist any Indebtedness other than (i) Indebtedness (including, without limitation, Capitalized Lease Obligations) secured by Liens permitted under Section 7.01, (ii) Indebtedness (including, without limitation, Guarantees) existing on the date hereof and listed in Schedule 7.03 annexed hereto, but (except for extensions or renewals of the IRB Indebtedness) not the increase, extension, renewal or refunding thereof, (iii) Indebtedness incurred hereunder and under the other Loan Documents, (iv) Indebtedness incurred with respect to interest rate protection agreements and other similar arrangements entered into with Fleet, (v) Guarantees constituting the endorsement of negotiable instruments for deposit or collection in the ordinary course of business, (vi) Guarantees of the Obligations, (vii) Indebtedness under the Senior Indenture or the Senior Notes, but not the increase, extension, renewal or refunding thereof, (viii) Indebtedness under the Senior Subordinated Indenture, but not the increase, extension, renewal or refunding thereof, (ix) other Subordinated Indebtedness, but not the increase, extension, renewal or refunding thereof, (x) Indebtedness to trade creditors incurred in the ordinary course of business, (xi) Intercompany Indebtedness, (xii) Indebtedness to A.I. Credit Corp. incurred in connection with a Premium Finance Agreement, Disclosure Statement and Security Agreement dated as of May 29, 1997 in a maximum amount of $16,000,000, (xiii) Indebtedness with respect to unsecured letters of credit not issued under this Agreement in a maximum amount of $5,000,000, plus any amount by which the maximum amount of Letters of Credit under this Agreement (presently $30,000,000) is permanently reduced, and (xiv) Indebtedness permitted to be incurred under Section 7.02 hereof. SECTION VII.4. Dividends, Distributions and Payments. Declare or pay, directly and indirectly, any cash dividends or make any other distribution, whether in cash, property, securities (other than payment-in-kind payments or non-cash accretions to liquidation preference made with respect to any preferred stock of Jitney Jungle) or a combination thereof, with respect to (whether by reduction of capital or otherwise) any shares of its capital stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any subsidiary to purchase or acquire) any shares of any class of its capital stock or set aside any amount for any such purpose, other than (i) the issuance of warrants to purchase up to 15%, on a fully diluted basis, of the common stock of Jitney Jungle and (ii) dividends or other distributions by any subsidiary of Jitney Jungle to Jitney Jungle or a subsidiary thereof and purchases by Jitney Jungle of the capital stock of Jitney Jungle from retiring employees of the Borrowers pursuant to the Securities Purchase and Holders Agreement in an aggregate amount for all such employees not in excess of $1,000,000 during the term of this Agreement (as such amount may from time to time be reduced by purchases of such capital stock by Jitney Jungle from such employees and increased by any sales by Jitney Jungle of such capital stock to other employees; provided, that such purchased capital stock shall be sold within 180 days of such purchase to one or more employees of the Borrowers for a cash consideration equal to or greater than the consideration paid by Jitney Jungle for such capital stock). SECTION VII.5. Consolidations, Merger and Sales of Assets. Consolidate with or merge into any other person, or sell, lease, transfer or assign to any persons or otherwise dispose of (whether in one transaction or a series of transactions) any portion of its assets (whether now owned or hereafter acquired), or permit another person to merge into it, or acquire all or substantially all the capital stock or assets of any other person, except that (i) the Borrowers and their respective subsidiaries may sell any of their inventory in the ordinary course of their business; (ii) the Borrowers and their respective subsidiaries may consummate the Related Transactions; (iii) the Borrowers may sell automobiles used by employees in a manner consistent with the Borrowers' past practices; (iv) any Borrower may sell obsolete equipment in the ordinary course of business; provided, that the Net Cash Proceeds of any such sale are applied to repay the Loans to the extent required by Section 2.09(d)(i); (v) any Borrower (other than Acquisition Corp. or Jitney Jungle) or Guarantor (other than Acquisition Corp. or Jitney Jungle) may merge into any other Borrower or Guarantor; (vi) the Borrowers and their respective subsidiaries may sell assets (other than inventory or as otherwise permitted hereby) that constitute properties of any Borrower or any subsidiary thereof no longer necessary for the proper conduct of their respective businesses, for fair consideration and having a sales price of not greater than $1,000,000 in any single transaction; provided, that the aggregate sales price of all assets permitted to be sold pursuant to this clause (vi) shall not exceed $5,000,000 during the term of this Agreement; and provided; further that the Net Cash Proceeds of any such sale are applied to repay the Loans to the extent required by Section 2.09(d)(i); (vii) the Borrowers and their respective subsidiaries may lease or sublease real property covered by a Mortgage in the ordinary course of business, such lease or sublease to be for an initial term of up to seven and one-half years; provided, that the real property covered by any such lease or sublease shall not exceed 5,000 square feet.; (viii) the Borrowers and their respective subsidiaries may sell assets permitted to be sold by Section 7.02 hereof; (ix) the Borrowers and their respective subsidiaries may sell the FTC Divestiture Stores; and (x) Acquisition Corp. may merge with and into the Target Company on the Merger Closing Date. SECTION VII.6. Investments. Own, purchase or acquire any stock, obligations, assets or securities of, or any interest in, or make any capital contribution or loan or advance to, any other person, or make any other investments, except: (a) certificates of deposit in dollars of any commercial banks registered to do business in any state of the United States (i) having capital and surplus in excess of $1,000,000,000 and (ii) whose long-term debt rating is at least investment grade as determined by either Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (b) readily marketable direct obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States; (c) commercial paper at the time of acquisition having the highest rating obtainable from either S&P or Moody's; (d) federally tax exempt securities rated A or better by either S&P or Moody's; (e) investments in the stock of any subsidiary existing on the Initial Closing Date, but not any additional investments therein; (f) loans to employees in connection with the purchase of capital stock of the Borrowers and/or for other purposes not in excess of $750,000 in the aggregate outstanding at any time for all loans under this clause (f); (g) so long as no Default or Event of Default shall exist at the time of acquisition (or after giving effect thereto) and subject to Section 7.13, acquisitions by any Borrower or any subsidiary thereof of assets of a business of a non-Affiliated person not to exceed in purchase price (whether in the form of cash, property, stock, Indebtedness, assumption of liabilities or otherwise) $1,000,000 individually or $5,000,000 in the aggregate for all such acquisitions during the term of this Agreement; (h) acquisitions of new stores for the conduct of the Borrowers' business to the extent permitted under this Agreement; (i) Intercompany Loans; and (j) investments in the Target Stock; provided, that, in each case mentioned in (a), (b), (c) and (d) above, such obligations shall mature not more than one year from the date of acquisition thereof; provided, further, that Loans may not be used to purchase or otherwise fund the investments described in clauses (a) through and including (d) above. SECTION VII.7. Capital Expenditures and Other Expenditures. Permit the aggregate amount of payments made, without duplication, for Capital Expenditures, Capitalized Lease Obligations and Indebtedness secured by Liens permitted under Section 7.01(e) and/or Section 7.01(k) hereof (excluding Capital Expenditures in respect of Reinvestment Assets to the extent funded with the Net Cash Proceeds of Asset Sales), at the end of each fiscal quarter, for the four most recent consecutive fiscal quarters of the Borrowers and their respective Consolidated subsidiaries to exceed 50% of EBITDA for such fiscal period. SECTION VII.8. Fixed Charge Coverage Ratio. If Undrawn Availability at any time (each, a "Fixed Charge Test Date") is less than $22,500,000, permit the Fixed Charge Coverage Ratio at the end of each fiscal quarter, commencing with the fiscal quarter following the fiscal quarter in which such Fixed Charge Test Date occurred, to be less than 1.00:1.00. SECTION VII.9. Leverage Ratio. Permit the Leverage Ratio at the end of each fiscal quarter set forth below to be greater than: Date of Determination Ratio --------------------- ------ Each Fiscal Quarter ending 5.00:1.00 in Fiscal Year 1998 Each Fiscal Quarter ending 4.40:1.00 in Fiscal Year 1999 Each Fiscal Quarter ending 4.30:1.00 in Fiscal Year 2000 Each Fiscal Quarter ending 3.90:1.00 in Fiscal Year 2001 Each Fiscal Quarter ending 3.60:1.00 in Fiscal Year 2002 Each Fiscal Quarter ending 3.40:1.00 in Fiscal Year 2003 SECTION VII.10. Interest Coverage Ratio. Permit the Interest Coverage Ratio at the end of each fiscal quarter set forth below to be less than: Date of Determination Ratio --------------------- ------ Each Fiscal Quarter ending 1.65:1.00 in Fiscal Year 1998 Each Fiscal Quarter ending 1.80:1.00 in Fiscal Year 1999 Each Fiscal Quarter ending 1.85:1.00 in Fiscal Year 2000 Each Fiscal Quarter ending 2.00:1.00 in Fiscal Year 2001 and thereafter SECTION VII.11. EBITDA. Permit EBITDA at the end of each fiscal quarter for the four most recent consecutive fiscal quarters ending on or prior to the date of determination to be less than the following amounts; provided, that for the fiscal quarters ending October 18, 1997, January 10, 1998 and May 2, 1998, EBITDA shall be calculated, with respect to Jitney Jungle and its subsidiaries (other than Delchamps and its subsidiaries), for the number of fiscal quarters that shall have elapsed since May 3, 1997 and with respect to Delchamps and its subsidiaries, for the period commencing June 29, 1997 through the date of determination: Date of Determination Ratio --------------------- ------ Fiscal Quarter ending $38,000,000 October 18, 1997 Fiscal Quarter ending $59,000,000 January 10, 1998 Fiscal Quarter ending $90,000,000 May 2, 1998 Each Fiscal Quarter ending $112,000,000 in Fiscal Year 1999 Each Fiscal Quarter ending $114,000,000 in Fiscal Year 2000 Each Fiscal Quarter ending $124,000,000 in Fiscal Year 2001 Each Fiscal Quarter ending $135,000,000 in Fiscal Year 2002 Each Fiscal Quarter ending $148,000,000 in Fiscal Year 2003 SECTION VII.12. Interest Rate Protection Arrangements. Enter into any interest rate protection agreement, interest rate swap agreement, hedge contract or any other agreement, arrangement, device or instrument designed or intended to protect the applicable Borrower against fluctuations in the rate of interest on its Indebtedness with any person other than Fleet or an Affiliate thereof (subject to market competition). SECTION VII.13. Business. Alter the nature of its business as operated on the date of this Agreement in any material respect. SECTION VII.14. Sales of Receivables. Sell, assign, discount, transfer, or otherwise dispose of any accounts receivable, promissory notes, drafts or trade acceptances or other rights to receive payment held by it, with or without recourse, except for the purpose of collection or settlement in the ordinary course of business. SECTION VII.15. Use of Proceeds. Permit the proceeds of any Credit Event to be used for any purpose which entails a violation of, or is inconsistent with, Regulation G, T, U or X of the Board, or for any purpose other than those set forth in Section 6.16 hereof. SECTION VII.16. ERISA. (a) Engage in any transaction in connection with which any Borrower or any ERISA Affiliate thereof could be subject to either a material civil penalty assessed pursuant to the provisions of Section 502 of ERISA or a material tax imposed under the provisions of Section 4975 of the Code. (b) Terminate any Pension Plan in a "distress termination" under Section 4041 of ERISA which could result in a material liability of any Borrower or any ERISA Affiliate thereof to the PBGC, or take any other action which could result in a material liability of any Borrower or any ERISA Affiliate thereof to the PBGC. (c) Fail to make payment when due of all amounts which, under the provisions of any Plan, any Borrower or any ERISA Affiliate thereof is required to pay as contributions thereto (other than a failure by reason of inadvertent error that is corrected as soon as practicable after discovery of such error if the effect of such failure would reasonably be expected to result in a Material Adverse Effect), or, with respect to any Pension Plan, permit to exist any "accumulated funding deficiency" (within the meaning of Section 302 of ERISA and Section 412 of the Code), whether or not waived, with respect thereto. (d) Adopt an amendment to any Pension Plan requiring the provision of security under Section 307 of ERISA or Section 401(a)(29) of the Code. SECTION VII.17. Accounting Changes. Make, or permit any subsidiary to make, any material change in its accounting treatment or financial reporting practices except as required or permitted by generally accepted accounting principles in effect from time to time. SECTION VII.18. Prepayment or Modification of Indebtedness; Modification of Charter and Other Documents. (a) Directly or indirectly prepay, redeem, purchase, defease or retire in advance of its scheduled maturity any Indebtedness (for borrowed money or under capital leases) other than (i) Indebtedness incurred hereunder, (ii) Indebtedness in respect of Capitalized Lease Obligations relating to real property, (iii) Indebtedness in respect of Capitalized Lease Obligations relating to personal property (such prepayments, redemptions, purchases or retirements under this clause (iii) not to exceed $2,500,000 in the aggregate during the term of this Agreement), or pay any Indebtedness in violation of any subordination provisions with respect thereto, or (iv) Indebtedness under certain insurance policies maintained with Aon Risk Services with respect to the premiums payable under such policies, as contemplated by the financing arrangements with A.I. Credit Corp. pursuant to a Premium Finance Agreement, Disclosure Statement and Security Agreement dated as of May 29, 1997. (b) Directly or indirectly prepay, redeem, purchase, decrease or retire in advance of its scheduled maturity any Indebtedness issued under the Senior Indenture, the Senior Subordinated Indenture or any of the Senior Notes or the Senior Subordinated Notes or any Subordinated Indebtedness. (c) Directly or indirectly modify, amend or otherwise alter the terms and provisions of the Senior Indenture or the Senior Notes or of the Senior Subordinated Indenture or the Senior Subordinated Notes or any Subordinated Indebtedness. (d) Directly or indirectly modify, amend or alter their certificates or articles of incorporation (except in connection with issuances of capital stock permitted by Section 7.23(iv)), preferred stock/certificates of designations or by-laws. (e) Directly or indirectly modify, amend or otherwise alter the terms and provisions of any of the Original Acquisition Documents, the Merger Documents, the Tender Offer Documents or the Capitalization Documents (except any stockholders agreement between or among the holders of the Acquisition Securities to the extent such would not reasonably be expected to have a Material Adverse Effect). (f) Directly or indirectly modify, amend or otherwise alter the terms and provisions of the SunTrust LC without the written consent of the Agent. SECTION VII.19. Transactions with Affiliates. Except as otherwise specifically permitted in this Agreement, including fees permitted in Section 7.20 and the transactions contemplated under the Original Acquisition Documents, the Merger Documents, the Tender Offer Documents and the Capitalization Documents, directly or indirectly purchase, acquire or lease any property from, or sell, transfer or lease any property to, or enter into any other transaction with, any stockholder, Affiliate or agent of any Borrower, any subsidiary thereof or any relative thereof, except at prices and on any terms not less favorable to it than that which would have been obtained in an arm's-length transaction with a non-affiliated third party. SECTION VII.20. Consulting Fees. Pay any management, consulting or other fees of any kind to any Affiliate of any Borrower or any subsidiary thereof, other than salaries to employees consistent with industry practice, legal fees and consulting and investment banking fees, except as specified in Schedule 7.20 annexed hereto. SECTION VII.21. Limitations on Dividends and Other Payments. Create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any subsidiary of any Borrower to (a) pay dividends or make any other distributions on its capital stock or any other equity interest or participation in, or measured by, its profits, owned by any other Borrower or any subsidiary thereof, or pay any indebtedness owed to, any other Borrower or any subsidiary thereof, (b) make loans or advances to any other Borrower or any subsidiary thereof, or (c) transfer any of its properties or assets to any other Borrower or any subsidiary thereof, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement, (iii) the Senior Indenture as in effect on the Initial Closing Date or (iv) the Senior Subordinated Indenture as in effect on the Initial Closing Date. SECTION VII.22. Limitation on Creation of Subsidiaries. Establish, create or acquire, or permit any subsidiary of any Borrower to establish, create or acquire, any new subsidiary, without the prior written consent of the Agent. SECTION VII.23. Limitation on Issuance of Capital Stock. Issue, or permit any subsidiary to issue, any capital stock (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock, except (i) to effect the Merger on the Merger Closing Date, (ii) to qualify directors to the extent required by applicable law, (iii) upon the formation of any new subsidiary to the extent permitted by this Agreement, such newly formed subsidiary may issue capital stock to the applicable Borrower so long as the capital stock so issued is immediately pledged to the Agent for the benefit of the Secured Parties under the applicable Pledge Agreement, and (iv) the issuance by Jitney Jungle of capital stock (including by way of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock of Jitney Jungle. VIII. EVENTS OF DEFAULT In case of the happening of any of the following events (herein called "Events of Default"): (a) any representation or warranty made or deemed made in or in connection with this Agreement, any of the Security Documents, the Notes or other Loan Documents or any Credit Events hereunder, shall prove to have been incorrect in any material respect when made or deemed to be made; (b) default shall be made in the payment of any principal of any Note when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any interest on any Note, any fee or any other amount payable hereunder, or under or with respect to the Notes, Letters of Credit, or any other Loan Document or in connection with any other Credit Event or any of the Transactions when and as the same shall become due and payable; (d) default shall be made in the due observance or performance of any covenant, condition or agreement to be observed or performed on the part of any Borrower, any Guarantor, any Grantor or any of their respective subsidiaries pursuant to the terms of this Agreement, any of the Notes, any of the Security Documents or any other Loan Document (and, with respect to defaults under Sections 6.04, 6.06, 6.07 and 6.12 hereof, such default shall continue for fifteen (15) days); (e) any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other Federal, state or foreign bankruptcy, insolvency, liquidation or similar law, (ii) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for such Borrower, such Guarantor, such Grantor or such subsidiary or for a substantial part of its property or assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take corporate action for the purpose of effecting any of the foregoing; (f) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof, or of a substantial part of the property or assets of any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof, under Title 11 of the United States Code or any other Federal state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof or for a substantial part of the property of any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof or (iii) the winding-up or liquidation of any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof; and such proceeding or petition shall continue undismissed for 30 days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for 60 days; (g) default shall be made with respect to any Indebtedness (excluding Indebtedness outstanding hereunder and Indebtedness covered by clause (h) or (i) of this Article VIII) or any obligations under a capitalized lease relating to any personal property of any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof, and, with respect to such lease, whose unpaid principal amount exceeds (together with all other Indebtedness or capitalized leases in default under this clause (g)) $250,000 in the aggregate at any time, if the effect of any such default shall be to accelerate, or to permit the holder or obligee of any such Indebtedness or obligations under a capitalized lease (or any trustee on behalf of such holder or obligee) at its option to accelerate, the maturity of such Indebtedness or such obligations under a capitalized lease, or if any such Indebtedness or such obligations under a capitalized lease shall not be paid when scheduled to be due and payable (taking into account any grace periods); (h) default shall be made with respect to any obligations under a capitalized lease relating to any real property of any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof, whose principal amount exceeds (together with all other capitalized leases in default under this clause (h)) $2,250,000 in the aggregate at any time, if the effect of any such default shall be to accelerate the maturity of such obligations under such capitalized lease; (i) default shall be made with respect to any IRB Indebtedness (including, without limitation, under the Letter of Credit Reimbursement Agreement, dated as of December 1, 1995, between McCarty-Holman Co., Inc. and Sun Trust Bank, Atlanta (or any successor or replacement agreement), pursuant to which an irrevocable letter of credit in favor of the IRB Trustee relating to such Indebtedness, was issued) by the City of Jackson, Mississippi or any Borrower, and Guarantor, any Grantor or any subsidiary of any thereof, if the effect of any such default shall be to accelerate, or to permit the holder or obligee of any such Indebtedness (or any trustee on behalf of such holder or obligee) at its option to accelerate, the maturity of such Indebtedness or if any such Indebtedness shall not be paid when scheduled to be due and payable (taking into account any grace periods); (j) (i) a Reportable Event shall have occurred with respect to a Pension Plan, (ii) the filing by any Borrower, any ERISA Affiliate, or an administrator of any Plan of a notice of intent to terminate such a Plan in a "distress termination" under the provisions of Section 4041 of ERISA, (iii) the receipt of notice by any Borrower, any ERISA Affiliate, or an administrator of a Plan that the PBGC has instituted proceedings to terminate (or appoint a trustee to administer) such a Pension Plan, (iv) any other event or condition exists which constitutes grounds under the provisions of Section 4042 of ERISA for the termination of (or the appointment of a trustee to administer) any Pension Plan by the PBGC, (v) a Pension Plan shall fail to maintain the minimum funding standard required by Section 412 of the Code for any plan year or a waiver of such standard is sought or granted under the provisions of Section 412(d) of the Code, (vi) any Borrower or any ERISA Affiliate thereof has incurred, or is likely to incur, a liability under the provisions of Section 4062, 4063, 4064, 4201 or 4203 of ERISA, (vii) any Borrower or any ERISA Affiliate thereof fails to pay the full amount of an installment required under Section 412(m) of the Code, (viii) the occurrence of any other event or condition with respect to any Plan which would constitute an event of default under any other agreement entered into by any Borrower or any ERISA Affiliate, and in each case in clauses (i) through (viii) of this subsection (h), such event or condition, together with all other such events or conditions, if any, could subject any Borrower or any ERISA Affiliate thereof to any taxes, penalties or other liabilities which, in the reasonable opinion of the Agent, would have a Material Adverse Effect on the financial condition of any Borrower or any ERISA Affiliate; (k) any Borrower or any ERISA Affiliate thereof (i) shall have been notified by the sponsor of a Multiemployer Plan that it has incurred any material withdrawal liability to such Multiemployer Plan, and (ii) does not have reasonable grounds for contesting such withdrawal liability and is not in fact contesting such withdrawal liability in a timely and appropriate manner; (l) a judgment (not reimbursed by insurance policies of any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof) or decree for the payment of money, a fine or penalty which when taken together with all other such judgments, decrees, fines and penalties shall exceed $500,000 shall be rendered by a court or other tribunal against any Borrower, any Guarantor, any Grantor or any subsidiary of any thereof and (i) shall remain undischarged or unbonded for a period of 30 consecutive days during which the execution of such judgment, decree, fine or penalty shall not have been stayed effectively or (ii) any judgment creditor or other person shall legally commence actions to collect on or enforce such judgment, decree, fine or penalty; (m) this Agreement, any Note, any of the Security Documents or any of the other Loan Documents shall for any reason cease to be, or shall be asserted by any Borrower, any Guarantor or any Grantor not to be, a legal, valid and binding obligation of such Borrower, such Guarantor or such Grantor, as applicable, enforceable in accordance with its terms, or the security interest or Lien purported to be created by any of the Security Documents shall for any reason cease to be, or be asserted by any Borrower, any Guarantor or any Grantor not to be, a valid, first priority perfected security interest in any Collateral (except to the extent otherwise permitted under this Agreement or any of the Security Documents); (n) a Change of Control shall occur; (o) any of the Related Transactions (other than the initial borrowing under the Commitment, the acquisition of all of the Target Stock and the Merger) shall not have been duly and validly consummated on the Initial Closing Date, without modification, amendment or waiver (except for de minimis modifications, amendments and waivers of which the Agent shall have received prior notification and except for other modifications, amendments or waivers as shall have been approved in writing by the Agent), in accordance with the terms, conditions and provisions of the Merger Documents, the Tender Offer Documents or the Senior Subordinated Indenture, as the case may be; or (p) the Merger shall not have been duly and validly consummated no later than the 180th day after the date hereof, without modification, amendment or waiver (except for de minimis modifications, amendments and waivers of which the Agent shall have received prior notification and except for other modifications, amendments or waivers as shall have been approved in writing by the Agent), in accordance with the terms, conditions and provisions of the Merger Documents and the Tender Offer Documents; then, and in any such event (other than an event described in paragraph (e) or (f) above), and at any time thereafter during the continuance of such event, the Agent may, and upon the written request of the Required Lenders shall, by written notice (or facsimile notice promptly confirmed in writing) to the Borrowers, take any or all of the following actions at the same or different times: (i) terminate forthwith all or any portion of the Total Commitment and the obligations of the Letter of Credit Issuer to issue Letters of Credit hereunder; and (ii) declare the Notes, any amounts then owing to the Lenders or the Letter of Credit Issuer on account of drawings under any Letters of Credit and all other Obligations to be forthwith due and payable, whereupon the principal of such Notes, together with accrued interest and fees thereon and any amounts then owing to the Lenders or the Letter of Credit Issuer on account of drawings under any Letters of Credit and other liabilities of the Borrowers accrued hereunder and all other Obligations, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by each Borrower and each Guarantor, anything contained herein or in the Notes to the contrary notwithstanding; provided, however, that with respect to a default described in paragraph (e) or (f) above, the Total Commitment and the obligation of the Letter of Credit Issuer to issue Letters of Credit shall automatically terminate and the principal of the Notes, together with accrued interest and fees thereon and any amounts then owing to the Lenders and the Letter of Credit Issuer on account of drawings under any Letters of Credit and any other liabilities of any Borrower accrued hereunder and all other Obligations shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each Borrower and each Guarantor, anything contained herein or in the Notes to the contrary notwithstanding. During the continuance of an Event of Default, the Agent shall have and may exercise all rights and remedies of a mortgagee or a secured party under the Uniform Commercial Code in effect in the State of New York at such time, whether or not applicable to the affected Collateral, and otherwise, including, without limitation, the right to foreclose the Liens granted herein or in any of the Security Documents by any available judicial procedure and/or to take possession of any or all of the Collateral, the other security for the Obligations and the books and records relating thereto, with or without judicial process; for the purposes of the preceding sentence, the Agent may enter upon any or all of the premises where any of the Collateral, such other security or books or records may be situated and take possession and remove the same therefrom. The Agent shall have the right, in its sole discretion, to determine which rights, Liens or remedies it shall at any time pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of them or any of the Lenders', the Letter of Credit Issuer's or the Agent's rights hereunder or under any other Loan Documents; and any moneys, deposits, accounts, balances or other property which may come into any Lender's, the Letter of Credit Issuer's or the Agent's hands at any time or in any manner, may be retained by such Lender, the Letter of Credit Issuer or the Agent and applied to any of the Obligations. In case any one or more Events of Default shall occur and be continuing, the Agent may proceed to protect and enforce its rights or remedies either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or other provision contained herein or in any document or instrument delivered in connection with or pursuant to this Agreement or any other Loan Document, or to enforce the payment of the Obligations or any other legal or equitable right or remedy. No right or remedy herein conferred upon the Lenders, the Letter of Credit Issuer or the Agent is intended to be exclusive of any other right or remedy contained herein or in any instrument or document delivered in connection with or pursuant to this Agreement or any other Loan Document, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise. No course of dealing between any Borrower or any Grantor or Guarantor and any Lender, the Letter of Credit Issuer or the Agent or any failure or delay on the part of any Lender, the Letter of Credit Issuer or the Agent in exercising any rights or remedies hereunder or under any other Loan Document shall operate as a waiver of any rights or remedies of the Lenders, the Letter of Credit Issuer or the Agent and no single or partial exercise of any rights or remedies hereunder or under any other Loan Document shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or under any other Loan Document or of the same right or remedy on a future occasion. After the occurrence of an Event of Default and acceleration of the Obligations as herein provided, the proceeds of the Collateral and of property of persons other than the Borrowers and the Grantors securing the Obligations and collections from each Guarantee of the Obligations shall be applied by the Agent to payment of the Obligations in the following order, unless a court of competent jurisdiction shall otherwise direct or if otherwise provided in a Security Document: (i) FIRST, to payment of all reasonable costs and expenses of the Agent, the Letter of Credit Issuer and the Lenders incurred in connection with the preservation, collection and enforcement of the Obligations or any Guarantee thereof, or of any of the Liens granted to the Agent pursuant to the Security Documents or otherwise, including, without limitation, any amounts advanced by the Agent, the Letter of Credit Issuer or the Lenders to protect or preserve the Collateral; (ii) SECOND, to payment of that portion of the Obligations constituting accrued and unpaid interest and fees and indemnities due and payable under Section 2 hereof, ratably amongst the Agent, the Letter of Credit Issuer and the Lenders in accordance with the proportion which the accrued interest and fees and indemnities due and payable under Section 2 hereof constituting the Obligations owing to the Agent, the Letter of Credit Issuer and each such Lender at such time bears to the aggregate amount of accrued interest and fees and indemnities payable under Section 2 hereof constituting the Obligations owing to the Agent, the Letter of Credit Issuer and all of the Lenders at such time until such interest, fees and indemnities shall be paid in full; (iii) THIRD, to the Agent on behalf of the Letter of Credit Issuer in an amount equal to 103% of the then aggregate undrawn amount of all outstanding Letters of Credit to be held by the Agent for the payment of the Obligations with respect thereto when and if due and payable; (iv) FOURTH, to payment of the principal of the Obligations (which shall exclude all Obligations with respect to the undrawn amount of Letters of Credit), ratably amongst the Lenders and the Letter of Credit Issuer in accordance with the proportion which the principal amount of the Obligations (which shall exclude all Obligations with respect to the undrawn amount of Letters of Credit) owing to each such Lender and the Letter of Credit Issuer bears to the aggregate principal amount of the Obligations (which shall exclude all Obligations with respect to the undrawn amount of Letters of Credit) owing to all of the Lenders and the Letter of Credit Issuer until such principal of the Obligations shall be paid in full; (v) FIFTH, to the payment of all other Obligations, ratably amongst the Lenders in accordance with the proportion which the amount of such other Obligations owing to each such Lender bears to the aggregate principal amount of such other Obligations owing to all of the Lenders until such other Obligations shall be paid in full; and (vi) SIXTH, the balance, if any, after all of the Obligations have been satisfied, shall, except as otherwise provided in the Security Documents, be deposited by the Agent in an operating account of the Borrowers with the Agent designated by the Borrowers, or paid over to such other person or persons as may be required by law. In the event that the amount of monies received by the Agent under clause (iii) above with respect to a Letter of Credit for which there are undrawn amounts at the time of the Agent's receipt of such monies shall exceed the amount of actual payments the Letter of Credit Issuer shall have made with respect to drawings under such Letter of Credit after the Agent's receipt of such monies, which determination shall be made after such Letter of Credit has been terminated or has expired, then the Agent shall apply such excess monies and cash collateral in accordance with paragraphs (iv), (v) and (vi) of the immediately preceding paragraph. Each of the Borrowers and the Guarantors acknowledges and agrees that they shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Collateral and collections under the Guarantees of the Obligations and the aggregate amount of the sums referred to in the first through fifth clauses above. IX. AGENT In order to expedite the transactions contemplated by this Agreement, Fleet Capital Corporation is hereby appointed to act as Agent on behalf of the Lenders. Each of the Lenders and each subsequent holder of any Note or issuer of any Letter of Credit by its acceptance thereof, irrevocably authorizes the Agent to take such action on its behalf and to exercise such powers hereunder and under the Security Documents and other Loan Documents as are specifically delegated to or required of the Agent by the terms hereof and the terms thereof together with such powers as are reasonably incidental thereto. Neither the Agent nor any of its directors, officers, employees or agents shall be liable as such for any action taken or omitted to be taken by it or them hereunder or under any of the Security Documents and other Loan Documents or in connection herewith or therewith (a) at the request or with the approval of the Required Lenders (or, if otherwise specifically required hereunder or thereunder, the consent of all the Lenders) or (b) in the absence of its or their own gross negligence, bad faith or willful misconduct. The Agent is hereby expressly authorized on behalf of the Lenders, without hereby limiting any implied authority, (a) to receive on behalf of each of the Lenders any payment of principal of or interest on the Notes outstanding hereunder and all other amounts accrued hereunder paid to the Agent, and promptly to distribute to each Lender its proper share of all payments so received, (b) to distribute to each Lender copies of all notices, agreements and other material as provided for in this Agreement or in the Security Documents and other Loan Documents as received by such Agent and (c) to take all actions with respect to this Agreement and the Security Documents and other Loan Documents as are specifically delegated to the Agent. The Lenders hereby designate DLJ Capital Funding, Inc. as Documentation Agent. The Documentation Agent, in its capacity as documentation agent, shall have no rights, responsibilities, duties or obligations under this Agreement or any other Loan Document. In the event that (a) the Borrowers fail to pay when due the principal of or interest on any Note, any amount payable under or with respect to any Letter of Credit, or any fee payable hereunder or (b) the Agent receives written notice of or otherwise becomes aware of the occurrence of a Default or an Event of Default, the Agent shall promptly give written notice thereof to the Lenders, and shall take such action with respect to such Event of Default or other condition or event as it shall be directed to take by the Required Lenders (but shall not be required to take any such actions which violate any law or any term of this Agreement or any other Loan Document); provided, however, that, unless and until the Agent shall have received such directions, the Agent may take such action or refrain from taking such action hereunder or under the Security Documents or other Loan Documents with respect to a Default or Event of Default as it shall deem advisable in the best interests of the Lenders. Neither the Agent nor the Documentation Agent shall be responsible in any manner to any of the Lenders for the effectiveness, enforceability, perfection, value, genuineness, validity or due execution of this Agreement, the Notes or any of the other Loan Documents or Collateral or any other agreements or certificates, requests, financial statements, notices or opinions of counsel or for any recitals, statements, warranties or representations contained herein or in any such instrument or be under any obligation to ascertain or inquire as to the performance or observance of any of the terms, provisions, covenants, conditions, agreements or obligations of this Agreement or any of the other Loan Documents or any other agreements on the part of any Borrower or any Guarantor and, without limiting the generality of the foregoing, the Agent shall, in the absence of knowledge to the contrary, be entitled to accept any certificate furnished pursuant to this Agreement or any of the other Loan Documents as conclusive evidence of the facts stated therein and shall be entitled to rely on any note, notice, consent, certificate, affidavit, letter, telegram, teletype message, statement, order or other document which it believes in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. It is understood and agreed that the Agent may exercise its rights and powers under other agreements and instruments to which it is or may be a party, and engage in other transactions with any Borrower or any Guarantor, as though it were not Agent of the Lenders hereunder. Neither the Agent, the Documentation Agent nor any of their respective directors, officers, employees or agents shall have any responsibility to any Borrower or any Guarantor on account of the failure or delay in performance or breach by any Lender other than the Agent of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or any Borrower or any Guarantor of any of their respective obligations hereunder or in connection herewith. The Agent may consult with legal counsel selected by it in connection with matters arising under this Agreement or any of the other Loan Documents and any action taken or suffered in good faith by it in accordance with the opinion of such counsel shall be full justification and protection to it. The Agent may exercise any of its powers and rights and perform any duty under this Agreement or any of the other Loan Documents through agents or attorneys. The Agent and the Borrowers may deem and treat the payee of any Note as the holder thereof until written notice of transfer shall have been delivered as provided herein by such payee to the Agent and the Borrowers. With respect to the Loans made hereunder, the Notes issued to it and any other Credit Event applicable to it, the Agent in its individual capacity and not as an Agent and the Documentation Agent in its individual capacity and not as Documentation Agent shall have the same rights, powers and duties hereunder and under any other Loan Document executed in connection herewith as any other Lender and may exercise the same as though it were not the Agent or the Documentation Agent, as the case may be, and the Agent, the Documentation Agent and their respective affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Borrower, any Guarantor or other affiliate thereof as if it were not the Agent or the Documentation Agent, as the case may be. Each Secured Party agrees (i) to reimburse the Agent and the Documentation Agent in the amount of such Lender's pro rata share (based on its Total Commitment hereunder) of any expenses incurred for the benefit of the Secured Parties by the Agent or the Documentation Agent (as applicable), including counsel fees and compensation of agents paid for services rendered on behalf of the Secured Parties, not reimbursed by the Borrowers and (ii) to indemnify and hold harmless the Agent, the Documentation Agent and any of their respective directors, officers, employees or agents, on demand, in the amount of its pro rata share, from 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 it or such directors, officers, employees or agents in its or their capacity as, or acting on behalf of, the Agent or the Documentation Agent (as applicable) in any way relating to or arising out of this Agreement or any of the other Loan Documents or any action taken or omitted by it or any of them under this Agreement or any of the other Loan Documents, to the extent not reimbursed by the Borrowers; provided, however, that no Secured Party shall be liable to the Agent or the Documentation Agent's (as applicable) for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgment, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Agent, the Documentation Agent or any of their respective directors, officers, employees or agents. Each Lender acknowledges that it has, independently and without reliance upon the Agent, the Documentation Agent, Fleet, DLJ or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and any other Loan Document to which such Lender is party. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, the Documentation Agent, Fleet, DLJ or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by notifying the Lenders and the Borrowers. Upon any such resignation, the Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by such Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a financial institution with an office (or an affiliate with an office) in New York, New York, having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor financial institution, such successor shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations hereunder and under each of the other Loan Documents. After any Agent's resignation hereunder, the provisions of this Article shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. The Documentation Agent may resign as Documentation Agent at any time by giving written notice thereof to the Agent. The Agent (and only the Agent) may appoint a successor Documentation Agent, which Documentation Agent shall be a Lender or an Affiliate of a Lender; provided, however, that the Agent shall have no obligation to appoint a successor Documentation Agent. The Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action permitted to be taken by the Agent pursuant to the provisions of this Agreement or any of the other Loan Documents unless it shall be requested in writing to do so by the Required Lenders (and the Agent shall not be obligated to take any such requested action which violates applicable law or any terms of this Agreement or any other Loan Document). The Lenders hereby acknowledge that neither the Agent nor the Documentation Agent is acting as the fiduciary of, or trustee for, any of the Lenders. X. CASH RECEIPTS COLLECTION SECTION X.1. Collection of Cash. (a) (i) The Borrowers will, at their own cost and expense, cause all payments received by the Borrowers from any source, whether in the form of cash, checks, notes, drafts, bills of exchange, money orders, credit card payments, debit card payments or otherwise (referred to herein as "Payments"), (ii) to be deposited daily in precisely the form received (but with any endorsements of the Borrowers necessary for deposit or collection) in one or more bank accounts maintained by the Borrowers and acceptable to the Agent in which only the Payments owned by the Borrowers will be deposited, (iii) to be transferred daily from the accounts referred to in clause (ii) to one or more concentration accounts designated by the Agent with a bank acceptable to the Agent in which only the Payments owned by the Borrowers will be deposited, and (iv) cause the Payments to be transferred daily from the concentration accounts referred to in clause (iii) to an account of the Agent, such Payments to be subject to withdrawal by the Agent only, as hereinafter provided. Until such Payments are deposited with the Agent in accordance with the prior sentence, such Payments shall be deemed to be held in trust by the Borrowers for and as the Agent's property. All Payments that are deposited with the Agent in accordance with the foregoing will, if deposited on or before 1:00 p.m. (New York time), be applied by the Agent on such Business Day (or, if deposited after 1:00 p.m. (New York time), within one Business Day after receipt thereof by the Agent) to reduce the outstanding balance of the Loans and thereafter other Obligations then due and payable, subject to final collection in cash of the item deposited. Each bank at which an account referred to in clause (ii) of the first sentence of this Section 10.01(a) is maintained and each bank at which a concentration account referred to in clause (iii) of such sentence shall execute and deliver to the Agent such agreements, in form and substance satisfactory to the Agent, as the Agent shall request with respect to such accounts, including, without limitation, with respect to prohibitions on the Borrowers withdrawing funds from such accounts or otherwise directing or modifying actions with respect to such accounts; provided, that with respect to each account referred to in clause (ii) of the first sentence of this Section 10.01(a) which is maintained by Delchamps or any subsidiary thereof, such agreements shall be delivered to the Agent within forty-five (45) days of the Initial Closing Date; provided, however, that such agreements shall permit the Borrowers to maintain the maximum balance set forth in Schedule III annexed hereto in each account referred to in clauses (ii) and (iii) of the first sentence of this Section 10.01(a). Upon the occurrence and continuance of an Event of Default, the Agent may send a notice of assignment and/or notice of the Agent's security interest to any and all third parties holding or otherwise concerned with any of the Collateral, and thereafter the Agent shall have the sole right to collect and/or take possession of the Collateral and the books and records relating thereto. (b) (i) Each Borrower hereby constitutes the Agent or the Agent's designee as such person's attorney-in-fact with power to endorse its name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral that may come into its possession; upon the occurrence of an Event of Default, to open and dispose of all mail received by such Borrower and to notify the Postal Service authorities to change the address for delivery of mail addressed to such person to such address as the Agent may designate; and to do all other acts and things necessary to carry out this Agreement. All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission, for any error of judgment or for any mistake of fact or law; provided, that the Agent or its designee shall not be relieved of liability to the extent it is determined by a final judicial decision that its act, error or mistake constituted gross negligence, bad faith or willful misconduct. This power of attorney being coupled with an interest is irrevocable until all of the Obligations are paid in full and this Agreement and the Total Commitment is terminated. (ii) The Agent, without notice to or consent of any Borrower, shall have the right to receive, endorse, assign and/or deliver in its name or the name of any Borrower any and all checks, drafts and other instruments for the payment of money relating to the Collateral, and each Borrower hereby waives notice of presentment, protest and non-payment of any instrument so endorsed. (c) Nothing herein contained shall be construed to constitute any Borrower as agent of the Agent for any purpose whatsoever, and neither the Agent nor any Lender shall be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof (except to the extent it is determined by a final judicial decision that the Agent's or a Lender's act or omission constituted gross negligence, bad faith or willful misconduct). The Agent and the Lenders shall not, under any circumstances or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Collateral or for any damage resulting therefrom (except to the extent it is determined by a final judicial decision that the Agent's or such Lender's error, omission or delay constituted gross negligence, bad faith or willful misconduct). The Agent and the Lenders do not, by anything herein or in any assignment or otherwise, assume any Borrower's obligations under any contract or agreement assigned to the Agent or the Lenders, and the Agent and the Lenders shall not be responsible in any way for the performance by any Borrower of any of the terms and conditions thereof. (d) If any of the Collateral includes a charge for any tax payable to any governmental tax authority, the Agent is hereby authorized (but in no event obligated) in its discretion to pay the amount thereof to the proper taxing authority for the account of the Borrowers and to charge the Borrowers' account therefor. The Borrowers shall notify the Agent if any Collateral includes any tax due to any such taxing authority and, in the absence of such notice, the Agent shall have the right to retain the full proceeds of such Collateral and shall not be liable for any taxes that may be due from the Borrowers by reason of the sale of any of the Collateral. SECTION X.2. Monthly Statement of Account. The Agent shall render to the Borrowers each calendar month a statement of the Borrowers' account, which shall constitute an account stated and shall be deemed to be correct and accepted by and be binding upon the Borrowers unless the Agent receives a written statement of the Borrowers' exceptions within 30 days after such statement was rendered to the Borrowers. SECTION X.3. Collateral Custodian. Upon the occurrence and continuance of an Event of Default, the Agent may at any time and from time to time employ and maintain in the premises of the Borrowers a custodian selected by the Agent who shall have full authority to do all acts necessary to protect the Agent's and Lenders' interests and to report to the Agent thereon. Each Borrower hereby agrees to cooperate with any such custodian and to do whatever the Agent may reasonably request to preserve the Collateral. All costs and expenses incurred by the Agent by reason of the employment of the custodian shall be charged to the Borrowers' account and added to the Obligations. XI. MISCELLANEOUS SECTION XI.1. Notices. Notices, consents and other communications provided for herein shall be in writing and shall be delivered or mailed by certified mail return receipt requested (or in the case of telex or facsimile communication, delivered by telex, graphic scanning, telecopier or other telecommunications equipment, with receipt confirmed with a copy mailed as aforesaid) addressed, (a) if to any Borrower, Guarantor or Grantor, at 1770 Ellis Avenue, Jackson, MS 39204, Attention: Michael E. Julian, President, with copies to Bruckmann, Rosser, Sherrill & Co., Inc., 126 East 56th Street, New York, NY 10022, Attention: Harold Rosser, Managing Director; and Dechert, Price & Rhoads, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, PA 19103, Attention: Gary L. Green, Esq.; (b) if to the Agent, at Fleet Capital Corporation, 60 East 42nd Street, New York, NY 10017, Attention: Mr. Thomas Maiale, with a copy to Kaye, Scholer, Fierman, Hays & Handler, LLP, 425 Park Avenue, New York, NY 10022, Attention: Albert M. Fenster, Esq.; and (c) if to any Lender, at the address set forth below its name in Schedule 2.01 annexed hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if hand delivered or three days after being sent by registered or certified mail, postage prepaid, return receipt requested, if by mail, or upon receipt if by any telex, facsimile or other telecommunications equipment, in each case addressed to such party as provided in this Section 11.01 or in accordance with the latest unrevoked direction from such party. SECTION XI.2. Survival of Agreement. All covenants, agreements, representations and warranties made by any Borrower, any Guarantor or any of their respective subsidiaries herein and in the certificates or other instruments prepared or delivered in connection with this Agreement, any of the Security Documents or any other Loan Document, shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans and the execution and delivery to the Lenders of the Notes and occurrence of any other Credit Event and shall continue in full force and effect as long as the principal of or any accrued interest on the Notes or any other fee or amount payable under the Notes or this Agreement or any other Loan Document is outstanding and unpaid and so long as the Total Commitment has not been terminated. SECTION XI.3. Successors and Assigns; Participations. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Borrower, any Guarantor, any Grantor, any ERISA Affiliate, any subsidiary of any thereof, the Agent or the Lenders, that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. Without limiting the generality of the foregoing, each Borrower specifically confirms that any Lender may at any time and from time to time pledge or otherwise grant a security interest in any Loan or any Note (or any part thereof) to any Federal Reserve Bank. The Borrowers may not assign or transfer any of their rights or obligations hereunder without the written consent of all the Lenders. (b) Each Lender, without the consent of the Borrowers, may sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment) and the Loans owing to it and interest in undrawn Letters of Credit and the Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment), shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the banks or other entities buying participations shall be entitled to the cost protection provisions contained in Sections 2.10(a) (except to the extent that application of such Section 2.10(a) to such banks and entities would cause any Borrower to make duplicate payments thereunder), 2.11, 2.12 and 2A.04 hereof, but only to the extent any of such Sections would be available to the Lender which sold such participation, and (iv) the Borrowers, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement; provided, further, however, that each Lender shall retain the sole right and responsibility to enforce the obligations of the Borrowers, the Grantors and the Guarantors relating to the Loans, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement, other than amendments, modifications or waivers with respect to any fees payable hereunder or the amount of principal or the rate of interest payable on, or the dates fixed for any payment of principal of or interest on, the Loans in which such entity is participating or the release of all Collateral. (c) Each Lender may assign and delegate to an Eligible Assignee with the prior written consent of the Borrowers (such consent not to be unreasonably withheld or delayed) and with the prior written consent of the Agent (such consent not to be unreasonably withheld or delayed), all or a portion of its interests, rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitment and the same portion of the Loans and interest in undrawn Letters of Credit at the time owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all of the assigning Lender's rights and obligations under this Agreement, which shall include the same percentage interest in the Loans, interest in undrawn and unreimbursed Letters of Credit and Notes, (ii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Agent) shall be in a minimum principal amount of $10,000,000 and (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance, together with any Note subject to such assignment and a processing and recordation fee of $3,000. Upon such execution, delivery, acceptance and recording and after receipt of the written consent of the Agent, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (x) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and under the other Loan Documents and (y) the Lender which is assignor thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement with respect to the period after the date of such assignment (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). Notwithstanding any other provisions of this Section 11.03(c), no transfer or assignment of the interests or obligations of any Lender hereunder or any grant of participation therein shall be permitted prior to the Syndication Date. (d) By executing and delivering an Assignment and Acceptance, the Lender which is assignor thereunder and the assignee thereunder confirm to, and agree with, each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereunder free and clear of any adverse claim, such Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, perfection, genuineness, sufficiency or value of this Agreement, the other Loan Documents or any Collateral with respect thereto or any other instrument or document furnished pursuant hereto or thereto; (ii) such Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower, or any Grantor or Guarantor or the performance or observance by any Borrower, Grantor or the Guarantor of any of their respective obligations under this Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee confirms that it has received a copy of this Agreement and of the other Loan Documents, together with copies of financial statements and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agent to take such action as the Agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (e) The Agent shall maintain at its address referred to in Section 11.01 hereof a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Agent and the Lenders may treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (f) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee together with any Note or Notes subject to such assignment and the written consent to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit E annexed hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders and the Borrowers. Within five (5) Business Days after receipt of such notice, the Borrowers, at their own expense, shall execute and deliver to the Agent in exchange for each surrendered Note or Notes a new Note or Notes to the order of such assignee in an amount equal to its portion of the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained any Commitment hereunder, a new Note or Notes to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A. Notes surrendered to the Borrowers shall be canceled by the Borrowers. (g) Notwithstanding any other provision herein, any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 11.03, disclose to the assignee or participant or proposed assignee or participant, any information, including, without limitation, any Information, relating to any Borrower, any Grantor or any Guarantor furnished to such Lender by or on behalf of any Borrower in connection with this Agreement; provided, however, that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential Information relating to the Borrowers received from such Lender. SECTION XI.4. Expenses; Indemnity. (a) Each Borrower agrees to pay all out-of-pocket expenses incurred by the Agent in connection with the preparation of this Agreement, the Security Documents, the Notes and the other Loan Documents or with any amendments, modifications, waivers, extensions, renewals, renegotiations or work-outs of the provisions hereof or thereof (whether or not the transactions hereby contemplated shall be consummated) or incurred by the Agent, the Documentation Agent, the Letter of Credit Issuer or any of the Lenders in connection with the enforcement or protection of its rights in connection with this Agreement or any of the other Loan Documents or with the Loans made or the Notes or Letters of Credit issued hereunder, or in connection with any pending or threatened action, proceeding, or investigation relating to the foregoing, including but not limited to the reasonable fees and disbursements of counsel for the Agent, the Documentation Agent, the Letter of Credit Issuer and each Lender and ongoing field examination expenses and charges. Without limitation of the foregoing, each Borrower hereby agrees to reimburse the Agent for any and all reasonable costs and expenses incurred in connection with audits and field exams of the Borrowers' and their subsidiaries' properties, assets, business and operations performed at the request of the Agent by an independent party selected by the Agent (provided that as long as the Default or Event of Default is in existence, the obligations of the Borrowers under this sentence shall not exceed $50,000 per calendar year). Each Borrower further indemnifies the Lenders and the Letter of Credit Issuer from and agrees to hold them harmless against any documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement, the Notes or the making of any Credit Events. (b) Each Borrower indemnifies the Agent, the Documentation Agent, the Letter of Credit Issuer and each Lender and their respective directors, officers, employees and agents against, and agrees to hold the Agent, the Letter of Credit Issuer, each Lender and each such person harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees and expenses, incurred by or asserted against the Agent, the Documentation Agent, the Letter of Credit Issuer, the Lender or any such person arising out of, in any way connected with, or as a result of (i) the use of any of the proceeds of the Loans or of any Letter of Credit, (ii) this Agreement, any of the Security Documents, or the other documents contemplated hereby or thereby, except, as to any Lender, as a result of a breach thereof by such Lender (iii) the performance by the parties hereto and thereto of their respective obligations hereunder and thereunder (including but not limited to the making of the Total Commitment) and consummation of the transactions contemplated hereby and thereby, (iv) breach of any representation or warranty, or (v) any claim, litigation, investigation or proceedings relating to the Related Transactions and/or any of the foregoing, whether or not the Agent, the Documentation Agent, the Letter of Credit Issuer, any Lender or any such person is a party thereto; provided, however, that such indemnity shall not, as to the Agent, the Documentation Agent, the Letter of Credit Issuer or any Lender, apply to any such losses, claims, damages, liabilities or related expenses to the extent that they result from the gross negligence, bad faith or willful misconduct of the Agent, the Documentation Agent, the Letter of Credit Issuer or any Lender. (c) Each Borrower indemnifies, and agrees to defend and hold harmless the Agent, the Letter of Credit Issuer and the Lenders and their respective officers, directors, shareholders, agents and employees (collectively, the "Indemnitees") from and against any loss, cost, damage, liability, lien, deficiency, fine, penalty or expense (including, without limitation, reasonable attorneys' fees and reasonable expenses for investigation, removal, cleanup and remedial costs and modification costs incurred to permit, continue or resume normal operations of any property or assets or business of any Borrower or any subsidiary thereof) arising from a violation of, or failure to comply with any Environmental Law and to remove any Lien arising therefrom except to the extent caused by the gross negligence, bad faith or willful misconduct of any Indemnitee, which any of the Indemnitees may incur or which may be claimed or recorded against any of the Indemnitees by any person. (d) The provisions of this Section 11.04 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or the Notes, or any investigation made by or on behalf of the Agent, the Letter of Credit Issuer or any Lender. All amounts due under this Section 11.04 shall be payable on written demand therefor (which demand shall include a reasonable description of such amounts). SECTION XI.5. Applicable Law. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF). SECTION XI.6. Right of Setoff. If an Event of Default shall have occurred and be continuing, upon the request of the Required Lenders, each Lender and the Letter of Credit Issuer shall and is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or the Letter of Credit Issuer to or for the credit or the account of the Borrowers against any and all of the Obligations, the Notes held by such Lender or any other Loan Document, irrespective of whether or not such Lender or the Letter of Credit Issuer shall have made any demand under this Agreement, the Notes or such other Loan Document and although such obligations may be unmatured. Each Lender agrees to notify promptly the Agent and the Borrowers after any such setoff and application made by such Lender, but the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender and the Letter of Credit Issuer under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which may be available to such Lender or the Letter of Credit Issuer. SECTION XI.7. Payments on Business Days. (a) Should the principal of or interest on the Notes or any fee or other amount payable hereunder become due and payable on other than a Business Day, payment in respect thereof may be made on the next succeeding Business Day (except as otherwise specified in the definition of "Interest Period"), and such extension of time shall in such case be included in computing interest, if any, in connection with such payment. (b) All payments by any Borrower and any Guarantor hereunder and all Loans made by the Lenders hereunder shall be made in lawful money of the United States of America in immediately available funds at the office of the Agent set forth in Section 11.01 hereof. SECTION XI.8. Waivers; Amendments; Final Maturity Date. (a) No failure or delay of the Agent, any Lender, Fleet or the Letter of Credit Issuer in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agent, the Lenders, Fleet and the Letter of Credit Issuer hereunder or under any other Loan Document are cumulative and not exclusive of any rights or remedies which they may otherwise have. No waiver of any provision of this Agreement or the Notes nor consent to any departure by any Borrower or any Guarantor therefrom shall in any event be effective unless the same shall be authorized as provided in paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Borrower or any Guarantor in any case shall entitle it to any other or further notice or demand in similar or other circumstances. Each holder of any of the Notes shall be bound by any amendment, modification, waiver or consent authorized as provided herein, whether or not such Note shall have been marked to indicate such amendment, modification, waiver or consent. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders; provided, however, (i) that no such agreement shall (A) change the principal amount of, or extend or advance the maturity of or the dates for the payment of principal of or interest on, any Note or fees payable hereunder or reduce the rate of interest on any Note or fees payable hereunder, without the consent of each holder affected thereby, (B) change the Commitment of any Lender or amend or modify the provisions of this Section 11.08, Section 2.01, Section 2.06, Section 2.13, Section 11.04 or Section 2A.06 hereof or the definition of "Required Lenders" or the dollar amount contained in the definition of "Supplemental Availability ", or (C) release any substantial portion of the Collateral, in each case without the prior written consent of each Lender affected thereby except that the Agent may, without the prior written consent of any Lender, release Collateral permitted to be sold pursuant to the terms of Section 7.05 hereof and (ii) that no such agreement shall amend, modify or otherwise affect the rights or duties of the Agent, Fleet or the Letter of Credit Issuer under this Agreement or the other Loan Documents without the written consent of the Agent. Each Lender and holder of any Note shall be bound by any modification or amendment authorized by this Section regardless of whether its Notes shall be marked to make reference thereto, and any consent by any Lender or holder of a Note pursuant to this Section shall bind any person subsequently acquiring a Note from it, whether or not such Note shall be so marked. SECTION XI.9. Severability. In the event any one or more of the provisions contained in this Agreement or in the Notes should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION XI.10. Entire Agreement; Waiver of Jury Trial, etc. (a) This Agreement, the Notes, the Fee Letter and the other Loan Documents constitute the entire contract between the parties hereto relative to the subject matter hereof. Any previous agreement among the parties hereto with respect to the Transactions is superseded by this Agreement, the Notes, the Fee Letter and the other Loan Documents. Except as expressly provided herein or in the Notes, the Fee Letter or the Loan Documents (other than this Agreement), nothing in this Agreement, the Notes, the Fee Letter or in the other Loan Documents, expressed or implied, is intended to confer upon any party, other than the parties hereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement, the Notes or the other Loan Documents. (b) EXCEPT AS PROHIBITED BY LAW, EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS. (c) Except as prohibited by law, each party hereto hereby waives any right it may have to claim or recover in any litigation referred to in paragraph (b) of this Section 11.10 any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. (d) Each party hereto (i) certifies that no representative, agent or attorney of any Lender has represented, expressly or otherwise, that such Lender would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that it has been induced to enter into this Agreement, the Notes or the other Loan Documents, as applicable, by, among other things, the mutual waivers and certifications herein. SECTION XI.11. Confidentiality. The Agent and the Lenders agree to keep confidential (and to cause their respective officers, directors, employees, agents, advisors, consultants and representatives to keep confidential) all information, materials and documents furnished by or on behalf of the Guarantors, the Borrowers, the Grantors or any of their respective subsidiaries to the Agent or any Lender (the "Information"). Notwithstanding the foregoing, the Agent and each Lender shall be permitted to disclose Information (i) to such of its officers, counsel, directors, employees, agents, advisors, consultants and representatives as need to know such Information in connection with its participation in any of the Transactions or the administration of this Agreement or the other Loan Documents with instructions to maintain the confidentiality thereof; (ii) to the extent required by applicable laws and regulations or by any subpoena or similar legal process, or requested by any governmental agency or authority (the Agent and each Lender receiving such subpoena or similar legal process agrees to use reasonable efforts to promptly furnish the Borrowers with a copy thereof); (iii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Agreement, (B) becomes available to the Agent or such Lender on a non-confidential basis from a source other than any Borrower, any Guarantor, any Grantor or any of their respective subsidiaries or (C) was available to the Agent or such Lender on a non-confidential basis prior to its disclosure to the Agent or such Lender by any Borrower, any Guarantor, any Grantor or any of their respective subsidiaries; (iv) to the extent any Borrower, any Guarantor or any of their respective subsidiaries shall have consented to such disclosure in writing; (v) in connection with the sale of any Collateral pursuant to the provisions of any of the other Loan Documents; or (vi) pursuant to Section 11.03(g) hereof. SECTION XI.12. Submission to Jurisdiction. (a) Any legal action or proceeding with respect to this Agreement or the Notes or any other Loan Document may be brought in state courts located in the City of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each of the Borrowers and each of the Guarantors hereby accept for themselves and in respect of their property, generally and unconditionally, the jurisdiction of the aforesaid courts. (b) Each of the Borrowers and each of the Guarantors hereby irrevocably waives, in connection with any such action or proceeding, any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non convenience, which they may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. (c) Each of the Borrowers and each of the Guarantors hereby irrevocably consents to the service of process 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 each such person, as the case may be, at its address set forth in Section 11.01 hereof. (d) Nothing herein shall affect the right of the Agent or any Lender to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Borrower or any Guarantor in any other jurisdiction. SECTION XI.13. Counterparts; Facsimile Signature. This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective when copies hereof which, when taken together, bear the signatures of each of the parties hereto shall be delivered to the Agent. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed signature page hereto. SECTION XI.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION XI.15. Defaulting Lender. (a) Notwithstanding anything to the contrary contained herein, in the event that any Lender (x) refuses (which refusal constitutes a breach by such Lender of its obligations under this Agreement and which has not been retracted) to make available its portion of any Loan or (y) notifies the Agent and/or any Borrower that it does not intend to make available its portion of any Loan (if the actual refusal would constitute a breach by such Lender of its obligations under this Agreement and which has not been retracted) (each, a "Lender Default"), all rights and obligations hereunder of the Lender (a "Defaulting Lender") as to which a Lender Default is in effect and of the other parties hereto shall be modified to the extent of express provisions of this Section 11.15 while such Lender Default remains in effect. (b) Loans shall be incurred pro rata from the Lenders (the "Non-Defaulting Lenders") which are not Defaulting Lenders based on their respective Commitments, and no Commitment of any Lender or any pro rata share of any Loans required to be advanced by any Lender shall be increased as a result of such Lender Default. Amounts received in respect of principal of the Loans shall be applied to reduce the Loans of each of the Lenders pro rata based on the aggregate of the outstanding Loans of all of the Lenders at the time of such application; provided that, such amount shall not be applied to any Loan of a Defaulting Lender at any time when, and to the extent that, the aggregate amount of Loans of any Non-Defaulting Lender exceeds such Non-Defaulting Lenders' pro rata share of all Loans then outstanding. (c) The Lenders shall participate in Letters of Credit on the basis of their respective pro rata shares, and no participation or reimbursement obligation of any Lender shall be increased as a result of a failure of any Defaulting Lender to reimburse the Agent on the Letter of Credit Issuer's behalf with respect to any amounts drawn on or otherwise payable with respect to any Letters of Credit (the amount that any such Defaulting Lender has failed to reimburse is hereinafter referred to as such Defaulting Lender's "Unreimbursed Amount"). Until such Defaulting Lender has reimbursed the Agent on the Letter of Credit Issuer's behalf for any Unreimbursed Amount owed by it, all payments and other amounts received from any source with respect to the Obligations or otherwise under or in connection with the Agreement (including any letter of credit fees) which would otherwise be payable to such Defaulting Lender will instead be paid to the Agent for the benefit of the Letter of Credit Issuer for application to such Unreimbursed Amount until such Unreimbursed Amount has been paid in full. A Defaulting Lender shall not be entitled to receive any portion of the Commitment Fee, the letter of credit fees or any other fees payable in connection with this Agreement, or any indemnity arising from its commitment to make Loans and/or participate in Letters of Credit. (d) A Defaulting Lender shall not be entitled to give instructions to the Agent or to approve, disapprove, consent to or vote on any matters relating to this Agreement and the Loan Documents. All amendments, waivers and other modifications of this Agreement and the Loan Documents may be made without regard to a Defaulting Lender and, for purposes of the definition of "Required Lenders", a Defaulting Lender shall be deemed not to be a Lender, not to have a Commitment, not to have a Term Commitment and not to have Loans outstanding. (e) Other than as expressly set forth in this Section 11.15, the rights and obligations of a Defaulting Lender (including the obligation to indemnify the Agent) and the other parties hereto shall remain unchanged. Nothing in this Section 11.15 shall be deemed to release any Defaulting Lender from its Commitment hereunder, shall alter such Commitment, shall operate as a waiver of any default by such Defaulting Lender hereunder, or shall prejudice any rights which the Borrowers, the Agent or any Lender may have against any Defaulting Lender as a result of any default by such Defaulting Lender hereunder. (f) In the event the Defaulting Lender is able to retroactively cure to the satisfaction of the Agent and with the consent of the Borrowers (which shall not be unreasonably withheld) the breach which caused a Lender to become a Defaulting Lender, such Defaulting Lender shall upon notice to Borrowers, no longer be a Defaulting Lender and shall be treated as a Lender hereunder. SECTION XI.16. LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY ANY BORROWER, ANY GUARANTOR, ANY SPECIFIED PERSON, OR ANY OTHER PERSON AGAINST THE AGENT, ANY LENDER, FLEET CAPITAL CORPORATION, FLEET BANK, N.A. OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF THE AGENT, SUCH LENDER, FLEET CAPITAL CORPORATION OR FLEET BANK, N.A. FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR, TO THE FULLEST EXTENT PERMITTED BY LAW, FOR ANY PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM OR CAUSE OF ACTION (WHETHER BASED ON CONTRACT, TORT, STATUTORY LIABILITY, OR ANY OTHER GROUND) BASED ON, ARISING OUT OF OR RELATED TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH BORROWER (FOR ITSELF AND ON BEHALF OF EACH GUARANTOR AND EACH SPECIFIED PERSON) HEREBY WAIVES, RELEASES AND AGREES NEVER TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER SUCH CLAIM NOW EXISTS OR HEREAFTER ARISES AND WHETHER OR NOT IT IS NOW KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. XII. GUARANTEES Each Guarantor unconditionally guarantees, as a primary obligor and not merely as a surety, jointly and severally with each other Guarantor, the due and punctual payment of the principal of and interest on each of the Notes, when and as due, whether at maturity, by acceleration, by notice of prepayment or otherwise, and the due and punctual performance of all other Obligations. Each Guarantor further agrees that the Obligations may be extended and renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligations. Each Guarantor waives presentment to, demand of payment from and protest to the Borrowers of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. The obligations of a Guarantor hereunder shall not be affected by (a) the failure of any Lender, the Letter of Credit Issuer or the Agent to assert any claim or demand or to enforce any right or remedy against the Borrowers or any other Guarantor under the provisions of this Agreement, the Notes or any of the other Loan Documents or otherwise; (b) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, the Notes, any of the other Loan Documents, any guarantee or any other agreement; (c) the release of any security held by the Agent for the Obligations or any of them; or (d) the failure of any Lender, the Agent or the Letter of Credit Issuer to exercise any right or remedy against any other Guarantor of the Obligations. Each Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by any Lender, the Agent or the Letter of Credit Issuer to any security (including, without limitation, any Collateral) held for payment of the Obligations or to any balance of any deposit account or credit on the books of any Lender, the Agent or the Letter of Credit Issuer in favor of any Borrower or any other person. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent, the Letter of Credit Issuer or any Lender to assert any claim or demand or to enforce any remedy under this Agreement, the Notes or under any other Loan Document, any guarantee or any other agreement, by any waiver or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission which may or might in any manner or to any extent vary the risk of such Guarantor or otherwise operate as a discharge of such Guarantor as a matter of law or equity. Each Guarantor further agrees that its guarantee shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be returned by the Agent, the Letter of Credit Issuer or any Lender upon the bankruptcy or reorganization of any Borrower or otherwise. Each Guarantor hereby subordinates all rights of subrogation against any Borrower and its property and all rights of indemnification, contribution and reimbursement from any Borrower and its property, in each case in connection with this guarantee and any payments made hereunder, and regardless of whether such rights arise by operation of law, pursuant to contract or otherwise, to the prior payment in full in cash of all Obligations. IN WITNESS WHEREOF, the Borrowers, the Guarantors, the Agent and the Lenders have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. JITNEY-JUNGLE STORES OF AMERICA, INC., as Borrower and as Guarantor By:_____________________________ Name: Title: SOUTHERN JITNEY JUNGLE COMPANY, as Borrower and as Guarantor By:_____________________________ Name: Title: McCARTY- HOLMAN CO., INC., as Borrower and as Guarantor By:_____________________________ Name: Title: JITNEY- JUNGLE BAKERY, INC., as Borrower and as Guarantor By:_____________________________ Name: Title: PUMP AND SAVE, INC., as Borrower and as Guarantor By:_____________________________ Name: Title: INTERSTATE JITNEY JUNGLE STORES, INC., as Borrower and as Guarantor By:_____________________________ Name: Title: DELTA ACQUISITION CORPORATION, as Borrower and as Guarantor By:_____________________________ Name: Title: DELCHAMPS, INC., as Borrower and as Guarantor By:_____________________________ Name: Title: SUPERMARKET CIGARETTE SALES, INC., as Guarantor By:_____________________________ Name: Title: FLEET CAPITAL CORPORATION, as Agent By:_____________________________ Name: Title: FLEET CAPITAL CORPORATION, as Lender By:_____________________________ Name: Title: BTM CAPITAL CORPORATION, as Lender By:_____________________________ Name: Title: HELLER FINANCIAL INC., as Lender By:_____________________________ Name: Title: IBJ SCHRODER BUSINESS CREDIT CORP., as Lender By:_____________________________ Name: Title: NATIONAL BANK OF CANADA, a Canadian Chartered Bank, as Lender By:_____________________________ Name: Title: NATIONAL CITY BANK, as Lender By:_____________________________ Name: Title: DEUTSCHE FINANCIAL SERVICES HOLDING CORPORATION, as Lender By:_____________________________ Name: Title: DLJ CAPITAL FUNDING, INC., as Lender By:_____________________________ Name: Title: DLJ CAPITAL FUNDING, INC., as Documentation Agent By:_____________________________ Name: Title: FLEET BANK, N.A., as a Letter of Credit Issuer By:_____________________________ Name: Title: SCHEDULE II FISCAL REPORTING PERIODS OF THE BORROWERS FISCAL FY FY FY FY FY FY FY MONTH 1998 1999 2000 2001 2002 2003 2004 - ------- -------- -------- -------- -------- -------- -------- -------- 1 5/31/97 5/30/98 5/29/99 5/27/00 2 6/28/97 6/27/98 6/26/99 6/24/00 3 7/26/97 7/25/98 7/24/99 7/22/00 4 8/23/97 8/22/98 8/21/99 8/19/00 5 9/20/97 9/19/98 9/18/99 9/16/00 61 10/18/97 10/17/98 10/16/99 10/14/00 7 11/15/97 11/14/98 11/13/99 11/11/00 8 12/13/97 12/12/98 12/11/99 12/9/00 91 1/10/98 1/9/99 1/8/00 1/6/01 10 2/10/98 2/6/99 2/5/00 2/3/01 11 3/7/98 3/6/99 3/4/00 3/3/01 12 4/4/98 4/3/99 4/1/00 3/31/01 13 5/2/98 5/1/99 4/29/00 4/28/01 TABLE OF CONTENTS PAGE ---- I. DEFINITIONS 2 IA. AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT 21 SECTION 1A.01. (a) Existing Loans and Existing Letters of Credit. 21 II. THE LOANS 23 SECTION 2.01. Commitments 23 SECTION 2.02. Loans 24 SECTION 2.03. Notice of Loans 26 SECTION 2.04. Notes; Repayment of Loans 26 SECTION 2.05. Interest on Loans 27 SECTION 2.06. Fees 27 SECTION 2.07. Termination of Commitments and Commitment Reductions 27 SECTION 2.08. Interest on Overdue Amounts 30 SECTION 2.09. Prepayment of Loans 31 SECTION 2.10. Reserve Requirements; Change in Circumstances 35 SECTION 2.11. Change in Legality 37 SECTION 2.12. Indemnity 37 SECTION 2.13. Pro Rata Treatment 38 SECTION 2.14. Sharing of Setoffs 38 SECTION 2.15. Taxes 39 SECTION 2.16. Payments and Computations 41 SECTION 2.17. Settlement Among Lenders 41 SECTION 2.18. Making of Loans 44 SECTION 2.19. Joint and Several Borrowers 45 SECTION 2.20. Individual Borrowing and Letter of Credit Limit 45 IIA. LETTERS OF CREDIT 46 SECTION 2A.01. Issuance of Letters of Credit 46 SECTION 2A.02. Payment; Reimbursement 46 SECTION 2A.03. The Letter of Credit Issuer's Actions 48 SECTION 2A.04. Payments in Respect of Increased Costs 48 SECTION 2A.05. Indemnity as to Letters of Credit 50 SECTION 2A.06. Letter of Credit Fees 50 III. COLLATERAL SECURITY 51 SECTION 3.01. Security Documents 51 SECTION 3.02. Filing and Recording 51 SECTION 3.03. Real Property; Mortgages; Title Insurance 51 SECTION 3.04. Additional Collateral 53 IV. REPRESENTATIONS AND WARRANTIES 53 SECTION 4.01. Organization, Legal Existence 53 SECTION 4.02. Authorization 54 SECTION 4.03. Governmental Approvals 54 SECTION 4.04. Binding Effect 54 SECTION 4.05. Material Adverse Change 55 SECTION 4.06. Litigation; Compliance with Laws; etc. 55 SECTION 4.07. Financial Statements 55 SECTION 4.08. Federal Reserve Regulations 57 SECTION 4.09. Taxes 57 SECTION 4.10. Employee Benefit Plans 58 SECTION 4.11. No Material Misstatements 59 SECTION 4.12. Investment Company Act; Public Utility Holding Company Act 59 SECTION 4.13. Security Interest 60 SECTION 4.14. Bank Accounts 60 SECTION 4.15. Capitalization 60 SECTION 4.16. Title to Properties; Possession Under Leases; Trademarks 60 SECTION 4.17. Solvency 62 SECTION 4.18. Permits, etc. 63 SECTION 4.19. Compliance with Environmental Laws 63 SECTION 4.20. Material Agreements 64 SECTION 4.21. Acquisition 64 SECTION 4.22. The Tender Offer and Merger 65 SECTION 4.23. Broker's Fees 65 V. CONDITIONS OF CREDIT EVENTS 66 SECTION 5.01. All Credit Events 66 SECTION 5.02. Initial Closing Date 66 SECTION 5.03. Merger Closing Date 75 VI. AFFIRMATIVE COVENANTS 81 SECTION 6.01. Legal Existence 81 SECTION 6.02. Businesses and Properties 82 SECTION 6.03. Insurance 82 SECTION 6.04. Taxes 83 SECTION 6.05. Financial Statements, Reports, etc. 83 SECTION 6.06. Litigation and Other Notices 86 SECTION 6.07. ERISA 87 SECTION 6.08. Maintaining Records; Access to Properties and Inspections; Right to Audit 88 SECTION 6.09. Fiscal Year-End 89 SECTION 6.10. Further Assurances 89 SECTION 6.11. Additional Grantors and Guarantors 89 SECTION 6.12. Environmental Laws 89 SECTION 6.13. Pay Obligations to Lenders and Perform Other Covenants 91 SECTION 6.14. Maintain Operating Accounts 92 SECTION 6.15. Amendments 92 SECTION 6.16. Use of Proceeds 92 SECTION 6.17. Voting Control of Target Company; No Sale of Stock, Etc 92 SECTION 6.18. Merger 92 VII. NEGATIVE COVENANTS 93 SECTION 7.01. Liens 93 SECTION 7.02. Sale and Lease-Back Transactions 94 SECTION 7.03. Indebtedness 94 SECTION 7.04. Dividends, Distributions and Payments 95 SECTION 7.05. Consolidations, Merger and Sales of Assets 95 SECTION 7.06. Investments 96 SECTION 7.07. Capital Expenditures and Other Expenditures 97 SECTION 7.08. Fixed Charge Coverage Ratio 97 SECTION 7.09. Leverage Ratio 97 SECTION 7.10. Interest Coverage Ratio 98 SECTION 7.11. EBITDA 98 SECTION 7.12. Interest Rate Protection Arrangements 99 SECTION 7.13. Business 99 SECTION 7.14. Sales of Receivables 99 SECTION 7.15. Use of Proceeds 99 SECTION 7.16. ERISA 99 SECTION 7.17. Accounting Changes 99 SECTION 7.18. Prepayment or Modification of Indebtedness; Modification of Charter and Other Documents 100 SECTION 7.19. Transactions with Affiliates 100 SECTION 7.20. Consulting Fees 100 SECTION 7.21. Limitations on Dividends and Other Payments 101 SECTION 7.22. Limitation on Creation of Subsidiaries 101 SECTION 7.23. Limitation on Issuance of Capital Stock 101 SECTION 7.24. Conduct of Business by Target Company 101 VIII. EVENTS OF DEFAULT 103 IX. AGENT 110 X. CASH RECEIPTS COLLECTION 113 SECTION 10.01. Collection of Cash 113 SECTION 10.02. Monthly Statement of Account 114 SECTION 10.03. Collateral Custodian 115 XI. MISCELLANEOUS 115 SECTION 11.01. Notices 115 SECTION 11.02. Survival of Agreement 115 SECTION 11.03. Successors and Assigns; Participations 116 SECTION 11.04. Expenses; Indemnity 119 SECTION 11.05. Applicable Law 120 SECTION 11.06. Right of Setoff 120 SECTION 11.07. Payments on Business Days 120 SECTION 11.08. Waivers; Amendments; Final Maturity Date 121 SECTION 11.09. Severability 121 SECTION 11.10. Entire Agreement; Waiver of Jury Trial, etc. 122 SECTION 11.11. Confidentiality 122 SECTION 11.12. Submission to Jurisdiction 123 SECTION 11.13. Counterparts; Facsimile Signature 123 SECTION 11.14. Headings 123 SECTION 11.15. Defaulting Lender 123 SECTION 11.16. LIMITATION OF LIABILITY 125 XII. GUARANTEES 125 Exhibits and Schedules were typed in manually in Table of Contents and will not be generated with the TOC. EXHIBITS EXHIBIT A Form of Note EXHIBIT B Form of Opinion of Counsel EXHIBIT C-1 Form of Pledge Agreement EXHIBIT C-2 Form of Partnership Pledge Agreement EXHIBIT D Form of Security Agreement EXHIBIT E Form of Assignment and Acceptance EXHIBIT F Form of Security Agreement--Patents and Trademarks EXHIBIT G Form of Assignment of Contract EXHIBIT H Form of Landlord Waiver EXHIBIT I Form of Settlement Report EXHIBIT J Form of Inventory Designation EXHIBIT K-1 Form of Monthly Borrowing Base Certificate EXHIBIT K-2 Form of Weekly Borrowing Base Certificate SCHEDULES SCHEDULE 2.01 Commitments SCHEDULE 2.02 Domestic Lending Offices SCHEDULE 2.03 Eurodollar Lending Offices SCHEDULE 4.01 Qualified Jurisdictions SCHEDULE 4.03 Consents SCHEDULE 4.13 Filing Jurisdictions SCHEDULE 4.14 List of Bank Accounts SCHEDULE 4.15(a) Ownership of Jitney Jungle SCHEDULE 4.15(b) Subsidiaries SCHEDULE 4.16(a-1) Owned Real Property SCHEDULE 4.16(a-2) Leased Real Property SCHEDULE 4.18 Permits SCHEDULE 4.20 Material Agreements SCHEDULE 4.23 Broker's Fees SCHEDULE 7.01 Existing Liens SCHEDULE 7.03 Existing Indebtedness SCHEDULE 7.20 Consulting Fees SCHEDULE I Certain Investors SCHEDULE II Fiscal Reporting Periods of the Borrowers SCHEDULE III Maximum Retained Balance in each Blocked Account SCHEDULE IV Outstanding Letters of Credit SCHEDULE V FTC Divestiture Stores - ------------------------ (1) Also, Fiscal Quarter-End. (2) Also, Fiscal Quarter-End and Fiscal Year-End. EX-10.1 5 PURCHASE AGREEMENT Exhibit 10.1 EXECUTION COPY ================================================================================ JITNEY-JUNGLE STORES OF AMERICA, INC. $200,000,000 of 103/8% Senior Subordinated Notes due 2007 Purchase Agreement September 10, 1997 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION CREDIT SUISSE FIRST BOSTON ================================================================================ JITNEY-JUNGLE STORES OF AMERICA, INC. $200,000,000 103/8% Senior Subordinated Notes due 2007 PURCHASE AGREEMENT ------------------ September 10, 1997 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION CREDIT SUISSE FIRST BOSTON c/o Donaldson, Lufkin & Jenrette Securities Corporation 277 Park Avenue New York, New York 10172 Dear Sirs: Jitney-Jungle Stores of America, Inc., a Mississippi corporation (the "COMPANY"), proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Credit Suisse First Boston ("FIRST BOSTON" and, together with DLJ, the "INITIAL PURCHASERS") an aggregate of $200,000,000 in principal amount of its 103/8% Senior Subordinated Notes due 2007 (the "SENIOR SUBORDINATED NOTES"), subject to the terms and conditions set forth herein. The Senior Subordinated Notes are to be issued pursuant to the provisions of an indenture (the "INDENTURE"), to be dated as of the Closing Date (as defined below), among the Company, the Guarantors (as defined below) and Marine Midland Bank, as trustee (the "TRUSTEE"). The Senior Subordinated Notes and the New Senior Subordinated Notes (as defined below) issuable in exchange therefor are collectively referred to herein as the "NOTES." The Notes will be guaranteed (the "SUBSIDIARY GUARANTEES") by each of the entities listed on Schedule A hereto (each, a "GUARANTOR" and collectively the "GUARANTORS"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture. Pursuant to the terms of an Agreement and Plan of Merger (the "MERGER AGREEMENT") entered into on July 8, 1997, Delta Acquisition Corporation ("DAC"), an Alabama corporation and a wholly-owned subsidiary of the Company, commenced a tender offer (the "DELCHAMPS TENDER OFFER") to purchase all of the issued and outstanding shares of common stock and associated preferred share purchase rights of Delchamps, Inc., an Alabama corporation ("DELCHAMPS"). Following the Delchamps Tender Offer and subject to certain conditions and other provisions contained in the Merger Agreement, DAC will be merged with and into Delchamps (the "DELCHAMPS MERGER" and, together with the Delchamps Tender Offer, the "DELCHAMPS ACQUISITION"), Delchamps will continue as the surviving corporation in the Delchamps Merger and will be a wholly-owned subsidiary of the Company. 1 The aggregate consideration expected to be paid to current stockholders of Delchamps in the Delchamps Acquisition will be approximately $218.2 million (the "DELCHAMPS PURCHASE PRICE"). For purposes of this Agreement, the term "Consummation" as used with respect to the Delchamps Tender Offer shall refer to the payment for the shares and preferred share purchase rights of Delchamps tendered in the Tender Offer. The Company intends to use the gross proceeds from the sale to the Initial Purchasers of the Senior Subordinated Notes, together with initial borrowings under a senior credit facility (the "SENIOR CREDIT FACILITY"), to (i) pay the Delchamps Purchase Price, (ii) repay certain of Delchamps' outstanding indebtedness, (iii) make change of control payments to certain Delchamps executives pursuant to the requirements of existing contractual provisions and (iv) pay related fees and expenses. 1. OFFERING MEMORANDUM. The Senior Subordinated Notes will be offered and sold to the Initial Purchasers pursuant to one or more exemptions from the registration requirements under the Securities Act of 1933, as amended (the "ACT"). The Company and the Guarantors (other than Delchamps and Supermarket Cigarette Sales, Inc., a Louisiana corporation ("SCSI")) have prepared a preliminary offering memorandum, dated August 25, 1997 (the "PRELIMINARY OFFERING MEMORANDUM"), and a final offering memorandum, dated September 10, 1997 (the "OFFERING MEMORANDUM"), relating to the Senior Subordinated Notes and the Subsidiary Guarantees. Upon original issuance thereof, and until such time as the same is no longer required pursuant to the Indenture, the Senior Subordinated Notes (and all securities issued in exchange therefor, in substitution thereof or upon conversion thereof) shall bear the following legend: "THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IS OTHERWISE PERMITTED TO PURCHASE THE NOTES PURSUANT TO THE REQUIREMENTS OF CLAUSE (2) BELOW, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER 2 THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING. 2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations, warranties and covenants contained in this Agreement, and subject to the terms and conditions contained herein, the Company agrees to issue and sell to the Initial Purchasers, and the Initial Purchasers agree, severally and not jointly, to purchase from the Company, the principal amounts of Senior Subordinated Notes set forth opposite the name of such Initial Purchaser on Schedule B hereto at a purchase price equal to 97.25% of the principal amount thereof (the "PURCHASE PRICE"). 3. TERMS OF OFFERING. The Initial Purchasers have advised the Company that the Initial Purchasers will make offers (the "EXEMPT RESALES") of the Senior Subordinated Notes purchased hereunder on the terms set forth in the Offering Memorandum, as amended or supplemented, solely to (i) persons whom the Initial Purchasers reasonably believe to be "qualified institutional buyers" as defined in Rule 144A under the Act ("QIBS") and (ii) to persons permitted to purchase the Senior Subordinated Notes in offshore transactions in reliance upon Regulation S under the Act (each, a "REGULATION S PURCHASER") (such persons specified in clauses (i) and (ii) being referred to herein as the "ELIGIBLE PURCHASERS"). The Initial Purchasers will offer the Senior Subordinated Notes to Eligible Purchasers initially at a price equal to 100% of the principal amount thereof. Such price may be changed at any time without notice. Holders (including subsequent transferees) of the Senior Subordinated Notes will have the registration rights set forth in the registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be executed on and dated the Closing Date, in substantially the form of Exhibit 3 A hereto, for so long as such Senior Subordinated Notes constitute "Transfer Restricted Securities" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company and the Guarantors will agree to file with the Securities and Exchange Commission (the "COMMISSION") under the circumstances set forth therein, (i) a registration statement under the Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to the Company's 103/8% new Senior Subordinated Notes due 2007 (the "NEW SENIOR SUBORDINATED NOTES"), identical in all material respects to the Senior Subordinated Notes (except that the New Senior Subordinated Notes shall have been registered pursuant to such Exchange Offer Registration Statement), to be offered in exchange for the Senior Subordinated Notes (such offer to exchange being referred to as the "EXCHANGE OFFER") and the Subsidiary Guarantees thereof and (ii) a shelf registration statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS") relating to the resale by certain holders of the Senior Subordinated Notes, and to use its best efforts to cause such Registration Statements to be declared and remain effective and usable for the periods specified in the Registration Rights Agreement. This Agreement, the Indenture, the Notes, the Subsidiary Guarantees and the Registration Rights Agreement are hereinafter sometimes referred to collectively as the "OPERATIVE DOCUMENTS." 4. DELIVERY AND PAYMENT. (a) Delivery of, and payment of the Purchase Price for, the Senior Subordinated Notes shall be made at the offices of Dechert Price & Rhoads at 30 Rockefeller Plaza, New York, New York 10112, or such other location as may be mutually acceptable. Such delivery and payment shall be made at 9:00 a.m. New York City time, on September 15, 1997 or at such other time as shall be agreed upon by the Initial Purchasers and the Company. The time and date of such delivery and payment are herein called the "CLOSING DATE." (b) One or more of the Senior Subordinated Notes in definitive global form, registered in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), having an aggregate principal amount corresponding to the aggregate principal amount of the Senior Subordinated Notes (collectively, the "GLOBAL NOTE"), shall be delivered by the Company to the Initial Purchasers (or as the Initial Purchasers direct) in each case with any transfer taxes thereon duly paid by the Company against payment by the Initial Purchasers of the Purchase Price thereof by wire transfer in federal (same day) funds to an account or accounts designated by the Company or such other manner of payment as may be designated by the Company and agreed to by the Initial Purchasers. The Global Note shall be made available to the Initial Purchasers for inspection not later than 9:30 a.m., New York City time, on the business day immediately preceding the Closing Date. 5. AGREEMENTS OF THE COMPANY AND THE GUARANTORS. As of the date hereof, the Company and each of the Guarantors (other than Delchamps and SCSI) and, as of the Consummation of the Delchamps Tender Offer, Delchamps and SCSI, hereby agrees with the Initial Purchasers as follows: (a) To advise the Initial Purchasers promptly after obtaining knowledge (and, if requested by the Initial Purchasers, confirm such advice in writing) of (i) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of any Senior Subordinated Notes for offering or sale in any jurisdiction designated by the Initial Purchasers pursuant to Section 5(e) hereof, or the initiation 4 of any proceeding by any state securities commission or any other federal or state regulatory authority for such purpose and (ii) the happening of any event during the period referred to in Section 5(c) below that makes any statement of a material fact made in the Offering Memorandum untrue or that requires any additions to or changes in the Offering Memorandum in order to make the statements therein not misleading. The Company shall use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of any Senior Subordinated Notes under any state securities or Blue Sky laws and, if at any time any state securities commission or other federal or state regulatory authority shall issue an order suspending the qualification or exemption of any Senior Subordinated Notes under any state securities or Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time. (b) To furnish the Initial Purchasers and those persons identified by the Initial Purchasers to the Company as many copies of the Offering Memorandum, and any amendments or supplements thereto, as the Initial Purchasers may reasonably request. Subject to the Initial Purchasers' compliance with its representations and warranties and agreements set forth in Section 7 hereof, the Company consents to the use of the Preliminary Offering Memorandum and the Offering Memorandum, and any amendments and supplements thereto required pursuant hereto, by the Initial Purchasers in connection with Exempt Resales. (c) During such period as in the opinion of counsel for the Initial Purchasers an Offering Memorandum is required by law to be delivered in connection with Exempt Resales by the Initial Purchasers or market-making activities of the Initial Purchasers with respect to Senior Subordinated Notes, not to make any amendment or supplement to the Offering Memorandum of which the Initial Purchasers shall not previously have been advised or to which the Initial Purchasers shall reasonably object within five Business Days after being so advised and to prepare promptly upon the Initial Purchasers' reasonable request, any amendment or supplement to the Offering Memorandum which may be necessary or advisable in connection with such Exempt Resales or such market-making activities. Notwithstanding any other provision of this Agreement to the contrary, the obligations of the Company which arise under this paragraph 5(c) as a result of market-making activities of the Initial Purchasers with respect to Senior Subordinated Notes will terminate 30 days after written notice by the Company to DLJ stating that the Company no longer needs the Initial Purchasers to act as "market makers" with respect to the Notes. (d) If, during the period referred to in Section 5(c) above (as such period may be adjusted pursuant to the last sentence thereof), any event shall occur or condition shall exist as a result of which, in the opinion of counsel to the Initial Purchasers, it becomes necessary to amend or supplement the Offering Memorandum in order to make the statements therein, in the light of the circumstances existing when such Offering Memorandum is delivered to an Eligible Purchaser, not misleading, or if, in the opinion of counsel to the Initial Purchasers, it is necessary to amend or supplement the Offering Memorandum to comply with any applicable law, to prepare promptly upon the Initial Purchasers' reasonable request an appropriate amendment or supplement to such Offering Memorandum so that the statements therein, as so amended or supplemented, will not, in the light of the circumstances existing when it is so delivered, be misleading, or so that such Offering Memorandum will comply with applicable law, and to furnish to the Initial Purchasers and such other persons as the Initial Purchasers may designate such number of copies thereof as the Initial Purchasers may reasonably request. 5 (e) Prior to the sale of all Senior Subordinated Notes pursuant to Exempt Resales as contemplated hereby, to cooperate with the Initial Purchasers and counsel to the Initial Purchasers in connection with the registration or qualification of the Senior Subordinated Notes for offer and sale to the Initial Purchasers and pursuant to Exempt Resales under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may reasonably request and to continue such qualification in effect so long as required for Exempt Resales and to file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification; PROVIDED, HOWEVER, that neither the Company nor any Guarantor shall be required in connection therewith to register or qualify as a foreign corporation in any jurisdiction in which it is not now so qualified or to take any action that would subject it to general consent to service of process or taxation in any jurisdiction in which it is not now so subject. (f) So long as the Notes are outstanding, (i) to mail and make generally available as soon as practicable after the end of each fiscal year to the record holders of the Notes a financial report of the Company and its subsidiaries on a consolidated basis (and a similar financial report of all unconsolidated subsidiaries, if any), all such financial reports to include a consolidated balance sheet, a consolidated statement of operations, a consolidated statement of cash flows and a consolidated statement of shareholders' equity as of the end of and for such fiscal year, together with comparable information as of the end of and for the preceding year, certified by the Company's independent public accountants and (ii) to mail and make generally available as soon as practicable after the end of each quarterly period (except for the last quarterly period of each fiscal year) to such holders, a consolidated balance sheet, a consolidated statement of operations and a consolidated statement of cash flows (and similar financial reports of all unconsolidated subsidiaries, if any) as of the end of and for such period, and for the period from the beginning of such year to the close of such quarterly period, together with comparable information for the corresponding periods of the preceding year. (g) During the period of five years after the date of this Agreement, furnish to the Initial Purchasers as soon as available copies of all reports or other communications made publicly available by the Company or any of the Guarantors to their security holders or filed with the Commission or any national securities exchange on which any class of securities of the Company or any of the Guarantors is listed and such other publicly available information concerning the Company and/or its subsidiaries as the Initial Purchasers may reasonably request. (h) So long as any of the Senior Subordinated Notes remain outstanding and during any period in which the Company and the Guarantors are not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make available to any holder of Senior Subordinated Notes in connection with any sale thereof and any prospective purchaser of such Senior Subordinated Notes from such holder, the information ("RULE 144A INFORMATION") required by Rule 144A(d)(4) under the Act. (i) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of the obligations of the Company and the Guarantors under this Agreement, including: (i) the fees, disbursements and expenses of counsel to the Company and the Guarantors and accountants of the Company and the Guarantors in connection with the sale and delivery of the Senior Subordinated Notes to the Initial Purchasers, and all other fees or expenses in connection with the preparation, printing, filing and distribution of the Preliminary 6 Offering Memorandum, the Offering Memorandum and all amendments and supplements to any of the foregoing (including financial statements) specified in Section 5(c) and 5(d) prior to or during the period specified in Section 5(c), including the mailing and delivering of copies thereof to the Initial Purchasers and persons designated by it in the quantities specified herein, (ii) all costs and expenses related to the sale and delivery of the Senior Subordinated Notes to the Initial Purchasers, including any transfer or other taxes payable thereon, (iii) all costs of printing or producing this Agreement, the other Operative Documents and any other agreements or documents in connection with the offering, purchase, sale or delivery of the Senior Subordinated Notes, (iv) all expenses in connection with the registration or qualification of the Senior Subordinated Notes and the Subsidiary Guarantees for offer and sale under the securities or Blue Sky laws of the several states and all costs of printing or producing any preliminary and supplemental Blue Sky memoranda in connection therewith (including the filing fees and the reasonable fees and disbursements of counsel for the Initial Purchasers in connection with such registration or qualification and memoranda relating thereto), (v) the cost of printing certificates representing the Senior Subordinated Notes and the Subsidiary Guarantees, (vi) all expenses and listing fees in connection with the application for quotation of the Senior Subordinated Notes in the National Association of Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the Trustee's counsel in connection with the Indenture, the Notes and the Subsidiary Guarantees, (viii) the costs and charges of any transfer agent, registrar and/or depositary (including DTC), (ix) any fees charged by rating agencies for the rating of the Notes, (x) all costs and expenses of the Exchange Offer and any Registration Statement, as set forth in the Registration Rights Agreement, and (xi) and all other costs and expenses incident to the performance of the obligations of the Company and the Guarantors hereunder for which provision is not otherwise made in this Section. Delchamps and SCSI shall not be responsible for any of the fees and expenses described in this paragraph unless and until the Delchamps Tender Offer is Consummated. (j) To use its best efforts to effect the inclusion of the Senior Subordinated Notes in PORTAL and to maintain the listing of the Senior Subordinated Notes on PORTAL for so long as the Senior Subordinated Notes are outstanding. (k) To obtain the approval of DTC for "book-entry" transfer of the Notes, and to comply with all of its agreements set forth in the representation letters of the Company and the Guarantors to DTC relating to the approval of the Notes by DTC for "book-entry" transfer. (l) During the period beginning on the date hereof and continuing to and including the Closing Date, not to offer, sell, contract to sell or otherwise transfer or dispose of any debt securities of the Company or any Guarantor or any warrants, rights or options to purchase or otherwise acquire debt securities of the Company or any Guarantor substantially similar to the Notes and the Subsidiary Guarantees (other than (i) the Notes and the Subsidiary Guarantees and (ii) commercial paper issued in the ordinary course of business, it being understood that the Company and the Guarantors will enter into the Senior Credit Facility on the Closing Date), without the prior written consent of the Initial Purchasers. (m) Not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) that would be integrated with the sale of the Senior Subordinated Notes to the Initial Purchasers or pursuant to Exempt Resales in a 7 manner that would require the registration of any such sale of the Senior Subordinated Notes under the Act. (n) Not to voluntarily claim, and to actively resist any attempts to claim, the benefit of any usury laws against the holders of any Notes. (o) To cause the Exchange Offer to be made on the appropriate form to permit New Senior Subordinated Notes and guarantees thereof by the Guarantors registered pursuant to the Act to be offered in exchange for the Senior Subordinated Notes and the Subsidiary Guarantees and to comply with all applicable federal and state securities laws in connection with the Exchange Offer. (p) To comply with all of its agreements set forth in the Registration Rights Agreement. (q) To use its best efforts to do and perform all things required or necessary to be done and performed under this Agreement by it prior to the Closing Date and to satisfy or obtain the waiver of all conditions precedent to the delivery of the Senior Subordinated Notes and the Subsidiary Guarantees. (r) Not to use any form of general solicitation or general advertising (within the meaning of Regulation D under the Act) in connection with the offer and sale of the Senior Subordinated Notes pursuant hereto, including, but not limited to, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE GUARANTORS. As of the date hereof, the Company and each of the Guarantors (other than Delchamps and SCSI) and, upon Consummation of the Delchamps Tender Offer, Delchamps and SCSI, represents and warrants to, and agrees with, the Initial Purchasers as set forth below, it being understood that the representations and warranties set forth in subparagraphs (d), (e), (h), (i), (j) and (l) shall not be deemed to have been made in respect of Delchamps or SCSI until the Consummation of the Delchamps Tender Offer. (a) The Offering Memorandum does not, and any supplement or amendment to 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 light of the circumstances under which they were made, not misleading, except that the representations and warranties contained in this paragraph (a) shall not apply to statements in or omissions from the Offering Memorandum (or any supplement or amendment thereto) based upon information relating to the Initial Purchasers furnished to the Company in writing by the Initial Purchasers expressly for use therein. No stop order preventing the use of the Offering Memorandum, or any amendment or supplement thereto, or any order asserting that any of the transactions contemplated by this Agreement are subject to the registration requirements of the Act, has been issued. (b) Each of the Company and each of its subsidiaries has been, and immediately after Consummation of the Delchamps Tender Offer will have been, duly 8 incorporated, is, and immediately after Consummation of the Delchamps Tender Offer will be, validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has, and immediately after Consummation of the Delchamps Tender Offer will have, the corporate power and authority to carry on its business as described in the Offering Memorandum and to own, lease and operate its properties as described in the Offering Memorandum, and each is, and immediately after Consummation of the Delchamps Tender Offer will be, duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. As used herein, "MATERIAL ADVERSE EFFECT" shall mean, with respect to any Person, any effect or group of related or unrelated effects that (i) would be reasonably expected, individually or in the aggregate, to result in a material adverse effect on the assets, properties, business, results of operations, condition (financial or otherwise) or prospects of such Person and its subsidiaries, taken as a whole or (ii) would materially interfere with or adversely affect (A) the issuance of the Senior Subordinated Notes or the consummation of this Agreement, (B) the performance by such Person and each of its subsidiaries of its respective agreements and obligations under this Agreement or the consummation of the transactions contemplated thereby or (C) the consummation of the Delchamps Acquisition. (c) Immediately following the Consummation of the Delchamps Tender Offer, the entities listed on Schedule A hereto will be the only subsidiaries, direct or indirect, of the Company. All of the outstanding shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable, and are owned by the Company, directly or indirectly through one or more subsidiaries, free and clear of any security interest, claim, lien, encumbrance or adverse interest of any nature (each, a "LIEN") other than as described in the Offering Memorandum. (d) This Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors and is a valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms except as the enforcement hereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. This Agreement conforms as to legal matters to the description thereof contained in the Offering Memorandum. (e) The Indenture has been duly authorized by the Company and each of the Guarantors and, on the Closing Date, will have been validly executed and delivered by the Company and each of the Guarantors. When the Indenture has been duly executed and delivered by the Company and each of the Guarantors, the Indenture will be a valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. The Indenture conforms in all material 9 respects to the requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or"TRUST INDENTURE ACT"), and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (f) The Senior Subordinated Notes have been duly authorized by the Company for issuance and sale to the Initial Purchasers pursuant to this Agreement and, on the Closing Date, will have been validly executed and delivered by the Company. When the Senior Subordinated Notes have been issued, executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement, the Senior Subordinated Notes will be entitled to the benefits of the Indenture and will be the valid and binding obligations of the Company, enforceable in accordance with their terms except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. (g) On the Closing Date, the New Senior Subordinated Notes will have been duly authorized by the Company. When the New Senior Subordinated Notes are issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the New Senior Subordinated Notes will be entitled to the benefits of the Indenture and will be the valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement hereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. (h) The Subsidiary Guarantee to be endorsed on the Senior Subordinated Notes by each Guarantor has been duly authorized by such Guarantor and, on the Closing Date, will have been duly executed and delivered by each such Guarantor. When the Senior Subordinated Notes have been issued, executed and authenticated in accordance with the Indenture and delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement, the Subsidiary Guarantee of each Guarantor endorsed thereon will be entitled to the benefits of the Indenture and will be the valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. (i) The Subsidiary Guarantee to be endorsed on the New Senior Subordinated Notes by each Guarantor has been duly authorized by such Guarantor and, when issued, will have been duly executed and delivered by each such Guarantor. When the New Senior Subordinated Notes have been issued, executed and authenticated in accordance with the 10 terms of the Exchange Offer and the Indenture, the Subsidiary Guarantee of each Guarantor endorsed thereon will be entitled to the benefits of the Indenture and will be the valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. (j) The Registration Rights Agreement has been duly authorized by the Company and each of the Guarantors and, on the Closing Date, will have been duly executed and delivered by the Company and each of the Guarantors. When the Registration Rights Agreement has been duly executed and delivered, the Registration Rights Agreement will be the valid and binding agreement of the Company and each of the Guarantors, enforceable against the Company and each Guarantor in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. (k) The Merger Agreement has been duly authorized, executed and delivered by the Company and DAC and is a valid and binding agreement of the Company and DAC, enforceable against the Company and DAC in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. (l) The Senior Credit Facility has been duly authorized by the Company and the subsidiaries of the Company that are obligors thereunder and, on the Closing Date, will have been duly executed and delivered by the Company and each of the subsidiaries of the Company that are obligors thereunder. When the Senior Credit Facility has been duly executed and delivered, the Senior Credit Facility will be the valid and binding agreement of the Company and each of the subsidiaries of the Company that are obligors thereunder, enforceable against the Company and each subsidiary of the Company that is an obligor thereunder in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and except as rights to indemnity and contribution thereunder may be limited by Federal or state securities laws or principles of public policy. (m) Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), and except for such of the following as would not have a Material Adverse Effect, neither the Company nor any of its subsidiaries is, and after 11 consummation of the Delchamps Tender Offer will be, in violation of its respective charter or by-laws or in default in the performance of any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of material indebtedness or in any other material agreement, indenture or instrument to which the Company or any of its subsidiaries is a party. (n) Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto) and except for such of the following as would not have a Material Adverse Effect, the execution, delivery and performance of the Merger Agreement, this Agreement and the other Operative Documents by the Company and each of the Guarantors, compliance by the Company and each of the Guarantors with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not require any consent (other than the Consent Solicitation (as defined herein)), approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body (except as such may be required under (1) the Securities Act and state securities or "blue sky" laws and regulations, (2) the Trust Indenture Act of 1939, as amended, (3) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (4) applicable Environmental Laws (as defined below), (5) the filings with and approvals by the Secretary of State of the States of Mississippi and Alabama, as applicable, of the articles of and certificates of merger, relating to the Delchamps Acquisition, and (6) state and local law with respect to the obtaining of new permits or licenses for the sale of tobacco, alcohol and similar regulated items) and will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the charter or by-laws of the Company, the Guarantors or any of their respective subsidiaries or any agreement, indenture or other instrument to which the Company, the Guarantors or any of their respective subsidiaries is a party or by which the Company, the Guarantors or any of their respective subsidiaries or their respective properties are bound, or violate or conflict with any laws, administrative regulations or rulings or court decrees applicable to the Company, any Guarantor or any of their respective subsidiaries or their respective properties. (o) Except as disclosed in the Offering Memorandum or that would not reasonably be expected to have a Material Adverse Effect, there are, and immediately after Consummation of the Delchamps Tender Offer there will be, no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or to which any of their respective properties is the subject, and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated. (p) Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), neither the Company nor any of its subsidiaries has, and immediately after Consummation of the Delchamps Tender Offer will have, violated any foreign, federal, state or local law or regulation relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS") or any federal or state law relating to discrimination in the hiring, promotion or pay of employees or any applicable federal or state wages and hours laws, or any provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. 12 (q) Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), or as otherwise disclosed in the Offering Memorandum, there are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any Authorization, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a Material Adverse Effect. (r) Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), or as otherwise disclosed in the Offering Memorandum, each of the Company and its subsidiaries has, and immediately after Consummation of the Delchamps Tender Offer will have, such permits, licenses, consents, exemptions, franchises, authorizations and other approvals (each, an "AUTHORIZATION") of, and has made all filings with and notices to, all governmental or regulatory authorities and self-regulatory organizations and all courts and other tribunals, including without limitation, under any applicable Environmental Laws, as are necessary to own, lease, license and operate its respective properties and to conduct its business in the manner described in the Offering Memorandum, except where the failure to have any such Authorization or to make any such filing or notice would not, singly or in the aggregate, have a Material Adverse Effect. Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), or as otherwise disclosed in the Offering Memorandum, each such Authorization is, and after consummation of the Delchamps Tender Offer will be, valid and in full force and effect and each of the Company and its subsidiaries is in compliance with all the terms and conditions thereof and with the rules and regulations of the authorities and governing bodies having jurisdiction with respect thereto; and no event has occurred (including, without limitation, the receipt of any notice from any authority or governing body) which allows or, after notice or lapse of time or both, would allow, revocation, suspension or termination of any such Authorization or results or, after notice or lapse of time or both, would result in any other impairment of the rights of the holder of any such Authorization; and such Authorizations contain no restrictions that are burdensome to the Company or any of its subsidiaries; except where such failure to be valid and in full force and effect or to be in compliance, the occurrence of any such event or the presence of any such restriction would not, singly or in the aggregate, have a Material Adverse Effect. (s) In connection with the Delchamps Acquisition, the Company has reviewed the effect of Environmental Laws and the disposal of hazardous or toxic substances or wastes, pollutants or contaminants on (i) the business, assets, operations and properties of the Company and its subsidiaries and (ii) the business, assets, operations and properties of the Company and its subsidiaries immediately following the Delchamps Tender Offer, and identified and evaluated associated costs and liabilities (including, without limitation, all material capital and operating expenditures required for clean-up, closure of properties and compliance with Environmental Laws, all permits, licenses and approvals, all related constraints on operating activities and all potential liabilities to third parties). On the basis of such reviews, the Company has reasonably concluded that such associated costs and liabilities would not, immediately subsequent to and giving effect to the Delchamps Tender Offer, have a Material Adverse Effect. (t) Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), the Company and each of its subsidiaries has, and immediately after Consummation of the Delchamps Tender Offer will have, good and marketable title, free and clear of all liens, claims, encumbrances and restrictions except liens for 13 taxes not yet due and payable, to all property and assets described in the Offering Memorandum as being owned by it, except as described in the Offering Memorandum or as would not have a Material Adverse Effect. Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), all leases to which any of the Company or any of its subsidiaries is, and immediately after Consummation of the Delchamps Tender Offer will be, a party are valid and binding and no default has occurred or is continuing thereunder which would have a Material Adverse Effect, and the Company and its subsidiaries enjoy peaceful and undisturbed possession under all such leases to which any of the Company and its subsidiaries is, and immediately after Consummation of the Delchamps Tender Offer will be, a party as lessee with such exceptions as do not materially interfere with the use currently made by the Company or such subsidiary, as the case may be. (u) The Company and its subsidiaries maintain, and immediately after Consummation of the Delchamps Tender Offer will maintain, reasonably adequate insurance. (v) The accountants, Deloitte & Touche L.L.P. and KPMG Peat Marwick, L.L.P., that have certified the financial statements and supporting schedules included in the Offering Memorandum are independent public accountants with respect to the Company and the Guarantors, as required by the Act and the Exchange Act. The historical financial statements, together with related schedules and notes, set forth in the Offering Memorandum comply as to form in all material respects with the requirements applicable to registration statements on Form S-1 under the Act. (w) The historical financial statements of the Company and its subsidiaries, together with related schedules and notes forming part of the Offering Memorandum (and any amendment or supplement thereto), present fairly the consolidated financial position, results of operations and changes in financial position of the Company and its subsidiaries on the basis stated in the Offering Memorandum at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein and, with respect to interim financial statements, except for the absence of footnote presentation and normal year-end adjustments; and the other financial and statistical information and data of the Company and its subsidiaries set forth in the Offering Memorandum (and any amendment or supplement thereto) are, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company. The representations set forth in this clause (w) shall be deemed to be made with respect to the historical financial statements and other financial and statistical data of Delchamps and its subsidiaries immediately upon Consummation of the Delchamps Tender Offer. (x) In the Company's opinion, the assumptions used in the preparation of the PRO FORMA financial statements included in the Offering Memorandum are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. The other PRO FORMA financial and statistical information and data included in the Offering Memorandum are accurately presented and prepared on a basis consistent with the PRO FORMA financial statements. (y) The Company is not and, after immediately giving effect to the offering and sale of the Senior Subordinated Notes and the application of the net proceeds thereof 14 as described in the Offering Memorandum will not be, an "investment company," as such term is defined in the Investment Company Act of 1940, as amended. (z) Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), or as otherwise disclosed in the Offering Memorandum, there are no holders of securities of the Company or any of the Guarantors who, by reason of the execution by the Company and the Guarantors of the Registration Rights Agreement or the consummation of the transactions contemplated thereby, have the right to request or demand that the Company or any of the Guarantors, as the case may be, register under the Act securities held by them. (aa) The Company has delivered to the Initial Purchasers true and correct executed copies of the Merger Agreement, including all schedules and exhibits thereto, and there have been no amendments, alterations, modifications or waivers thereto or in the exhibits or schedules thereto, except as have been delivered to the Initial Purchasers. (ab) The Company and each of its subsidiaries has complied, and immediately after Consummation of the Delchamps Tender Offer will have complied, with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida). (ac) There are, and immediately after Consummation of the Delchamps Tender Offer there will be, no outstanding subscriptions, rights, warrants, options, calls, convertible securities, commitments of sale or liens related to or entitling any person to purchase or otherwise to acquire any shares of the capital stock of, or other ownership interest in, any of the Company's subsidiaries, except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), or as otherwise disclosed in the Offering Memorandum. (ad) Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto) or as otherwise set forth in the Offering Memorandum, there is, and immediately after Consummation of the Delchamps Tender Offer there will be, (i) no significant unfair labor practice complaint pending against the Company any of its subsidiaries or, to the best knowledge of the Company, threatened against any of them, before the National Labor Relations Board or any state or local labor relations board, and no significant grievance or more significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Company or any of its subsidiaries or, to the best knowledge of the Company, threatened against any of them, and (ii) no significant strike, labor dispute, slowdown or stoppage pending against the Company any of its subsidiaries, or, to the best knowledge of the Company, threatened against it or any of its subsidiaries except for such actions specified in clause (i) or (ii) above, which, singly or in the aggregate, would not have a Material Adverse Effect. (ae) Each of the Company and each of its subsidiaries maintains, and immediately after Consummation of the Delchamps Acquisition will maintain, a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded 15 accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (af) Except as otherwise disclosed in the Merger Agreement (including, without limitation, Annex B thereto), all material tax returns required to be filed by the Company and its subsidiaries in any jurisdiction have been, and immediately after Consummation of the Delchamps Tender Offer will have been, filed, other than those filings being contested in good faith, and all material taxes, including withholding taxes, penalties and interest, assessments, fees and other charges due pursuant to such returns or pursuant to any assessment received by the Company or any of its subsidiaries have been, and immediately after Consummation of the Delchamps Tender Offer will have been, paid, other than those being contested in good faith and for which adequate reserves have been provided. (ag) The Offering Memorandum, as of its date, contains all the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Act. (ah) When the Senior Subordinated Notes and the Subsidiary Guarantees are issued and delivered pursuant to this Agreement, neither the Senior Subordinated Notes nor the Subsidiary Guarantees will be of the same class (within the meaning of Rule 144A under the Act) as any security of the Company or the Guarantors that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated inter-dealer quotation system. (ai) No form of general solicitation or general advertising (as defined in Regulation D under the Act) was used by the Company, the Guarantors or any of their respective representatives (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation) in connection with the offer and sale of the Senior Subordinated Notes contemplated hereby, including, but not limited to, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. No securities of the same class as the Senior Subordinated Notes have been issued and sold by the Company within the six-month period immediately prior to the date hereof. (aj) Assuming (i) the accuracy of and compliance with the Initial Purchasers' representations, warranties and agreements set forth in Section 7 hereof and (ii) compliance by the Initial Purchasers with the offering and transfer procedures and restrictions described elsewhere in this Agreement and the Offering Memorandum, prior to the effectiveness of any Registration Statement, the Indenture is not required to be qualified under the TIA. (ak) None of the Company, the Guarantors nor any of their respective affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation) has engaged or will engage in any directed selling efforts within the meaning of Regulation S under the Act ("REGULATION S") with respect to the Senior Subordinated Notes or the Subsidiary Guarantees. (al) The Company has not, and will not, offer or sell the Senior Subordinated Notes in reliance on Regulation S except in offshore transactions. 16 (am) The Company has not, and will not, offer or sell the Senior Subordinated Notes as part of a plan or scheme to evade the registration provisions of the Act. (an) The Company, the Guarantors and their respective affiliates and all persons acting on their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation) have complied with and will comply with the offering restrictions requirements of Regulation S in connection with the offering of the Senior Subordinated Notes outside the United States and, in connection therewith, the Offering Memorandum will contain the disclosure required by Rule 902(h). (ao) The Company is a "reporting issuer" as defined in Rule 902 under the Act. (ap) Assuming (i) the accuracy of the Initial Purchasers' representations and warranties and agreements set forth in Section 7 hereof and (ii) compliance by the Initial Purchasers with the offering and transfer procedures and restrictions described elsewhere in this Agreement and the Offering Memorandum, no registration under the Act of the Senior Subordinated Notes or the Subsidiary Guarantees is required for the sale of the Senior Subordinated Notes and the Subsidiary Guarantees to the Initial Purchasers as contemplated hereby or for the Exempt Resales. (aq) No "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or has informed the Company or any Guarantor that it is considering imposing) any condition (financial or otherwise) on the Company's or any Guarantor's retaining any rating assigned as of the date hereof to the Company, any Guarantor or any securities of the Company or any Guarantor or (ii) has indicated to the Company or any Guarantor that it is considering (a) the downgrading, suspension or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned or (b) any change in the outlook for any rating of the Company or any Guarantor. The Company acknowledges that the Initial Purchasers and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 9 hereof, counsel to the Company and the Guarantors and counsel to the Initial Purchasers, will rely upon the accuracy and truth of the foregoing representations and hereby consents to such reliance. 7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of the Initial Purchasers, severally and not jointly, represents and warrants to the Company and the Guarantors, and agrees that: (a) Such Initial Purchaser is either a QIB or an institutional "accredited investor" (as defined in rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) (an "Accredited Institution"), in either case, with such knowledge and experience in financial and business matters as is necessary in order to evaluate the merits and risks of an investment in the Senior Subordinated Notes. (b) Such Initial Purchaser (A) is not acquiring the Senior Subordinated Notes with a view to any distribution thereof or with any present intention of offering or selling any of the Senior Subordinated Notes in a transaction that would violate the 17 Act or the securities laws of any state of the United States or any other applicable jurisdiction and (B) will be reoffering and reselling the Senior Subordinated Notes only to (x) QIBs in reliance on the exemption from the registration requirements of the Act provided by Rule 144A and (y) in offshore transactions in reliance upon Regulation S under the Act. (c) Such Initial Purchaser agrees that no form of general solicitation or general advertising (within the meaning of Regulation D under the Act) has been or will be used by such Initial Purchaser or any of its representatives in connection with the offer and sale of the Senior Subordinated Notes pursuant hereto, including, but not limited to, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. (d) Such Initial Purchaser agrees that, in connection with Exempt Resales, such Initial Purchaser will solicit offers to buy the Senior Subordinated Notes only from, and will offer to sell the Senior Subordinated Notes only to, Eligible Purchasers. Each Initial Purchaser further agrees that it will offer to sell the Senior Subordinated Notes only to, and will solicit offers to buy the Senior Subordinated Notes only from (A) Eligible Purchasers that agree that (x) the Senior Subordinated Notes purchased by them may be resold, pledged or otherwise transferred prior to the expiration of the time period referred to under Rule 144(k) (taking into account the provisions of Rule 144(d) under the Act, if applicable) under the Act, as in effect on the date of the transfer of such Senior Subordinated Notes, only (I) to the Company or any of its subsidiaries, (II) to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A under the Act, (III) in an offshore transaction (as defined in Rule 902 under the Act) meeting the requirements of Rule 904 of the Act, (IV) in a transaction meeting the requirements of Rule 144 under the Act, (V) to an Accredited Institution that, prior to such transfer, furnishes the Trustee a signed letter containing certain representations and agreements relating to the registration of transfer of such Senior Subordinated Note and, if such transfer is in respect of an aggregate principal amount of Senior Subordinated Notes less than $250,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Act, (VI) in accordance with another exemption from the registration requirements of the Act (and based upon an opinion of counsel acceptable to the Company) or (VII) pursuant to an effective registration statement and, in each case, in accordance with the applicable securities laws of any state of the United States or any other applicable jurisdiction and (y) they will deliver to each person to whom such Senior Subordinated Notes or an interest therein is transferred a notice substantially to the effect of the foregoing. (e) None of such Initial Purchasers nor any of its affiliates or any person acting on its or their behalf has engaged or will engage in any directed selling efforts within the meaning of Regulation S with respect to the Senior Subordinated Notes or the Subsidiary Guarantees. (f) The Senior Subordinated Notes offered and sold by such Initial Purchaser pursuant hereto in reliance on Regulation S have been and will be offered and sold only in offshore transactions. 18 (g) The sale of the Senior Subordinated Notes offered and sold by such Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or scheme to evade the registration provisions of the Act. (h) Such Initial Purchaser agrees that it has not offered or sold and will not offer or sell the Senior Subordinated Notes in the United States or to, or for the benefit or account of, a U.S. Person (other than a distributor), in each case, as defined in Rule 902 under the Act (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering of the Senior Subordinated Notes pursuant hereto and the Closing Date, other than in accordance with Regulation S of the Act or another exemption from the registration requirements of the Act. Such Initial Purchaser agrees that, during such 40-day restricted period, it will not cause any advertisement with respect to the Senior Subordinated Notes (including any "tombstone" advertisement) to be published in any newspaper or periodical or posted in any public place and will not issue any circular relating to the Senior Subordinated Notes, except such advertisements as are permitted by and include the statements required by Regulation S. (i) Such Initial Purchaser agrees that, at or prior to confirmation of a sale of Senior Subordinated Notes by it to any distributor, dealer or person receiving a selling concession, fee or other remuneration during the 40-day restricted period referred to in Rule 903(c)(2) under the Act, it will send to such distributor, dealer or person receiving a selling concession, fee or other remuneration a confirmation or notice to substantially the following effect: "The Senior Subordinated Notes covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the Offering and the Closing Date, except in either case in accordance with Regulation S under the Securities Act (or Rule 144A or to Accredited Institutions in transactions that are exempt from the registration requirements of the Securities Act), and in connection with any subsequent sale by you of the Senior Subordinated Notes covered hereby in reliance on Regulation S during the period referred to above to any distributor, dealer or person receiving a selling concession, fee or other remuneration, you must deliver a notice to substantially the foregoing effect. Terms used above have the meanings assigned to them in Regulation S." (j) Such Initial Purchaser further represents and agrees that (1) it has not offered or sold and will not offer or sell any Senior Subordinated Notes to persons in the United Kingdom prior to the expiration of the period of six months from the issue date of the Senior Subordinated Notes, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Senior Subordinated Notes in, from or otherwise involving the United Kingdom and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received 19 by it in connection with the issuance of the Senior Subordinated Notes to a person who is of a kind described in Article 11(3) of the Financial Services Act of 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the document may otherwise lawfully be issued or passed on. (k) Such Initial Purchaser agrees that it will not offer, sell or deliver any of the Senior Subordinated Notes in any jurisdiction outside the United States except under circumstances that will result in compliance with the applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Senior Subordinated Notes in such jurisdictions. Such Initial Purchaser understands that no action has been taken to permit a public offering in any jurisdiction outside the United States where action would be required for such purpose. The Initial Purchasers acknowledge that the Company and the Guarantors and, for purposes of the opinions to be delivered to each Initial Purchaser pursuant to Section 9 hereof, counsel to the Company and the Guarantors and counsel to the Initial Purchasers, will rely upon the accuracy and truth of the foregoing representations and the Initial Purchasers hereby consent to such reliance. 8. INDEMNIFICATION. (a) As of the date hereof, the Company and each of the Guarantors (other than Delchamps and SCSI) and, as of the Consummation of the Delchamps Tender Offer, Delchamps and SCSI, agrees, jointly and severally, to indemnify and hold harmless each Initial Purchaser, its directors, its officers and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities and judgments (including, without limitation, any legal or other expenses reasonably incurred in connection with investigating or defending any matter, including any action, that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum (or any amendment or supplement thereto), the Preliminary Offering Memorandum or any Rule 144A Information provided by the Company or any Guarantor to any holder or prospective purchaser of Senior Subordinated Notes pursuant to Section 5(h) or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are (i) caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to an Initial Purchaser furnished in writing to the Company by such Initial Purchaser (and not with respect to the information provided by any other Initial Purchaser) or (ii) caused by any untrue statement or omission, or any alleged untrue statement or omission, made in the Preliminary Offering Memorandum, but eliminated or remedied in the Offering Memorandum, if (A) the Company shall have previously furnished copies thereof to the Initial Purchasers in accordance with this agreement, (B) a copy of the Offering Memorandum was not sent or given to such person at or prior to the written confirmation of such sale, (C) the Offering Memorandum would have completely corrected such untrue statement or omission and (D) such allegations are upheld by a final judgement. (b) The Initial Purchasers agree, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors, and their respective directors and 20 officers and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company or any Guarantor, to the same extent as the foregoing indemnity from the Company and the Guarantors to each Initial Purchaser but only with reference to information relating to an Initial Purchaser furnished in writing to the Company by such Initial Purchaser (and not with respect to the information provided by any other Initial Purchaser) expressly for use in the Preliminary Offering Memorandum or the Offering Memorandum or any amendment or supplement thereto. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Initial Purchasers shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Initial Purchasers). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one 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 fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in the case of the parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any such action or proceeding effected without its prior written consent (not to be unreasonably withheld) and if settled with its written consent or if there is a final judgment for the plaintiff, the indemnifying party agrees to indemnify and hold harmless the indemnified party to the extent provided herein. Notwithstanding the immediately preceding sentence, if in any case where the fees and expenses of counsel are at the expense of the indemnifying party and an indemnified party shall have requested the indemnifying party to reimburse the indemnified party for such fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of any action effected without its written consent if (i) such settlement is entered into more than thirty business days after the receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall have failed to reimburse the indemnified party in accordance with such request for reimbursement prior to the date of such settlement (unless the reasonableness of such fees and expenses of counsel is being contested in good faith). No indemnifying party shall, 21 without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action. (d) To the extent the indemnification provided for in this Section 8 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages, liabilities or judgments referred to herein, then each indemnifying party, in lieu 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 and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Initial Purchasers on the other hand from the offering of the Senior Subordinated Notes or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors, on the one hand and the Initial Purchasers, on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the offering of the Senior Subordinated Notes (before deducting expenses) received by the Company, and the total discounts and commissions received by the Initial Purchasers bear to the total price to investors of the Senior Subordinated Notes, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault of the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantors, on the one hand, or the Initial Purchasers, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Guarantors, and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such indemnified party in connection with investigating or defending any matter, including any action, that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, the Initial Purchasers shall not be required to contribute any amount in excess of the amount by which the total price of the Senior Subordinated Notes sold by them to investors in Exempt Resales exceeds the amount of any damages which the Initial Purchasers have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such 22 fraudulent misrepresentation. The Initial Purchasers' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Senior Subordinated Notes purchased by each of the Initial Purchasers hereunder and not joint. (e) The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 9. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of the Initial Purchasers to purchase the Senior Subordinated Notes under this Agreement are subject to the satisfaction of each of the following conditions: (a) All the representations and warranties of the Company and the Guarantors contained in this Agreement and all the representations and warranties of the Company contained in the Merger Agreement shall be true and correct on the Closing Date with the same force and effect as if made on and as of the Closing Date. (b) On or after the date hereof, (i) there shall not have occurred any downgrading, suspension or withdrawal of, nor shall any notice have been given of any potential or intended downgrading, suspension or withdrawal of, or of any review (or of any potential or intended review) for a possible change that does not indicate the direction of the possible change in, any rating of the Company or any Guarantor or any securities of the Company or any Guarantor (including, without limitation, the placing of any of the foregoing ratings on credit watch with negative or developing implications or under review with an uncertain direction) by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have occurred any change, nor shall notice have been given of any potential or intended change, in the outlook for any rating of the Company or any Guarantor by any such rating organization and (iii) no such rating organization shall have given notice that it has assigned (or is considering assigning) a lower rating to the Notes than that on which the Notes were marketed. (c) Since the respective dates as of which information is given in the Offering Memorandum, other than as set forth in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), (i) there shall not have occurred any material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or the earnings, business, management or operations of the Company and its subsidiaries, taken as a whole, (ii) there shall not have been any material adverse change or any development involving a prospective material adverse change in the capital stock or in the long-term debt of the Company and its subsidiaries, taken as a whole, and (iii) neither the Company nor any of its subsidiaries shall have incurred any liability or obligation, direct or contingent, the effect of which, in any such case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is material and adverse and, in your judgment, makes it impracticable to market the Senior Subordinated Notes on the terms and in the manner contemplated in the Offering Memorandum. (d) The Initial Purchasers shall have received on the Closing Date a certificate dated the Closing Date, signed by the President and the Chief Financial Officer of the Company, confirming the matters set forth in Sections 9(a), 9(b) and 9(c). 23 (e) The Initial Purchasers shall have received on the Closing Date an opinion (satisfactory to you and counsel for the Initial Purchasers), dated the Closing Date, of Dechert Price & Rhoads, counsel for the Company and the Guarantors, to the effect that: (i) When the Senior Subordinated Notes are duly executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchasers in accordance with the terms of the Purchase Agreement, the Senior Subordinated Notes will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company, enforceable in accordance with their terms; (ii) When the Senior Subordinated Notes are duly executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchasers in accordance with the terms of the Purchase Agreement, the Subsidiary Guarantees endorsed thereon will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Guarantors, enforceable in accordance with their terms; (iii) When the Indenture is duly executed and delivered by the Company and each Guarantor, the Indenture will be a valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms; (iv) When the Registration Rights Agreement is duly executed and delivered by the Company and each Guarantor, the Registration Rights Agreement will be a valid and binding agreement of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms; (v) To our knowledge, there are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of their respective properties is subject which, if determined adversely to the Company or any such subsidiary, would be reasonably expected, individually or in the aggregate, to result in a Material Adverse Effect; (vi) The Company is not an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; (vii) Except as contemplated by the Registration Rights Agreement, to our knowledge there are no holders of securities of the Company or any of the Guarantors who, by reason of the execution by the Company and the Guarantors of the Registration Rights Agreement or the consummation by the Company and the Guarantors of the transactions contemplated thereby, have the right to request or demand that the Company or any of the Guarantors, as the case may be, register under the Act securities held by them; and 24 (viii) Assuming (i) the accuracy of, and compliance with, the representations, warranties and agreements of the Company and the Guarantors set forth in Sections 5(h), 5(m) and 5(r) and 6(ah), (ai), (ak), (al), (am), (an) and (ao) of the Purchase Agreement, (ii) the accuracy of, and compliance with, the representations, warranties and agreements of the Initial Purchasers set forth in Section 7 of the Purchase Agreement, (iii) compliance by the Initial Purchasers with the offering and transfer procedures and restrictions described elsewhere in the Purchase Agreement and the Offering Memorandum and (iv) the accuracy of, and compliance with, the representations, warranties and agreements made in accordance with the Purchase Agreement, the Offering Memorandum and the Indenture by Eligible Purchasers to whom the Initial Purchasers initially resell Senior Subordinated Notes in Exempt Resales, it is not necessary in connection with the offer, sale and delivery of the Senior Subordinated Notes to the Initial Purchasers in the manner contemplated by the Purchase Agreement or in connection with Exempt Resales to register the Senior Subordinated Notes under the Act or to qualify the Indenture under the TIA. The opinion of Dechert Price & Rhoads described in Section 9(e) above shall be rendered to the Initial Purchasers at the request of the Company and the Guarantors and shall so state therein. The Initial Purchasers shall have received on the Closing Date a letter (satisfactory to the Initial Purchasers and counsel for the Initial Purchasers) dated the Closing Date, from Dechert Price & Rhoads, counsel for the Company and the Guarantors, to the effect that such counsel has no reason to believe that, as of the date of the Offering Memorandum or as of the Closing Date, the Offering Memorandum, as amended or supplemented, if applicable (except for the financial statements and the notes related thereto and other financial, statistical and accounting data included therein, as to which such counsel need not express any belief) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In writing such letter with respect to the matters covered by this paragraph, Dechert Price & Rhoads may state that their belief is based upon their participation in the preparation of the Offering Memorandum and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification except as specified. Additionally, the Initial Purchasers shall have received on the Closing a letter (satisfactory to the Initial Purchasers and counsel for the Initial Purchasers) dated the Closing Date, from Dechert Price & Rhoads, counsel for the Company and the Guarantors, to the effect that the Initial Purchasers may rely on the opinions of Dechert Price & Rhoads rendered pursuant to the Senior Credit Facility. (f) The Initial Purchasers shall have received on the Closing Date an opinion (satisfactory to the Initial Purchasers and counsel for the Initial Purchasers), dated the Closing Date, of Butler, Snow, O'Mara, Stevens & Cannada, PLLC, counsel to the Company and the Guarantors (other than Delchamps, SCSI, Interstate Jitney-Jungle Stores, Inc. ("Interstate") and DAC), substantially to the effect that: 25 (i) each of the Company and each of the Guarantors (other than Delchamps, SCSI, Interstate and DAC) is a corporation duly organized, validly existing and in good standing under the laws of the State of Mississippi and has the corporate power and authority to carry on its business as it is currently being conducted as described in the Offering Memorandum and to own, lease and operate its properties as described in the Offering Memorandum; (ii) to such counsel's knowledge, and based solely on certificates to such effect examined by such counsel as issued by the Secretary of State for each of the states identified in writing to such counsel as jurisdictions where the failure by the Company and the Guarantors (other than Delchamps, SCSI, Interstate and DAC) to be qualified to do business as a foreign corporation would have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole (as set forth on a schedule to this opinion), each of the Company and the Guarantors (other than Delchamps, SCSI, Interstate and DAC) is duly qualified and in good standing as a foreign corporation authorized to do business in each such jurisdiction; (iii) all the outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid, non-assessable; (iv) all of the outstanding shares of capital stock of each of the Guarantors (other than Delchamps, SCSI, Interstate and DAC) have been duly authorized and validly issued and are fully paid and non-assessable; (v) the Senior Subordinated Notes have been duly authorized by the Company; (vi) the Subsidiary Guarantees have been duly authorized by the Guarantors (other than Delchamps, SCSI, Interstate and DAC); (vii) the Indenture has been duly authorized, executed and delivered by the Company and the Guarantors (other than Delchamps, SCSI, Interstate and DAC); (viii) this Agreement has been duly authorized, executed and delivered by the Company and the Guarantors (other than Delchamps, SCSI, Interstate and DAC); (ix) the Registration Rights Agreement has been duly authorized, executed and delivered by the Company and the Guarantors (other than Delchamps, SCSI, Interstate and DAC); (x) the New Senior Subordinated Notes have been duly authorized by the Company; 26 (xi) the Subsidiary Guarantees to be endorsed on the New Senior Subordinated Notes have been duly authorized by the Guarantors (other than Delchamps, SCSI, Interstate and DAC); (xii) the Merger Agreement has been duly authorized, executed and delivered by the Company; (xiii) the Senior Credit Facility has been duly authorized, executed and delivered by the Company and the Guarantors (other than Delchamps, SCSI, Interstate and DAC); (xiv) to such counsel's knowledge, neither the Company nor any of the Guarantors (other than Delchamps, SCSI, Interstate and DAC) is in violation of its respective articles of incorporation or by-laws or in default in the performance of any agreement, indenture or other instrument to which the Company or any Guarantor (other than Delchamps, SCSI, Interstate and DAC) is a party or by which any of their respective properties are bound that would result in any Material Adverse Effect on the conduct of the business of the Company and its subsidiaries, taken as a whole; and (xv) the execution, delivery and performance of the Merger Agreement, this Agreement and the other Operative Documents by the Company and each of the Guarantors (other than Delchamps, SCSI, Interstate and DAC) will not (A) require any consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body, except as specifically referenced in Section 3.4 of the Merger Agreement and the related Disclosure Schedule attached thereto and except for such consents, approvals, authorizations or orders under (1) the Securities Act and state securities or "blue sky" laws and regulations, (2) the Trust Indenture Act of 1939, as amended, (3) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (4) applicable Environmental Laws (as defined below), (5) the filings with and approvals by the Secretary of State of the State of Alabama of the articles of and certificates of merger, relating to the Delchamps Acquisition, and (6) state and local law with respect to the obtaining of new permits or licenses for the sale of tobacco, alcohol, pharmaceuticals, lottery tickets, food services and health and similar regulated items, (B) conflict with the articles of incorporation or by-laws of the Company or any of the Guarantors (other than Delchamps, SCSI, Interstate and DAC), (C) to such counsel's knowledge, conflict with or constitute a breach of the terms or provisions of, or a default under, any material agreement, indenture or other instrument to which the Company or any of the Guarantors (other than Delchamps, SCSI, Interstate and DAC) is a party or by which any of their respective properties are bound, except as would not have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole, (D) to such counsel's knowledge, result in a material violation or conflict with any laws or administrative regulations or rulings that are 27 applicable to the Company or any Guarantor (other than Delchamps, SCSI, Interstate and DAC) or to their respective properties, or (E) result in a material violation of any court decrees which have been identified by certificate of the Company to such counsel as specifically applicable to the Company or any of the Guarantors (other than Delchamps, SCSI, Interstate and DAC) or to their respective properties which would have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole; except that the opinions set forth in the within clauses (A) and (D) are based on only those statutes, rules or regulations which, in the opinion of such counsel, are customarily applicable to securities underwriting and merger transactions; and except that the opinions set forth in this paragraph 9(f)(xv) will not include any opinion as to the enforceability of the Merger Agreement, this Agreement or the other Operative Documents. (g) The Initial Purchasers shall have received on the Closing Date an opinion (satisfactory to the Initial Purchasers and counsel for the Initial Purchasers), dated the Closing Date, of Maynard, Cooper & Gale, P.C., counsel to Interstate and DAC, substantially to the effect that: (i) each of Interstate and DAC is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Alabama and has the corporate power and authority to carry on its business as described in the Offering Memorandum and to own, lease and operate its properties as described in the Offering Memorandum; (ii) this Agreement, the Indenture, the Registration Rights Agreement and the Senior Credit Facility have each been duly authorized, executed and delivered by Interstate and DAC, and the DAC Senior Note Guaranty, the DAC Supplemental Indenture and the Merger Agreement have been duly authorized, executed and delivered by DAC; (iii) the Subsidiary Guarantees have been duly authorized by Interstate and DAC; (iv) all of the outstanding shares of capital stock of DAC have been duly authorized and validly issued and are fully paid, non-assessable and not subject to any preemptive or similar rights; and (v) the execution and delivery by Interstate of the Operative Documents, and by DAC of the Operative Documents and the Merger Agreement, does not and, if Interstate or DAC, as the case may be, were to perform on the date hereof its obligations under the Operative Documents, such performance would not, (i) conflict with the Articles of Incorporation or Bylaws of Interstate or DAC, as the case may be, or (ii) to such counsel's actual knowledge with independent investigation, (A) require any consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body of the State of Alabama (except as for such consents, approvals, 28 authorizations or orders required under state securities or "blue sky" laws and regulations, and, with respect to performance only, required for the normal ordinary conduct of the business of Interstate or DAC, as the case may be, such as permits or licenses for the sale of tobacco, alcohol, pharmaceuticals, food and food services, health permits, environmental permits and zoning approvals), or (B) violate or conflict with any laws or administrative regulations or rulings of the State of Alabama that are applicable to Interstate or DAC, as the case may be; except that the opinions set forth pursuant to this paragraph 9(g)(v) will not include any opinion as to the enforceability of the Operative Documents. (h) The Initial Purchasers shall have received on the Closing Date an opinion (satisfactory to the Initial Purchasers and counsel for the Initial Purchasers), dated the Closing Date, of Hand Arendall, L.L.C., counsel to Delchamps, substantially to the effect that: (i) Delchamps is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Alabama and has the corporate power and authority to carry on its business as currently conducted; (ii) Delchamps is duly qualified and in good standing as a foreign corporation authorized to do business in each of the states of Florida, Louisiana and Mississippi; (iii) the Subsidiary Guarantee of Delchamps has been duly authorized by Delchamps; (iv) the Indenture has been duly authorized, executed and delivered by Delchamps; (v) this Agreement has been duly authorized, executed and delivered by Delchamps; (vi) the Registration Rights Agreement has been duly authorized, executed and delivered by Delchamps; (vii) the Subsidiary Guarantees to be endorsed on the New Senior Subordinated Notes have been duly authorized by Delchamps; (viii) the Senior Credit Facility has been duly authorized, executed and delivered by Delchamps; (ix) the Supplemental Indenture dated September 15, 1997 between Delchamps and Marine Midland Bank has been duly authorized by Delchamps; (x) the Senior Guarantee dated as of September 15, 1997 has been duly authorized by Delchamps; 29 (xi) to such counsel's knowledge (and without expressing an opinion with respect to the effect of the Merger Agreement contemplated by the Operative Documents), Delchamps is not in violation of its Articles of Incorporation or Bylaws and, based solely on the Officer's Certificate, Delchamps is not in default in the performance of any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of material indebtedness or in any other material agreement, indenture or instrument (A) material to the conduct of the business of Delchamps and its subsidiaries, taken as a whole, (B) material to the conduct of the business of Delchamps and its subsidiaries, taken as a whole, immediately following the Delchamps Acquisition, (C) by which Delchamps', or any of its subsidiaries' property is bound or (D) by which any of Delchamps', or any of its subsidiaries' property will be bound following the Delchamps Acquisition; and (xii) the execution, delivery and performance of the Operative Documents by Delchamps, compliance by Delchamps with all provisions thereof (except that such counsel expresses no opinion with respect to the Merger contemplated thereby) and the consummation of the transactions contemplated thereby will not require any consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body of the State of Alabama (except as such may be required under state securities or "blue sky" laws and regulations) and will not conflict with or constitute a breach of the terms or provisions of, or a default under, the Articles of Incorporation or Bylaws of Delchamps or, based solely on the Officer's Certificate, of any material agreement, indenture or other instrument to which Delchamps is a party or by which Delchamps or its properties are bound, or violate or conflict with any laws or administrative rulings or court decrees applicable to Delchamps or its properties, which violations or conflicts would reasonably be expected to have a Material Adverse Effect. The opinions in this paragraph 9(h)(xii) are subject to the fact that such counsel have done no independent research of Alabama law with regard to the legal opinions in this opinion and same are based solely on such counsel's knowledge of Alabama law and without further research or inquiry. With respect to all opinions of such counsel expressed pursuant to paragraphs 9(e), (f), (g) and (h), such opinions are to be based upon the assumption that no actions, events, occurrences or circumstances by, affecting or concerning any of the Company or Guarantors occurred or existed prior to the effective time of the Delchamps Tender Offer which would cause any inaccuracy in, conflict with, or contravention of, in whole or in part, any of the opinions expressed. With respect to the opinions of counsel expressed pursuant to paragraphs 9(e), (f), (g) and (h) as "within the knowledge of such counsel," such opinions are to be interpreted as conveying that, during the participation of such counsel in the preparation, negotiation, execution and performance of the Merger Agreement, in connection with such 30 counsel's representation of the Company and the Guarantors, but without making any independent investigation or verification, no information has come to the attention of the attorneys of such firm that have had substantive involvement in the preparation, negotiation, execution and performance of the Merger Agreement to give any such attorney conscious awareness and actual knowledge of any facts or law contrary to the statements and opinions so expressed. To the extent the knowledge of such counsel is qualified by "after reasonable inquiry," such inquiry is limited to the appropriate officers and records of the Company and the Guarantors. In rendering the opinions set forth in paragraphs 9(f)(xv), 9(g)(xiii) and 9(h)(xiii), such counsel may state that the opinions, with your permission, assume that all courts of competent jurisdiction would enforce all agreements, indentures or other instruments as written but for all purposes would apply the internal laws of the State of Mississippi or Alabama, as applicable, without giving effect to any choice of law provisions contained therein or any choice of law principles which would result in application of the internal laws of any other state. (i) The Initial Purchasers shall have received on the Closing Date an opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial Purchasers, in form and substance reasonably satisfactory to the Initial Purchasers. (j) The Initial Purchasers shall have received, at the time this Agreement is executed and at the Closing Date, letters dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Initial Purchasers from (i) Deloitte & Touche L.L.P., independent public accountants for the Company and (ii) KPMG Peat Marwick L.L.P., independent public accountants for Delchamps, in each case containing the information and statements of the type ordinarily included in accountants' "comfort letters" to the Initial Purchasers with respect to the financial statements and certain financial information contained in the Offering Memorandum. (k) The Senior Subordinated Notes shall have been approved by the NASD for trading and duly listed in PORTAL. (l) The Initial Purchasers shall have received a counterpart, conformed as executed, of the Indenture which shall have been entered into by the Company, the Guarantors and the Trustee (provided, that with respect to Delchamps and SCSI, such counterpart may be delivered subject to the Consummation of the Delchamps Tender Offer). (m) The Company and the Guarantors shall have executed the Registration Rights Agreement and the Initial Purchasers shall have received an original copy thereof, duly executed by the Company and the Guarantors (provided, that with respect to Delchamps and SCSI, such counterpart may be delivered subject to the Consummation of the Delchamps Tender Offer). (n) The Company and the Guarantors shall have executed this Agreement and the Initial Purchasers shall have received an original copy thereof, duly executed by the Company and the Guarantors (provided, that with respect to Delchamps and SCSI, such counterpart may be delivered subject to the Consummation of the Delchamps Tender Offer). (o) The Company and the subsidiaries of the Company that are obligors thereunder shall have entered into the Senior Credit Facility (the form and substance of 31 which shall be reasonably acceptable to the Initial Purchasers) and the Initial Purchasers shall have received counterpart, conformed as executed, thereof and of all other documents and agreements entered into in connection therewith (provided, that with respect to Delchamps and SCSI, such counterparts may be delivered subject to the Consummation of the Delchamps Tender Offer). (p) The Initial Purchasers shall have received a copy of the Merger Agreement, with all schedules, exhibits and amendments thereto, certified by an executive officer of the Company as a true, correct and complete copy as of the date hereof. (q) Each condition to the closing contemplated by the Senior Credit Facility (other than the issuance and sale of the Senior Subordinated Notes and Subsidiary Guarantees pursuant hereto) shall have been satisfied or waived. There shall exist at and as of the Closing Date (after giving effect to the transactions contemplated by this Agreement and the Merger Agreement) no conditions that would constitute a default (or an event that with notice or the lapse of time, or both, would constitute a default) under the Senior Credit Facility. On the Closing Date, the closing under the Senior Credit Facility shall have been consummated on terms that conform in all material respects to the description thereof in the Offering Memorandum and the Initial Purchasers shall have received evidence satisfactory to the Initial Purchasers of the consummation thereof. (r) Each condition to the closing of the Delchamps Tender Offer contemplated by the Merger Agreement (other than the issuance and sale of the Senior Subordinated Notes and the Subsidiary Guarantees pursuant hereto and the closing under the Senior Credit Facility) shall have been satisfied or waived. There shall exist at and as of the Closing Date (after giving effect to the transactions contemplated by this Agreement and the Senior Credit Facility) no conditions that would constitute a default (or an event that with notice or the lapse of time, or both, would constitute a default) under the Merger Agreement. On the Closing Date, the Delchamps Tender Offer shall have been consummated on terms that conform in all material respects to the description thereof in the Offering Memorandum and the Initial Purchasers shall have received evidence satisfactory to the Initial Purchasers of the consummation thereof. (s) The Company shall have received the consent of the holders of at least a majority in principal amount of the outstanding 12% Senior Notes due 2006 of the Company (the "Senior Notes"), excluding any Senior Notes owned by the Company, any Guarantor or any affiliate of the Company or any Guarantor, to approve certain amendments to the indenture, dated March 5, 1996 among the Company, the guarantors named therein and Marine Midland Bank, as trustee, governing the Senior Notes (the "Consent Solicitation"). (t) Latham & Watkins shall have been furnished with such documents, in addition to those set forth above, as they may reasonably require for the purpose of enabling them to review or pass upon the matters referred to in this Section 9 and in order to evidence the accuracy, completeness or satisfaction in all material respects of any of the representations, warranties or conditions herein contained. (u) Prior to the Closing Date, the Company shall have furnished to the Initial Purchasers such further information, certificates and documents as the Initial Purchasers may reasonably request. 32 (v) The Company shall not have failed at or prior to the Closing Date to perform or comply with any of the agreements herein contained and required to be performed or complied with by the Company at or prior to the Closing Date. 10. CONDITIONS OF THE COMPANY'S AND THE GUARANTORS' OBLIGATIONS. The obligations of the Company and the Guarantors to sell the Senior Subordinated Notes and issue the Subsidiary Guarantees under this Agreement are subject to the satisfaction to each of the following conditions: (a) Each condition to the closing of the Delchamps Tender Offer contemplated by the Merger Agreement (other than the issuance and sale of the Senior Subordinated Notes and Subsidiary Guarantees pursuant hereto and the closing of the Senior Credit Facility) shall have been satisfied or waived. There shall exist at and as of the Closing Date (after giving effect to the transactions contemplated by this Agreement and the Senior Credit Facility) no conditions that would constitute a default (or an event that with notice or the lapse of time, or both, would constitute a default) under the Merger Agreement. On the Closing Date, the Delchamps Tender Offer shall have been consummated on terms that conform in all material respects to the description thereof in the Offering Memorandum and the Company shall have received evidence satisfactory to the Company of the consummation thereof. (b) The Consent Solicitation shall have been consummated. (c) The Initial Purchasers shall have delivered payment to the Company for the Senior Subordinated Notes pursuant to Section 4 of this Agreement. (d) All of the representations and warranties of the Initial Purchasers shall be true and correct in all material respects at and as of the Closing Date and the Initial Purchasers shall not have failed at or prior to the Closing Date to perform or comply with any of the agreements herein contained and required to be performed or complied with by the Initial Purchasers at or prior to the Closing Date. (e) No injunction, restraining order, action, statute, rule or regulation of any Governmental Authority shall have been issued as of the Closing Date that would prevent or interfere with the issuance of the Senior Subordinated Notes hereunder or subject the Company to any material penalty if the Senior Subordinated Notes were to be issued and sold hereunder. 11. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall become effective upon the execution and delivery of this Agreement by the parties hereto other than Delchamps and SCSI. This Agreement may be terminated at any time prior to the Closing Date by the Initial Purchasers by written notice to the Company if any of the following has occurred: (i) any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic conditions or in the financial markets of the United States or elsewhere that, in the Initial Purchasers' judgment, is material and adverse and, in the Initial Purchasers' judgment, makes it impracticable to market the Senior Subordinated Notes on the terms and in the manner contemplated in the Offering Memorandum, (ii) the suspension or material limitation of trading in securities or other instruments on the New York Stock Exchange, the American Stock 33 Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq National Market or limitation on prices for securities or other instruments on any such exchange or the Nasdaq National Market, (iii) the suspension of trading of any securities of the Company or any Guarantor on any exchange or in the over-the-counter market, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority which in your opinion materially and adversely affects, or will materially and adversely affect, the business, prospects, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by either federal or New York State authorities or (vi) the taking of any action by any federal, state or local government or agency in respect of its monetary or fiscal affairs which in your opinion has a material adverse effect on the financial markets in the United States. If on the Closing Date either of the Initial Purchasers shall fail or refuse to purchase the Senior Subordinated Notes which it or they have agreed to purchase hereunder on such date and the aggregate principal amount of the Senior Subordinated Notes which such defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed but failed or refused to purchase is not more than one-tenth of the aggregate principal amount of the Senior Subordinated Notes to be purchased on such date by all Initial Purchasers, each non-defaulting Initial Purchaser shall be obligated severally, in the proportion which the principal amount of the Senior Subordinated Notes set forth opposite its name in Schedule B bears to the aggregate principal amount of the Senior Subordinated Notes which all the non-defaulting Initial Purchasers, as the case may be, have agreed to purchase, or in such other proportion as you may specify, to purchase the Senior Subordinated Notes which such defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed but failed or refused to purchase on such date; PROVIDED that in no event shall the aggregate principal amount of the Senior Subordinated Notes which any Initial Purchaser has agreed to purchase pursuant to Section 2 hereof be increased pursuant to this Section 11 by an amount in excess of one-ninth of such principal amount of the Senior Subordinated Notes without the written consent of such Initial Purchaser. If on the Closing Date any Initial Purchaser or Initial Purchasers shall fail or refuse to purchase the Senior Subordinated Notes and the aggregate principal amount of the Senior Subordinated Notes with respect to which such default occurs is more than one-tenth of the aggregate principal amount of the Senior Subordinated Notes to be purchased by all Initial Purchasers and arrangements satisfactory to the Initial Purchasers and the Company for purchase of such the Senior Subordinated Notes are not made within 48 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Initial Purchaser and the Company. In any such case which does not result in termination of this Agreement, either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Offering Memorandum or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Initial Purchaser from liability in respect of any default of any such Initial Purchaser under this Agreement. 12. MISCELLANEOUS. Notices given pursuant to any provision of this Agreement shall be addressed as follows: (i) if to the Company or any Guarantor, to 1770 Ellis Avenue, Suite 200, Jackson, Mississippi 39204 and (ii) if to the Initial Purchasers, Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate Department, or in any case to such other address as the person to be notified may have requested in writing. 34 The respective indemnities, contribution agreements, representations, warranties and other statements of the Company, the Guarantors and the Initial Purchasers set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive delivery of and payment for the Senior Subordinated Notes, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of the Initial Purchasers, the officers or directors of the Initial Purchasers, any person controlling the Initial Purchasers, the Company, any Guarantor, the officers or directors of the Company or any Guarantor, or any person controlling the Company or any Guarantor, (ii) acceptance of the Senior Subordinated Notes and payment for them hereunder and (iii) termination of this Agreement. If this Agreement shall be terminated by the Initial Purchasers because of any failure or refusal on the part of the Company or the Guarantors to comply with the terms or to fulfill any of the conditions of this Agreement, the Company and the Guarantors, jointly and severally, agree to reimburse the Initial Purchasers for all out-of-pocket expenses (including the fees and disbursements of counsel) reasonably incurred by them (provided that Delchamps and SCSI shall not be responsible for any of the fees and expenses described in this paragraph unless and until the Delchamps Tender Offer is Consummated). Notwithstanding any termination of this Agreement, the Company shall be liable for all expenses which it has agreed to pay pursuant to Section 5(i) hereof. The Company and each Guarantor also agree, jointly and severally, to reimburse each Initial Purchaser and its officers, directors and each person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act for any and all fees and expenses (including without limitation the fees and expenses of counsel) incurred by them in connection with enforcing their rights under this Agreement (including without limitation its rights under this Section 12). Except as otherwise provided, this Agreement has been and is made solely for the benefit of and shall be binding upon the Company, the Guarantors, the Initial Purchasers, the Initial Purchasers' directors and officers, any controlling persons referred to herein, the directors of the Company and the Guarantors and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include a purchaser of any of the Senior Subordinated Notes from the Initial Purchasers merely because of such purchase. This Agreement shall be governed and construed in accordance with the laws of the State of New York. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. 35 Please confirm that the foregoing correctly sets forth the agreement among the Company, the Guarantors and the Initial Purchasers as of the date first above written. Very truly yours, JITNEY-JUNGLE STORES OF AMERICA, INC. By: ----------------------------------- Name: Title: SOUTHERN JITNEY JUNGLE COMPANY By: ----------------------------------- Name: Title: MCCARTY-HOLMAN CO., INC. By: ----------------------------------- Name: Title: INTERSTATE JITNEY-JUNGLE STORES, INC. By: ----------------------------------- Name: Title: PUMP AND SAVE, INC. By: ----------------------------------- Name: Title: DELTA ACQUISITION CORPORATION By: ----------------------------------- Name: Title: The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written by Donaldson, Lufkin & Jenrette Securities Corporation on behalf of the Initial Purchasers. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: ---------------------------------- Name: Title: The foregoing Purchase Agreement is hereby agreed to and accepted as of the Consummation of the Delchamps Tender Offer by Delchamps, Inc. and Supermarket Cigarette Sales, Inc., each a Guarantor, it being understood that the provisions thereof applicable to and binding upon the Guarantors shall be applicable to and binding upon Delchamps, Inc. and Supermarket Cigarette Sales, Inc. as of and effective immediately upon Consummation of the Delchamps Tender Offer. DELCHAMPS, INC. By: ---------------------------------- Name: Title: SUPERMARKET CIGARETTE SALES, INC. By: ---------------------------------- Name: Title: SCHEDULE A GUARANTORS Southern Jitney Jungle Company McCarty-Holman Co., Inc. Interstate Jitney-Jungle Stores, Inc. Pump and Save, Inc. Delta Acquisition Corporation Delchamps, Inc. (simultaneously upon Consummation of the Delchamps Tender Offer) Supermarket Cigarette Sales, Inc. (simultaneously upon Consummation of the Delchamps Tender Offer) S-1 SCHEDULE B Principal Amount Initial Purchaser of Notes ----------------- ------------ Donaldson, Lufkin & Jenrette Securities Corporation.................................... $140,000,000 Credit Suisse First Boston.................................... $ 60,000,000 Total..................................................... $200,000,000 ============ S-2 EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT A-1 EX-12.1 6 STATEMENT OF RATIO OF EARNINGS Exhibit 12.1 Calculation of Ratio of Earnings to Fixed Charges (dollars in thousands)
12 WEEKS FISCAL YEAR ENDED ENDED ----------------------------------------------------------- --------- MAY 1, APRIL 30, APRIL 29, APRIL 27, MAY 3, JULY 20, 1993 1994 1995 1996 1997 1996 --------- ----------- ----------- ----------- --------- --------- Earnings: Income before taxes................................... 26,471 27,135 30,220 22,655 1,085 2,473 Add fixed charges..................................... 12,658 14,756 14,183 16,519 40,763 9,190 Earnings........................................... 39,129 41,891 44,403 39,174 41,848 11,663 Fixed Charges: Interest expense...................................... 9,920 11,626 10,823 13,000 36,215 8,378 Amort of deferred financing costs..................... 963 Other adjustments (a)................................. 2,738 3,130 3,360 3,519 3,585 812 Fixed charges...................................... 12,658 14,756 14,183 16,519 40,763 9,190 Ratio of earnings to fixed charges.................... 3.1 2.8 3.1 2.4 1.0 1.3 JULY 26, 1997 --------- Earnings: Income before taxes................................... 3,443 Add fixed charges..................................... 9,290 Earnings.............................................. 12,733 Fixed Charges: Interest expense...................................... 8,241 Amort of deferred financing costs..................... 222 Other adjustments (a)................................. 827 Fixed charges......................................... 9,290 Ratio of earnings to fixed charges.................... 1.4
(a) Other adjustments includes a portion of rent expense that manatement considers to be interest. Note: The ratio of earnings to fixed charges is computed by adding fixed charges to earnings (loss) before taxes on income and dividing that sum by the fixed charges. Fixed charges consist of interest (including amortization costs) and a portion of rent expense that management considers to be interest. EX-21.1 7 SUBSIDIARIES OF THE COMPANY Exhibit 21.1 JITNEY-JUNGLE STORES OF AMERICA, INC. Subsidiaries State or Other Jurisdiction of Name Incorporation - ---- --------------- Interstate Jitney-Jungle Stores, Inc. Alabama McCarty-Holman Co., Inc. Mississippi Southern Jitney Jungle Company Mississippi Pump And Save, Inc. Mississippi Delta Acquisition Corporation Alabama Supermarket Cigarette Sales, Inc. Louisiana Jitney-Jungle Bakery, Inc. Mississippi Delchamps, Inc. Alabama II- EX-23.3 8 CONSENT OF DELOITTE AND TOUCHE LLP EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Jitney-Jungle Stores of America, Inc. on Form S-4 of our report dated July 10, 1997, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Deloitte & Touche LLP ----------------------- Jackson, Mississippi October 23, 1997 EX-23.4 9 CONSENT OF KPMG PEAT MARWICK EXHIBIT 23.4 INDEPENDENT ACCOUNTANTS' CONSENT The Board of Directors Jitney-Jungle Stores of America, Inc. We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Atlanta, Georgia October 29, 1997 EX-25 10 STATEMENT OF ELIGIBILITY FORM T-1 Conformed Copy SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ---------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ---------------------- MARINE MIDLAND BANK (Exact name of trustee as specified in its charter) New York 16-1057879 (Jurisdiction of incorporation (I.R.S. Employer or organization if not a U.S. Identification No.) national bank) 140 Broadway, New York, N.Y. 10005-1180 (212) 658-1000 (Zip Code) (Address of principal executive offices) Charles E. Bauer Vice President Marine Midland Bank 140 Broadway New York, New York 10005-1180 Tel: (212) 658-1792 (Name, address and telephone number of agent for service) JITNEY-JUNGLE STORES OF AMERICA, INC. (Exact name of obligor as specified in its charter) Mississippi 64-0280539 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1770 Ellis Avenue, Suite 200 Jackson, Mississippi 39204 (601) 965-8600 (Zip Code) (Address of principal executive offices) 10_%SENIOR SUBORDINATED NOTES DUE 2007 (Title of Indenture Securities) General Item 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervisory authority to which it is subject. State of New York Banking Department. Federal Deposit Insurance Corporation, Washington, D.C. Board of Governors of the Federal Reserve System, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None Item 16. LIST OF EXHIBITS. EXHIBIT - ------- T1A(i) * - Copy of the Organization Certificate of Marine Midland Bank. T1A(ii) * - Certificate of the State of New York Banking Department dated December 31, 1993 as to the authority of Marine Midland Bank to commence business. T1A(iii) - Not applicable. T1A(iv) * - Copy of the existing By-Laws of Marine Midland Bank as adopted on January 20, 1994. T1A(v) - Not applicable. T1A(vi) * - Consent of Marine Midland Bank required by Section 321(b) of the Trust Indenture Act of 1939. T1A(vii) - Copy of the latest report of condition of the trustee (June 30, 1997), published pursuant to law or the requirement of its supervisory or examining authority. T1A(viii) - Not applicable. T1A(ix) - Not applicable. * Exhibits previously filed with the Securities and Exchange Commission with Registration No. 33-53693 and incorporated herein by reference thereto. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, Marine Midland Bank, a banking corporation and trust company organized under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York on the 16th day of October, 1997. MARINE MIDLAND BANK By: /s/ Frank J. Godino ---------------------------------- Frank J. Godino Assistant Vice President EXHIBIT T1A (vii) Board of Governors of the Federal Reserve System OMB Number: 7100-0036 Federal Deposit Insurance Corporation OMB Number: 3064-0052 Office of the Comptroller of the Currency OMB Number: 1557-0081 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 1999 - -------------------------------------------------------------------------------- 1 This financial information has not /1/ been reviewed, or confirmed for accuracy or relevance, by the Federal Reserve System. Please refer to page i, Table of Contents, for the required disclosure of estimated burden. - -------------------------------------------------------------------------------- CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1997 This report is required by law; 12 U.S.C. Section 324 This report form is to be filed by banks with branches (State member banks); 12 U.S.C. Section 1817 (State and consolidated subsidiaries in U.S. territories and nonmember banks); and 12 U.S.C. Section 161 (National possessions, Edge or Agreement subsidiaries, foreign banks). branches, consoli-dated foreign subsidiaries, or International Banking Facilities. - --------------------------------------------------------------------------------------------------------------------------- NOTE: The Reports of Condition and Income must be signed The Reports of Condition and Income are to be prepared in by an authorized officer and the Report of Condition must accordance with Federal regulatory authority be attested to by not less than two directors (trustees) instructions. NOTE: These instructions may in some cases for State nonmember banks and three directors for State differ from generally accepted accounting principles. member and National Banks. We, the undersigned directors (trustees), attest to the I, Gerald A. Ronning, Executive VP & Controller correctness of this Report of Condition (including the --------------------------------------------- supporting schedules) and declare that it has been Name and Title of Officer Authorized to Sign Report examined by us and to the best of our knowledge and belief has been prepared in conformance with the of the named bank do hereby declare that these Reports of instructions issued by the appropriate Federal regulatory Condition and Income (including the supporting schedules) authority and is true and correct. have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority /s/ James H. Cleave and are true to the best of my knowledge and believe. ------------------------------------- Director (Trustee) /s/ Gerald A. Ronning ------------------------------------------- /s/ Bernard J. Kennedy Signature of Officer Authorized to Sign Report ------------------------------------- Director (Trustee) 7/25/97 - ----------------------------------------------- /s/ Malcolm Burnett Date of Signature ------------------------------------- Director (Trustee) - --------------------------------------------------------------------------------------------------------------------------- FOR BANKS SUBMITTING HARD COPY REPORT FORMS: STATE MEMBER BANK: Return the original and one copy to the appropriate Federal Reserve District Bank. NATIONAL BANKS: Return the original only in the SPECIAL RETURN ADDRESS ENVELOPE PROVIDED. If express mail is STATE NONMEMBER BANKS: Return the original only in the used in lieu of the special return address envelope, SPECIAL RETURN ADDRESS ENVELOPE PROVIDED. If express return the original only to the FDIC, c/o Quality Data mail is used in lieu of the special return address Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114. envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114. - ---------------------------------------------------------------------------------------------------------------------------
FDIC Certificate Number / 0 / 0 / 5 / 8 / 9 / ---------------------- (RCRI 9030) NOTICE This form is intended to assist institutions with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. REPORT OF CONDITION Consolidating domestic and foreign subsidiaries of the Marine Midland Bank of Buffalo Name of Bank City in the state of New York, at the close of business June 30, 1997 ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances currency and coin.................................... $1,044,050 Interest-bearing balances ........................... 2,065,434 Held-to-maturity securities.......................... 0 Available-for-sale securities........................ 3,576,879 Federal funds sold and securities purchased under agreements to resell........................... 3,311,653 Loans and lease financing receivables: Loans and leases net of unearnedincome............... 20,801,413 LESS: Allowance for loan and lease losses............ 429,338 LESS: Allocated transfer risk reserve................ 0 Loans and lease, net of unearned income, allowance, and reserve....................... 20,372,075 Trading assets....................................... 982,806 Premises and fixed assets (including capitalized leases).................................. 221,952 Other real estate owned................................. 8,293 Investments in unconsolidated subsidiaries and associated companies................... 0 Customers' liability to this bank on acceptances outstanding................................. 26,490 Intangible assets....................................... 495,034 Other assets............................................ 530,288 Total assets............................................ 32,634,954 LIABILITIES Deposits: In domestic offices.................................. 20,705,098 Noninterest-bearing.................................. 4,382,353 Interest-bearing..................................... 16,322,745 In foreign offices, Edge, and Agreement subsidiaries, and IBFs.................................. 3,458,100 Noninterest-bearing.................................. 0 Interest-bearing..................................... 3,458,100 Federal funds sold and securities purchased under agreements to resell........................... 3,784,599 Demand notes issued to the U.S. Treasury................ 300,000 Trading Liabilities..................................... 169,194 Other borrowed money: With a remaining maturity of one year or less........ 878,716 With a remaining maturity of more than one year through three years......................... 133,670 With a remaining maturity of more than three years... 112,907 Bank's liability on acceptances executed and outstanding............................................. 26,490 Subordinated notes and debentures....................... 497,648 Other liabilities....................................... 336,900 Total liabilities....................................... 30,403,322 Limited-life preferred stock and related surplus........ 0 EQUITY CAPITAL Perpetual preferred stock and related surplus........... 0 Common Stock............................................ 205,000 Surplus................................................. 1,983,530 Undivided profits and capital reserves.................. 38,878 Net unrealized holding gains (losses) on available-for-sale securities........................ 4,224 Cumulative foreign currency translation adjustments..... 0 Total equity capital.................................... 2,231,632 Total liabilities, limited-life preferred stock, and equity capital..................... 32,634,954 -----END PRIVACY-ENHANCED MESSAGE-----