-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, F9H38yICLB3aHOhrLFZIa6pasX+W6RAsY6N3W9V+Np+68UNBk2a8F/EQR+qnHUZt 9W7CCME28erKImmhzOphlA== 0000912057-95-001989.txt : 19950802 0000912057-95-001989.hdr.sgml : 19950518 ACCESSION NUMBER: 0000912057-95-001989 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950331 SROS: MSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEMING COMPANIES INC /OK/ CENTRAL INDEX KEY: 0000352949 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 480222760 STATE OF INCORPORATION: OK FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08140 FILM NUMBER: 95525477 BUSINESS ADDRESS: STREET 1: 6301 WATERFORD BLVD STREET 2: P O BOX 26647 CITY: OKLAHOMA CITY STATE: OK ZIP: 73126 BUSINESS PHONE: 4058407200 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended DECEMBER 31, 1994 or __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ___________________ to ___________________ Commission file number 1-8140 FLEMING COMPANIES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Oklahoma 48-0222760 ------------------------------------ -------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6301 Waterford Boulevard, Box 26647 Oklahoma City, Oklahoma 73126 - -------------------------------------- -------------------------- Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (405) 840-7200 -------------------------- Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------- Common Stock, $2.50 Par Value and New York Stock Exchange Common Stock Purchase Rights Pacific Stock Exchange Chicago Stock Exchange 9.5% Debentures New York Stock Exchange - ------------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: NONE ------------------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. ------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- As of March 3, 1995, 37,429,000 common shares were outstanding. The aggregate market value of the common shares (based upon the closing price of these shares on the New York Stock Exchange) of Fleming Companies, Inc. held by nonaffiliates was approximately $750 million. DOCUMENTS INCORPORATED BY REFERENCE A portion of Part III has been incorporated by reference from the registrant's proxy statement dated March 17, 1995, in connection with its annual meeting of shareholders to be held on May 3, 1995. PART I ITEM 1. BUSINESS Fleming Companies, Inc. (hereinafter referred to as "Fleming," the "registrant" or the "company") was incorporated in Kansas in 1915 and in 1981 was reincorporated as an Oklahoma corporation. Fleming is engaged primarily in the food marketing and distribution industry with both wholesale and retail operations. In July 1994, pursuant to a stock purchase agreement between the company and Franz Haniel & Cie. GmbH, Fleming acquired all of the outstanding stock of Haniel Corporation ("Haniel"). Haniel, its sole direct subsidiary, Scrivner, Inc., and Scrivner, Inc.'s subsidiaries are collectively referred to herein as "Scrivner." Fleming paid $388 million in cash and refinanced substantially all of Scrivner's existing indebtedness (approximately $670 million in aggregate principal and premium). In connection with the acquisition, Fleming refinanced approximately $340 million in aggregate principal amount of its own indebtedness. The company currently serves as the principal source of supply for approximately 10,000 retail food stores, including approximately 3,700 supermarkets. Company supplied supermarkets have a total area of approximately 100 million square feet. The company serves food stores of various sizes operating in a wide variety of formats, including conventional full-service stores, supercenters, price impact stores (including warehouse stores), combination stores (which typically carry a higher proportion of non-food items) and convenience stores. These food stores are predominantly independent stores, many of which operate and advertise under a common name to promote greater consumer recognition. Fleming's retail customers also include national and regional corporate chains. With customers in 43 states and several international markets, the company services a geographically diverse area. The company's food distribution operations offer a wide variety of national brand and private label products, including groceries, meat, dairy and delicatessen products, frozen foods, produce, bakery goods and a variety of general merchandise and related items. In addition, Fleming offers a wide range of support services to its customers to help them compete more effectively with other food retailers in their respective market areas. In addition, the company has a significant presence in food retailing, owning and operating 350 retail food stores, including 270 supermarkets with an aggregate of approximately 9.5 million square feet. Company-owned stores operate under a number of names and vary in format from super warehouse stores and conventional supermarkets to convenience stores. The company operates in two segments: food distribution and retail store operations. Segment information as required by Statement of Financial Accounting Standards No. 14 is presented in Item 8. Financial Statements and Supplementary Data. THE CONSOLIDATION, REORGANIZATION AND RE-ENGINEERING PLAN Fleming has determined that its performance during the past several years, along with the performance of a number of its retail customers, has been unfavorably affected by a number of changes taking place within the food marketing and distribution industry, which has become increasingly competitive in an environment of relatively static over-all demand. Alternative format food stores (such as warehouse stores and supercenters) have gained retail food market share at the expense of traditional supermarket operators, including independent grocers, many of whom are customers of the company. Vendors, seeking to ensure that more of their promotional dollars are used by retailers to increase sales volume, increasingly direct promotional dollars to large self-distributing chains. The company believes that these changes have led to reduced margins and lower profitability among many of its customers and at the company itself. Having identified these market forces, Fleming initiated specific actions to respond to, and help its retail customers respond to, changes in the marketplace. In January 1994, Fleming announced the details of a plan to improve operating performance by consolidating facilities, eliminating regional operations and re-engineering the distribution and pricing of goods and services. The company believes consolidation, reorganization and re-engineering will result in significant cost savings through lower product handling expenses, lower selling and administrative expenses and reduced staffing of retailer services (or increased income from retailers to offset the cost of retailer services). Estimated pre-tax cost savings are expected to grow to at least $65 million per year beginning in 1997 after the plan has been fully implemented. The company believes these expense savings and income offsets will allow it to deliver goods and services to its customers at a lower all-in cost, while increasing the company's profitability. However, unforeseen events or circumstances could cause the company to alter planned work force reductions or facilities consolidations, thereby delaying or reducing expected cost savings. CONSOLIDATION. In order to improve operating efficiencies, the company closed four distribution centers, with the closing of one more facility to be announced. The business formerly conducted through these closed distribution centers has been transferred to certain other company facilities. During 1994, approximately 450 associate positions were eliminated through facilities consolidation. 2 OPERATIONAL REORGANIZATION. Historically, Fleming's operations were organized around geographical divisions each of which functioned as a separate business unit. Each division contained sales, merchandising, human resources, distribution, procurement, accounting, store development and management information functions, and provided services to a number of retail stores of various formats located within a certain geographical area. As the first step in its organizational realignment, Fleming closed its regional administrative offices. This resulted in the elimination of approximately 100 associate positions. Staff functions previously performed at the regional offices were moved to corporate headquarters, moved into the divisions or eliminated. RE-ENGINEERING. Fleming commissioned an internal management task force to re-engineer Fleming's business processes at both the divisional and corporate level. The task force made specific re-engineering recommendations, which were approved by Fleming's Board of Directors, to enhance value-added services and to eliminate non-value-added services. The company is reorganizing itself around four core business units: customer management, retailer services, category marketing and product supply. Customer management, retailer services, and category marketing represent the marketing functions of the company. Product supply represents the procurement and distribution functions of the company. A fifth unit, support services, will provide a variety of administrative support services to all of the Company's operations. Through customer management, the company will manage its relationships with customers primarily on the basis of customer type instead of on the basis of geography. This will enable the company to be more effective in serving its diverse customer base. Through retailer services, the company will offer retailers the same services it currently offers, except that these services will be offered on a fee basis to those retailers choosing to purchase such services. In the past, Fleming has offered many services without a direct charge but has indirectly charged all customers for such services. Through category marketing, the company will more efficiently manage its relationships with vendors, manufacturers and other suppliers, working to obtain the best possible promotional benefits offered by suppliers and will pass through directly to retailers 100% of those benefits related to grocery, frozen foods and dairy products. Through product supply, which will be comprised of all food distribution centers and operations, the company will work to provide retailers with the lowest possible "landed" cost of goods (i.e., the total of cost of product and all related charges plus the company's distribution fee). A new flexible marketing plan for grocery, frozen foods and dairy products will be introduced throughout the company's market areas. The flexible marketing plan will be based on a new pricing policy whereby retailers will pay the company's actual cost of acquiring goods, receiving 100% of available promotional benefits from the vendor arranged by the company, including those derived from forward buying. Customers will pay all costs incurred by the company for transportation (which currently are often subsidized by the company). Instead of paying a basic distribution fee, customers will pay handling and storage charges, which will be higher than the prior distribution fee. Additionally, retail customers will pay for all other retailer services purchased. The company estimates that the re-engineering process will be substantially completed by the end of 1996. Re-engineering is currently being implemented at certain of the company's operations in the western United States and should be implemented throughout the remainder of the company's operations over the course of 1995 and 1996. 3 PRODUCTS The company supplies its customers with a full line of national brand products as well as an extensive range of private and controlled label products, perishables and non-food items. Controlled labels are those which the company controls and private labels are those which may be offered only in stores operating under specific banners, which may or may not be under the company's control. Among the controlled labels offered by the company are TV-R-, Hyde Park-R-, Marquee-R-, Bonnie Hubbard-R-, Montco-R-, Best Yet-R- and Rainbow-R-. Among the private labels handled by the company are IGA-R-, Piggly Wiggly-R-, and Sentry-R-. Controlled label and private label products offer both the wholesaler and the retailer opportunities for higher margins as the costs of national advertising campaigns can be eliminated. The controlled label program is augmented with marketing and promotional support programs developed by the company. Certain categories of perishables also offer both the wholesaler and the retailer opportunities for improved margins as consumers are generally willing to pay relatively higher prices for produce and bakery goods and high quality frozen foods. Furthermore, retailers are increasingly competing for business through an emphasis on perishables and private label products. SERVICES TO CUSTOMERS The company offers value-added services to its customers. These services include, among others, merchandising and marketing assistance, in-house advertising, consumer education programs, retail electronic services and employee training. See also "-- Capital Invested in Customers." In addition, the company provides its customers with assistance in the development and expansion of retail stores, including retail site selection and market surveys; store design, layout, and decor assistance; and equipment and fixture planning. The company also has expertise in developing sales promotions, including employee and customer incentive programs, such as "continuity programs" designed to entice the customer to return regularly to the store. SALE TERMS The company charges customers for products based generally on an agreed price which includes the company's defined "cost" (which does not give effect to promotional fees and allowances from vendors), to which is added a fee determined by the volume of the customer's purchase. In some geographic areas, product charges are based upon a percentage markup over cost. A delivery charge is usually added based on order size and mileage from the distribution center to the customer's store. Payment may be received upon delivery of the order, or within credit terms that generally are weekly or semi-weekly. As part of the re-engineering process and pursuant to its new flexible marketing plan, the company will begin to charge the actual costs of acquiring its grocery, frozen food and dairy products while passing through to its customers all promotional fees and allowances received from vendors. In addition, the company will charge customers for the costs of transportation and will charge for handling and storage, which charges will be higher than the previous basic distribution fee. The company will also begin charging retailers directly for services for which they formerly paid indirectly. As a result, the company believes it will lower the cost of products to most of its customers while increasing the company's profitability. DISTRIBUTION The company currently operates 38 distribution centers which are responsible for the distribution of national brand and private label groceries, meat, dairy and delicatessen products, frozen foods, produce, bakery goods and a variety of related food and non-food items. Six general merchandise distribution centers distribute health and beauty care items and other non-food items. One distribution center serves convenience stores and one distribution center handles only dairy, delicatessen and fresh meat products. Substantially all facilities are equipped with modern material 4 handling equipment for receiving, storing and shipping large quantities of merchandise. As a result of the acquisition of Scrivner, the company has closed four Scrivner distribution centers, and expects to close an additional five distribution centers during 1995. Pursuant to the consolidation, reorganization and re-engineering plan, the company has closed four distribution centers and will close one additional distribution center. The company's distribution facilities comprise more than 21 million square feet of warehouse space. Additionally, the company rents, on a short-term basis, approximately 7 million square feet of off-site temporary storage space. Most distribution divisions operate a truck fleet to deliver products to customers. The company increases the utilization of its truck fleet by backhauling products from many suppliers, thereby reducing the number of empty miles traveled. To further increase its fleet utilization, the company has made its truck fleet available to other firms on a for-hire carriage basis. During 1994 and early 1995 the company engaged dedicated contract carriers to deliver its products to customers from certain distribution centers. RETAIL STORES SERVED The company serves approximately 10,000 retail stores ranging in size from small convenience outlets to conventional supermarkets, combination units, price impact stores and large supercenters. Among the stores served are approximately 3,700 supermarkets with an aggregate of approximately 100 million square feet. Fleming's customers are geographically diverse, with operations in 43 states and several international markets. The company's principal customers are supermarkets carrying a wide variety of grocery, meat, produce, frozen food and dairy products. Most customers also handle an assortment of non-food items, including health and beauty care products and general merchandise such as housewares, soft goods and stationery. Most supermarkets also operate one or more specialty departments such as in-store bakeries, delicatessens, seafood departments and floral departments. The company believes that its focus on quality service, broad product offerings, competitive prices and value-added services enables the company to maintain long-term customer relationships while attracting new customers. The company has targeted self-distributing chains and operators of alternative format stores as sources of incremental sales. These operations have gained increasing market share in the retail food industry in recent years. The company currently serves 980 chain stores, compared to 810 at year-end 1993. In late 1993, Fleming signed a six-year supply agreement with Kmart to serve new Super Kmart Centers in areas where Fleming has distribution facilities. The company also licenses or grants franchises to retailers to use certain trade names such as IGA-R-, Piggly Wiggly-R-, Food 4 Less-R-, Big Star-R-, Big T-R-, Buy-for-Less-R-, Checkers-R-, Festival Foods-R-, Jubilee Foods-R-, Jamboree Foods-R-, MEGA MARKET-R-, Minimax-R-, Sentry-TM-, Shop 'n Bag-R-, Shop 'n Kart-R-, Super 1 Foods-R-, Super Save-R-, Super Thrift-R-, Thriftway-R-, United Supers-R-, and Value King-R-. There are approximately 2,200 food stores operating under company franchises or licenses. COMPANY-OWNED STORES Principally as a result of the acquisition of Scrivner, the number of company-owned stores increased from 72 at December 25, 1993 to 350 at December 31, 1994, including 270 supermarkets with an aggregate of approximately 9.5 million square feet. Company-owned stores are located in 14 states and are all served by the company's distribution centers. Formats vary from super warehouse stores and conventional supermarkets to convenience stores. Generally in the industry, an average super warehouse store is 58,000 square feet, a conventional supermarket is 23,000 square feet and a convenience store is 2,500 square feet. All company-owned supermarkets are designed and equipped to offer a broad selection of both national brands as well as private label products at attractive prices while maintaining high levels of service. Most supermarket formats 5 have extensive produce sections and complete meat departments together with one or more specialty departments such as in-store bakeries, delicatessens, seafood departments and floral departments. Specialty departments generally produce higher gross margins per selling square foot than general grocery sections. The company-owned stores provide added purchasing power as they enable the company to commit to certain promotional efforts at the retail level. The company, through its owned stores, is able to retain many of the promotional savings offered by vendors in exchange for volume increases. Until recently, the company conducted its retail operations primarily as an extension of its wholesale business. Each company-owned retail store was managed by personnel at the distribution center serving such store and did not benefit from any coordinated retail strategy. The company emphasized wholesale operations, and many of its retail stores, while making a positive contribution to overall company profitability through increased wholesale volume, were not profitable on a stand-alone basis. In 1993, the company determined that its retail operations were underperforming and that, as a part of its overall business strategy, the company would pursue stand-alone profitability in its retail operations. The company recruited a senior officer to assume responsibility for retail operating results for all company-owned stores and to focus on the development of successful retail strategies. TECHNOLOGY Fleming has played a leading role in employing technology for internal operations as well as for its independent retail customers. The company may enter into agreements with one or more technology partners to maintain this position. Over the past three years, Fleming has introduced radio-frequency terminals in its distribution centers to track inventory, further improve customer service levels, reduce out-of-stock conditions and obtain other operational improvements. Most Fleming distribution centers are managed by computerized inventory control systems, along with warehouse productivity monitoring and scheduling systems. Fleming intends to add these technological aids to the Scrivner distribution system. Most of Fleming's truck fleet is equipped with on-board computers to monitor the efficiency of deliveries to its customers. Additonally, the company has developed and is introducing an advanced on-line communications vehicle, called Visionet, for instant electronic connection of Fleming with vendors and retailers. Visionet is a retail-driven, two-way rapid response communication system that ties vendors, product supply, category managers, local category advisors and retailers together. One of Visionet's features is the Opportunity Wire, which enables Fleming to electronically offer retailers unique opportunities to buy products at advantageous prices as well as assist in coordinating delivery. SUPPLIERS The company purchases its products from numerous vendors and growers. As the largest single customer of many of its suppliers, the company is able to secure favorable terms and volume discounts on most of its purchases, leading to lower unit costs. The company purchases products from a diverse group of suppliers and believes it has adequate and alternative sources of supply for substantially all of its products. 6 CAPITAL INVESTED IN CUSTOMERS As part of its services to retailers, the company provides capital to customers in several ways. In making credit and investment decisions, the company considers many factors, including estimated return on capital, risk and the benefits to be derived from sustained or increased product sales. Any equity investment or loan of $250,000 or more must be approved by the company's business development committee and any investment or loan in excess of $5 million must be approved by the Board of Directors. For equity investments, the company has active representation on the customer's board of directors. The company also conducts periodic credit reviews, receives and analyzes customers' financial statements and visits customers' locations regularly. On an ongoing basis, senior management reviews the company's largest investments and credit exposures. The company provides capital to certain customers by becoming primarily or secondarily liable for store leases, by extending credit for inventory purchases, and by guaranteeing loans and making secured loans to and equity investments in customers. STORE LEASES. The company leases stores for sublease to certain customers. Sublease rentals are generally higher than the base rental to the company. As of December 31, 1994, the company was the primary lessee of approximately 1,000 retail store locations subleased to and operated by customers. In certain circumstances, the company also guarantees the lease obligations of certain customers. EXTENSION OF CREDIT FOR INVENTORY PURCHASES. The company has supply agreements with customers in which it invests and, in connection with supplying such customers, will, in certain circumstances, extend credit for inventory purchases. Customary trade credits terms are up to seven days; the company has extended credit for additional periods under certain circumstances. GUARANTEES AND SECURED LOANS. The company guarantees the obligations of certain of its customers. Loans are also made to customers primarily for store expansions or improvements. These loans are typically secured by inventory and store fixtures, bear interest at rates at or above the prime rate, and are for terms of up to ten years. During fiscal year 1993 and 1992 Fleming sold, with limited recourse, $68 million and $45 million, respectively, of notes evidencing such loans. During fiscal years 1993 and 1992, Scrivner sold, with limited recourse, $51 million and $40 million, respectively, of notes evidencing similar loans. Neither Scrivner nor the company sold any notes during 1994. The company believes its loans to customers are illiquid and would not be investment grade if rated. EQUITY INVESTMENTS. The company has made equity investments in strategic multi-store customers, which it refers to as Business Development Ventures, and in smaller operators, referred to as Equity Stores. Equity Store participants typically retain the right to purchase the company's investment over a five to ten-year period. Many of the customers in which the company has made equity investments are highly leveraged, and the company believes its equity investments are highly illiquid. 7 The following table sets forth the components of Fleming's portfolio of loans to and investments in customers at year end 1994 and 1993.
CUSTOMERS WITH EQUITY INVESTMENTS --------------------------------------------- TOTAL LOAN RETAIL TO AND CUSTOMERS BUSINESS STORES EQUITY IN WITH DEVELOPMENT EQUITY HELD FOR EQUITY NO EQUITY VENTURES STORES RESALE CUSTOMERS INVESTMENTS TOTAL ----------- ------ --------- ---------- ------------ ------ 1994 - ----- Loans (a) $ 52 $55 $ 1 $108 $267 $375 Equity Investments 45 6 25 76 - 76 ---- --- --- ---- ---- ---- Total $ 97 $61 $26 $184 $267 $451 ==== === === ==== ==== ==== 1993 - ----- Loans (a) $ 78 $55 $ 2 $135 $178 $313 Equity Investments 28 15 12 55 - 55 ---- --- --- ---- ---- ---- Total $106 $70 $14 $190 $178 $368 ==== === === ==== ==== ==== - ------------------------ (a) Includes current portion of loans, which amounts are recorded as receivables on the company's balance sheet.
The table does not include the company's investments in customers through direct financing leases, lease guarantees, operating leases, loan guarantees or credit extensions for inventory purchases. As of December 31, 1994, the company's undiscounted obligations under direct financing leases and lease guarantees were $213 million and $227 million, respectively. The company has shifted its strategy to emphasize ownership of, rather than investment in, retail stores. In addition, the company intends to de-emphasize credit extensions to its customers and to reduce future credit loss expense by raising the company's financial standards for credit extensions and by conducting post-financing reviews more frequently and in more depth. Fleming's credit loss expense, including from receivables as well as from investments in customers, was $61 million in the year ended December 31, 1994 and $52 million and $28 million in 1993 and 1992, respectively. COMPETITION Competition in the food marketing and distribution industry is intense. The company's primary competitors are national chains who perform their own distribution (such as The Kroger Co. and Albertson's, Inc.), national food distributors (such as SUPERVALU Inc.) and regional and local food distributors. The principal competitive factors include price, quality and assortment of product lines, schedules and reliability of delivery, and the range and quality of customer services. The sales volume of wholesale food distributors is dependent on the level of sales achieved by the retail food stores they serve. Retail stores served by the company compete with other retail food outlets in their geographic areas on the basis of price, quality and assortment, store location and format, sales promotions, advertising, availability of parking, hours of operation and store appeal. The primary competitors of the company-owned stores are national, regional and local chains, as well as independent supermarkets and convenience stores. The principal competitive factors include price, quality and assortment, store location and format, sales promotions, advertising, availability of 8 parking, hours of operation and store appeal. EMPLOYEES At year-end 1994, the company had approximately 42,400 full time and part-time associates. Almost half of the company's associates are covered by collective bargaining agreements with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, the United Food and Commercial Workers, the International Longshoremen's and Warehousemen's Union and the Retail Warehouse and Department Store Union. Most of such agreements expire at various times throughout the next five years. The company believes it has satisfactory relationships with its unions. 9 ITEM 2. PROPERTIES The following table sets forth information with respect to Fleming's major distribution facilities.
SIZE, IN FOOD THOUSANDS OF OWNED OR DISTRIBUTION SQUARE FEET LEASED ------------ ------------ -------- Altoona, PA 164 Owned Buffalo, NY 540 Leased Columbus, OH 264 Leased Concordia, KS 107 Owned El Paso, TX (1) 465 Leased Ewa Beach, HI 196 Leased Fresno, CA 380 Owned Garland, TX 1,206 Owned Geneva, AL 345 Leased Houston, TX 662 Leased Huntingdon, PA 257 Owned Johnson City, TN 235 Owned Kansas City, KS 909 Leased Knoxville, TN 202 Owned La Crosse,WI 913 Owned Lafayette, LA 430 Owned Laurens, IA 368 Owned Lincoln, NE 255 Leased Lubbock, TX (1) 378 Owned Marshfield, WI 156 Owned Massillon, OH 547 Owned Memphis, TN 780 Owned Miami, FL 763 Owned Minneapolis, MN (2) 479 Owned Milwaukee, WI 600 Owned Nashville, TN 734 Leased North East, MD (3) 107 Owned Oklahoma City, OK (4) 966 Owned/Leased Peoria, KS 325 Owned Philadelphia, PA (3) 830 Leased Phoenix, AZ 912 Owned Portland, OR 323 Owned Sacramento, CA 681 Owned Salt Lake City, UT 361 Owned San Antonio, TX 513 Leased Sikeston, MO 481 Owned Superior, WI (2) 371 Owned Syracuse, NY 284 Leased Warsaw, NC 716 Owned York, PA 450 Owned ------ 19,655
10
GENERAL MERCHANDISE ------------------- Dallas, TX 170 Leased King of Prussia, PA 377 Leased La Crosse, WI 162 Owned Memphis, TN 339 Owned Sacramento, CA 294 Owned Topeka, KS 179 Leased ------ 1,521 OUTSIDE STORAGE --------------- Outside storage facilities - typically rented on a short-term basis. 6,731 ------ Total square feet 27,907 ====== (1) Comprise the Lubbock distribution operation. (2) The company plans to consolidate the administrative functions of these two distribution operations effectively immediately. (3) Comprise the Philadelphia distribution operation. (4) The company operates two distribution operations in Oklahoma City. One is owned and occupies 556,000 square feet and the other is leased and occupies 410,000 square feet. The administrative functions of these two distribution operations are consolidated.
At the end of 1994, Fleming operated a delivery fleet consisting of approximately 2,300 power units and 4,700 trailers. Most of this equipment is owned by the company. Company-operated retail stores occupy approximately 9.5 million square feet which is primarily leased. ITEM 3. LEGAL PROCEEDINGS TROPIN V. THENEN, ET AL., CASE NO. 93-2502-CIV-MORENO, UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF FLORIDA. WALCO INVESTMENTS, INC., ET AL. V. THENEN, ET AL., CASE NO. 93-2534-CIV-MORENO, UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF FLORIDA. On December 21, 1993, these cases were filed in the United States District Court for the Southern District of Florida. Both cases name numerous defendants including a former subsidiary of the registrant and four former employees of former subsidiaries of registrant. The cases contain similar factual allegations. Plaintiffs allege, among other things, that former employees of subsidiaries participated in fraudulent activities by taking money for confirming diverting transactions which had not occurred and that, in so doing, they acted within the scope of their employment. Plaintiffs also allege that a former subsidiary allowed its name to be used in furtherance of the alleged fraud. The allegations against registrant's former subsidiary include common law fraud, 11 breach of contract and negligence, conversion and civil theft. In addition, allegations were made against the former subsidiary claiming it violated the federal Racketeer Influenced and Corrupt Organizations Act and comparable state law. Plaintiffs seek damages, treble damages, attorneys' fees, costs, expenses and other appropriate relief. While the amount of damages sought under most claims is not specified, plaintiffs allege that hundreds of millions of dollars were lost as the result of the matters complained of. Registrant denies the allegations and is vigorously defending the actions. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 12 EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information concerning the executive officers of the company as of March 20, 1995:
YEAR FIRST BECAME NAME (AGE) PRESENT POSITION AN OFFICER - ---------- ---------------- ---------- Robert E. Stauth (50) Chairman, President and Chief Executive Officer 1987 Gerald G. Austin (57) Executive Vice President- Operations 1982 E. Stephen Davis (54) Executive Vice President- Scrivner Group 1981 Glenn E. Mealman (60) Executive Vice President- National Accounts 1977 Harry L. Winn, Jr. (50) Executive Vice President and Chief Financial Officer 1994 David R. Almond (55) Senior Vice President- General Counsel and Secretary 1989 Ronald C. Anderson (52) Senior Vice President-General Merchandise 1993 Mark K. Batenic (46) Senior Vice President-Customer Management 1994 Darreld R. Easter (58) Senior Vice President- Category Marketing 1988 William M. Lawson, Jr. (44) Senior Vice President-Corporate Development/International Operations 1994 Dixon E. Simpson (52) Senior Vice President-Retail Services 1994 Larry A. Wagner (48) Senior Vice President- Human Resources 1989 Thomas L. Zaricki (50) Senior Vice President-Retail Operations 1993 Kevin J. Twomey (44) Vice President-Controller 1995
13 No family relationship exists among any of the executive officers listed above. Executive officers are elected by the board of directors for a term of one year beginning with the annual meeting of shareholders held in April or May of each year. Each of the executive officers has been employed by the company or its subsidiaries for the preceding five years except for Messrs. Anderson, Lawson, Winn and Zaricki. Mr. Anderson joined the company as Vice President-General Merchandise in July 1993. In March 1995, he was named Senior Vice President-General Merchandise. Since 1986, until joining the company, he was vice president of McKesson Corporation, a distributor of pharmaceutical and related products, where he was responsible for its service merchandising division. Mr. Lawson joined the company in his present position in June 1994. Prior to that, Mr. Lawson was a practicing attorney in Phoenix for 18 years. Mr. Winn joined the company in his present position in May 1994. He was with UtiliCorp United in Kansas City, an energy company, where he was managing senior vice president and chief financial officer from 1990 to 1993. Mr. Zaricki joined the company in his present position in October 1993. Since 1987, until joining the company, Mr. Zaricki was president of Arizona Supermarkets, Inc., a regional supermarket chain headquartered in Phoenix. 14 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Fleming common stock is traded on the New York, Chicago and Pacific stock exchanges. The ticker symbol is FLM. As of December 31, 1994, the 37.5 million outstanding shares were owned by 11,500 shareholders of record and approximately 23,000 beneficial owners whose shares are held in street name by brokerage firms and financial institutions. According to the New York Stock Exchange Composite Transactions tables, the high and low prices of Fleming common stock during each calendar quarter of the past two years are shown below.
1994 1993 --------------- --------------- QUARTER HIGH LOW HIGH LOW ------- ------ ------ ------ ------ First $26.13 $24.25 $34.38 $30.75 Second 29.25 23.50 33.75 31.25 Third 30.00 22.88 33.75 31.13 Fourth 24.50 22.63 33.25 23.75
Cash dividends on Fleming common stock have been paid for 78 consecutive years. Dividends are generally declared on a quarterly basis with holders as of the record date being entitled to receive the cash dividend on the payment date. Record and payment dates are normally as shown below:
RECORD DATES: PAYMENT DATES: ------------- -------------- February 20 March 10 May 20 June 10 August 20 September 10 November 20 December 10
Cash dividends of $.30 per share were paid on each of the above four payment dates in 1993 and 1994. 15 ITEM 6. SELECTED FINANCIAL DATA
- ----------------------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1994(a) 1993 1992 1991 1990 - ----------------------------------------------------------------------------------------------- Net sales $15,753,487 $13,092,145 $12,893,534 $12,851,129 $11,932,767 Earnings before extraordinary loss and cumulative effect(b) 56,169 37,480 118,904 64,365 97,256 Net earnings per common share(b) 1.51 1.02 3.33 1.82 3.06 Total assets 4,608,329 3,102,632 3,117,705 2,958,416 2,767,696 Long-term debt and capital leases 1,994,793 1,003,828 1,038,183 951,864 981,488 Cash dividends paid per common share 1.20 1.20 1.20 1.14 1.03 - ----------------------------------------------------------------------------------------------- (a) The results in 1994 reflect the July 1994 acquisition of Scrivner, Inc. (b) In 1993 and 1992, the company recorded an after-tax loss of $2.3 million and $5.9 million, respectively, for early retirement of debt. In 1991, the company changed its method of accounting for postretirement health care benefits, resulting in a charge to net earnings of $9.3 million. The results in 1993 include an after-tax charge of approximately $62 million for additional facilities consolidations, re- engineering, impairment of retail-related assets and elimination of regional operations. The company instituted a plan late in 1991 to reduce costs and increase operating efficiency by consolidating four distribution centers into larger, higher volume and more efficient facilities. The after-tax charge was $41.4 million. See notes to consolidated financial statements and the financial review included in Item 7 and 8.
16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL THE CONSOLIDATION, REORGANIZATION AND RE-ENGINEERING PLAN. In January 1994, the company announced the details of a plan to restructure its organizational alignment, re-engineer its operations and consolidate facilities. The company's objective is to lower product costs to retail customers while providing the company with a fair and adequate return for product supply and value-added services. To achieve this objective, management is making major organizational changes, introducing a new flexible marketing plan and investing in technology. The actions contemplated by the plan will affect the company's food and general merchandise wholesaling operations as well as certain retail operations and are expected to be substantially completed by the end of 1996. The acquisition of Scrivner, described more fully in the next section, has not changed the plan design but has delayed implementation. The 1993 fourth quarter results reflect a charge of $101 million to cover four categories of charges related to the plan: elimination of regional operations, re-engineering operations, facilities consolidation and focus on company-owned retail stores. This is in addition to a provision of $7 million for facilities consolidation in the second quarter of 1993. Related cash requirements during 1994 were $21 million; additional cash expenditures necessary to fully implement the plan during 1995 and 1996 are estimated to be $50 million. Cash requirements have been and are expected to be met by internally generated cash flows and borrowings under the company's existing credit agreement. The plan is expected to produce approximate annual pretax savings of $65 million, net of incremental expenses. These savings will not be fully realized until after complete implementation. Unforeseen events or circumstances could cause the company to alter the plan, thereby delaying or reducing expected cost savings. Elimination of the company's regional operations resulted in cash severance payments to approximately 100 associates, as well as the transfer of approximately 60 associates. The annual savings are approximately $4 million, principally in payroll costs. The provision for eliminating regional operations is approximately $8 million, including the write-down to estimated fair value of certain related assets. The re-engineering component of the charge provides for the cash costs related to the expected termination of approximately 1,500 associates brought about by re-engineering. Annual payroll savings are projected to be approximately $40 million. The provision for re-engineering is approximately $25 million. Management believes that the benefits to operating results will not begin until late 1995. Facilities consolidation has resulted in the closure of four distribution centers and is expected to result in the closure of one additional facility, the relocation of two operations, and consolidation of administrative functions. During 1994, approximately 450 associate positions were eliminated through facilities consolidations. Expected losses on disposition of the related property through sale or sublease are provided for through the estimated disposal dates. The total provision for facilities consolidation is approximately $60 million. Estimated components include: severance costs - $15 million; impaired property and equipment - $13 million; other related asset impairment and obligations - $11 million; lease and holding costs - - $10 million; completion of actions contemplated in an earlier restructuring charge - $7 million; and product handling and damage - $4 million. The actions are not expected to result in a material reduction in net sales. Transportation expense is expected to increase as the result of trucks driving farther to serve customers. It is not practical to estimate reduced depreciation and amortization, labor or operating costs separately. Management anticipates that, in the aggregate, a positive annual pretax earnings impact will result from 17 administrative expense savings and working capital and productivity improvements once the facilities consolidation plan is fully implemented. The costs to complete activities, including the consolidation and closure of distribution facilities contemplated in an earlier restructuring charge, result principally from additional estimated costs related to dispositions or related real estate assets. Such costs are principally the result of the deterioration of the San Francisco Bay area commercial real estate market since 1991. Increased costs to complete the earlier facilities consolidation were partially offset by a change in management's 1993 plans regarding the consolidation of four existing facilities into a large, new facility to be constructed in the Kansas City area; the revised plan, which calls for enlarging and utilizing existing facilities, is expected to result in lower associated closure costs. Thirty retail supermarket locations leased or owned by the company no longer represent viable strategic sites for stores due to size, location or age. The charge includes the present value of lease payments on these locations, as well as holding costs until disposition, the write-off of capital lease assets recorded for certain locations, and the expected loss on a location closed in 1994. The charge consists principally of cash costs for lease payments and the write-down of property. A positive annual pretax benefit will result from this charge but the annual amount will vary from year to year due to the dynamic nature of the lease and sublease arrangements. The provision for retail-related assets is approximately $15 million. THE ACQUISITION. Results beginning with the third quarter of 1994 have been materially affected by the acquisition of Scrivner. Sales have increased dramatically and gross margin and selling and administrative expenses as a percent of sales are significantly higher due to the increased ratio of retail food operations in Scrivner. Interest expense increased materially as a result of the increased borrowing level and higher interest rates and expense for the amortization of goodwill also significantly increased, both due to the acquisition. As of the end of 1994, the company has closed four Scrivner distribution centers and expects to close five more in 1995. Charges related to the closing of the distribution centers operated by Scrivner have been considered a direct cost of the acquisition and are included in goodwill. RESULTS OF OPERATIONS Set forth in the following table is information regarding the company's net sales and certain components of earnings expressed as a percentage of net sales, before the effect of early debt retirement in 1993 and 1992.
1994 1993 1992 ------ ------ ------ Net sales 100.00% 100.00% 100.00% Gross margin 7.28 5.85 5.64 Less: Selling and administrative expense 6.11 4.27 3.84 Interest expense .77 .60 .63 Interest income (.40) (.48) (.46) Equity investment results .09 .09 .12 Facilities consolidation and restructuring charge - .82 - ------ ------ ------ Total 6.57 5.30 4.13 Earnings before taxes .71 .55 1.51 Taxes on income .35 .26 .59 ------ ------ ------ Earnings before extraordinary items .36% .29% .92% ====== ====== ======
18 1994 AND 1993 NET SALES. Net sales for 1994 increased by $2.66 billion, or 20.3%, to $15.75 billion from $13.09 billion for 1993. The increase in net sales was attributable to the $2.76 billion of net sales generated by Scrivner operations since the acquisition. Without Scrivner, net sales would have declined by $100 million, or .7%, due to several factors, none of which individually was material to net sales, including: the expiration of the temporary agreement with Albertson's, Inc. as its distribution center came on line, the sale of a distribution center, the loss of a customer at one of the company's distribution centers and the loss of business due to the bankruptcy of Megafoods Stores, Inc. These losses were partially offset by the addition of business from Kmart, Florida retail operations acquired in the fourth quarter of 1993 ("Hyde Park") and Randall's Food Markets, Inc. Fleming measures inflation using data derived from the average cost of a ton of product sold by the company; for 1994 food price inflation was negligible. Tonnage of food product sold in 1994, without giving effect to the acquisition, increased .6% compared to 1993, reflecting the difficult retail environment. Consistent tonnage statistics for Scrivner are not available. GROSS MARGIN. Gross margin for 1994 increased by $381 million, or 49.9%, to $1.15 billion from $765 million for 1993 and increased as a percentage of net sales to 7.28% for 1994 from 5.85% for 1993. The increase in gross margin was due to retail stores, principally the 179 stores acquired with Scrivner as well as the 21 Hyde Park stores and 24 Consumers stores, which were not included for a full year in 1993. Retail operations typically have both a higher gross margin and higher selling expenses than wholesale operations. In addition, product handling expenses, which consist of warehouse, truck and building expenses, decreased as a percentage of net sales for 1994 from 1993 due in part to the positive impact of the company's facilities consolidation program and to higher fees charged to certain customers. These gross margin increases were partially offset by charges to income of $6 million resulting from the LIFO method of inventory valuation in 1994 compared to credits to income of $7 million in 1993. SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense for 1994 increased by $405 million, or 72.4%, to $962 million from $558 million for 1993 and increased as a percentage of net sales to 6.11% for 1994 from 4.27% in 1993. This increase was due primarily to the acquisition of Scrivner, particularly its retail operations, as well as the acquisition of 21 Hyde Park stores and 24 Consumers stores which were not included for a full year in 1993. Retail operations typically have higher selling expenses than wholesale operations. Selling and administrative expenses also increased by reason of the provision for additional goodwill amortization, principally related to the acquisition and the absence of several non-recurring items that occurred in 1993. The increase in the operating loss-corporate shown in the Segment Information note to the consolidated financial statements is the result of the aforementioned absence of non-recurring items and the increase in staff expense. Credit loss expense included in selling and administrative expense for 1994 increased by $9 million to $61 million from $52 million in 1993. This increase, including the $6.5 million credit loss discussed below, was primarily due to the continued difficult retail environment and low levels of food price inflation. Although the company has begun to de-emphasize credit extensions to and investments in customers and has adopted more stringent credit practices, there can be no assurance that credit losses from existing or future investments or commitments will not have a material adverse effect on results of operations or financial position. In August 1994, a customer of the company, Megafoods Stores, Inc. and certain of its affiliates, filed Chapter 11 bankruptcy proceedings. As of such date, Megafoods' total indebtedness to Fleming for goods sold on open account, equipment 19 leases and loans aggregated approximately $20 million. The company holds collateral with respect to a substantial portion of these obligations. Megafoods is also liable to the company under store sublease agreements for approximately $37 million, and the company is contingently liable on certain lease guarantees given by the company on behalf of Megafoods. The company is partially secured as to these obligations. Megafoods has alleged claims against the company arising from breach of contract, tortious interference with contracts and business relationships and wrongful set-off of a $12 million cash security deposit and has threatened to seek equitable subordination of the company's claims. The company denies these allegations and will vigorously protect its interests. Based on this event, the company took a charge to earnings of $6.5 million in the third quarter of 1994 to cover its estimated net credit exposure. However, the exact amount of the ultimate loss may vary depending upon future developments in the bankruptcy proceedings including those related to collateral values, priority issues and the company's ultimate expense, if any, related to certain customer store leases. An estimate of additional possible loss, or the range of additional losses, if any, cannot be made at this stage of the proceedings. The company estimates that its annualized sales to Megafoods prior to the bankruptcy were approximately $335 million and currently are approximately $170 million pursuant to a short-term arrangement. INTEREST EXPENSE. Interest expense for 1994 increased $42 million to $120 million from $78 million for 1993. The increase was due to the indebtedness incurred to finance the acquisition and higher interest rates imposed on the company as a result thereof. Without these factors, interest expense for 1994 is estimated to have been approximately the same as 1993. The company enters into interest rate hedge agreements to manage interest costs and exposure to changing interest rates. During July 1994, management terminated all of its outstanding hedge contracts at an immaterial net gain, which will be amortized over the original term of each hedge instrument. The credit agreement with the company's banks requires the company to provide interest rate protection on a substantial portion of the indebtedness outstanding thereunder. The company has entered into interest rate swaps and caps covering $1 billion aggregate principal amount of floating rate indebtedness. This amount exceeds the requirements set forth in the credit agreement. The average interest rate on the company's floating rate indebtedness is equal to the London interbank offered interest rate ("LIBOR") plus a margin. The average fixed interest rate paid by the company on the interest rate swaps is 6.79%, covering $750 million of floating rate indebtedness. The interest rate swap agreements, which were implemented through eight counterparty banks, and which have an average remaining life of 3.5 years, provide for the company to receive substantially the same LIBOR that the company pays on its floating rate indebtedness. For the remaining $250 million, the company has purchased interest rate cap agreements from an additional two counterparty banks covering $250 million of its floating rate indebtedness. The agreements cap LIBOR at 7.33% over the next 3.8 years. The company's payment obligations and receivables under the interest rate swap and cap agreements meet the criteria for hedge accounting treatment. Accordingly, the company's payment obligations and receivables are accounted for as interest expense. With respect to the interest rate hedging agreements, the company believes its exposure to potential credit loss expense is minimized primarily due to the relatively strong credit ratings of the counterparties for their unsecured long-term debt (A+ or higher from Standard & Poor's Ratings Group and A1 or higher from Moody's Investors Service, Inc.) and the size and diversity of the counterparty banks. The hedge agreements are subject to market risk to the extent that market interest rates for similar instruments decrease, and the company terminates the hedges prior to their maturity. However, the company believes the risk is minimized as it currently foresees no need to terminate any hedge agreements prior to their maturity. Also, 20 interest rates for similar instruments have increased. For 1994, the interest rate hedge agreements contributed $6 million to interest expense. The estimated fair value of the hedge agreements at December 31, 1994 was $32 million. INTEREST INCOME. Interest income for 1994 increased by $1 million to $64 million from $63 million for 1993. The increase was due to the acquisition. The company has sold certain notes receivable with limited recourse in prior years and may do so again in the future. EQUITY INVESTMENT RESULTS. The company's portion of operating losses from equity investments for 1994 increased by $3 million to $15 million from $12 million for 1993. The increase resulted primarily from losses related to the company's investments in small retail operators under the company's equity store program, offset in part by improved results from investments in strategic multi-store customers under the company's business development ventures program. TAXES ON INCOME. The company's effective tax rate for 1994 increased to 50.0% from 48.0% for 1993 primarily as a result of the lower than expected earnings for 1994, Scrivner's operations in states with higher tax rates and increased goodwill amortization with no related tax deduction. OTHER. In November 1994, the company announced that Smitty's Super Valu, a customer based in Arizona, had challenged the enforceability of its supply contract with the company and may seek alternate arrangements. Smitty's provided Fleming with the opportunity to match the terms offered by a competitor. The company has determined that the competitor's offer incorrectly excludes freight costs and is not a bona fide offer. The supply contract will expire in 31 months if the company matches any bona fide competing offer and in 15 months if it does not. The company intends to comply fully with the supply contract and expects Smitty's to do likewise. Smitty's purchased approximately $290 million of products from the company during 1994. The company has been named in two related legal actions filed in the U.S. District Court in Miami in December 1993. The litigation is complex, discovery has not commenced, and the ultimate outcome cannot presently be determined. Furthermore, the company is unable to predict a potential range of monetary exposure, if any, to the company. Based on the recovery sought, an unfavorable judgment could have a material adverse effect on the company. Management believes that several factors negatively affecting earnings in 1994 are likely to continue. Such factors include: flat wholesale sales; lack of food price inflation; operating losses in certain company-owned retail stores; increased interest expense, goodwill amortization and integration costs related to the acquisition; and a higher effective tax rate. 1993 AND 1992 NET SALES. Net sales in 1993 increased by $199 million, or 1.5%, to $13.09 billion from $12.89 billion for 1992. The net sales increase was primarily due to the following items, none of which individually was material to net sales: the inclusion of a full year of operation of Baker's Supermarkets Inc. in 1993, compared to 12 weeks in 1992, and the addition of the Garland, Texas distribution center purchased in August 1993. Also contributing to the 1993 increase were the addition of new customers, including Kmart. For 1993, the company experienced food price deflation of 0.1% compared to deflation of 1.0% in 1992. Tonnage of food product sold in 1993 was essentially the same as 1992. The lower tonnage growth rate reflects sluggish retail food industry sales and the lack of net expansion of the company's customer base. 21 GROSS MARGIN. Gross margin in 1993 increased by $39 million, or 5.3%, to $765 million from $726 million for 1992 and increased as a percentage of net sales to 5.85% from 5.64% in 1992. The increase in gross margin was due to increased net sales by company-owned stores (which included the 10 Baker's Supermarkets Inc. stores acquired in September 1992). Retail operations typically have a higher gross margin than wholesale operations. Product handling expense for 1993 decreased as a percentage of net sales from 1992. The resulting increase in gross margin was offset in part by lower wholesale margins. SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense in 1993 increased $63 million, or 12.8%, to $558 million from $495 million in 1992 and increased as a percentage of net sales to 4.27% from 3.84%. The increase was due primarily to the higher selling and administrative expense associated with a higher number of company-owned stores (which included 10 Baker's stores acquired at the beginning of the fourth quarter of 1992). Retail operations generally have higher selling expenses than wholesale operations. In addition, selling and administrative expense included credit loss expense of $52 million in 1993 compared with $28 million in 1992. The increase was due to the combined effects on customers' financial conditions of sluggish retail sales, intensified retail competition and lack of food price inflation. These increases were offset in part by reductions in certain other selling and administrative expense categories. Furthermore, in 1993, selling and administrative expense was affected by several non-recurring items. The company recorded $11 million of pre-tax income resulting from cash received from the favorable resolution of litigation and a $1 million accrual for expected settlements in other legal proceedings. The company estimated that its contingent liability for lease obligations exceeded its previously established reserves by $2 million and recorded this amount as an expense. A $5 million gain from a real estate transaction was also recorded. INTEREST EXPENSE. Interest expense in 1993 declined $3 million, to $78 million from $81 million in 1992. The decrease in 1993 was due primarily to lower short-term interest rates and lower average borrowing levels. The company entered into interest rate hedge agreements to manage its exposure to interest rates. INTEREST INCOME. Interest income in 1993 increased by $3 million, to $63 million from $60 million in 1992. The increase was due to higher outstanding notes receivable and direct financing leases, partially offset by a slight decline in interest rates. Interest income consists primarily of interest earned on notes receivable and income generated from direct financing leases of retail stores and related equipment. EQUITY INVESTMENT RESULTS. The company's share of operating losses from equity investments in certain customers (including customers participating in the company's equity store program or the business development venture program) accounted for under the equity method in 1993 decreased by $3 million, to $12 million from $15 million in 1992. The improvement was due to improved operating performance by certain of the company's business development ventures partially offset by the company's share of losses from customers participating in the company's equity store program. EARLY DEBT RETIREMENT. In the fourth quarters of 1993 and 1992, the company recorded extraordinary losses related to the early retirement of debt. In 1993, the company retired $63 million of the 9.5% debentures at a cost of $2 million, net of tax benefits of $2 million. In 1992, the company recorded a charge of $6 million, net of tax benefits of $4 million. The 1992 costs related to retiring $173 million aggregate principal amount of convertible notes, $30 million aggregate principal amount of 9.5% debentures and certain other debt. TAXES ON INCOME. The effective income tax rate for 1993 increased to 48% from 39% in 1992. The increase was primarily due to facilities consolidation and related 22 restructuring charges. As a result, pre-tax income was reduced, causing nondeductible items for tax purposes to have a larger impact on the effective tax rate. In addition, both the federal and state income tax rates increased by 1% due to a new tax law enacted in 1993. Moreover, the 1992 effective rate had been reduced due to favorable settlements of tax assessments recorded in prior years. CERTAIN ACCOUNTING MATTERS. Statement of Financial Accounting Standards No. 114 - Accounting by Creditors for Impairment of a Loan (as amended by Statement of Financial Accounting Standards No. 118 - Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures) will be effective in the first quarter of 1995. These statements require that loans that are determined to be impaired must be measured by the present value of expected future cash flows discounted at the loan's effective interest rate or collateral values. The impact on the consolidated statements of earnings and financial position is expected to be immaterial. LIQUIDITY AND CAPITAL RESOURCES
Capital Structure (In millions) 1994 % 1993 % ------ ----- ------ ----- Long-term debt $1,752 54.8% $ 728 34.0% Capital lease obligations 369 11.5 350 16.4 ------ ----- ------ ----- Total debt 2,121 66.3 1,078 50.4 Shareholders' equity 1,079 33.7 1,060 49.6 ------ ----- ------ ----- Total capital $3,200 100.0% $2,138 100.0% ====== ===== ====== =====
Includes current maturities of long-term debt and current obligations under capital leases. Fleming's capital structure changed significantly as a result of the July 19, 1994 acquisition of Scrivner. The acquisition was financed, and a large portion of the existing debt of both Fleming and Scrivner was refinanced, through a $2.2 billion revolving credit and term loan agreement entered into with a group of banks. Upon execution of the new credit agreement the company terminated its $400 million and $200 million bank credit agreements. In December, the company sold $300 million of 10.625% seven-year senior notes and $200 million of floating rate seven-year senior notes in a public offering and retired the $500 million two-year loan tranche of the credit agreement with the proceeds. The company's credit ratings for its senior unsecured long-term debt were downgraded from investment grade to Ba1 and BB+ by Moody's and Standard & Poor's, respectively, as a result of the additional debt incurred in the acquisition. However, in late February 1995, Standard & Poor's placed its rating of Fleming's senior unsecured long-term debt on CreditWatch with negative implications. Standard & Poor's expressed concerns that lower than expected earnings for the third and fourth quarters of 1994, combined with re-engineering costs that are now anticipated to reduce 1995 earnings below Standard & Poor's prior expectations, will limit the company's ability to reduce acquisition-related debt. The company's principal sources of liquidity are cash flows from operating activities and borrowings under the bank credit agreement. Borrowings under the two remaining tranches of the credit agreement totaled $1.08 billion at the end of 1994, their maximum level for the year. Borrowings under the new agreement, excluding the $500 million two-year tranche, averaged $998 million. At year end, the $800 million six-year amortizing term loan was fully drawn and $280 million was drawn on the $900 million five-year revolving credit facility. Borrowings under the credit agreement are guaranteed by most of the company's subsidiaries and are secured by the company's accounts receivable, inventories and a pledge of the stock of most subsidiaries. These security provisions will terminate 23 at such time that the company's credit ratings for unsecured senior long-term debt improve to investment grade status. The company was also required to pledge its intercompany receivables as security for its medium-term notes and its 9.5% debentures and to provide guarantees from most of its subsidiaries. Additionally, it has provided guarantees from most of its subsidiaries in favor of the senior notes. The credit agreement and the indentures for the senior notes contain customary covenants associated with similar facilities. The bank credit agreement currently contains the following covenants: maintenance of a consolidated-debt-to-net-worth ratio of not more than 2.45 to 1; maintenance of a minimum consolidated net worth of at least $857 million; maintenance of a fixed charge coverage ratio of at least 1.40 to 1; a limitation on restricted payments (including dividends and company stock repurchases); prohibition of certain liens; prohibitions of certain mergers, consolidations and sales of assets; restrictions on the incurrence of debt and additional guarantees; limitations on transactions with affiliates; limitations on acquisitions and investments; limitations on capital expenditures; and a limitation on payment restrictions affecting subsidiaries. The company is permitted to pay dividends or repurchase capital stock in the aggregate amount of approximately $50 million each year. At year-end 1994 the consolidated-debt-to-net-worth test would have allowed the company to borrow an additional $489 million and the fixed charge coverage test would have allowed the company to incur an additional $22 million of annual interest expense. Covenants associated with the senior notes are generally less restrictive than those of the bank facility. At year-end 1994, the company was in compliance with all financial covenants under the credit agreement and the senior note indentures. Continued compliance over the near-term will depend on the company's ability to generate sufficient earnings during the implementation of re-engineering and integration of Scrivner. Pricing under the credit agreement automatically increases with respect to certain rating declines. Despite the effect of reduced earnings and the CreditWatch action by Standard & Poor's, the company believes that appropriate means are available to maintain adequate liquidity for the foreseeable future at acceptable rates. The credit agreement may be terminated in the event of a defined change of control. Under the indentures for the senior notes, the noteholders may require the company to repurchase the notes in the event of a defined change of control and defined decline in credit ratings. In October 1994, the company acquired $33 million of a $97 million series of medium-term notes pursuant to an offer to purchase which resulted from the Scrivner acquisition and the related downgrade of the company's long-term credit ratings. This redemption was funded by borrowings under the credit agreement. At year-end 1994 the company had $130 million of contingent obligations under undrawn letters of credit, primarily related to insurance reserves associated with its normal risk management activities. To the extent that any of these letters of credit would be drawn, payments would be financed by borrowings under the credit agreement. Operating activities generated $333 million of net cash flows for 1994 compared to $209 million in 1993. The increase is principally due to the Scrivner acquisition, lower working capital requirements (excluding Scrivner) and higher deferred taxes. Working capital was $496 million at year end, an increase from $442 million at year-end 1993. The current ratio decreased to 1.38 to 1, from 1.48 to 1 at year-end 1993. Management believes that cash flows from operating activities and the company's ability to borrow under the credit agreement will be adequate to meet working capital needs, capital expenditures and cash needs of approximately $50 million for the facilities consolidation and restructuring plan. Capital expenditures for 1994 were approximately $140 million. The increase over prior year is due to expansion projects at several distribution centers and 24 additions of normal Scrivner expenditures subsequent to the acquisition. Management expects that 1995 capital expenditures, excluding acquisitions, if any, will approximate $100 million. Uncommitted bank lines were used prior to the Scrivner acquisition when rates were lower than commercial paper rates. During 1994, borrowings under these lines averaged $115 million and ranged up to $280 million. There were no borrowings outstanding at year-end 1994. Commercial paper borrowings, which ceased prior to the Scrivner acquisition, averaged $41 million during 1994 and ranged up to $166 million. Fleming makes investments in and loans to its retail customers, primarily in conjunction with the establishment of long-term supply agreements. At year-end 1994 these investments and loans of $471 million, combined with trade receivables of $297 million, totaled $768 million, a $157 million net increase from 1993 due primarily to the Scrivner acquisition. Net investments and loans increased $92 million, from $379 million to $471 million. However, there was no sale of notes in 1994, compared to a $67 million sale in 1993. In addition, net trade receivables increased $65 million, from $232 million to $297 million. These increases primarily resulted from the Scrivner acquisition. Trade receivables in 1994 had a turnover rate of 50.4 times, up from 45.3 times the prior year. Inventory turns increased slightly to 13.2 times in 1994 compared to 13.1 times the year before. Both of these changes were influenced by the large mix of retail operations of Scrivner. Long-term debt and capital lease obligations increased $1.04 billion to $2.12 billion during 1994 as a result of the acquisition. Shareholders' equity at the end of 1994 was $1.08 billion. The year-end debt-to-capital ratio increased to 66.3%, above last year's ratio of 50.4%. The company's long-term target ratio is approximately 50%. Total capital was $3.2 billion at year end, up $1.06 billion from the prior year. The composite interest rate for total funded debt (excluding capital lease obligations) before the effect of interest rate hedges was 7.6% at year end, versus 4.8% a year earlier, principally due to higher interest rates and to a lesser extent refinancing activities associated with the Scrivner acquisition. Including the effect of interest rate hedges, the composite interest rate of debt was 8.4% and 4.9% at the end of 1994 and 1993, respectively. See the Long-Term Debt note to consolidated financial statements for additional discussion regarding derivatives. The dividend payments of $1.20 per common share in 1994 and 1993 were 79% and 125% of primary net earnings per share in 1994 and 1993 respectively. The payout ratio would have been 44% in 1993 before fourth quarter charges for facilities consolidation and restructuring and debt prepayment. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Part IV, Item 14(a) 1. Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 25 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated herein by reference to pages 3 through 6 of the company's proxy statement dated March 17, 1995, in connection with its annual meeting of shareholders to be held on May 3, 1995. Information concerning Executive Officers of the company is included in Part I herein which is incorporated in this Part III by reference. ITEM 11. EXECUTIVE COMPENSATION Incorporated herein by reference to pages 11 through 20 of the company's proxy statement dated March 17, 1995, in connection with its annual meeting of shareholders to be held on May 3, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference to pages 9 and 10 of the company's proxy statement dated March 17, 1995, in connection with its annual meeting of shareholders to be held on May 3, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. 26 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements: Page No. -------- - Consolidated Statements of Earnings - For the years ended December 31, 1994, December 25, 1993, and December 26, 1992 28 - Consolidated Balance Sheets - At December 31, 1994, and December 25, 1993 29 - Consolidated Statements of Shareholders' Equity - For the years ended December 31, 1994, December 25, 1993, and December 26, 1992 30 - Consolidated Statements of Cash Flows - For the years ended December 31, 1994, December 25, 1993, and December 26, 1992 31 - Notes to Consolidated Financial Statements - For the years ended December 31, 1994, December 25, 1993, and December 26, 1992 32 - Independent Auditors' Report 50 - Quarterly Financial Information (Unaudited) 51 (a) 2. Financial Statement Schedule: - Schedule II - Valuation and Qualifying Accounts 53 All other financial statement schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. 27 CONSOLIDATED STATEMENTS OF EARNINGS For the years ended December 31, 1994, December 25, 1993, and December 26, 1992 (In thousands, except per share amounts)
================================================================================ 1994 1993 1992 - -------------------------------------------------------------------------------- Net sales $15,753,487 $13,092,145 $12,893,534 Costs and expenses: Cost of sales 14,606,963 12,326,778 12,166,858 Selling and administrative 962,929 558,470 494,983 Interest expense 120,408 78,029 81,102 Interest income (63,943) (62,902) (59,477) Equity investment results 14,793 11,865 15,127 Facilities consolidation and - 107,827 - restructuring - -------------------------------------------------------------------------------- Total costs and expenses 15,641,150 13,020,067 12,698,593 - -------------------------------------------------------------------------------- Earnings before taxes 112,337 72,078 194,941 Taxes on income 56,168 34,598 76,037 - -------------------------------------------------------------------------------- Earnings before extraordinary loss 56,169 37,480 118,904 Extraordinary loss from early - 2,308 5,864 retirement of debt - -------------------------------------------------------------------------------- Net earnings $ 56,169 $ 35,172 $ 113,040 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net earnings per share: Primary before extraordinary loss $1.51 $1.02 $3.33 Extraordinary loss - .06 .16 - -------------------------------------------------------------------------------- Primary $1.51 $ .96 $3.16 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Fully diluted before extraordinary $1.51 $1.02 $3.21 loss Extraordinary loss - .06 .15 - -------------------------------------------------------------------------------- Fully diluted $1.51 $ .96 $3.06 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Weighted average shares outstanding 37,254 36,801 35,759 ================================================================================
Sales to customers accounted for under the equity method were approximately $1.6 billion, $1.6 billion and $1.3 billion in 1994, 1993 and 1992, respectively. See notes to consolidated financial statements. 28 CONSOLIDATED BALANCE SHEETS At December 31, 1994, and December 25, 1993 (In thousands, except per share amounts)
================================================================================ Assets 1994 1993 - -------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 28,352 $ 1,634 Receivables 364,884 301,514 Inventories 1,301,980 923,280 Other current assets 124,865 134,229 - -------------------------------------------------------------------------------- Total current assets 1,820,081 1,360,657 Investments and notes receivable 402,603 309,237 Investment in direct financing leases 230,357 235,263 Property and equipment: Land 66,702 49,580 Buildings 366,109 268,317 Fixtures and equipment 656,068 466,904 Leasehold improvements 199,713 133,897 Leased assets under capital leases 167,362 143,207 - -------------------------------------------------------------------------------- 1,455,954 1,061,905 Less accumulated depreciation and amortization 467,830 426,846 - -------------------------------------------------------------------------------- Net property and equipment 988,124 635,059 Other assets 179,332 90,633 Goodwill 987,832 471,783 - -------------------------------------------------------------------------------- Total assets $4,608,329 $3,102,632 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Liabilities and Shareholders' Equity - -------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 960,333 $ 682,988 Current maturities of long-term debt 110,321 61,329 Current obligations under capital leases 15,780 13,172 Other current liabilities 237,197 161,043 - ------------------------------------------------------------------------------- Total current liabilities 1,323,631 918,532 Long-term debt 1,641,390 666,819 Long-term obligations under capital leases 353,403 337,009 Deferred income taxes 51,279 27,500 Other liabilities 160,071 92,366 Shareholders' equity: Common stock, $2.50 par value, authorized - 100,000 shares, issued and outstanding - 37,480 and 36,940 shares 93,705 92,350 Capital in excess of par value 494,966 489,044 Reinvested earnings 503,962 492,250 Cumulative currency translation adjustment (2,972) (288) - ------------------------------------------------------------------------------- 1,089,661 1,073,356 Less ESOP note 11,106 12,950 - ------------------------------------------------------------------------------- Total shareholders' equity 1,078,555 1,060,406 - ------------------------------------------------------------------------------- Total liabilities and shareholders' equity $4,608,329 $3,102,632 ================================================================================
Receivables include $37 million and $48 million in 1994 and 1993, respectively, due from customers accounted for under the equity method. See notes to consolidated financial statements. 29 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years ended December 31, 1994, December 25, 1993, and December 26, 1992 (In thousands)
========================================================================================== 1994 1993 1992 ---------------- ---------------- --------------- Shares Amount Shares Amount Shares Amount - ---------------------------------------------------------------------------------------- Common stock: Beginning of year 36,940 $ 92,350 36,698 $ 91,746 35,433 $ 88,584 Incentive stock and stock ownership plans 540 1,355 242 604 191 478 Stock issued for acquisition - - - - 1,074 2,684 - ------------------------------------------------------------------------------------------ End of year 37,480 93,705 36,940 92,350 36,698 91,746 ====== ------ ====== ------ ====== ------ Capital in excess of par value: Beginning of year 489,044 482,107 445,501 Incentive stock and stock ownership plans 5,922 6,937 5,165 Stock issued for acquisition - - 31,441 - ------------------------------------------------------------------------------------------ End of year 494,966 489,044 482,107 - ------------------------------------------------------------------------------------------ Reinvested earnings: Beginning of year 492,250 501,231 431,120 Net earnings 56,169 35,172 113,040 Cash dividends, $1.20 per share (44,457) (44,153) (42,929) - ------------------------------------------------------------------------------------------ End of year 503,962 492,250 501,231 - ------------------------------------------------------------------------------------------ Cumulative currency translation adjustment: Beginning of year (288) - Currency translation adjustments (2,684) (288) - ------------------------------------------------------------------------------------------ End of year (2,972) (288) - ------------------------------------------------------------------------------------------ ESOP note: Beginning of year (12,950) (14,650) (16,218) Payments 1,844 1,700 1,568 - ------------------------------------------------------------------------------------------ End of year (11,106) (12,950) (14,650) - ------------------------------------------------------------------------------------------ Total shareholders' equity, end of year $1,078,555 $1,060,406 $1,060,434 ==========================================================================================
See notes to consolidated financial statements. 30 CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1994, December 25, 1993, and December 26, 1992 (In thousands)
======================================================================================== 1994 1993 1992 - ---------------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings $ 56,169 $ 35,172 $ 113,040 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 145,910 101,103 93,827 Credit losses 61,218 52,018 28,258 Deferred income taxes 30,430 (24,471) 11,343 Equity investment results 14,793 11,865 15,128 Consolidation and reserve activities, net (29,304) 87,211 (31,226) Change in assets and liabilities, excluding effect of acquisitions: Receivables 1,964 (16,420) (75,924) Inventories 57,689 58,625 (440) Other assets 13,346 (48,984) (10,218) Accounts payable 30,691 (38,472) (41,285) Other liabilities (50,083) (10,883) (16,566) Other adjustments, net 39 1,779 3,918 - ----------------------------------------------------------------------------------------- Net cash provided by operating activities 332,862 208,543 89,855 - ----------------------------------------------------------------------------------------- Cash flows from investing activities: Collections on notes receivable 111,149 82,497 88,851 Notes receivable funded (122,206) (130,846) (168,814) Notes receivable sold - 67,554 44,970 Businesses acquired (387,488) (51,110) (8,233) Proceeds from sale of businesses 6,682 - - Purchase of property and equipment (150,057) (55,554) (66,376) Proceeds from sale of property and equipment 14,917 2,955 3,603 Investments in customers (12,764) (37,196) (17,315) Proceeds from sale of investments 4,933 7,077 9,763 Other investing activities (2,793) 197 (353) - ----------------------------------------------------------------------------------------- Net cash used in investing activities (537,627) (114,426) (113,904) - ----------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from long-term borrowings 2,225,751 331,502 462,726 Principal payments on long-term debt (1,912,717) (373,693) (383,188) Principal payments on capital lease obligations (13,990) (11,316) (10,904) Sale of common stock under incentive stock and stock ownership plans 7,277 7,541 5,653 Dividends paid (44,457) (44,153) (42,929) Redemption of preferred stock - - (19,100) Other financing activities (30,381) (7,076) (4,587) - ----------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 231,483 (97,195) 7,671 - ----------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 26,718 (3,078) (16,378) Cash and cash equivalents, beginning of year 1,634 4,712 21,090 - ----------------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 28,352 $ 1,634 $ 4,712 =========================================================================================
See notes to consolidated financial statements. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 1994, December 25, 1993, and December 26, 1992 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FISCAL YEAR: The company's fiscal year ends on the last Saturday in December. Fiscal year 1994 was 53 weeks; 1993 and 1992 were 52 weeks. The impact of the additional week in 1994 is not material to the results of operations or financial position. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include all material subsidiaries. Material intercompany items have been eliminated. The equity method of accounting is used for investments in certain entities in which the company has an investment in common stock of between 20% and 50%. Under the equity method, original investments are recorded at cost and adjusted by the company's share of earnings or losses of these entities and for declines in estimated realizable values deemed to be other than temporary. CASH AND CASH EQUIVALENTS: Cash equivalents consist of liquid investments readily convertible to cash with a maturity of three months or less. The carrying amount for cash equivalents is a reasonable estimate of fair value. RECEIVABLES: Receivables include the current portion of customer notes receivable of $68 million (1994) and $70 million (1993). Receivables are shown net of allowance for credit losses of $40 million (1994) and $44 million (1993). The company extends credit to its retail customers located over a broad geographic base. Regional concentrations of credit risk are limited. INVENTORIES: Inventories are valued at the lower of cost or market. Most grocery and certain perishable inventories are valued on a last-in, first-out (LIFO) method. Other inventories are valued on a first-in, first-out (FIFO) method. PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost or, for leased assets under capital leases, at the present value of minimum lease payments. Depreciation, as well as amortization of assets under capital leases, are based on the estimated useful asset lives using the straight-line method. Asset impairments are recorded when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such impairment losses are measured by the excess of the carrying amount of the asset over the fair value of the related asset. The estimated useful lives used in computing depreciation and amortization are: buildings and major improvements - 20 to 40 years; warehouse, transportation and other equipment - 3 to 10 years; mechanized warehouse equipment - 15 years; and data processing equipment - 5 to 7 years. GOODWILL: The excess of purchase price over the value of net assets of businesses acquired is amortized on the straight-line method over periods not exceeding 40 years. Goodwill is shown net of accumulated amortization of $97 million (1994) and $74 million (1993). Goodwill is written down if it is probable that estimated undiscounted operating income generated by the related assets will be less than the carrying amount. FINANCIAL INSTRUMENTS: Interest rate hedge transactions and other financial instruments are utilized to manage interest rate exposure. The difference between amounts to be paid or received is accrued and recognized over the life of the contracts. The methods and assumptions used to estimate the fair value of significant financial instruments are discussed in the Investments and Notes Receivable and Long-Term Debt notes. TAXES ON INCOME: Deferred income taxes arise from temporary differences between financial and tax bases of certain assets and liabilities. FOREIGN CURRENCY TRANSLATION: Net exchange gains or losses resulting from the translation of assets and liabilities of an international investment are included in shareholders' equity. NET EARNINGS PER SHARE: Primary earnings per share are computed based on net earnings divided by the weighted average shares outstanding. The impact of common stock options on primary earnings per common share is not materially dilutive. Fully diluted earnings per share in 1992 assume conversion of convertible subordinated notes redeemed that year. 32 ACQUISITIONS As of July 1994, the company completed the acquisition of all the outstanding stock of Haniel Corporation, the parent of Scrivner Inc. ("Scrivner"). The company paid $388 million in cash and refinanced substantially all of Scrivner's existing indebtedness (approximately $670 million in aggregate principal and premium). In connection with the acquisition, the company refinanced approximately $340 million in aggregate principal amount of its own indebtedness. The acquisition has been accounted for as a purchase and the results of operations of Scrivner have been included in the consolidated financial statements since the beginning of the third quarter of 1994. The purchase price was allocated based on estimated fair values at the date of the acquisition. At December 31, 1994, the excess of purchase price over assets acquired was $540 million and is being amortized on a straight-line basis over 40 years. The following unaudited pro forma information presents a summary of consolidated results of operations of the company and Scrivner as if the acquisition had occurred at the beginning of 1993, with pro forma adjustments to give effect to amortization of goodwill, interest expense on acquisition debt and certain other adjustments, together with related income tax effects.
============================================================================= Dec. 31, Dec. 25, (In thousands, except per share amounts) 1994 1993 - ----------------------------------------------------------------------------- Net sales $18,977,000 $19,109,000 Net earnings $43,000 $19,000 Net earnings per share $1.15 $.53 =============================================================================
33 In 1994, the company acquired the remaining common stock of a supermarket operator of a 24-store chain with locations in Missouri and Kansas. The acquisition was accounted for as a purchase. The results are not material to the company. In 1993, the company acquired the assets or common stock of three businesses. In August, the company purchased distribution center assets located in Garland, Texas. In September and November, the company purchased certain assets and the common stock, respectively, of two supermarket operators in southern Florida. The acquisitions were accounted for as purchases. The results of these entities are not material to the company. In 1992, the company acquired the common stock of Baker's Supermarkets, the operator of 10 supermarkets located in Omaha, Nebraska. The acquisition was accounted for as a purchase. The results of Baker's operations are not material to the company. INVENTORIES Inventories are valued as follows:
============================================================================== Dec. 31, Dec. 25, (In thousands) 1994 1993 - ------------------------------------------------------------------------------ LIFO method $1,014,381 $638,383 FIFO method 287,599 284,897 - ------------------------------------------------------------------------------ Inventories $1,301,980 $923,280 ==============================================================================
Current replacement cost of LIFO inventories were greater than the carrying amounts by approximately $19 million at December 31, 1994, and $13 million at December 25, 1993. INVESTMENTS AND NOTES RECEIVABLE Investments and notes receivable consist of the following: ============================================================================== Dec. 31, Dec. 25, (In thousands) 1994 1993 - ------------------------------------------------------------------------------ Investments in and advances to customers $ 163,090 $ 164,292 Notes receivable from customers 219,852 133,935 Other investments and receivables 19,661 11,010 - ------------------------------------------------------------------------------ Investments and notes receivable $402,603 $309,237 ==============================================================================
The company extends long-term credit to certain retail customers. Loans are primarily collateralized by inventory and fixtures. Investments and notes receivable are shown net of allowance for credit losses of $9 million and $18 million in 1994 and 1993, respectively. Interest rates are above prime with terms up to 10 years. The carrying amount of notes receivable approximates fair value because of the variable interest rates charged on the notes. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards (SFAS) No. 114 - Accounting by Creditors for Impairment of a Loan (as amended by SFAS No. 118 - Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures). These new statements require that loans determined to be impaired be measured by the present value of expected future cash flows discounted at the loan's effective interest rate or collateral values. The new standards are effective for the first quarter of 1995. The impact on the consolidated statements of earnings and financial position is expected to be immaterial. 34 The company has sold certain notes receivable at face value with limited recourse. The outstanding balance at year-end 1994 on all notes sold is $162 million, of which the company is contingently liable for $29 million should all the notes become uncollectible. LONG-TERM DEBT Long-term debt consists of the following:
============================================================================== Dec. 31, Dec. 25, (In thousands) 1994 1993 - ------------------------------------------------------------------------------- Term bank loans, due 1995 to 2000, average interest rates of 6.6% and 3.7% $ 800,000 $160,000 10.625% senior notes due 2001 300,000 - Revolving bank credit, average interest rate of 6.6% 280,000 - Floating rate senior notes due 2001, annual payments of $1,000 in 1999 and 2000, current rate of 8.7% 200,000 - Medium-term notes, due 1995 to 2003, average interest rates of 6.9% and 7.5% 155,950 222,450 Commercial paper, average interest rate of 3.3% - 165,866 Unsecured credit lines, average interest rates of 3.3% - 145,000 9.5% debentures, due 2010, annual sinking fund payments of $5,000 commencing in 1997 7,000 7,000 Guaranteed bank loan of employee stock ownership plan - 12,950 Mortgaged real estate notes and other debt, varying interest rates from 4% to 14.35%, due 1995 to 2003 8,761 14,882 - ------------------------------------------------------------------------------ 1,751,711 728,148 Less current maturities 110,321 61,329 - ------------------------------------------------------------------------------ Long-term debt $1,641,390 $666,819 ==============================================================================
FIVE YEAR MATURITIES: Aggregate maturities of long-term debt for the next five years are as follows: 1995-$110 million; 1996-$58 million; 1997-$136 million; 1998-$191 million and 1999-$234 million. 35 REVOLVING CREDIT AND TERM LOAN AGREEMENT: In 1994, in connection with the acquisition of Scrivner, the company redeemed a portion of its medium-term notes and repaid all of its borrowings under uncommitted credit lines, commercial paper programs, all term bank loans, the employee stock ownership plan loan and certain other debt. The company also repaid substantially all the debt of Scrivner and its parent. The debt redemptions and repayments, as well as the purchase price of $388 million for the common stock, were financed by borrowing $1.6 billion under a new $2.2 billion committed revolving credit and term loan agreement with a group of banks. Upon execution of the credit agreement, the company terminated its $400 million and $200 million bank credit agreements. The credit agreement carries an annual facility fee and a commitment fee on any unused amount for the revolving credit portion. Interest rates are based on various money market rate options selected by the company at the time of borrowing. Borrowings under the revolving credit portion of the credit agreement mature in 1999 and the term bank loans mature in 2000. In December 1994, the company repaid $500 million of term bank loans under the credit agreement upon the sale of the 10.625% $300 million senior notes and $200 million floating rate senior notes. The credit agreement and senior note indentures contain customary covenants associated with similar facilities. The credit agreement currently contains the following financial covenants: maintenance of a consolidated-debt-to-net-worth ratio of not more than 2.45 to 1; maintenance of a minimum consolidated net worth of at least $857 million; and maintenance of a fixed charge coverage ratio of at least 1.40 to 1. The company is currently in compliance with all financial covenants under the credit agreement and senior note indentures. As of December 31, 1994, the restricted payments test would have allowed the company to pay dividends or repurchase capital stock in the aggregate amount of $50 million. The consolidated-debt-to-net-worth test would have allowed the company to borrow an additional $489 million. The fixed charge coverage test would have allowed the company to incur an additional $22 million of annual interest expense. The credit agreement and the senior note indentures also place significant restrictions on the company's ability to incur additional indebtedness, to create liens or other encumbrances, to make certain payments, investments, loans and guarantees and to sell or otherwise dispose of a substantial portion of assets to, or merge or consolidate with, an unaffiliated entity. The credit agreement contains a provision that, in the event of a defined change of control, the agreement may be terminated. The indentures for the senior notes provide an option for the noteholders to require the company to repurchase the notes in the event of a defined change of control and defined decline in credit ratings. Prior to the acquisition of Scrivner, the company employed a financing program for variable financing needs consisting of uncommitted bank credit lines and two commercial paper programs supported by committed bank credit. The agreement effectively restricts borrowings under these facilities. MEDIUM-TERM NOTES: The company has registered $565 million in medium-term notes. Of this, $290 million may be issued from time to time, at fixed or floating rates, as determined at the time of issuance. The agreement effectively limits any new issues to debt with maturities after December 2000. The security provisions for the agreement required the company to equitably and ratably secure the medium-term notes. Security for the medium-term notes consists of guarantees from most of the company's subsidiaries and a pledge of intercompany receivables. The carrying value of assets collateralized under mortgaged real estate notes and other debt is not material. 36 INTEREST EXPENSE: Components of interest expense are as follows:
=============================================================================== (In thousands) 1994 1993 1992 - ------------------------------------------------------------------------------- Interest costs incurred: Long-term debt $ 83,748 $44,628 $50,524 Capital lease obligations 33,718 31,355 29,103 Other 3,306 2,046 1,475 - ------------------------------------------------------------------------------- Total incurred 120,772 78,029 81,102 Less interest capitalized 364 - - - ------------------------------------------------------------------------------- Interest expense $120,408 $78,029 $81,102 ===============================================================================
EARLY RETIREMENT OF DEBT: In 1993 and 1992, the company recorded extraordinary losses for early retirement of debt. In 1993, the company retired $63 million of the 9.5% debentures. The extraordinary loss was $2 million, after income tax benefits of $2 million, or $.06 per share. The funding source for the early redemption was the sale of notes receivable. In 1992, the company retired the $173 million of convertible subordinated notes, $30 million of the 9.5% debentures and certain other debt. The extraordinary loss was $6 million, after income tax benefits of $4 million, or $.15 per share. Funding sources related to the 1992 early retirement were bank lines, medium-term notes, sale of notes receivable and commercial paper. 37 SUBSIDIARY GUARANTEE OF SENIOR NOTES: The senior notes are guaranteed by all direct and indirect subsidiaries of the company (except for certain inconsequential subsidiaries), all of which are wholly owned. The guarantees are joint and several, full, complete and unconditional. There are currently no restrictions on the ability of the subsidiary guarantors to transfer funds to the company in the form of cash dividends, loans or advances. Full financial statements for the subsidiary guarantors are not presented herein because management does not believe such information would be material. The following summarized financial information for the combined subsidiary guarantors has been prepared from the books and records maintained by the subsidiary guarantors and the company. Intercompany transactions are eliminated. The summarized financial information may not necessarily be indicative of the results of operations or financial position had the subsidiary guarantors been operated as independent entities. The summarized financial information includes allocations of material amounts of expenses such as corporate services and administration, interest expense on indebtedness and taxes on income. The allocations are generally based on proportional amounts of sales or assets, and taxes on income are allocated consistent with the asset and liability approach used for consolidated financial statement purposes. Management believes these allocation methods are reasonable.
============================================================================== (In thousands) 1994 1993 - ------------------------------------------------------------------------------ Current assets $754,000 $1,168,000 Noncurrent assets $1,405,000 $1,579,000 Current liabilities $501,000 $764,000 Noncurrent liabilities $875,000 $936,000 ==============================================================================
============================================================================== (In thousands) 1994 1993 1992 - ------------------------------------------------------------------------------ Net sales $3,318,000 $11,759,000 $11,488,000 Costs and expenses $3,341,000 $11,674,000 $11,321,000 Earnings (loss) before extraordinary items $(12,000) $44,000 $102,000 Net earnings (loss) $(12,000) $42,000 $97,000 ==============================================================================
During 1994, the company merged a significant number of subsidiaries, resulting in a substantial reduction in the amounts appearing in the summarized financial information. EMPLOYEE STOCK OWNERSHIP PLAN: The company's employee stock ownership plan (ESOP) allows substantially all associates to participate. ln 1989, the ESOP purchased 640,000 shares of common stock from the company at $31.25 per share, resulting in proceeds of $20 million. The ESOP borrowed the money from a bank. The company guaranteed the bank loan until 1994, when the company paid off the loan and the ESOP entered into a note with the company. The note terms are the same as the bank loan. The receivable from the ESOP is presented as a reduction of shareholders' equity. The ESOP will repay to the company the remaining loan balance with proceeds from company contributions. The company makes contributions based on fixed debt service requirements of the ESOP note. The ESOP used approximately $.5 million of common stock dividends for debt service in each of 1994, 1993 and 1992. During 1994, 1993 and 1992, the company recognized $1 million each year in compensation expense. Interest expense of $.8 million, $.5 million and $.7 million was recognized at average rates of 4.2%, 3.7% and 4.4% in 1994, 1993 and 1992, respectively. 38 DERIVATIVES: The company enters into interest rate hedge agreements with the objective of managing interest costs and exposure to changing interest rates. The classes of derivative financial instruments used include interest rate swaps and caps. The credit agreement requires the company to provide interest rate protection on a substantial portion of the indebtedness outstanding thereunder. Strategies for achieving the company's objectives have resulted in the company entering into interest rate swaps and caps covering $1 billion aggregate principal amount of floating rate indebtedness at year-end 1994. This amount exceeds the requirements set forth in the credit agreement. The average interest rate on the company's floating rate indebtedness is equal to the London interbank offered rate ("LIBOR") plus a margin. The average fixed interest rate paid by the company on the interest rate swaps is 6.79%, covering $750 million of floating rate indebtedness. The interest rate swap agreements, which were implemented through eight counterparty banks, and which have an average remaining life of 3.5 years, provide for the company to receive substantially the same LIBOR that the company pays on its floating rate indebtedness. For the remaining $250 million, the company has purchased interest rate cap agreements from an additional two counterparty banks covering $250 million of its floating rate indebtedness. The agreements cap LIBOR at 7.33% over the next 3.8 years. The company believes its exposure to potential credit loss expense is minimized primarily due to the relatively strong credit ratings of the counterparty banks for their unsecured long-term debt (A+ or higher from Standard & Poor's Ratings Group and A1 or higher from Moody's Investor Service, Inc.) and the size and diversity of the counterparty banks. The hedge agreements are subject to market risk to the extent that market interest rates for similar instruments decrease, and the company terminates the hedges prior to maturity. However, the company believes this risk is minimized as it currently foresees no need to terminate any hedge agreements prior to their maturity. Also, interest rates for similar instruments have increased. At year-end 1994 and 1993, hedge agreements were in place that effectively fixed rates on $1 billion (referenced above) and $70 million, respectively, of the company's floating rate debt. Additionally, for 1993, $60 million of agreements converted fixed rate debt to floating and a $100 million transaction hedged the company's risk of fluctuation between prime rate and LIBOR. The maturities for hedge agreements covering $1 billion of debt range from 1995 to 2000. The counterparties to these agreements are major national and international financial institutions. 39 Derivative financial instruments are reported in the balance sheet where the company has made a cash payment upon entering into the transaction. The carrying amount is amortized over the initial life of the hedge agreement. The company has a financial basis of $6.8 million in the interest rate cap agreements at year-end 1994. In addition, accrued interest payable or receivable for the interest rate agreements is included in the balance sheet. At year-end 1993, the company did not have any financial basis in the hedge agreements other than accrued interest payable or receivable. The company's payment obligations under the interest rate swap and cap agreements meet the criteria for hedge accounting treatment. Accordingly, the company's payment obligations and receivables are accounted for as interest expense. FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of long-term debt as of year-end 1994 and 1993 was determined using valuation techniques that considered cash flows discounted at current market rates and management's best estimate for instruments without quoted market prices. At year-end 1994, the carrying value of debt exceeded the fair value by $14 million. At year-end 1993, the fair value of debt exceeded the carrying amount by $14 million. For interest rate agreements, the fair value was estimated using termination cash values. At year-end 1994, the fair value of interest rate hedge agreements was $32 million. At year-end 1993, swap agreements had no fair value. LEASE AGREEMENTS CAPITAL AND OPERATING LEASES: The company leases certain distribution facilities with terms generally ranging from 20 to 30 years, while lease terms for other operating facilities range from 1 to 15 years. The leases normally provide for minimum annual rentals plus executory costs and usually include provisions for one to five renewal options of five years. The company leases company-owned retail store facilities with terms generally ranging from 3 to 20 years. These agreements normally provide for contingent rentals based on sales performance in excess of specified minimums. The leases usually include provisions for one to three renewal options of two to five years. Certain other equipment is leased under agreements ranging from 2 to 8 years with no renewal options. Accumulated amortization related to leased assets under capital leases was $45 million and $42 million at year-end 1994 and 1993, respectively. Future minimum lease payment obligations for leased assets under capital leases as of year-end 1994 are set forth below:
============================================================================== (In thousands) Lease Years Obligations - ------------------------------------------------------------------------------ 1995 $ 21,199 1996 21,005 1997 20,491 1998 20,058 1999 19,733 Later 175,078 - ------------------------------------------------------------------------------ Total minimum lease payments 277,564 Less estimated executory costs 285 - ------------------------------------------------------------------------------ Net minimum lease payments 277,279 Less interest 129,646 - ------------------------------------------------------------------------------ Present value of net minimum lease payments 147,633 Less current obligations 7,463 - ------------------------------------------------------------------------------ Long-term obligations $140,170 ==============================================================================
40 Future minimum lease payments required at year-end 1994 under operating leases that have initial noncancelable lease terms exceeding one year are presented in the following table:
============================================================================== (In thousands) Facility Facilities Equipment Equipment Net Years Rentals Subleased Rentals Subleased Rentals - ------------------------------------------------------------------------------ 1995 $ 162,677 $ 80,440 $33,121 $ 6,419 $ 108,939 1996 151,015 71,572 24,693 6,314 97,822 1997 139,247 64,395 14,241 4,182 84,911 1998 128,031 55,231 8,266 2,126 78,940 1999 112,932 44,338 5,106 1,404 72,296 Later 781,195 208,948 2,451 1,290 573,408 - ------------------------------------------------------------------------------ Total lease payments $1,475,097 $524,924 $87,878 $21,735 $1,016,316 ==============================================================================
The following table shows the composition of total annual rental expense under noncancelable operating leases and subleases with initial terms of one year or greater:
============================================================================== (In thousands) 1994 1993 1992 - ------------------------------------------------------------------------------ Minimum rentals $160,065 $126,040 $123,189 Contingent rentals 866 182 247 Less sublease income 77,684 57,308 54,348 - ------------------------------------------------------------------------------ Rental expense $ 83,247 $ 68,914 $ 69,088 ==============================================================================
DIRECT FINANCING LEASES: The company leases retail store facilities for sublease to customers with terms generally ranging from 5 to 25 years. Most leases provide for a contingent rental based on sales performance in excess of specified minimums. Sublease rentals are generally higher than the rental paid. The leases and subleases usually contain provisions for one to four renewal options of two to five years. 41 The following table shows the future minimum rentals receivable under direct financing leases and future minimum lease payment obligations under capital leases in effect at December 31, 1994:
============================================================================== (In thousands) Lease Rentals Lease Years Receivable Obligations - ------------------------------------------------------------------------------ 1995 $ 43,306 $ 29,234 1996 41,964 29,294 1997 40,136 29,357 1998 37,415 29,339 1999 33,247 29,314 Later 273,566 258,304 - ------------------------------------------------------------------------------ Total minimum lease payments 469,634 404,842 Less estimated executory costs 1,948 1,941 - ------------------------------------------------------------------------------ Net minimum lease payments 467,686 402,901 Less unearned income 222,848 - Less interest - 181,351 - ------------------------------------------------------------------------------ Present value of net minimum lease payments 244,838 221,550 Less current portion 14,481 8,317 - ------------------------------------------------------------------------------ Long-term portion $230,357 $213,233 ==============================================================================
Contingent rental income and contingent rental expense is not material. FACILITIES CONSOLIDATION AND RESTRUCTURING The results in 1993 include a charge of $108 million for facilities consolidations, re-engineering, impairment of retail-related assets and elimination of regional operations. Facilities consolidations has resulted in the closure of four distribution centers and is expected to result in the closure of one additional facility the relocation of two operations and the consolidation of a center's administrative function. The related charge provides for severance costs, impaired property and equipment, product handling and damage, and impaired other assets. The re-engineering component of the charge provides for severance costs of terminating associates displaced by the re-engineering plan. Impairment of retail-related assets provides for the present value of lease payments and assets associated with certain retail supermarket locations leased or owned by the company. The table presented below reflects changes to the facilities consolidation and restructuring reserves recorded in the balance sheets.
============================================================================== Re-engineering/ Consolidation Severance Costs/Assets (In thousands) Total Costs Impairments - ------------------------------------------------------------------------------ Balance, December 28, 1991 $54,000 $11,000 $43,000 Expenditures and write-offs (24,108) (2,852) (21,256) - ------------------------------------------------------------------------------ Balance, December 26, 1992 29,892 8,148 21,744 Charged to costs and expenses 107,827 25,136 82,691 Expenditures and write-offs (52,198) (8,148) (44,050) - ------------------------------------------------------------------------------ Balance, December 25, 1993 85,521 25,136 60,385 Expenditures and write-offs (31,142) (2,686) (28,456) - ------------------------------------------------------------------------------ Balance, December 31, 1994 $54,379 $22,450 $31,929 ==============================================================================
42 TAXES ON INCOME Components of taxes on income (tax benefit) are as follows:
============================================================================== (In thousands) 1994 1993 1992 - ------------------------------------------------------------------------------ Current: Federal $ 18,536 $48,742 $55,473 State 7,202 10,327 11,814 - ------------------------------------------------------------------------------ Total current 25,738 59,069 67,287 - ------------------------------------------------------------------------------ Deferred: Federal 22,188 (20,160) 7,280 State 8,242 (4,311) 1,470 - ------------------------------------------------------------------------------ Total deferred 30,430 (24,471) 8,750 - ------------------------------------------------------------------------------ Taxes on income $56,168 $34,598 $76,037 ==============================================================================
Deferred tax expense (benefit) relating to temporary differences includes the following components:
============================================================================== (In thousands) 1994 1993 1992 - ------------------------------------------------------------------------------ Depreciation and amortization $ (4,967) $ 516 $ 2,161 Asset valuations and reserves 20,396 (28,849) 14,807 Equity investment results 6,255 (6,767) (4,292) Credit losses 11,728 (5,417) (4,539) Prepaid expenses 374 3,200 - Lease transactions (1,448) (2,307) (230) Noncompete agreement 388 2,170 2,552 Associate benefits (3,665) 10,979 (2,977) Note sales (2,547) 1,880 623 Other 3,916 124 645 - ------------------------------------------------------------------------------ Deferred tax expense (benefit) $30,430 $(24,471) $ 8,750 ==============================================================================
43 Temporary differences that give rise to deferred tax assets and liabilities as of December 31, 1994 and December 25, 1993 are as follows:
============================================================================== (In thousands) 1994 1993 - ------------------------------------------------------------------------------ DEFERRED TAX ASSETS: Depreciation and amortization $ 6,028 $ 4,333 Asset valuations and reserve activities 78,622 57,522 Associate benefits 68,595 33,447 Credit losses 26,775 22,579 Equity investment results 10,969 13,848 Lease transactions 11,009 8,857 Inventory 14,993 7,743 Acquired loss carryforwards 10,690 4,514 Other 18,533 7,385 - ------------------------------------------------------------------------------ Gross deferred tax assets 246,214 160,228 Less valuation allowance (4,514) (6,514) - ------------------------------------------------------------------------------ Total deferred tax assets 241,700 153,714 - ------------------------------------------------------------------------------ DEFERRED TAX LIABILITIES: Depreciation and amortization 154,688 88,609 Equity investment results 4,036 1,758 Lease transactions 1,743 1,623 Inventory 63,666 18,401 Associate benefits 18,287 16,568 Asset valuations 6,552 - Note sales 3,373 3,555 Prepaid expenses 3,799 3,200 Other 15,476 8,582 - ------------------------------------------------------------------------------ Total deferred tax liabilities 271,620 142,296 - ------------------------------------------------------------------------------ Net deferred tax asset (liability) $ (29,920) $ 11,418 ==============================================================================
The effect of the 1993 increase in the federal statutory rate to 35% on deferred tax assets and liabilities was immaterial. The valuation allowance contains $4 million of acquired loss carryforwards that, if utilized, will be reversed to goodwill in future years. The effective income tax rates are different from the statutory federal income tax rates for the following reasons:
============================================================================== 1994 1993 1992 - ------------------------------------------------------------------------------ Statutory rate 35.0% 35.0% 34.0% State income taxes, net of federal tax benefit 8.9 5.4 4.4 Acquisition-related differences 7.1 6.6 2.3 Possible assessments - - (1.4) Other (1.0) 1.0 (.3) - ------------------------------------------------------------------------------ Effective rate 50.0% 48.0% 39.0% ==============================================================================
SHAREHOLDERS' EQUITY The company offers a Dividend Reinvestment and Stock Purchase Plan which offers shareholders the opportunity to automatically reinvest their dividends in common stock at a 5% discount from market value. Shareholders also may purchase shares at market value by making cash payments up to $5,000 per calendar quarter. Shareholders reinvested dividends in 242,000 and 174,000 new shares in 1994 and 1993, respectively. Additional shares totaling 28,000 and 9,000 in 1994 and 1993, respectively, were purchased at market value by shareholders. In 1994, the company registered an additional 600,000 shares pursuant to this plan. The company has a shareholder rights plan designed to protect shareholders should the company become the target of coercive and unfair takeover tactics. Shareholders have one right for each share of stock held. When exercisable, each right entitles shareholders to buy one share of common stock at a specific price in the event of certain defined actions that constitute a change of control. The rights expire on July 6, 1996. The company has severance agreements with certain management associates. The agreements generally provide two years' salary to these associates if the associate's employment terminates within two years after a change of control. In the event of a change of control, a supplemental trust will be funded to provide these salary obligations. 44 SEGMENT INFORMATION The following table sets forth, for each of the last three years the composition of the company's net sales and operating earnings.
============================================================================== (In thousands) 1994 1993 1992 - ------------------------------------------------------------------------------ NET SALES - ------------------------------------------------------------------------------ Marketing and distribution $15,680,925 $13,174,214 $13,125,801 Less: Elimination 1,976,984 954,810 876,441 - ------------------------------------------------------------------------------ Net marketing and distribution 13,703,941 12,219,404 12,249,360 Retail food 2,123,146 943,972 692,839 Corporate (73,600) (71,231) (48,665) - ------------------------------------------------------------------------------ Total $15,753,487 $ 13,092,145 $12,893,534 - ------------------------------------------------------------------------------ OPERATING EARNINGS - ------------------------------------------------------------------------------ Marketing and distribution $222,951 $200,179 $222,335 Retail food 7,905 9,371 6,868 Corporate (47,261) (2,653) 2,490 - ------------------------------------------------------------------------------ Total operating earnings 183,595 206,897 231,693 Interest expense 120,408 78,029 81,102 Interest income (63,943) (62,902) (59,477) Equity investment results 14,793 11,865 15,127 Facilities consolidation and restructuring - 107,827 - - ------------------------------------------------------------------------------ Earnings before taxes $112,337 $ 72,078 $194,941 - ------------------------------------------------------------------------------ DEPRECIATION AND AMORTIZATION - ------------------------------------------------------------------------------ Marketing and distribution $ 98,806 $ 80,540 $75,885 Retail food 33,455 14,922 9,135 Corporate 13,649 5,641 8,807 - ------------------------------------------------------------------------------ Total $145,910 $101,103 $93,827 - ------------------------------------------------------------------------------ CAPITAL EXPENDITURES - ------------------------------------------------------------------------------ Marketing and distribution $107,550 $ 42,045 $52,092 Retail food 25,647 8,134 7,933 Corporate 7,274 3,005 2,206 - ------------------------------------------------------------------------------ Total $140,471 $53,184 $62,231 - ------------------------------------------------------------------------------ IDENTIFIABLE ASSETS - --------------------------------------------------------------- Marketing and distribution $3,261,711 $2,185,861 Retail food 547,019 177,891 Corporate 799,599 738,880 - --------------------------------------------------------------- Total $4,608,329 $3,102,632 ===============================================================
INCENTIVE STOCK PLANS The company's stock option plans allow the granting of nonqualified stock options and incentive stock options, with or without stock appreciation rights (SARs), to key associates. 45 In 1994 and 1993, options with SARs were exercisable for 20,000 and 35,000 shares, respectively. Options without SARs were exercisable for 790,000 shares in 1994 and 841,000 shares in 1993. At year-end 1994, there were 208,000 shares available for grant under the stock option plans. Stock option transactions are as follows:
============================================================================= (Shares in thousands) Options Price Range - ----------------------------------------------------------------------------- Outstanding, December 28, 1991 1,168 $4.72 - 42.13 Granted 4 $30.00 Exercised (28) $12.88 - 29.81 Canceled and forfeited (60) - - ----------------------------------------------------------------------------- Outstanding, December 26, 1992 1,084 $4.72 - 42.13 Exercised (59) $20.33 - 31.75 Canceled and forfeited (42) - ----------------------------------------------------------------------------- Outstanding, December 25, 1993 983 $4.72 - 42.13 Granted 1,782 $24.81 - 29.75 Exercised (7) $4.72 - 25.19 Canceled and forfeited (288) - ----------------------------------------------------------------------------- Outstanding, December 31, 1994 2,470 $10.29 - 42.13 =============================================================================
The company has a stock incentive plan that allows awards to key associates of up to 400,000 restricted shares of common stock and phantom stock units. At year-end 1994, 62,000 shares were available for grant under the stock incentive plan. Certain restricted common shares issued in 1991 were forfeited and returned to the company since the performance objectives contained in the plans were not met and the plan expired. These shares were recorded at the market value when issued, $4 million, and were amortized to expense as earned. No amounts were expensed in 1993 or 1994, since objectives in those years were not met. In 1993, the $2 million unamortized portion was netted against capital in excess of par value within shareholders' equity. This unamortized portion was eliminated upon expiration of the plan. The shares reverted to treasury shares and $2 million is netted against capital in excess of par value within shareholders' equity. During 1994, 262,000 restricted shares were awarded. These shares were recorded at market value when issued, $6 million, and will be amortized to expense as earned. Approximately $500,000 of compensation expense was recognized during 1994. The unamortized portion is netted against capital in excess of par value within shareholders' equity. In the event of a change of control, the company may accelerate the vesting and payment of any award or make a payment in lieu of an award. 46 ASSOCIATE RETIREMENT PLANS The company sponsors retirement and profit sharing plans for substantially all nonunion and some union associates. The company also has nonqualified, unfunded supplemental retirement plans for selected associates. These plans comprise the company's defined benefit pension plans. Contributory profit sharing plans maintained by the company are for associates who meet certain types of employment and length of service requirements. Company contributions under these defined contribution plans are made at the discretion of the board of directors. Expenses for these plans were $6 million, $2 million and $1 million in 1994, 1993 and 1992, respectively. Benefit calculations for the company's defined benefit pension plans are primarily a function of years of service and final average earnings at the time of retirement. Final average earnings are the average of the highest five years of compensation during the last 10 years of employment. The company funds these plans by contributing the actuarially computed amounts that meet funding requirements. The following table sets forth the company's defined benefit pension plans' funded status and the amounts recognized in the statements of earnings. Substantially all the plans' assets are invested in listed stocks, short-term investments and bonds. The significant actuarial assumptions used in the calculation of funded status for 1994 and 1993 are: discount rate - 8.75% and 7.5%, respectively; compensation increases - 4.5% and 4%, respectively; and return on assets - 9.5% for both years.
====================================================================================== December 31, 1994 December 25, 1993 ----------------- ----------------- Assets Exceed Accumulated Assets Exceed Accumulated Accumulated Benefits Accumulated Benefits (In thousands) Benefits Exceed Assets Benefits Exceed Assets - -------------------------------------------------------------------------------------- Actuarial present value of accumulated benefit obligations: Vested $169,132 $ 9,126 $166,474 $ 9,587 Total $176,380 $15,469 $174,332 $16,577 - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Projected benefit obligations $191,637 $17,342 $187,833 $18,302 Plan assets at fair value 185,180 - 176,307 - - -------------------------------------------------------------------------------------- Projected benefit obligation in excess of plan assets 6,457 17,342 11,526 18,302 Unrecognized net loss (37,980) (5,034) (42,195) (7,672) Unrecognized prior service cost (1,684) (667) (2,293) (777) Unrecognized net asset (obligation) 159 - 291 (216) - -------------------------------------------------------------------------------------- Pension liability (asset) $(33,048) $11,641 $(32,671) $ 9,637 ======================================================================================
Net pension expense includes the following components:
============================================================================ (In thousands) 1994 1993 1992 - ---------------------------------------------------------------------------- Service cost $ 7,476 $ 5,323 $ 4,997 Interest cost 16,583 14,792 13,503 Actual (return) loss on plan assets 5,064 (19,103) (8,159) Net amortization and deferral (20,611) 8,039 (5,030) - ---------------------------------------------------------------------------- Net pension expense $ 8,512 $ 9,051 $ 5,311 ============================================================================
47 Certain associates have pension and health care benefits provided under collectively bargained multiemployer agreements. Expenses for these benefits were $56 million, $44 million and $40 million for 1994, 1993 and 1992, respectively ASSOCIATE POSTRETIREMENT HEALTH CARE BENEFITS The company offers a comprehensive major medical plan to eligible retired associates who meet certain age and years of service requirements. This unfunded defined benefit plan generally provides medical benefits until Medicare insurance commences. Components of postretirement benefits expense are as follows:
============================================================================ (In thousands) 1994 1993 1992 - ---------------------------------------------------------------------------- Service cost $ 223 $ 140 $ 108 Interest cost 1,542 1,628 1,430 Amortization of net loss 196 138 - - ---------------------------------------------------------------------------- Postretirement expense $1,961 $1,906 $1,538 ============================================================================
The composition of the accumulated postretirement benefit obligation (APBO) and the amounts recognized in the balance sheets are presented below.
============================================================================ (In thousands) 1994 1993 - ---------------------------------------------------------------------------- Retirees $16,385 $13,299 Fully eligible actives 1,046 1,916 Others 2,569 1,680 - ---------------------------------------------------------------------------- APBO 20,000 16,895 Unrecognized net loss 2,010 3,333 - ---------------------------------------------------------------------------- Accrued postretirement benefit cost $17,990 $13,562 ============================================================================
During 1993, a postretirement benefit obligation was settled. No additional benefit payments will be made for this terminated obligation. 48 The weighted average discount rate used in determining the APBO was 8.75% and 7.5% for 1994 and 1993, respectively. For measurement purposes in 1994 and 1993, a 14% annual rate of increase in the per capita cost of covered medical care benefits was assumed. In both years, the rate was assumed to decrease to 8% by 2000, then to 7.5% in 2001 and thereafter. If the assumed health care cost increased by 1% for each future year the current cost and the APBO would have increased by 3% to 5% for all periods presented. The company also provides other benefits for certain inactive associates. Expenses related to these benefits are immaterial. SUPPLEMENTAL CASH FLOWS INFORMATION
============================================================================ (In thousands) 1994 1993 1992 - ---------------------------------------------------------------------------- Acquisitions: Fair value of assets acquired $1,575,323 $111,077 $88,721 Less: Liabilities assumed or created 1,198,050 9,057 39,781 Existing company investment (15,281) 50,628 - Common stock issued - - 34,125 Cash acquired 5,066 282 6,582 - ---------------------------------------------------------------------------- Cash paid, net of cash acquired $ 387,488 $ 51,110 $ 8,233 Cash paid during the year for: Interest, net of amounts capitalized $98,254 $79,634 $82,051 Income taxes $40,414 $74,320 $65,884 Direct financing leases and related obligations $15,640 $33,594 $27,507 Property and equipment additions by capital leases $30,606 $21,011 $22,513 ============================================================================
LITIGATION AND CONTINGENCIES In December 1993, the company and numerous other defendants were named in two suits filed in U.S. District Court in Miami. The plaintiffs allege liability on the part of the company as a consequence of an alleged fraudulent scheme conducted by Premium Sales Corporation and others in which unspecified but large losses in the Premium-related entities occurred to the detriment of a purported class of investors which has brought one of the suits. The other suit is by the receiver/trustee of the estates of Premium and certain of its affiliated entities. Plaintiffs seek damages, treble damages, attorney's fees, costs, expenses and other appropriate relief. While the amount of damages sought under most claims is not specified, plaintiffs allege that hundreds of millions of dollars were lost as the result of the allegations contained in the complaint. The litigation is complex, discovery has not commenced and the ultimate outcome cannot presently be determined. Furthermore, management is unable to predict a potential range of monetary exposure, if any, to the company. Based on the large recovery sought, an unfavorable judgment could have a material adverse effect on the company. Management believes, however, that a material adverse effect on the company's consolidated financial position is not likely. The company intends to vigorously defend the actions. The company's facilities are subject to various laws and regulations regarding the discharge of materials into the environment. In conformity with these provisions, the company has a comprehensive program for testing and removal, replacement or repair of its underground fuel storage tanks and for site remediation where necessary. The company has established reserves that it believes will be sufficient to satisfy anticipated costs of all known remediation requirements. In addition, the company is addressing several other environmental cleanup matters involving its properties, all of which the company believes are immaterial. The company has been designated by the U. S. Environmental Protection Agency ("EPA") as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") with others, with respect to EPA-designated Superfund sites. While liability under CERCLA for remediation at such sites is joint and several with other responsible parties, the company believes that, to the extent it is ultimately determined to be liable for clean up at any site, such liability will not result in a material adverse effect on its consolidated financial position or results of operations. The company is committed to maintaining the environment and protecting natural resources and to achieving full compliance with all applicable laws and regulations. The company is a party to various other litigation, possible tax assessments and other matters, some of which are for substantial amounts, arising in the ordinary course of business. While the ultimate effect of such actions cannot be predicted with certainty, the company expects that the outcome of these matters will not result in a material adverse effect on its consolidated financial position or results of operations. The company has aggregate contingent liabilities for future minimum rental commitments made on behalf of customers of $227 million in 1994 and $370 million in 1993. 49 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders Fleming Companies, Inc. We have audited the accompanying consolidated balance sheets of Fleming Companies, Inc. and subsidiaries as of December 31, 1994 and December 25, 1993, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedule listed in the index at item 14. These financial statements and financial statement schedule are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule 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 consolidated financial position of Fleming Companies, Inc. and subsidiaries as of December 31, 1994 and December 25, 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion such financial statement schedule, when considered in relation to the basic consolidated statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP Oklahoma City, Oklahoma February 23, 1995 50 QUARTERLY FINANCIAL INFORMATION (In thousands, except per share amounts) (Unaudited)
====================================================================================================== 1994 First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------ Net sales $4,031,980 $2,883,648 $4,141,538 $4,696,321 $15,753,487 Costs and expenses: Cost of sales 3,777,967 2,699,029 3,818,129 4,311,838 14,606,963 Selling and administrative 201,535 144,157 289,449 327,788 962,929 Interest expense 21,828 16,365 37,498 44,717 120,408 Interest income (16,252) (11,811) (18,821) (17,059) (63,943) Equity investment results 3,257 2,640 5,130 3,766 14,793 - ------------------------------------------------------------------------------------------------------ Total costs and expenses 3,988,335 2,850,380 4,131,385 4,671,050 15,641,150 - ------------------------------------------------------------------------------------------------------ Earnings before taxes 43,645 33,268 10,153 25,271 112,337 Taxes on income 19,248 14,671 7,437 14,812 56,168 - ------------------------------------------------------------------------------------------------------ Net earnings $ 24,397 $ 18,597 $ 2,716 $ 10,459 $ 56,169 - ------------------------------------------------------------------------------------------------------ Net earnings per share $.66 $.50 $.07 $.28 $1.51 Dividends paid per share $.30 $.30 $.30 $.30 $1.20 Weighted average shares outstanding 37,093 37,247 37,332 37,424 37,254 =======================================================================================================
The first quarter of both years consists of 16 weeks, all other quarters are 12 weeks, except for the fourth quarter of 1994 which was 13 weeks. The year 1994 was a 53-week year, 1993 consists of 52 weeks. The results of Scrivner are included effective at the beginning of the third quarter. A customer filed for bankruptcy during the third quarter, resulting in a credit loss of $6.5 million. 51 QUARTERLY FINANCIAL INFORMATION
============================================================================================================= 1993 First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------------- Net sales $4,044,894 $2,964,655 $2,936,010 $3,146,586 $13,092,145 Costs and expenses: Cost of sales 3,803,545 2,787,087 2,767,074 2,969,072 12,326,778 Selling and administrative 170,893 121,366 125,106 141,105 558,470 Interest expense 23,481 17,804 17,796 18,948 78,029 Interest income (18,548) (14,469) (14,885) (15,000) (62,902) Equity investment results 2,067 805 2,952 6,041 11,865 Facilities consolidation and restructuring - 6,500 - 101,327 107,827 - ------------------------------------------------------------------------------------------------------------- Total costs and expenses 3,981,438 2,919,093 2,898,043 3,221,493 13,020,067 - ------------------------------------------------------------------------------------------------------------- Earnings (loss) before taxes 63,456 45,562 37,967 (74,907) 72,078 Taxes on income (tax benefit) 26,081 18,726 17,662 (27,871) 34,598 - ------------------------------------------------------------------------------------------------------------- Earnings (loss) before extraordinary loss 37,375 26,836 20,305 (47,036) 37,480 Extraordinary loss from early retirement of debt - - - 2,308 2,308 - ------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 37,375 $ 26,836 $ 20,305 $ (49,344) $ 35,172 - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- Net earnings (loss) per share: Earnings before extraordinary loss $1.02 $.73 $.55 $(1.28) $1.02 Extraordinary loss - - - .06 .06 - ------------------------------------------------------------------------------------------------------------- Net earnings (loss) per share $1.02 $.73 $.55 $(1.34) $ .96 Dividends paid per share $.30 $.30 $.30 $.30 $1.20 Weighted average shares outstanding 36,722 36,780 36,833 36,896 36,801 =============================================================================================================
The second quarter of 1993 includes $11 million of pretax income resulting from the favorable resolution of a litigation matter and a $1 million accrual for charges in other legal proceedings. Also included is a $2 million charge for an increase to previously established reserves related to the company's contingent liability for lease obligations. The company also recorded a $5 million gain from a real estate transaction during the second quarter of 1993. The effective tax rate was increased in the third quarter of 1993 due to the new tax law enacted in August 1993. See discussion of facilities consolidation and restructuring charges in the notes to consolidated financial statements. 52 SCHEDULE II FLEMING COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1994, DECEMBER 25, 1993, AND DECEMBER 26, 1992 (In thousands)
ALLOWANCE FOR CREDIT LOSSES CURRENT NONCURRENT ------------- ------- ---------- ALLOWANCE FOR DOUBTFUL ACCOUNTS BALANCE, December 28, 1991 $ 32,758 $25,330 $ 7,428 ======= ======= Charged to costs and expenses 28,258 Uncollectible accounts, written off, less recoveries (17,485) -------- BALANCE, December 26, 1992 43,531 $25,298 $18,233 ======= ======= Charged to costs and expenses 52,018 Uncollectible accounts written off, less recoveries (32,954) -------- BALANCE, December 25, 1993 62,595 $44,320 $18,275 ======= ======= Acquired reserves, Scrivner acquisition, July 19, 1994 25,950 Charged to costs and expenses 61,218 Uncollectible accounts written off, less recoveries (101,196) -------- BALANCE, December 31, 1994 $ 48,567 $39,506 $ 9,061 ======== ======= =======
53 (a), (c) 3. Exhibits: PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO ------- ---------------- 3.1 Certificate of Incorporation Exhibit 3.1 to Form 10-K for year ended December 28, 1991. 3.2 By-Laws Exhibit 28.2 to Form 8-K dated August 22, 1989. 4.0 Credit Agreement, dated as of Exhibit 4.0 to July 19, 1994, among Fleming Form 8-K dated Companies, Inc., the Banks July 19, 1994 listed therein and Morgan Guaranty Trust Company of New York, as Managing Agent 4.1 Pledge Agreement, dated as of Exhibit 4.1 to July 19, 1994, among Fleming Form 8-K dated Companies, Inc. and Morgan July 19, 1994 Guaranty Trust Company of New York, as Collateral Agent 4.2 Security Agreement dated as of Exhibit 4.2 to July 19, 1994, between Fleming Form 8-K dated Companies, Inc. in favor of July 19, 1994 Morgan Guaranty Trust Company of New York, as Collateral Agent 4.3 Amendment No. 1 to Credit Exhibit 4.3 to Agreement dated as of Form 8-K dated July 21, 1994 July 19, 1994 4.4 Amendment No. 2 to Credit Agreement dated as of November 14, 1994 4.5 Agreement to furnish copies of other long-term debt instruments 4.6 Rights Agreement dated as of Exhibit 28 to July 7, 1986, between the Form 8-K dated Registrant and Morgan June 24, 1986. Guaranty Trust Company of New York 4.7 Amendment to Rights Agreement Exhibit 28.1 to dated as of August 22, 1989, Form 8-K dated between the Registrant August 22, 1989. and First Chicago Trust Company of New York, as Rights Agent 4.8 Indenture dated as of December Exhibit 4 to 1, 1989, between the Registrant Registration and Morgan Guaranty Trust Statement No. Company of New York, as trustee 33-29633. 4.9 Indenture dated as of December 15, 1994, between the Registrant, the Subsidiary Guarantors and Texas Commerce Bank National Association, as Trustee, regarding $300 million of 10 5/8% Senior Notes 4.10 Indenture dated as of December 15, 1994, between the Registrant, the Subsidiary Guarantors and the Texas Commerce Bank National Association, as Trustee, regarding $200 million of Floating Rate Senior Notes 54 PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO ------- ---------------- 10.0 Stock Purchase Agreement by and Exhibit 2.0 to Fleming Companies, Inc. and Form 8-K dated Franz Haniel & Cie. GmbH dated July 19, 1994 as of July 15, 1994 10.1 Investment Advisor Agreement Exhibit 10.17 to between the Registrant and The Form 10-K for year First Boston Corporation dated ended December 30, November 27, 1989 1989. 10.2 Investment Advisor Agreement Exhibit 10.18 to between the Registrant and Form 10-K for year Merrill Lynch, Pierce, Fenner ended December 30, & Smith Incorporated dated 1989. December 5, 1989 10.3 Dividend Reinvestment and Exhibit 28.1 to Stock Purchase Plan, as Registration amended Statement No. 33-26648 and Exhibit 28.3 to Registration Statement No. 33-45190. 10.4* 1985 Stock Option Plan Exhibit 28(a) to Registration Statement No. 2-98602. 10.5* Form of Award Agreement for Exhibit 10.6 to Form 1985 Stock Option Plan (1994) 10-K for year ended December 25, 1993. 10.6* 1990 Stock Option Plan Exhibit 28.2 to Registration Statement No. 33-36586. 10.7* Form of Award Agreement for Exhibit 10.8 to Form 1990 Stock Option Plan (1994) 10-K for year ended December 25, 1993. 10.8* Fleming Management Incentive Exhibit 10.4 to Compensation Plan Registration Statement No. 33-51312. 55 PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO ------- ---------------- 10.9* Directors' Deferred Exhibit 10.5 to Compensation Plan Registration Statement No. 33-51312. 10.10* Amended and Restated Supplemental Retirement Plan 10.11* Form of Amended and Restated Supplemental Retirement Income Agreement 10.12* Godfrey Company 1984 Non- Appendix II to qualified Stock Option Plan Registration Statement No. 33-18867. 10.13* Form of Amended and Restated Severance Agreement between the Registrant and certain of its officers 10.14* Fleming Companies, Inc. 1990 Exhibit B to Stock Incentive Plan dated Proxy Statement February 20, 1990 for year ended December 30, 1989. 10.15* Phase I of Fleming Companies, Exhibit 10.16 to Inc. Stock Incentive Plan and Form 10-K for year Form of Awards Agreement ended December 30, 1989. 10.16* Phase II of Fleming Companies, Exhibit 10.12 to Inc. Stock Incentive Plan Form 10-K for year ended December 26, 1992. 10.17* Phase III of Fleming Companies, Exhibit 10.17 to Inc. Stock Incentive Plan Form 10-K for year ended December 25, 1993. 10.18* Fleming Companies, Inc. Exhibit 10.14 to Directors' Stock Form 10-K for year Equivalent Plan ended December 28, 1991. 10.19* Agreement between the Exhibit 10.19 to Registrant and Form 10-K for year E. Dean Werries ended December 25, 1993. 10.20* Supplemental Income Trust 10.21* Form of Employment Agreement between Registrant and certain of the employees 10.22* Economic Value Added Exhibit A to Proxy Incentive Bonus Plan Statement for year ended December 31, 1994 11 Earnings per share computation 12 Computation of ratio of earnings to fixed charges 56 PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO ------- ---------------- 21 Subsidiaries of the Registrant 23 Consent of Deloitte & Touche LLP 24 Power of attorney instruments signed by certain directors and officers of the Registrant appointing Harry L. Winn, Jr., Executive Vice President and Chief Financial Officer, as attorney-in-fact and agent to sign the Annual Report on Form 10-K on behalf of said directors and officers 27 Financial Data Schedule 99 Company Undertaking * Management contract, compensatory plan or arrangement. (b) Reports on Form 8-K: None. 57 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Fleming has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 28th day of March 1995. FLEMING COMPANIES, INC. /s/ Robert E. Stauth --------------------------------- By: Robert E. Stauth (Chairman, President and Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 28th day of March 1995. /s/ Robert E. Stauth /s/ Archie R. Dykes * /s/ Carol B. Hallett * - ------------------------- ----------------------- ----------------------- Robert E. Stauth Archie R. Dykes Carol B. Hallett (Chairman of the Board) (Director) (Director) /s/ James G. Harlow, Jr.* /s/ Lawrence M. Jones * /s/ Edward C.Joullian III* - ------------------------- ------------------------ -------------------------- James G. Harlow, Jr. Lawrence M. Jones Edward C. Joullian III (Director) (Director) (Director) /s/ Howard H. Leach * /s/ John A. McMillan * /s/ Guy O. Osborn * - ------------------------- ----------------------- ----------------------- Howard H. Leach John A. McMillan Guy O. Osborn (Director) (Director) (Director) /s/ E. Dean Werries * - ------------------------- E. Dean Werries (Director) *By /s/ Harry L. Winn, Jr. ------------------------- Harry L. Winn, Jr. Attorney-In-Fact A Power of Attorney authorizing Harry L. Winn, Jr. to sign the Annual Report on Form 10-K on behalf of each of the indicated directors of Fleming Companies, Inc. has been filed herein as Exhibit 25. 58 INDEX TO EXHIBITS PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO ------- ---------------- 3.1 Certificate of Incorporation Exhibit 3.1 to Form 10-K for year ended December 28, 1991. 3.2 By-Laws Exhibit 28.2 to Form 8-K dated August 22, 1989. 4.0 Credit Agreement, dated as of Exhibit 4.0 to July 19, 1994, among Fleming Form 8-K dated Companies, Inc., the Banks July 19, 1994 listed therein and Morgan Guaranty Trust Company of New York, as Managing Agent 4.1 Pledge Agreement, dated as of Exhibit 4.1 to July 19, 1994, among Fleming Form 8-K dated Companies, Inc. and Morgan July 19, 1994 Guaranty Trust Company of New York, as Collateral Agent 4.2 Security Agreement dated as of Exhibit 4.2 to July 19, 1994, between Fleming Form 8-K dated Companies, Inc. in favor of July 19, 1994 Morgan Guaranty Trust Company of New York, as Collateral Agent 4.3 Amendment No. 1 to Credit Exhibit 4.3 to Agreement dated as of Form 8-K dated July 21, 1994 July 19, 1994 4.4 Amendment No. 2 to Credit Agreement dated as of November 14, 1994 4.5 Agreement to furnish copies of other long-term debt instruments 4.6 Rights Agreement dated as of Exhibit 28 to July 7, 1986, between the Form 8-K dated Registrant and Morgan June 24, 1986. Guaranty Trust Company of New York 4.7 Amendment to Rights Agreement Exhibit 28.1 to dated as of August 22, 1989, Form 8-K dated between the Registrant August 22, 1989. and First Chicago Trust Company of New York, as Rights Agent 4.8 Indenture dated as of December Exhibit 4 to 1, 1989, between the Registrant Registration and Morgan Guaranty Trust Statement No. Company of New York, as trustee 33-29633. 4.9 Indenture dated as of December 15, 1994, between the Registrant, the Subsidiary Guarantors and Texas Commerce Bank National Association, as Trustee, regarding $300 million of 10 5/8% Senior Notes 4.10 Indenture dated as of December 15, 1994, between the Registrant, the Subsidiary Guarantors and the Texas Commerce Bank National Association, as Trustee, regarding $200 million of Floating Rate Senior Notes PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO ------- ---------------- 10.0 Stock Purchase Agreement by and Exhibit 2.0 to Fleming Companies, Inc. and Form 8-K dated Franz Haniel & Cie. GmbH dated July 19, 1994 as of July 15, 1994 10.1 Investment Advisor Agreement Exhibit 10.17 to between the Registrant and The Form 10-K for year First Boston Corporation dated ended December 30, November 27, 1989 1989. 10.2 Investment Advisor Agreement Exhibit 10.18 to between the Registrant and Form 10-K for year Merrill Lynch, Pierce, Fenner ended December 30, & Smith Incorporated dated 1989. December 5, 1989 10.3 Dividend Reinvestment and Exhibit 28.1 to Stock Purchase Plan, as Registration amended Statement No. 33-26648 and Exhibit 28.3 to Registration Statement No. 33-45190. 10.4* 1985 Stock Option Plan Exhibit 28(a) to Registration Statement No. 2-98602. 10.5* Form of Award Agreement for Exhibit 10.6 to Form 1985 Stock Option Plan (1994) 10-K for year ended December 25, 1993. 10.6* 1990 Stock Option Plan Exhibit 28.2 to Registration Statement No. 33-36586. 10.7* Form of Award Agreement for Exhibit 10.8 to Form 1990 Stock Option Plan (1994) 10-K for year ended December 25, 1993. 10.8* Fleming Management Incentive Exhibit 10.4 to Compensation Plan Registration Statement No. 33-51312. PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO ------- ---------------- 10.9* Directors' Deferred Exhibit 10.5 to Compensation Plan Registration Statement No. 33-51312. 10.10* Amended and Restated Supplemental Retirement Plan 10.11* Form of Amended and Restated Supplemental Retirement Income Agreement 10.12* Godfrey Company 1984 Non- Appendix II to qualified Stock Option Plan Registration Statement No. 33-18867. 10.13* Form of Amended and Restated Severance Agreement between the Registrant and certain of its officers 10.14* Fleming Companies, Inc. 1990 Exhibit B to Stock Incentive Plan dated Proxy Statement February 20, 1990 for year ended December 30, 1989. 10.15* Phase I of Fleming Companies, Exhibit 10.16 to Inc. Stock Incentive Plan and Form 10-K for year Form of Awards Agreement ended December 30, 1989. 10.16* Phase II of Fleming Companies, Exhibit 10.12 to Inc. Stock Incentive Plan Form 10-K for year ended December 26, 1992. 10.17* Phase III of Fleming Companies, Exhibit 10.17 to Inc. Stock Incentive Plan Form 10-K for year ended December 25, 1993. 10.18* Fleming Companies, Inc. Exhibit 10.14 to Directors' Stock Form 10-K for year Equivalent Plan ended December 28, 1991. 10.19* Agreement between the Exhibit 10.19 to Registrant and Form 10-K for year E. Dean Werries ended December 25, 1993. 10.20* Supplemental Income Trust 10.21* Form of Employment Agreement between Registrant and certain of the employees 10.22* Economic Value Added Exhibit A to Proxy Incentive Bonus Plan Statement for year ended December 31, 1994 11 Earnings per share computation 12 Computation of ratio of earnings to fixed charges PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO ------- ---------------- 21 Subsidiaries of the Registrant 23 Consent of Deloitte & Touche LLP 24 Power of attorney instruments signed by certain directors and officers of the Registrant appointing Harry L. Winn, Jr., Executive Vice President and Chief Financial Officer, as attorney-in-fact and agent to sign the Annual Report on Form 10-K on behalf of said directors and officers 27 Financial Data Schedule 99 Company Undertaking * Management contract, compensatory plan or arrangement. EX-4.4 2 ADMT#2 C.A. AMENDMENT NO. 2 TO CREDIT AGREEMENT AMENDMENT dated as of November 14, 1994, to the $2,200,000,000 Credit Agreement dated as of July 19, 1994 (as heretofore amended, the "Credit Agreement") among FLEMING COMPANIES, INC., the BANKS party thereto, the AGENTS party thereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Managing Agent. W I T N E S S E T H: WHEREAS, the Borrower desires to amend the Credit Agreement to effect the amendments reflected herein, and the Banks party hereto are willing to agree to such amendments; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically defined herein, each term used herein that is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof," "hereunder," "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby. SECTION 2. AMENDMENT OF SECTION 1.01 OF THE CREDIT AGREEMENT. (a) Section 1.01 of the Credit Agreement is hereby amended by changing the reference to "Article III" to a reference to "Article IV" where it appears in the definition of "Borrower's Knowledge". (b) Section 1.01 of the Credit Agreement is hereby further amended by restating the definition of "Borrower Special Charges" to read in its entirety as follows: "Borrower Special Charges" means the charges to the Borrower's earnings originally taken in December 1993 relating to (i) the consolidaton of certain of the Borrower's facilities and operations, as approved by the board of directors of the Borrower at a meeting on January 17, 1994 and (ii) the extraordinary loss from the early retirement of debt, as approved by the board of directors of the Borrower at a meeting on December 15, 1993." SECTION 3. AMENDMENT OF SECTION 2.09 OF THE CREDIT AGREEMENT. Clause (b)(i) of Section 2.09 of the Credit Agreement is hereby amended by inserting the words "or will be" after the words "to the extent it was" where such words appear in clause (B) of the last sentence of such clause (b)(i). SECTION 4. NEW SECTION 6.04. A new Section 6.04 shall be added to the Credit Agreement as follows: "Section 6.04 RESTATEMENT OF FINANCIAL STATEMENTS. No representation or warranty as to, or statement contained in, any financial statement or other information delivered by the Borrower pursuant to this Agreement shall be considered to be or to have been incorrect or misleading when made (or deemed made) if solely as a result of a restatement of the Borrower's financial statements to record some or all of the Borrower Special Charges in a period subsequent to the fourth quarter of 1993 pursuant to the request or direction of the Securities and Exchange Commission or with the approval of the Borrower's independent public accountants. SECTION 5. AMENDMENT TO SECTION 5.13 OF THE CREDIT AGREEMENT. Clause (iii) of Section 5.13(a) of the Credit Agreement is hereby amended in its entirety to read as follows: "(iii) Debt incurred by the Borrower after the date hereof that has a final maturity of at least six months after the Tranche C Termination Date and of which no more than $2,000,000 in the aggregate is subject to mandatory repayment or repurchase at the option of the holders thereof or otherwise prior to such time; PROVIDED that such Debt may be so subject to mandatory repayment or repurchase so long as neither the Borrower nor any Subsidiary has any obligation to repay, repurchase or otherwise retire an amount of such Debt exceeding $2,000,000 in the aggregate when any Loans, Letters of Credit Liabilities or Commitments are outstanding hereunder;" For the sake of avoidance of doubt, it is hereby confirmed and agreed that references in clause (iii) of Section 5.13(a) of the Credit Agreement to mandatory repayment, repurchase or retirement of Debt do not include any obligation to do so arising solely 2 upon the occurrence of a default or event of default with respect to such Debt. SECTION 6. AMENDMENTS TO SECURITY DOCUMENTS AND GUARANTEE AGREEMENTS. Each Bank party hereto hereby unconditionally and irrevocably authorizes and directs the Collateral Agent to execute and deliver amendments to each Security Document and Guarantee Agreement substantially in the forms attached to the Borrower's letter to the Banks dated November 14, 1994. SECTION 7. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective as of the date hereof when the Managing Agent shall become effective as of the date hereof when the Managing Agent shall have received duly executed counterparts hereof signed by the Borrower and the Required Banks or, in the case of the authorization in Section 6 of amendments to the Security Documents, the Releasing Banks (or, in the case of any Bank as to which an executed counterpart shall not have been received, the Managing Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such Bank). SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. FLEMING COMPANIES, INC. By /s/ John M. Thompson --------------------------------- Name: John M. Thompson Title: Vice President and Treasurer BANKS MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Stephen B. King -------------------------------- Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Jody B. Schneider -------------------------------- Title: Vice President THE BANK OF NOVA SCOTIA By /s/ F.C.H. Ashby -------------------------------- Title: Sr. Manager Loan Operations CANADIAN IMPERIAL BANK OF COMMERCE By /s/ MAG Corkum -------------------------------- Title: Authorized Signatory 4 CREDIT SUISSE By /s/ Geoffrey M. Craig -------------------------------- Title: Member of Sr. Management By /s/ Kristinn R. Kristinsson -------------------------------- Title: Associate DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH By /s/ Dr. Hans-Deter Wettlaufer -------------------------------- Title: Vice President By /s/ Jean Hannigan -------------------------------- Title: Associate THE FUJI BANK, LIMITED By /s/ David Kelley -------------------------------- Title: Vice President and Senior Manager NATIONSBANK OF TEXAS, N.A. By /s/ Bianca Hemmen -------------------------------- Title: Senior Vice President SOCIETE GENERALE, SOUTHWEST AGENCY By /s/ Richard M. Lewis -------------------------------- Title: Assistant Vice President By /s/ Louis P. Laville -------------------------------- Title: Vice President 5 THE SUMITOMO BANK LTD. HOUSTON AGENCY By /s/ Tatsuo Ueda -------------------------------- Title: General Manager TEXAS COMMERCE BANK NATIONAL ASSOCIATION By /s/ Matthew H. Hildreth -------------------------------- Title: Vice President THE TORONTO-DOMINION BANK By /s/ F.B. Hawley -------------------------------- Title: Mgr. Credit Administration UNION BANK OF SWITZERLAND, HOUSTON AGENCY By /s/ Alfred W. Imholz -------------------------------- Title: First Vice President By /s/ Jan Buettgen -------------------------------- Title: First Vice President FIRST INTERSTATE BANK OF CALIFORNIA By /s/ William Baird -------------------------------- Title: Vice President By /s/ Wendy Purcell -------------------------------- Title: Assistant Vice President 6 WACHOVIA BANK OF GEORGIA, NATIONAL ASSOCIATION By /s/ Terry L. Akin -------------------------------- Title: Senior Vice President CREDIT LYONNAIS NEW YORK BRANCH By /s/ Robert Ivosevich -------------------------------- Title: Senior Vice President COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By /s/ J. Scott Taylor -------------------------------- Title: Vice President By /s/ W. Jeffrey Vollack -------------------------------- Title: Vice President THE SANWA BANK LIMITED, DALLAS AGENCY By /s/ Blake Wright -------------------------------- Title: Assistant Vice President BANQUE NATIONALE DE PARIS By /s/ Henry F. Setina -------------------------------- Title: Vice President BOATMEN'S FIRST NATIONAL BANK OF OKLAHOMA By /s/ K. Randy Roper -------------------------------- Title: Senior Vice President 7 CITIBANK N.A. By /s/ W.P. Stengel -------------------------------- Title: Vice President COMMERZBANK AG, NEW YORK AND/OR GRAND CAYMAN BRANCH By /s/ Juergen Scmieding -------------------------------- Title: Vice President By /s/Juergen Boysen -------------------------------- Title: Senior Vice President DAI-ICHI KANGYO BANK, LTD. NEW YORK BRANCH By /s/ Frank A. Bertelle -------------------------------- Title: Corporate Credit Officer THE INDUSTRIAL BANK OF JAPAN, LTD. By /s/ Takeshi Kawano -------------------------------- Title: Senior Vice President and Senior Manager LTCB TRUST COMPANY By /s/ John J. Sullivan -------------------------------- Title: Executive Vice President THE MITSUBISHI BANK, LIMITED HOUSTON AGENCY By /s/ Shoji Honda -------------------------------- Title: General Manager 8 NATIONAL WESTMINSTER BANK Plc NASSAU BRANCH By /s/ David L. Smith -------------------------------- Title: Vice President NATIONAL WESTMINSTER BANK Plc NEW YORK BRANCH By /s/ David L. Smith -------------------------------- Title: Vice President UNITED STATES NATIONAL BANK OF OREGON By /s/ Blake R. Howells -------------------------------- Title: Vice President BANK OF AMERICA ILLINOIS By /s/ Jody B. Schneider -------------------------------- Title: Vice President PNC BANK, NATIONAL ASSOCIATION By /s/ Greg Gaschler -------------------------------- Title: Vice President BANCA DI ROMA SpA By /s/ Oakley W. Cheney, Jr. -------------------------------- Title: Chief Manager By /s/ William Fontana -------------------------------- Title: Vice President 9 BANK IV OKLAHOMA, N.A. By /s/ Paul Anderson -------------------------------- Title: Vice President BANK OF HAWAII By /s/ Joseph T. Donaldson -------------------------------- Title: Vice President THE BANK OF TOKYO, LTD., DALLAS AGENCY By /s/ J. Mearns -------------------------------- Title: V.P. and Manager BANQUE PARIBAS By /s/ Robert G. Shaw -------------------------------- Title: Vice President By /s/ Pierre-Jean de Filippis -------------------------------- Title: General Manager BANQUE FRANCAISE DU COMMERCE EXTERIEUR By /s/ Kenneth C. Couiter -------------------------------- Title: Assistant Vice President By /s/ Mark A. Harrington -------------------------------- Title: Vice President and Regional Manager 10 BAYERISCHE VEREINSBANK AG, LOS ANGELES AGENCY By /s/ Jarunee Hanpachern -------------------------------- Title: Assistant Vice President By /s/ Sylvia K. Cheng -------------------------------- Title: Assistant Vice President BHF-BANK, NEW YORK BRANCH By /s/ Paul Travers -------------------------------- Title: Vice President By /s/ David Fraenkel -------------------------------- Title: Vice President DAIWA BANK AND TRUST COMPANY By -------------------------------- Title: By -------------------------------- Title: DG BANK DEUTSCHE GENOSSENSCHAFTSBANK By /s/ John L. Dean -------------------------------- Title: Senior Vice President By /s/ Karen A. Brinkman -------------------------------- Title: Vice President FIRST HAWAIIAN BANK By /s/ Robert M. Wheeler III -------------------------------- Title: Vice President 11 FIRST UNION NATIONAL BANK OF NORTH CAROLINA By /s/ Edwin T. Gray -------------------------------- Title: Account Officer FLEET BANK OF MASSACHUSETTS, N.A. By /s/ Roger C. Boucher -------------------------------- Title: Vice President LIBERTY BANK AND TRUST COMPANY OF OKLAHOMA CITY, N.A. By /s/ Laura Christofferson -------------------------------- Title: Vice President MANUFACTURERS AND TRADERS TRUST COMPANY By /s/ Geoffrey R. Fenn -------------------------------- Title: Vice President THE MITSUBISHI TRUST AND BANKING CORPORATION By /s/ Masaaki Yamagishi -------------------------------- Title: Chief Manager THE MITSUI TRUST AND BANKING COMPANY, LIMITED By /s/ Shigeru Tsujimoto -------------------------------- Title: Vice President and Manager 12 NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION By /s/ Perry G. Pelos -------------------------------- Title: Vice President WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch By /s/ Lucy Gurnsey -------------------------------- Title: Vice President WESTDEUTSCHE LANDESBANK GIROZENTRALE, Cayman Islands Branch By /s/ Jeffrey Hilsgen -------------------------------- Title: Vice President THE YASUDA TRUST AND BANKING COMPANY, LTD. By /s/ Neil T. Chau -------------------------------- Title: First Vice President THE FIRST NATIONAL BANK OF CHICAGO By /s/ Jeanette Ganousis -------------------------------- Title: Vice President 13 DRESDNER BANK AG NEW YORK BRANCH By /s/ R. Matthew Scherer -------------------------------- Title: Vice President By /s/ Robert Conroy -------------------------------- Title: Vice President BANK HAPOALIM B.M., Los Angeles Branch By /s/ David L. Ruggeri -------------------------------- Title: Vice President By /s/ Craig M. Ciebiera -------------------------------- Title: Vice President THE CHASE MANHATTAN BANK, N.A. By /s/ William J. Bokos -------------------------------- Title: Attorney-In-Fact KREDIETBANK N.V. By /s/ Diane Grimmig -------------------------------- Title: Vice President By /s/ Robert Snauffer -------------------------------- Title: Vice President MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION By /s/ John C. Billings -------------------------------- Title: Vice President THE SUMITOMO BANK OF CALIFORNIA By /s/ Seishi Jiromaru -------------------------------- Title: Vice President and Division Manager 14 EX-4.5 3 EX 4.5 EXHIBIT 4.5 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES The Registrant has various long-term debt agreements which define the rights of the holders of the related debt securities of the Registrant. No agreement with respect to the Registrant's long-term debt exceeds 10% of total assets, except the $1.7 billion Credit Agreement dated as of July 19, 1994 (as amended) (incorporated by reference) and the Indentures dated as of December 15, 1994 (incorporated by reference). Debt agreements that do not exceed 10% of total assets have not been filed. The Registrant agrees to furnish copies of any unfiled debt agreements to the Commission upon request. FLEMING COMPANIES, INC. ----------------------------- (Registrant) Date March 28, 1995 By /s/ KEVIN J. TWOMEY -------------- ----------------------------- Kevin J. Twomey Vice President-Controller (Chief Accounting Officer) EX-4.9 4 SENIOR NOTE IND. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FLEMING COMPANIES, INC. ISSUER TO TEXAS COMMERCE BANK NATIONAL ASSOCIATION TRUSTEE THE SUBSIDIARY GUARANTORS NAMED HEREIN GUARANTORS ------------------------ Indenture Dated as of December 15, 1994 ------------------------ $300,000,000 10 5/8% Senior Notes due 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FLEMING COMPANIES, INC. RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND INDENTURE, DATED AS OF , 1994
TRUST INDENTURE ACT SECTION INDENTURE SECTION - ------------------------- ---------------------------- Section310(a)(1) .......................................................... 607[(a)] (a)(2) .......................................................... 607[(a)] (b) .......................................................... [607(b),] 608 Section312(c) .......................................................... 701 Section314(a) .......................................................... 703 (a)(4) .......................................................... 1008(a) (c)(1) .......................................................... 102 (c)(2) .......................................................... 102 (e) .......................................................... 102 Section315(b) .......................................................... 601 Section316(a)(last sentence) .......................................................... 101 ("Outstanding") (a)(1)(A) .......................................................... 502, 512 (a)(1)(B) .......................................................... 513 (b) .......................................................... 508 (c) .......................................................... 104(d) Section317(a)(1) .......................................................... 503 (a)(2) .......................................................... 504 (b) .......................................................... 1003 Section318(a) .......................................................... 111
- ------------------------ Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. TABLE OF CONTENTS
SECTION PAGE - --------------------- ----- PARTIES.............................................................................. 1 RECITALS OF THE COMPANY.............................................................. 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions.......................................................................... 1 Acquired Indebtedness................................................................ 2 Act.................................................................................. 2 Affiliate............................................................................ 2 Average Life to Stated Maturity...................................................... 2 Bankruptcy Law....................................................................... 2 Banks................................................................................ 2 Board of Directors................................................................... 2 Board Resolution..................................................................... 3 Business Day......................................................................... 3 Business Development Program......................................................... 3 Business Development Venture......................................................... 3 Capital Lease Obligation............................................................. 3 Capital Stock........................................................................ 3 Change of Control.................................................................... 3 Change of Control Purchase Date...................................................... 4 Change of Control Purchase Offer..................................................... 4 Change of Control Purchase Price..................................................... 4 Change of Control Triggering Event................................................... 4 Commission........................................................................... 4 Common Stock......................................................................... 4 Company.............................................................................. 4 Company Request or Company Order..................................................... 4 Consolidated......................................................................... 4 Consolidated Fixed Charge Coverage Ratio............................................. 4 Consolidated Income Tax Expense...................................................... 5 Consolidated Interest Expense........................................................ 5 Consolidated Net Income.............................................................. 5 Consolidated Net Tangible Assets..................................................... 6
- ------------------------ Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. ii
SECTION PAGE - --------------------- ----- Consolidated Non-Cash Charges........................................................ 6 Corporate Trust Office............................................................... 6 Corporation.......................................................................... 6 Credit Agreement..................................................................... 6 Currency Agreements.................................................................. 6 Default.............................................................................. 6 Defaulted Interest................................................................... 6 Equity Store......................................................................... 6 Event of Default..................................................................... 6 Exchange Act......................................................................... 6 Floating Rate Note Indenture......................................................... 7 Floating Rate Notes.................................................................. 7 Generally Accepted Accounting Principles............................................. 7 Guaranteed Debt...................................................................... 7 Guaranteed Obligations............................................................... 7 Holder............................................................................... 7 Indebtedness......................................................................... 7 Indenture............................................................................ 8 Interest Payment Date................................................................ 8 Interest Rate Agreements............................................................. 8 Investment........................................................................... 8 Investment Grade..................................................................... 8 Lien................................................................................. 8 Managing Agent....................................................................... 8 Maturity............................................................................. 8 Moody's.............................................................................. 9 Note Guarantee....................................................................... 9 Notes................................................................................ 9 Offering............................................................................. 9 Officers' Certificate................................................................ 9 Opinion of Counsel................................................................... 9 Outstanding.......................................................................... 9 Paying Agent......................................................................... 10 Permitted Indebtedness............................................................... 10 Permitted Investment................................................................. 12 Permitted Liens...................................................................... 12 Permitted Receivables Financing...................................................... 14
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SECTION PAGE - --------------------- ----- Person............................................................................... 14 Predecessor Note..................................................................... 14 Preferred Stock...................................................................... 14 Principal Property................................................................... 14 Prior Indentures..................................................................... 14 Public Equity Offering............................................................... 14 Qualified Capital Stock.............................................................. 15 Rating Agency........................................................................ 15 Rating Category...................................................................... 15 Rating Decline....................................................................... 15 Redeemable Capital Stock............................................................. 15 Redemption Date...................................................................... 15 Redemption Price..................................................................... 15 Regular Record Date.................................................................. 15 Responsible Officer.................................................................. 15 Securities Act....................................................................... 16 Security Register and Security Registrar............................................. 16 Senior Indebtedness.................................................................. 16 Significant Subsidiary............................................................... 16 S&P.................................................................................. 16 Special Record Date.................................................................. 16 Stated Maturity...................................................................... 16 Subordinated Indebtedness............................................................ 16 Subsidiary........................................................................... 16 Subsidiary Guarantor................................................................. 16 Temporary Cash Investments........................................................... 17 Transferred Receivables.............................................................. 17 Trust Indenture Act or TIA........................................................... 18 Trustee.............................................................................. 18 U.S. Government Obligations.......................................................... 18 Vice President....................................................................... 18 Voting Stock......................................................................... 18 Wholly Owned Subsidiary.............................................................. 18 SECTION 102. Compliance Certificates and Opinions................................................. 18 103. Form of Documents Delivered to Trustee............................................... 19 104. Acts of Holders...................................................................... 19 105. Notices, Etc., to Trustee, Company and Subsidiary Guarantors......................... 20
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SECTION PAGE - --------------------- ----- 106. Notice to Holders; Waiver............................................................ 21 107. Effect of Headings and Table of Contents............................................. 21 108. Successors and Assigns............................................................... 21 109. Separability Clause.................................................................. 21 110. Benefits of Indenture................................................................ 22 111. Governing Law........................................................................ 22 112. Legal Holidays....................................................................... 22 ARTICLE TWO NOTE FORMS SECTION 201. Forms Generally...................................................................... 22 202. Form of Face of Note................................................................. 23 203. Form of Reverse of Note.............................................................. 24 204. Form of Trustee's Certificate of Authentication...................................... 27 ARTICLE THREE THE NOTES SECTION 301. Title and Terms...................................................................... 27 302. Denominations........................................................................ 28 303. Execution, Authentication, Delivery and Dating....................................... 28 304. Temporary Notes...................................................................... 29 305. Registration, Registration of Transfer and Exchange.................................. 29 306. Mutilated, Destroyed, Lost and Stolen Notes.......................................... 30 307. Payment of Interest; Interest Rights Preserved....................................... 31 308. Persons Deemed Owners................................................................ 32 309. Cancellation......................................................................... 32 310. Computation of Interest.............................................................. 32 311. CUSIP Numbers........................................................................ 33 ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture.............................................. 33 402. Application of Trust Money........................................................... 34
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SECTION PAGE - --------------------- ----- ARTICLE FIVE REMEDIES SECTION 501. Events of Default.................................................................... 34 502. Acceleration of Maturity; Rescission and Annulment................................... 36 503. Collection of Indebtedness and Suits for Enforcement by Trustee...................... 37 504. Trustee May File Proofs of Claim..................................................... 37 505. Trustee May Enforce Claims Without Possession of Notes............................... 38 506. Application of Money Collected....................................................... 38 507. Limitation on Suits.................................................................. 38 508. Unconditional Right of Holders to Receive Principal, Premium and Interest............ 39 509. Restoration of Rights and Remedies................................................... 39 510. Rights and Remedies Cumulative....................................................... 39 511. Delay or Omission Not Waiver......................................................... 40 512. Control by Holders................................................................... 40 513. Waiver of Past Defaults.............................................................. 40 514. Waiver of Stay or Extension Laws..................................................... 40 515. Notice of Defaults................................................................... 41 ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults................................................................... 41 602. Certain Rights of Trustee............................................................ 41 603. Trustee Not Responsible for Recitals or Issuance of Notes............................ 42 604. May Hold Notes....................................................................... 42 605. Money Held in Trust.................................................................. 43 606. Compensation and Reimbursement....................................................... 43 607. Corporate Trustee Required; Eligibility.............................................. 43 608. Resignation and Removal; Appointment of Successor.................................... 44 609. Acceptance of Appointment by Successor............................................... 45 610. Merger, Conversion, Consolidation or Succession to Business.......................... 45 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND SUBSIDIARY GUARANTORS SECTION 701. Disclosure of Names and Addresses of Holders......................................... 46 702. Reports by Trustee................................................................... 46 703. Reports by Company and Subsidiary Guarantors......................................... 46
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SECTION PAGE - --------------------- ----- ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms................................. 47 802. Successor Substituted................................................................ 48 803. Notes to Be Secured in Certain Events................................................ 48 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders................................... 49 902. Supplemental Indentures With Consent of Holders...................................... 49 903. Execution of Supplemental Indentures................................................. 50 904. Effect of Supplemental Indentures.................................................... 50 905. Conformity with Trust Indenture Act.................................................. 50 906. Reference in Notes to Supplemental Indentures........................................ 50 907. Notice of Supplemental Indentures.................................................... 51 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, If Any, and Interest.................................. 51 1002. Maintenance of Office or Agency...................................................... 51 1003. Money for Note Payments to Be Held in Trust.......................................... 52 1004. Corporate Existence.................................................................. 53 1005. Payment of Taxes and Other Claims.................................................... 53 1006. Maintenance of Properties............................................................ 53 1007. Insurance............................................................................ 53 1008. Statement by Officers As to Default.................................................. 54 1009. Purchase of Notes Upon a Change of Control Triggering Event.......................... 54 1010. Limitation on Indebtedness........................................................... 55 1011. Limitation on Restricted Payments.................................................... 55 1012. Limitation on Liens.................................................................. 57 1013. Additional Guarantees................................................................ 57 1014. Provision of Financial Statements.................................................... 58 1015. Waiver of Certain Covenants.......................................................... 58 ARTICLE ELEVEN REDEMPTION OF NOTES SECTION 1101. Right of Redemption.................................................................. 58 1102. Applicability of Article............................................................. 59 1103. Election to Redeem; Notice to Trustee................................................ 59 1104. Selection by Trustee of Notes to Be Redeemed......................................... 59 1105. Notice of Redemption................................................................. 59
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SECTION PAGE - --------------------- ----- 1106. Deposit of Redemption Price.......................................................... 60 1107. Notes Payable on Redemption Date..................................................... 60 1108. Notes Redeemed in Part............................................................... 60 ARTICLE TWELVE NOTE GUARANTEES SECTION 1201. Note Guarantees...................................................................... 61 1202. Obligations of the Subsidiary Guarantors Unconditional............................... 62 1203. Ranking of Note Guarantee............................................................ 63 1204. Limitation of Note Guarantees........................................................ 63 1205. Release of Subsidiary Guarantors..................................................... 63 1206. Subsidiary Guarantors May Consolidate, Etc. on Certain Terms......................... 64 ARTICLE THIRTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance......................... 64 1302. Defeasance and Discharge............................................................. 64 1303. Covenant Defeasance.................................................................. 65 1304. Conditions to Defeasance or Covenant Defeasance...................................... 65 1305. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions............................................................ 66 1306. Reinstatement........................................................................ 67
INDENTURE, dated as of December 15, 1994 among FLEMING COMPANIES, INC., a corporation duly organized and existing under the laws of the State of Oklahoma (herein called, the "Company"), having its principal office at 6301 Waterford Boulevard, P.O. Box 26647, Oklahoma City, Oklahoma 73126, each of the Subsidiary Guarantors (as hereinafter defined), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States, Trustee (herein called, the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of 10 5/8% Senior Notes due 2001 (herein called, the "Notes"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. This Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended and shall, to the extent applicable, be governed by such provisions. The Company, directly or indirectly, owns beneficially and of record 100% of the Capital Stock of the Subsidiary Guarantors; the Company and the Subsidiary Guarantors are members of the same consolidated group of companies; the Subsidiary Guarantors will derive direct and indirect economic benefit from the issuance of the Notes; accordingly, the Subsidiary Guarantors have each duly authorized the execution and delivery of this Indenture to provide for the Guarantee by each of them with respect to the Notes as set forth in this Indenture. All things necessary have been done to make the Notes, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, to make the Note Guarantees of each of the Subsidiary Guarantors, when executed by the respective Subsidiary Guarantors and delivered hereunder, the valid obligations of the respective Subsidiary Guarantors, and to make this Indenture a valid agreement of the Company and each of the Subsidiary Guarantors, in accordance with their and its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; 2 (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms "cash transaction" and "self-liquidating paper", as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; PROVIDED, HOWEVER, that with respect to any computation required pursuant to Sections 1009, 1010, 1011 and 1012, such term shall mean such accounting principles as are generally accepted as of the date of the Indenture; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Acquired Indebtedness" means Indebtedness of a Person (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Average Life to Stated Maturity" means, as of the date of determination with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (A) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (B) the amount of each such principal payment by (ii) the sum of all such principal payments. "Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law. "Banks" means the banks or other financial institutions from time to time that are lenders under the Credit Agreement. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board, and, with respect to any Subsidiary Guarantor, either the board of directors of such Subsidiary Guarantor or any duly authorized committee of that board. 3 "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, and delivered to the Trustee, and, with respect to a Subsidiary Guarantor, a copy of a resolution certified by the Secretary or an Assistant Secretary of the Subsidiary Guarantor to have been duly adopted by its Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. "Business Development Program" means the business practice of the Company and its Subsidiaries of making or guaranteeing loans to, or making equity investments in, third parties engaged in the retail grocery business in exchange for long-term supply agreements with the Company or any Subsidiary. "Business Development Venture" means any Person participating in the Business Development Program and BFL of Tulsa, Inc., Butch's Finer Foods, Inc., South Ogden Super Duper, Inc., Stores located at 301 South Main, Smith Center, KS 66967, 109 West Main Street, Inc., Route 417, Inc., Route 16, Inc. and Route 219, Inc. "Capital Lease Obligation" means, with respect to any Person, any obligations of such Person and its Subsidiaries on a Consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation. "Capital Stock" of any Person means any and all shares, interests, partnership interests, participations or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the date hereof, including, without limitation, all Common Stock and Preferred Stock of such Person. "Change of Control" means the occurrence of any of the following events: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total outstanding Voting Stock of the Company; (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the shareholders of the Company, was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors then in office; (iii) the Company consolidates with or merges with or into any Person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with or merges into or with the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is changed into or exchanged for cash, securities or other property, other than any such transaction where the outstanding Voting 4 Stock of the Company is not changed or exchanged at all (except to the extent necessary to reflect a change in the jurisdiction of incorporation of the Company) or where (A) the outstanding Voting Stock of the Company is changed into or exchanged for (x) Voting Stock of the surviving corporation which is not Redeemable Capital Stock or (y) cash, securities or other property (other than Capital Stock of the surviving corporation) in an amount which could be paid by the Company as a Restricted Payment under Section 1011 (and such amount shall be treated as a Restricted Payment subject to Section 1011) and (B) immediately after such transaction no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total outstanding Voting Stock of the surviving corporation; or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with Section 801. "Change of Control Purchase Date" has the meaning specified in Section 1009. "Change of Control Purchase Offer" has the meaning specified in Section 1009. "Change of Control Purchase Price" has the meaning specified in Section 1009. "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Rating Decline. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act then the body performing such duties at such time. "Common Stock" means, with respect to any Person, any and all shares, interests, participations and other equivalents (however designated, whether voting or non-voting) of such Person's common stock, whether now outstanding or issued after the date of this Indenture, including, without limitation, all series and classes of such common stock. "Company" means the Person named as the "Company" in the first paragraph of this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman, any Vice Chairman, its President, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Trustee. "Consolidated" means, with respect to any Person, the consolidation of the accounts of such Person and each of its subsidiaries if and to the extent the accounts of such Person and each of its subsidiaries would normally be consolidated with those of such Person, all in accordance with GAAP consistently applied. "Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (a) the sum of Consolidated Net Income, Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash Charges deducted in computing 5 Consolidated Net Income, in each case, for such period, of the Company and its Subsidiaries on a Consolidated basis, all determined in accordance with GAAP to (b) Consolidated Interest Expense for such period; PROVIDED that (i) in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a PRO FORMA basis and (A) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (B) which was not outstanding during the period for which the computation is being made but which bears, at the option of the Company, a fixed or floating rate of interest, shall be computed by applying, at the option of the Company, either the fixed or floating rate; (ii) in making such computation, Consolidated Interest Expense attributable to interest on any Indebtedness under a revolving credit facility computed on a PRO FORMA basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period; and (iii) in making such computation, Consolidated Interest Expense attributable to interest on Indebtedness constituting obligations in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities computed on a PRO FORMA basis shall be computed excluding any contingent obligations and without assuming that any undrawn letter of credit has been drawn. "Consolidated Income Tax Expense" means for any period the provision for federal, state, local and foreign income taxes of the Company and its Subsidiaries for such period as determined on a Consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, without duplication, for any period, the sum of (a) the interest expense of the Company and its Subsidiaries for such period, as determined on a Consolidated basis in accordance with GAAP including, without limitation, (i) amortization of debt discount, (ii) the net cost under Interest Rate Agreements (including amortization of discount), (iii) the interest portion of any deferred payment obligation and (iv) accrued interest, plus (b) the aggregate amount for such period of dividends on any Redeemable Capital Stock or Preferred Stock of the Company and its Subsidiaries, (c) the interest component of the Capital Lease Obligations paid, accrued and/or scheduled to be paid, or accrued by such Person during such period and (d) all capitalized interest of the Company and its Subsidiaries determined on a Consolidated basis in accordance with GAAP. "Consolidated Net Income" means, for any period, the Consolidated net income (or loss) of the Company and its Subsidiaries for such period as determined on a Consolidated basis in accordance with GAAP, adjusted, to the extent included in calculating such net income (loss), by excluding, without duplication, (i) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (ii) the $101.3 million facilities consolidation and restructuring charge originally reflected in the Company's audited Consolidated statement of earnings for the year ended December 25, 1993, (iii) the portion of net income (or loss) of the Company and its Subsidiaries determined on a Consolidated basis allocable to minority interests in unconsolidated Persons to the extent that cash dividends or distributions have not actually been received by the Company or any Subsidiary, (iv) net income (or loss) of any Person combined with the Company or any Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination, (v) net gains or losses (less all fees and expenses relating thereto) in respect of dispositions of assets other than in the ordinary course of business and (vi) the net income of any Subsidiary to the extent that the declaration 6 of dividends or similar distributions by that Subsidiary of that income is not at the time permitted, 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 Subsidiary or its shareholders. "Consolidated Net Tangible Assets" means the total of all the assets appearing on the Consolidated balance sheet of the Company and its Consolidated Subsidiaries, less the following: (1) current liabilities; (2) reserves for depreciation and other asset valuation reserves; (3) intangible assets including, without limitation, items such as goodwill, trademarks, trade names, patents and unamortized debt discount and expense; and (4) appropriate adjustments on account of minority interests of other Persons holding stock in any majority-owned Subsidiary of the Company. "Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization and other non-cash charges of the Company and its Consolidated Subsidiaries for such period, as determined on a Consolidated basis in accordance with GAAP (excluding any non-cash charges which require an accrual or reserve for any future period). "Corporate Trust Office" means a corporate trust office of the Trustee, at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at 2200 Ross Avenue, 5th Floor, Dallas, Texas 75201. "Corporation" includes corporations, associations, companies and business trusts. "Credit Agreement" means the Credit Agreement, dated as of July 19, 1994, among the Company, the Banks, the Agents listed therein and the Managing Agent, as such agreement may be amended, renewed, extended, substituted, refinanced, restructured, replaced, supplemented or otherwise modified from time to time (including, without limitation, any successive renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementations or other modifications of the foregoing). "Currency Agreements" means any spot or forward foreign exchange agreements and currency swap, currency option or other similar financial agreements or arrangements entered into by the Company or any of its Subsidiaries. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 307. "Equity Store" means a Person in which the Company or any of its Subsidiaries has invested capital or to which it has made loans in accordance with the business practice of the Company and its Subsidiaries of making equity investments in Persons, and making or guaranteeing loans to such Persons, for the purpose of assisting such Person in acquiring, remodeling, refurbishing, expanding or operating one or more retail grocery stores and pursuant to which such Person is permitted or required to reduce the Company's or the Subsidiary's equity interest to a minority position over time (usually five to ten years). "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 7 "Floating Rate Note Indenture" means the indenture dated as of December 15, 1994 among the Company, each of the Subsidiary Guarantors and Texas Commerce Bank National Association, Trustee covering the Company's Floating Rate Notes. "Floating Rate Notes" means the Floating Rate Senior Notes due 2001 and, more particularly, means any notes authenticated and delivered under the Floating Rate Note Indenture. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, as applied from time to time by the Company in the preparation of its Consolidated financial statements. "Guaranteed Debt" means, with respect to any Person, without duplication, all Indebtedness of any other Person referred to in the definition of Indebtedness contained herein guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness other than to the Company, a Wholly Owned Subsidiary of the Company or a Subsidiary Guarantor or to assure the holder of such Indebtedness other than the Company, a Wholly Owned Subsidiary of the Company or a Subsidiary Guarantor against loss, (iii) to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services without requiring that such property be received or such services be rendered), (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or (v) otherwise to assure a creditor against loss, PROVIDED that the term "guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business. "Guaranteed Obligations" has the meaning specified in Section 1201. "Holder" means a Person in whose name a Note is registered in the Security Register. "Indebtedness" means, with respect to any Person, without duplication, (i) all liabilities of such Person for borrowed money (including overdrafts) or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities arising in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade payables arising in the ordinary course of business, (iv) all Capital Lease Obligations of such Person, (v) all obligations under Interest Rate Agreements or Currency Agreements of such Person, (vi) all Indebtedness referred to in clauses (i) through (v) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, 8 upon or with respect to property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, (vii) all Guaranteed Debt of such Person, (viii) all Redeemable Capital Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends, and (ix) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing of any liability of the types referred to in clauses (i) through (viii) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value is to be determined in good faith by the Board of Directors of the issuer of such Redeemable Capital Stock. "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Notes. "Interest Rate Agreements" means any interest rate protection agreements and other types of interest rate hedging agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements). "Investment" means, with respect to any Person, directly or indirectly, any advance (other than advances to customers in the ordinary course of business, which are recorded as accounts receivable on the balance sheet of the Company and its Subsidiaries), loan or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities issued by any other Person. "Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's or in the event Moody's or S&P shall cease rating the Notes and the Company shall select any other Rating Agency, the equivalent of such ratings by such other Rating Agency. "Lien" means any mortgage or deed of trust, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation or other encumbrance upon or with respect to any property or assets of any kind, real or personal, movable or immovable. "Managing Agent" means Morgan Guaranty Trust Company of New York as managing agent under the Credit Agreement and any future managing agent under the Credit Agreement. "Maturity", when used with respect to the Notes, means the date on which the principal of the Notes becomes due and payable as therein provided or as provided in this Indenture, 9 whether at Stated Maturity, purchase upon a Change of Control Triggering Event or redemption date, and whether by declaration of acceleration, Change of Control, call for redemption or purchase or otherwise. "Moody's" means Moody's Investors Service, Inc. or any successor rating agency. "Note Guarantee" means any guarantee by a Subsidiary Guarantor of the Company's obligations under this Indenture as set forth in Article Twelve of this Indenture and any additional guarantee of the Notes pursuant to Section 1013 hereof. "Notes" has the meaning stated in the first recital of this Indenture and, more particularly, means any Notes authenticated and delivered under this Indenture. "Offering" means the sale of the Notes by the Company to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc., as underwriters. "Officers' Certificate" means a certificate signed by the Chairman, any Vice Chairman, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, including an officer or employee of the Company, and who shall be reasonably acceptable to the Trustee. "Outstanding", when used with respect to the Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except: (i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Notes; PROVIDED that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Notes, except to the extent provided in Sections 1302 and 1303, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Thirteen; and (iv) Notes which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands the Notes are valid obligations of the Company; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, consent, notice or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Notes owned by the Company or any other obligor upon the Notes or any 10 Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the Company or such other obligor. "Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal of (and premium, if any, on) or interest on any Notes on behalf of the Company. "Permitted Indebtedness" means any of the following Indebtedness of the Company or any Subsidiary, as the case may be: (i) Indebtedness of the Company and guarantees of the Subsidiary Guarantors under the Credit Agreement (including Indebtedness of the Company under Tranche A of the Credit Agreement to the extent that the aggregate commitment thereunder does not exceed $900 million, the maximum aggregate commitment for such facility on the date of this Indenture, and any guarantees with respect thereto outstanding on the date of this Indenture and any additional guarantees executed in connection therewith) in an aggregate principal amount, together with Indebtedness, if any, incurred pursuant to clauses (ii) and (xi) of this definition of "Permitted Indebtedness", at any one time outstanding not to exceed $1.7 billion (after giving PRO FORMA effect to the use of proceeds of the Offering) less mandatory repayments actually made in respect of any term Indebtedness thereunder; (ii) Indebtedness of the Company under uncommitted bank lines of credit; PROVIDED, HOWEVER, that the aggregate principal amount of Indebtedness incurred pursuant to clauses (i), (ii) and (xi) of this definition of "Permitted Indebtedness" does not exceed $1.7 billion (after giving PRO FORMA effect to the use of proceeds of the Offering) less mandatory repayments actually made in respect of any term Indebtedness thereunder; (iii) Indebtedness of the Company evidenced by the Notes and the Note Guarantees with respect thereto under this Indenture; (iv) Indebtedness of the Company evidenced by the Floating Rate Notes and the Note Guarantees (as defined in the Floating Rate Note Indenture) with respect thereto under the Floating Rate Note Indenture; (v) Indebtedness of the Company or any Subsidiary outstanding on the date of this Indenture and listed on Schedule A hereto; (vi) obligations of the Company or any Subsidiary entered into in the ordinary course of business (a) pursuant to Interest Rate Agreements designed to protect against or manage exposure to fluctuations in interest rates in respect of Indebtedness or retailer notes receivables, which, if related to Indebtedness or retailer notes receivables, do not exceed the aggregate notional principal amount of such Indebtedness or such retailer notes receivables, as the case may be, to which such Interest Rate Agreements 11 relate, or (b) under any Currency Agreements in the ordinary course of business and designed to protect against or manage exposure to fluctuations in foreign currency exchange rates which, if related to Indebtedness, do not increase the amount of such Indebtedness other than as a result of foreign exchange fluctuations; (vii) Indebtedness of the Company owing to a Wholly Owned Subsidiary or of any Subsidiary owing to the Company or any Wholly Owned Subsidiary; PROVIDED that any disposition, pledge (except any pledge under the Credit Agreement or the Prior Indentures) or transfer of any such Indebtedness to a Person (other than the Company or another Wholly Owned Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company or Subsidiary, as the case may be, not permitted by this clause (vii); (viii) Indebtedness in respect of letters of credit, surety bonds and performance bonds provided in the ordinary course of business; (ix) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business; PROVIDED that such Indebtedness is extinguished within five Business Days of its incurrence; (x) Indebtedness of the Company or any Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets; (xi) Indebtedness of the Company evidenced by commercial paper issued by the Company; PROVIDED, HOWEVER, that the aggregate principal amount of Indebtedness incurred pursuant to clauses (i), (ii) and (xi) of this definition of "Permitted Indebtedness" does not exceed $1.7 billion (after giving PRO FORMA effect to the use of proceeds of the Offering) less mandatory repayments actually made in respect of any term Indebtedness thereunder; (xii) Indebtedness of the Company pursuant to guarantees by the Company or any Subsidiary Guarantor in connection with any Permitted Receivables Financing; PROVIDED, HOWEVER, that such Indebtedness shall not exceed 15% of the book value of the Transferred Receivables or, in the case of receivables arising from direct financing leases for retail electronics systems, 30% of the book value thereof; (xiii) Indebtedness of the Company and its Subsidiaries in addition to that described in clauses (i) through (xii) of this definition of "Permitted Indebtedness," together with any other outstanding Indebtedness incurred pursuant to this clause (xiii), not to exceed $100 million at any time outstanding in the aggregate; and (xiv) any renewals, extensions, substitutions, refundings, refinancings or replacements (each, a "refinancing") of any Indebtedness described in clauses (iii), (iv) and (v) of this definition of "Permitted Indebtedness", including any successive refinancings, so long as (A) the aggregate principal amount of Indebtedness represented thereby is not increased by such refinancing to an amount greater than such principal amount plus the lesser of (x) the stated amount of any premium or other payment required to be paid in connection with such a refinancing pursuant to the terms of the Indebtedness 12 being refinanced or (y) the amount of premium or other payment actually paid at such time to refinance the Indebtedness, plus, in either case, the amount of expenses of the Company or Subsidiary, as the case may be, incurred in connection with such refinancing and (B) such refinancing does not reduce the Average Life to Stated Maturity or the Stated Maturity of such Indebtedness. "Permitted Investment" means (i) Investment in any Wholly Owned Subsidiary or any Investment in any Person by the Company or any Wholly Owned Subsidiary as a result of which such Person becomes a Wholly Owned Subsidiary or any Investment in the Company by a Wholly Owned Subsidiary; (ii) intercompany Indebtedness to the extent permitted under clause (vii) of the definition of "Permitted Indebtedness"; (iii) Temporary Cash Investments; (iv) sales of goods on trade credit terms consistent with the Company's past practices or otherwise consistent with trade credit terms in common use in the industry; (v) Investments in direct financing leases for equipment owned by the Company and leased to its customers in the ordinary course of business consistent with past practice; (vi) Investments in existence on the date of this Indenture; and (vii) any substitutions or replacements of any Investment so long as the aggregate amount of such Investment is not increased by such substitution or replacement. "Permitted Liens" means, with respect to any Person: (a) any Lien existing as of the date of this Indenture; (b) any Lien arising by reason of (1) any judgment, decree or order of any court, so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (2) taxes, assessments, governmental charges or levies not yet delinquent or which are being contested in good faith; (3) security for payment of workers compensation or other insurance; (4) security for the performance of tenders, leases (including, without limitation, statutory and common law landlord's liens) and contracts (other than contracts for the payment of money); (5) zoning restrictions, easements, licenses, reservations, title defects, rights of others for rights-of-way for utilities, sewers, electric lines, telephone or telegraph lines and other similar purposes, provisions, covenants, conditions, waivers and restrictions on the use of 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 or owner of the leased property, with or without consent of the lessee), none of which materially impairs the use of any parcel of property material to the operation of the business of the Company or any Subsidiary or the value of such property for the purpose of such business; (6) deposits to secure public or statutory obligations; (7) operation of law in favor of growers, dealers and suppliers of fresh fruits and vegetables, carriers, mechanics, materialmen, laborers, employees or suppliers, incurred in the ordinary course of business for sums which are not yet delinquent or are being contested in good faith by negotiations or by appropriate proceedings which suspend the collection thereof; (8) the grant by the Company to licensees, pursuant to security agreements, of security interests in trademarks and goodwill, patents and trade secrets of the Company to secure the damages, if any, of such licensees, 13 resulting from the rejection of the license of such licensees in a bankruptcy, reorganization or similar proceeding with respect to the Company; or (9) security for surety or appeal bonds; (c) any extension, renewal, refinancing or replacement of any Lien on property of the Company or any Subsidiary existing as of the date of this Indenture and securing the Indebtedness under the Credit Agreement or the Prior Indenture in an aggregate principal amount not to exceed the principal amount of the Indebtedness outstanding as permitted by clause (i) of the definition of "Permitted Indebtedness" so long as no additional collateral is granted as security thereby; PROVIDED that this clause (c) shall not apply to any Lien on such property that has not been subject to a Lien for 30 days; (d) any Lien on any property or assets of a Subsidiary in favor of the Company or any Wholly Owned Subsidiary; (e) any Lien securing Acquired Indebtedness created prior to (and not created in connection with, or in contemplation of) the incurrence of such Indebtedness by the Company or any Subsidiary; PROVIDED that such Lien does not extend to any assets of the Company or any Subsidiary other than the assets acquired in the transaction resulting in such Acquired Indebtedness being incurred by the Company or Subsidiary, as the case may be; (f) any Lien to secure the performance of bids, trade contracts, letters of credit and other obligations of a like nature and incurred in the ordinary course of business of the Company or any Subsidiary; (g) any Lien securing any Interest Rate Agreements or Currency Agreements permitted to be incurred pursuant to clause (v) of the definition of "Permitted Indebtedness" or any collateral for the Indebtedness to which such Interest Rate Agreements or Currency Agreements relate; (h) any Lien securing the Notes; (i) any Lien on an asset securing Indebtedness (including Capital Lease Obligations) incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset; PROVIDED that such Lien attaches to such asset concurrently or within 180 days after the acquisition or completion of construction thereof; and (j) any Lien on real or personal property securing Capital Lease Obligations of the Company or any Subsidiary as lessee with respect to such real or personal property (1) to the extent that the Company or such Subsidiary has entered into (and not terminated), or has a binding commitment for, subleases on terms which, to the Company, are at least as favorable, on a current basis, as the terms of the corresponding capital lease or (2) under which the aggregate principal component of the annual rent payable does not exceed $5 million; (k) any Lien on a Financing Receivable or other receivable that is transferred in a Permitted Receivables Financing; 14 (l) any Lien consisting of any pledge to any Person of Indebtedness owed by any Subsidiary to the Company or any Wholly Owned Subsidiary; PROVIDED that (i) such Subsidiary is a Subsidiary Guarantor and (ii) the principal amount pledged does not exceed the Indebtedness secured by such pledge; and (m) any extension, renewal, refinancing or replacement, in whole or in part, of any Lien described in the foregoing clause (a) so long as no additional collateral is granted as security thereby. "Permitted Receivables Financing" means any transaction involving the transfer (by way of sale, pledge or otherwise) by the Company or any of its Subsidiaries of receivables to any other Person, PROVIDED that after giving effect to such transaction the sum of (i) the aggregate uncollected balances of the receivables so transferred ("Transferred Receivables") PLUS (ii) the aggregate amount of all collections on Transferred Receivables theretofore received by the seller but not yet remitted to the purchaser, in each case at the date of determination, would not exceed $750 million. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Note" of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 306 in exchange for a mutilated security or in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred stock whether now outstanding or issued after the date of this Indenture, including, without limitation, all classes and series of preferred or preference stock of such Person. "Principal Property" means any manufacturing or processing plant, office facility, retail store, warehouse or distribution center, including, in each case, the fixtures appurtenant thereto, located within the continental United States and owned and operated now or hereafter by the Company or any Subsidiary (other than an Equity Store or a Business Development Venture) and having a book value on the date as of which the determination is being made of more than 2% of Consolidated Net Tangible Assets. "Prior Indentures" means the Indenture, dated March 15, 1986, between the Company and Morgan Guaranty Trust Company of New York, as Trustee, covering $100 million aggregate principal amount of the Company's 9 1/2% Debentures due 2016 and the Indenture, dated December 1, 1989, between the Company and Morgan Guaranty Trust Company of New York, as Trustee, covering $275 million aggregate principal amount of the Company's Medium-Term Notes. "Public Equity Offering" means a primary public offering of equity securities of the Company pursuant to an effective registration statement under the Securities Act with net cash proceeds of at least $50 million. 15 "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock. "Rating Agency" means any of (i) S&P, (ii) Moody's or (iii) if S&P or Moody's or both shall not make a rating of the Notes publicly available, a security rating agency or agencies, as the case may be, nationally recognized in the United States, selected by the Company, which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Category" means (i) with respect to S&P, any of the following categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect to Moody's, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradation, gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (E.G., with respect to S&P, a decline in rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one gradation). "Rating Decline" means the occurrence on, or within 90 days after, the date of public notice of the occurrence of a Change of Control or of the intention of the Company or Persons controlling the Company to effect a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of the following: (i) if the Notes are rated by either Rating Agency as Investment Grade immediately prior to the beginning of such period, the rating of the Notes by both Rating Agencies shall be below Investment Grade; or (ii) if the Notes are rated below Investment Grade by both Rating Agencies immediately prior to the beginning of such period, the rating of the Notes by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "Redeemable Capital Stock" means any Capital Stock that, either by its terms or by the terms of any security into which it is convertible or exchangeable or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to any Stated Maturity of the principal of the Notes or is redeemable at the option of the holder thereof at any time prior to any such Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to any such Stated Maturity at the option of the holder thereof. "Redemption Date", when used with respect to any Note to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the June 1 or December 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the 16 executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Securities Act" means the Securities Act of 1933, as amended. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means Indebtedness of the Company other than Subordinated Indebtedness. "Significant Subsidiary" of the Company means any Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1.02(v) of Regulation S-X under the Securities Act. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill Inc., a New York corporation, or any successor rating agency. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity" when used with respect to any Indebtedness or any installment of interest thereon, means the date specified in such Indebtedness as the fixed date on which the principal of or premium on such Indebtedness or such installment of interest is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company subordinated in right of payment to the Notes. "Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. "Subsidiary Guarantor" means any Person that is required pursuant to Section 1013, on or after the date of this Indenture, to execute a Note Guarantee of the Notes until a successor replaces any such party pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor, and the following Subsidiaries of the Company: ATI, Inc., Badger Markets, Inc., Baker's Supermarkets, Inc., Ball Motor Service, Inc., Boogaart Stores of Nebraska, Inc., Central Park Super Duper, Inc., Commercial Cold/Dry Storage Company, Consumers Markets, Inc., D.L. Food Stores, Inc., Del-Arrow Super Duper, Inc., Festival Foods, Inc., Fleming Direct Sales Corporation, Fleming Foods East, Inc., Fleming Foods of Alabama, Inc., Fleming Foods of Ohio, Inc., Fleming Foods of Tennessee, Inc., Fleming Foods of Texas, Inc., Fleming Foods of Virginia, Inc., Fleming Foods South, Inc., Fleming Foods West, Inc., Fleming Foreign Sales Corporation, Fleming Franchising, Inc., Fleming Holdings, Inc., Fleming International, Ltd., Fleming Site Media, Inc., Fleming 17 Supermarkets of Florida, Inc., Fleming Technology Leasing Company, Inc., Fleming Transportation Service, Inc., Food Brands, Inc., Food-4-Less, Inc., Food Holdings, Inc., Food Saver of Iowa, Inc., Gateway Development Co., Inc., Gateway Food Distributors, Inc., Gateway Foods, Inc., Gateway Foods of Altoona, Inc., Gateway Foods of Pennsylvania, Inc., Gateway Foods of Twin Ports, Inc., Gateway Foods Service Corporation, Grand Central Leasing Corporation, Great Bend Supermarkets, Inc., Hub City Transportation, Inc., Kensington and Harlem, Inc., LAS, Inc., Ladysmith East IGA, Inc., Ladysmith IGA, Inc., Lake Markets, Inc., M&H Desoto, Inc., M&H Financial Corp., M&H Realty Corp., Malone & Hyde, Inc., Malone & Hyde of Lafayette, Inc., Manitowoc IGA, Inc., Moberly Foods, Inc., Mt. Morris Super Duper, Inc., Niagara Falls Super Duper, Inc., Northern Supermarkets of Oregon, Inc., Northgate Plaza, Inc., 109 West Main Street, Inc., 121 East Main Street, Inc., Peshtigo IGA, Inc., Piggly Wiggly Corporation, Quality Incentive Company, Inc., Rainbow Transportation Services, Inc., Route 16, Inc., Route 219, Inc., Route 417, Inc., Richland Center IGA, Inc, Scrivner, Inc., Scrivner-Food Holdings, Inc., Scrivner of Alabama, Inc., Scrivner of Illinois, Inc., Scrivner of Iowa, Inc., Scrivner of Kansas, Inc., Scrivner of New York, Inc., Scrivner of North Carolina, Inc., Scrivner of Pennsylvania, Inc., Scrivner of Tennessee, Inc., Scrivner of Texas, Inc., Scrivner Super Stores of Illinois, Inc., Scrivner Super Stores of Iowa, Inc., Scrivner Transportation, Inc., Sehon Foods, Inc., Selected Products, Inc., Sentry Markets, Inc., Smar Trans, Inc., Southern Supermarkets, Inc. (TX), Southern Supermarkets, Inc. (OK), Southern Supermarkets of Louisiana, Inc., Star Groceries, Inc., Store Equipment, Inc., Sundries Service, Inc., Switzer Foods, Inc., 35 Church Street, Inc., Thompson Food Basket, Inc., 29 Super Market, Inc., 27 Slayton Avenue, Inc. and WPC, Inc. "Temporary Cash Investments" means (i) any evidence of Indebtedness issued by the United States, or an instrumentality or agency thereof, and guaranteed fully as to principal, premium, if any, and interest by the United States, (ii) any certificate of deposit issued by, or time deposit of, a bank or trust company in the United States having combined capital and surplus and undivided profits of not less than $500 million, whose debt has a rating, at the time as of which any investment therein is made, of "A" (or higher) according to Moody's or "A" (or higher) according to S&P, (iii) commercial paper issued by an entity (other than an Affiliate or Subsidiary of the Company) with a rating, at the time as of which any investment therein is made, of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, (iv) any money market deposit accounts issued or offered by a financial institution in the United States having capital and surplus in excess of $500 million, (v) short term tax exempt bonds with a rating, at the time as of which any investment is made therein, of "Aa2" (or higher) according to Moody's or "AA" (or higher) according to S&P, (vi) shares in a mutual fund, the investment objectives and policies of which require it to invest substantially all of its assets in investments of the type described in clause (v) and (vii) repurchase and reverse repurchase obligations underlying securities of the types described in clauses (i) and (ii) entered into with any financial institution meeting the qualifications specified in clause (ii); PROVIDED that in the case of clauses (i), (ii), (iii), (v) and (vii), such investment matures within one year from the date of acquisition thereof. "Transferred Receivables" has the meaning specified in the definition of "Permitted Receivables Financing" in this Section. 18 "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this Indenture was executed, except as provided in Section 905. "Trustee" means the Person named as the Trustee in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; PROVIDED that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" means stock of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock (other than directors' qualifying shares) of which is owned by the Company or another Wholly Owned Subsidiary. SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. 19 Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 1008) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. In giving such opinion, such counsel may rely upon opinions of local counsel reasonably satisfactory to the Trustee. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are 20 herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The principal amount and serial numbers of Notes held by any Person, and the date of holding the same, shall be proved by the Security Register. (d) If the Company shall solicit from the Holders of Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Notes shall be computed as of such record date; PROVIDED that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than 330 days after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 105. NOTICES, ETC., TO TRUSTEE, COMPANY AND SUBSIDIARY GUARANTORS. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, 21 (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Department, or (2) the Company or any Subsidiary Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture, or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides notice of any event to Holders by the Company, any Subsidiary Guarantor or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder when so mailed, whether or not such Holder actually receives such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice for every purpose hereunder. SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 108. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company and the Subsidiary Guarantors shall bind their respective successors and assigns, whether so expressed or not. SECTION 109. SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Notes or the Note Guarantees 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. 22 SECTION 110. BENEFITS OF INDENTURE. Nothing in this Indenture, in the Notes or the Note Guarantees, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Securities Registrar and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 111. GOVERNING LAW. This Indenture, the Notes and the Note Guarantees shall be governed by and construed in accordance with the law of the State of New York. This Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended and shall, to the extent applicable, be governed by such provisions. SECTION 112. LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date or Stated Maturity or Maturity of any Note shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date, or at the Stated Maturity or Maturity; PROVIDED that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be. ARTICLE TWO NOTE FORMS SECTION 201. FORMS GENERALLY. The Notes and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. 23 The definitive Notes shall be printed, lithographed or engraved on steel-engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Notes may be listed, all as determined by the officers of the Company executing such Notes, as evidenced by their execution of such Notes. SECTION 202. FORM OF FACE OF NOTE. FLEMING COMPANIES, INC. 10 5/8% SENIOR NOTE DUE 2001 CUSIP NO. $ Fleming Companies, Inc., an Oklahoma corporation (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to or registered assigns, the principal sum of Dollars on December 15, 2001, at the office or agency of the Company referred to below, and to pay interest thereon from December 15, 1994, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually on June 15 and December 15, of each year, commencing June 15, 1995, at the rate of 10 5/8% per annum, until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Notes from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be the [date] or [date] (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and such Defaulted Interest, and (to the extent lawful) interest on such Defaulted Interest at the rate borne by the Notes, may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any, on) and interest on this Note will be made at the office or agency of the Company maintained for that purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose, 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; PROVIDED, HOWEVER, that payment of interest may be made at the option of the Company (i) by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register or (ii) if requested in writing at least 10 days prior to a Regular Record Date or a Special Record Date, as the case may be, by a Person who is entitled thereto with respect to at least $1 million in principal amount of the Notes, by transfer to an account maintained by such Person at a bank located in the United States. 24 Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: FLEMING COMPANIES, INC. By ___________________________________ Attest: ___________________________________ Secretary SECTION 203. FORM OF REVERSE OF NOTE. This Note is one of a duly authorized issue of securities of the Company designated as its 10 5/8% Senior Notes due 2001 (herein called the "Notes"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $300,000,000, which may be issued under an indenture (herein called the "Indenture") dated as of December 15, 1994, among the Company, the Subsidiary Guarantors named therein and Texas Commerce Bank National Association, trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Subsidiary Guarantors, the Trustee and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. The Notes are subject to redemption at the option of the Company, upon not less than 30 nor more than 60 days notice at any time after December 15, 1999, as a whole or in part, at the election of the Company, at a Redemption Price equal to the percentage of the principal amount of the Notes set forth below if redeemed during the 12-month period beginning on December 15 of the years indicated below (subject to the right of Holders of record on relevant record dates to receive accrued interest due on an Interest Payment Date):
YEAR REDEMPTION PRICE - ---------------------------------------------------- ----------------- 1999................................................ 103.0% 2000................................................ 101.5%
and thereafter at 100% of the principal amount together in the case of any such redemption with accrued interest, if any, to the Redemption Date, all as provided in the Indenture. 25 In addition, up to 20% of the initial aggregate principal amount of the Notes may be redeemed on or prior to December 15, 1997, at the option of the Company, within 180 days of a Public Equity Offering at a redemption price equal to 110% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of redemption (subject to the right of Holders of record on relevant record dates to receive interest due on relevant Interest Payment Dates); PROVIDED that after giving effect to such redemption at least $200 million aggregate principal amount of the Notes remain outstanding. Upon the occurrence of a Change of Control Triggering Event, the Holder of this Note may require the Company, subject to certain limitations provided in the Indenture, to purchase this Note at a purchase price in cash in an amount equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. In the case of any redemption of Notes, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Notes, or one or more Predecessor Notes, of record at the close of business on the relevant Record Date referred to on the face hereof. Notes (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. In the event of redemption of this Note in part only, a new Note or Notes for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, the principal of all the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company and any Subsidiary Guarantor on this Note and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company and the Subsidiary Guarantors with certain conditions set forth therein, which provisions apply to this Note. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the Subsidiary Guarantors and the rights of the Holders under the Indenture at any time by the Company, the Subsidiary Guarantors and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to waive compliance by the Company and the Subsidiary Guarantors with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. 26 No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any, on) and interest on this Note at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registerable on the Security Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the time of due presentment of this Note for registration of transfer, the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company, the Subsidiary Guarantors or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Subsidiary Guarantors, the Trustee nor any such agent shall be affected by notice to the contrary. Interest on this Note shall be computed on the basis of a 360-day year of twelve 30-day months. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. FORM OF ASSIGNMENT FOR VALUE RECEIVED ___________________ hereby sell(s), assign(s) and transfer(s) unto ______________ ______________ ______________ (please insert social security or other identifying number of assignee) the within Note and hereby irrevocably constitutes and appoints ______________ ______________ as agent to transfer the said Note on the books of the Company with the full power of substitution in the premises. Dated: ______________________________________ Signature(s) 27 Signature must be guaranteed by a bank or trust company or a member firm of a major stock exchange ______________________________________ Signature Guarantee NOTICE: The signature on the assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever. SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication shall be in substantially the following form: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture. TEXAS COMMERCE BANK NATIONAL ASSOCIATION as Trustee By ___________________________________ Authorized Signatory ARTICLE THREE THE NOTES SECTION 301. TITLE AND TERMS. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to $300,000,000, except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 303, 304, 305, 306, 801, 906, 1009 or 1108. The Notes shall be known and designated as the "10 5/8% Senior Notes due 2001" of the Company. Their Stated Maturity shall be December 15, 2001, and they shall bear interest at the rate of 10 5/8% per annum from December 15, 1994, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable semi-annually on June 15 and December 15 of each year, commencing June 15, 1995 and at said Stated Maturity, until the principal thereof is paid or duly provided for. The principal of (and premium, if any, on) and interest on the Notes shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; PROVIDED, HOWEVER, that, at the option of the Company, interest may be paid by 28 (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears in the Security Register or (ii) if requested in writing at least 10 days prior to a Regular Record Date or a Special Record Date, as the case may be, by a person who is entitled thereto with respect to at least $1 million in principal amount of the Notes by transfer to an account maintained by such Person at a bank located in the United States. The Notes shall be redeemable as provided in Article Eleven. SECTION 302. DENOMINATIONS. The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Notes shall be executed on behalf of the Company by its Chairman, any Vice Chairman, its President or a Vice President, under its corporate seal reproduced thereon and attested by its Secretary or an Assistant Secretary. The signature of any of these officers on the Notes may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Notes. Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Company Order shall authenticate and deliver such Notes. Each Note shall be dated the date of its authentication. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of a Responsible Officer, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Notes authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Notes executed in the 29 name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Notes surrendered for such exchange and of like principal amount; and the Trustee, upon Company Request of the successor Person, shall authenticate and deliver Notes as specified in such request for the purpose of such exchange. If Notes shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Notes, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Notes at the time Outstanding for Notes authenticated and delivered in such new name. SECTION 304. TEMPORARY NOTES. Pending the preparation of definitive Notes, the Company may execute and upon Company Order the Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Notes may determine, as conclusively evidenced by their execution of such Notes. If temporary Notes are issued, the Company will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes. SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Security Register shall be open to inspection by the Trustee. The Trustee is hereby initially appointed as security registrar (the "Security Registrar") for the purpose of registering Notes and transfers of Notes as herein provided. Upon surrender for registration of transfer of any Note at the office or agency of the Company designated pursuant to Section 1002, the Company shall execute and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denomination or denominations of a like aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination and of a like aggregate principal amount, upon surrender of the Notes to be 30 exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Company shall execute and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company and, pursuant to the Note Guarantees, the Subsidiary Guarantors, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange or redemption of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 303, 304, 801, 906, 1108 or 1009 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the selection of Notes to be redeemed under Section 1104 and ending at the close of business on the day of such mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If (i) any mutilated Note is surrendered to the Trustee, or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of actual notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any new Note under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company and, pursuant to the Note Guarantees, the Subsidiary Guarantors, whether or not the destroyed, 31 lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; PROVIDED, HOWEVER, that each installment of interest may at the Company's option be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears in the Security Register or (ii) if requested in writing at least 10 days prior to a Regular Record Date or a Special Record Date, as the case may be, by a person who is entitled thereto with respect to at least $1 million in principal amount of the Notes by transfer to an account maintained by such Person at a bank located in the United States. Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on the Regular Record Date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Notes (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given in the manner provided for in Section 106, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, such Defaulted Interest shall be paid to the Persons in 32 whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. SECTION 308. PERSONS DEEMED OWNERS. Prior to the due presentment of a Note for registration of transfer, the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company, the Subsidiary Guarantors or the Trustee may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of (and premium, if any, on) and (subject to Sections 305 and 307) interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Company, any Subsidiary Guarantor, the Trustee or any agent of the Company, any Subsidiary Guarantor or the Trustee shall be affected by notice to the contrary. SECTION 309. CANCELLATION. All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Notes previously authenticated hereunder which the Company has not issued and sold, and all Notes so delivered shall be promptly cancelled by the Trustee. If the Company shall so acquire any of the Notes, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures and certification of their disposal delivered to the Company unless by Company Order the Company shall direct that cancelled Notes be returned to it. SECTION 310. COMPUTATION OF INTEREST. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. 33 SECTION 311. CUSIP NUMBERS. The Company may use "CUSIP" numbers in issuing the Notes (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that no representation is made as to the correctness of such "CUSIP" numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such "CUSIP" numbers. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall upon Company Request cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Notes issued under this Indenture) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture when (1) either (A) all Notes theretofore authenticated and delivered (except (i) lost, stolen or destroyed Notes which have been replaced or paid as provided in Section 306 and (ii) Notes for whose payment funds have theretofore been deposited in trust by the Company with the Trustee or any Paying Agent or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, and either the Company or any Subsidiary Guarantor has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for principal, premium, if any, and interest to the date of such deposit; (2) the Company or any Subsidiary Guarantor has paid all other sums payable hereunder by the Company and any Subsidiary Guarantors; and (3) 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 the satisfaction and discharge of this Indenture have been complied with and that such satisfaction and discharge will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company or any Subsidiary Guarantor is a party or by which it is bound. 34 Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. ARTICLE FIVE REMEDIES SECTION 501. EVENTS OF DEFAULT. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest on any Note issued under this Indenture when such interest becomes due and payable, and continuance of such default for a period of 60 days; or (2) default in the payment of the principal of (or premium, if any, on) any Note at its Stated Maturity; or (3) (A) default in the performance, or breach, of any covenant or agreement of the Company or any Subsidiary Guarantor under this Indenture (other than a default in the performance, or breach, of a covenant or agreement which is specifically dealt with in the immediately preceding clauses (1) and (2) or clauses (B) and (C) of this clause (3), and such default or breach shall continue for a period of 60 days after written notice has been given, by certified mail, (x) to the Company by the Trustee or (y) to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Notes specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (B) default in the performance or breach of the provisions in Section 801; or (C) the Company shall have failed to make or consummate a Change of Control Purchase Offer in accordance with the provisions of Section 1009; or (4) (A) there shall have occurred any default in the payment of principal of any Indebtedness under any agreements, indentures (including any such default under the Floating Rate Note Indenture) or instruments under which the Company or any Subsidiary of the Company then has outstanding Indebtedness in excess of $50 million, when the same shall become due and payable in full and such default shall have continued 35 after any applicable grace period and shall not have been cured or waived or (B) an event of default as defined in any of the agreements, indentures or instruments described in clause (A) of this clause (4) shall have occurred and the Indebtedness thereunder, if not already matured at its final maturity in accordance with its terms, shall have been accelerated or otherwise declared due and payable, or required to be prepaid or repurchased (other than by regularly scheduled required prepayment), prior to the stated maturity thereof; or (5) any Person entitled to take the actions described in this clause (5), after the occurrence of any event of default on Indebtedness in excess of $50 million in the aggregate of the Company or any Subsidiary, shall notify the Trustee of the intended sale or disposition of any assets of the Company or any Subsidiary that have been pledged to or for the benefit of such Person to secure such Indebtedness or shall commence proceedings, or take any action (including by way of set-off) to retain in satisfaction of any Indebtedness, or to collect on, seize, dispose of or apply, any such assets of the Company or any Subsidiary (including funds on deposit or held pursuant to lock-box and other similar arrangements), pursuant to the terms of any agreement or instrument evidencing any such Indebtedness or in accordance with applicable law; or (6) any Note Guarantee of any Significant Subsidiary individually or any other Subsidiaries if such Subsidiaries in the aggregate represent 15% or more of the assets of the Company and its Subsidiaries on a Consolidated basis with respect to such Notes shall for any reason cease to be, or be asserted in writing by the Company, any Subsidiary Guarantor or any other Subsidiary of the Company, as applicable, not to be, in full force and effect, enforceable in accordance with its terms, except pursuant to the release of any such Note Guarantee in accordance with this Indenture; or (7) one or more judgments, orders or decrees for the payment of money in excess of $50 million (net of amounts covered by insurance, bond or similar instrument), either individually or in an aggregate amount, entered against the Company or any Subsidiary or any of their respective properties which is not discharged and either (i) any creditor shall have commenced an enforcement proceeding upon such judgment, order or decree or (ii) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of pending appeal or otherwise, shall not be in effect; or (8) the entry by a court of competent jurisdiction of (A) a decree or order for relief in respect of the Company or any Significant Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy Law or (B) a decree or order adjudging the Company or any Significant Subsidiary bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Significant Subsidiary under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order for relief shall continue to be in effect, or any such other decree or order shall be unstayed and in effect, for a period of 60 consecutive days; or 36 (9) (A) the commencement by the Company or any Significant Subsidiary of a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent, (B) the Company or any Significant Subsidiary consents to the entry of a decree or order for relief in respect of the Company or such Significant Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy Law or to the commencement of any bankruptcy or insolvency case or proceeding against it, (C) the Company or any Significant Subsidiary files a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, (D) the Company or any Significant Subsidiary (x) consents to the filing of such petition or the appointment of, or taking possession by, a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or such Significant Subsidiary or of any substantial part of its property, (y) makes an assignment for the benefit of creditors or (z) admits in writing its inability to pay its debts generally as they become due or (E) the Company or any Significant Subsidiary takes any corporate action in furtherance of any such actions in this clause (9). SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default (other than an Event of Default specified in Section 501(8) or 501(9)) shall occur and be continuing, then and in every such case the Trustee, by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes Outstanding may declare all amounts payable in respect of such Notes to be due and payable immediately, by a notice in writing to the Company and to the Trustee, and upon any such declaration such amounts shall become immediately due and payable. If an Event of Default specified in Section 501(8) or 501(9) occurs then all amounts payable in respect of such Notes shall IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Notes Outstanding, by written notice to the Company and the Trustee, may rescind or annul such declaration if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (B) all overdue interest on all Outstanding Notes, and (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes; and (2) all Events of Default, other than the non-payment of principal of such Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission or annulment shall affect any subsequent default or impair any right consequent thereon. 37 SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if (a) default is made in the payment of any installment of interest on any Note when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Note at the Maturity thereof, the Company will, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal (and premium, if any) and interest, and interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installment of interest, at the rate borne by the Notes, and, in addition thereto, 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. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Notes, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Notes or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and 38 (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due 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 606. 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 thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES. All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered. SECTION 506. APPLICATION OF MONEY COLLECTED. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 606; SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any, on,) and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal (and premium, if any) and interest, respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto. SECTION 507. LIMITATION ON SUITS. No Holder of any Notes shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; 39 (2) the Holders of not less than 25% in principal amount of the Outstanding Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee, for 60 days after its receipt of such notice, request and offer of reasonably satisfactory indemnity, has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority or more in principal amount of the Outstanding Notes; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST. Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, Article Thirteen) and in such Note, of the principal of (and premium, if any, on) and (subject to Section 307) interest on, such Note on the respective Stated Maturities expressed in such Note (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Subsidiary Guarantors, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and, subject to the provisions of Section 507, every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and 40 remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. CONTROL BY HOLDERS. The Holders of not less than a majority in principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, PROVIDED that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) the Trustee need not take any action which might involve it in personal liability or be unjustly prejudicial to the Holders not consenting. SECTION 513. WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in principal amount of the Outstanding Notes may on behalf of the Holders of all the Notes waive any past default hereunder and its consequences, except a default (1) in respect of the payment of the principal of (or premium, if any, on) or interest on any Note, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 514. WAIVER OF STAY OR EXTENSION LAWS. Each of the Company and the Subsidiary Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each of the Company and the Subsidiary Guarantors (to 41 the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 515. NOTICE OF DEFAULTS. Within ten days after the occurrence of any Default hereunder, the Company shall transmit in the manner and to the extent provided in TIA Section 313(c), notice to the Trustee of such Default hereunder known to the Company or any Subsidiary Guarantor, unless such Default shall have been cured or waived. ARTICLE SIX THE TRUSTEE SECTION 601. NOTICE OF DEFAULTS. Within 90 days after the occurrence of any Default hereunder, the Trustee shall transmit in the manner and to the extent provided in TIA Section 313(c), notice of such Default hereunder known to the Trustee, unless such Default shall have been cured or waived; PROVIDED, HOWEVER, that, except in the case of a Default in the payment of the principal of (or premium, if any, on) or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and PROVIDED FURTHER that in the case of any Default of the character specified in Section 501(3) no such notice to Holders shall be given until at least 30 days after the occurrence thereof. SECTION 602. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of TIA Sections 315(a) through 315(d): (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; 42 (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled at all reasonable times to examine the books, records and premises of the Company and the Subsidiary Guarantors, personally or by agent or attorney; (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (8) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 603. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES. The recitals contained herein and in the Notes, except for the Trustee's certificates of authentication, shall be taken as the statements of the Company or the Subsidiary Guarantors, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility of Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company of Notes or the proceeds thereof. SECTION 604. MAY HOLD NOTES. The Trustee, any Paying Agent, any Security Registrar or any other agent of the Company or of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company and any Subsidiary Guarantor with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar or such other agent. 43 SECTION 605. MONEY HELD IN TRUST. Cash in United States dollars or U.S. Government Obligations held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any such cash or U.S. Government Obligations received by it hereunder except as otherwise agreed in writing with the Company or any Subsidiary Guarantor. SECTION 606. COMPENSATION AND REIMBURSEMENT. The Company agrees: (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance, administration or enforcement of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute indebtedness and shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Company, the Trustee shall have a claim prior to the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any, on) or interest on particular Notes. SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50 million. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. 44 (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609. (b) The Trustee may resign at any time by giving written notice thereof to the Company addressed to the Company and the Subsidiary Guarantors. If the instrument of acceptance by a successor Trustee required by Section 609 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of not less than a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Company addressed to the Company and the Subsidiary Guarantors. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company, any Subsidiary Guarantor or by any Holder who has been a bona fide Holder of a Note for at least six months, or (2) the Trustee shall cease to be eligible under Section 607 and shall fail to resign after written request therefor by the Company, any Subsidiary Guarantor or by any Holder who has been a bona fide Holder of a Note for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company, by a Board Resolution, may remove the Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Company, the Subsidiary Guarantors and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. 45 (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to the Holders of Notes in the manner provided for in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, PROVIDED such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes; and in case at that time any of the Notes shall not have been authenticated, any successor Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor 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; PROVIDED, HOWEVER, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. 46 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND SUBSIDIARY GUARANTORS SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS. Every Holder of Notes, by receiving and holding the same, agrees with the Company and the Trustee that none of the Company or the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b). SECTION 702. REPORTS BY TRUSTEE. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Notes, the Trustee shall transmit to the Holders, in the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such May 15 if required by TIA Section 313(a). SECTION 703. REPORTS BY COMPANY AND SUBSIDIARY GUARANTORS. The Company and each of the Subsidiary Guarantors shall: (1) file with the Trustee, within 15 days after the Company or such Subsidiary Guarantor is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company or such Subsidiary Guarantor may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company or any of the Subsidiary Guarantors is not required to file information, documents or reports pursuant to either of said Sections, then they shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit by mail to all Holders, in the manner and to the extent provided in TIA Section 313(c), within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; PROVIDED, HOWEVER, that any Subsidiary Guarantor shall be relieved of its obligations under clauses (1) and (2) of this Section to the extent that it is relieved of its obligations under Section 13 47 or Section 15(d) of the Exchange Act by the Commission pursuant to the terms of any no-action letter addressed to the Company or such Subsidiary Guarantor from the staff of the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not, in a single transaction or a series of related transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of affiliated Persons, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in a sale, assignment, transfer, lease or disposal of all or substantially all of the properties and assets of the Company and its Subsidiaries on a Consolidated basis to any other Person or group of affiliated Persons, unless at the time and after giving effect thereto: (1) either (A) the Company shall be the surviving or continuing corporation or (B) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, conveyance, transfer, lease or disposition, the properties and assets of the Company substantially as an entirety (the "Surviving Entity") (i) shall be a corporation duly organized and validly existing under the laws of the United States, any state thereof or the District of Columbia and (ii) shall, in any case, expressly assume, by a supplement indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company under the Notes and this Indenture, and this Indenture shall remain in full force and effect; (2) immediately before and immediately after giving effect to such transaction on a PRO FORMA basis (and treating any Indebtedness which becomes an obligation of the Company or any of its Subsidiaries in connection with or as a result of such transaction as having been incurred at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; (3) immediately before and immediately after giving effect to such transaction on a PRO FORMA basis (on the assumption that the transaction occurred on the first day of the four-quarter period immediately prior to the consummation of such transaction with the appropriate adjustments with respect to the transaction being included in such PRO FORMA calculation), the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions of Section 1010; 48 (4) each Subsidiary Guarantor, unless it is the other party to the transactions described above, shall have, by supplemental indenture to this Indenture, confirmed that its respective Note Guarantees with respect to the Notes shall apply to such Person's obligations under this Indenture and the Notes; (5) if any property or assets of the Company or any of its Subsidiaries would thereupon become subject to any Lien, the provisions of Section 1012 are complied with; and (6) the Company shall have delivered, or caused to be delivered, to the Trustee an Officers' Certificate and an Opinion of Counsel, each to the effect that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other transaction and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 802. SUCCESSOR SUBSTITUTED. Upon any consolidation, merger, sale, assignment, conveyance, transfer, lease or other transaction described in, and complying with the provisions of, Section 801 in which the Company is not the continuing corporation, the successor Person formed or remaining shall succeed to, and be substituted for, and may exercise every right and power of, the Company, as the case may be, and the Company shall be discharged from all obligations and covenants under this Indenture and the Notes, PROVIDED that, in the case of a transfer by lease, the predecessor shall not be released from its obligations with respect to the payment of principal (premium, if any) and interest on the Notes. SECTION 803. NOTES TO BE SECURED IN CERTAIN EVENTS. If, upon any such consolidation of the Company with or merger of the Company into any other corporation, or upon any conveyance, lease or transfer of the property of the Company substantially as an entirety to any other Person, any property or assets of the Company would thereupon become subject to any Lien, then unless such Lien could be created pursuant to Section 1012 without equally and ratably securing the Notes, the Company, prior to or simultaneously with such consolidation, merger, conveyance, lease or transfer, will as to such property or assets, secure the Notes Outstanding (together with, if the Company shall so determine any other Indebtedness of the Company now existing or hereinafter created which is not subordinate in right of payment to the Notes) equally and ratably with (or prior to) the Indebtedness which upon such consolidation, merger, conveyance, lease or transfer is to become secured as to such property or assets by such Lien, or will cause such Notes to be so secured. 49 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders, the Company, the Subsidiary Guarantors, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained herein and in the Notes; or (2) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default; or (4) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee pursuant to the requirements of Section 609; or (5) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; PROVIDED that such action shall not adversely affect the interests of the Holders in any material respect; (6) to add new Subsidiary Guarantors pursuant to Section 1013; (7) to secure the Notes pursuant to the requirements of Section 803 or otherwise; or (8) to comply with any requirements of the Commission in order to effect and maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Notes, by Act of said Holders delivered to the Company, the Subsidiary Guarantors and the Trustee, the Company, when authorized by a Board Resolution, the Subsidiary Guarantors and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (1) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption or purchase thereof, or change the coin or currency in which any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or 50 (2) reduce the percentage in principal amount of the Outstanding Notes, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or (3) modify any of the provisions of this Section or Sections 513 and 1015, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. (a) In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. (b) Each Subsidiary Guarantor hereby appoints the Company as its attorney-in-fact to execute, on its behalf, any indenture supplemental hereto to be entered into solely for the purpose specified in Section 901(6). SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to the Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company and the Subsidiary Guarantors shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Company and the Subsidiary Guarantors, to any such supplemental indenture may be prepared and executed by the Company and the Subsidiary Guarantors and authenticated and delivered by the Trustee in exchange for Outstanding Notes. 51 SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Sections 901 and 902, the Company shall give notice thereof to the Holders of each Outstanding Note affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture; PROVIDED, HOWEVER, that the Company shall not be required to give notice of any indenture supplemental hereto entered into solely for the purpose specified in Section 901(5), (6) or (8), notice with respect to which shall be given by the Company when it is next required to give notice pursuant to this Section. ARTICLE TEN COVENANTS SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. The Company covenants and agrees for the benefit of the Holders that it will duly and punctually pay the principal of (and premium, if any, on) and interest on the Notes in accordance with the terms of the Notes and this Indenture. SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in The City of New York, an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company or any Subsidiary Guarantor in respect of the Notes and this Indenture may be served. The Corporate Trust Office of the Trustee shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any 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, and the Company and each of the Subsidiary Guarantors hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified with respect to the Notes as contemplated by Section 301, the Company hereby designates as a Place of Payment for the Notes the office or agency of the Trustee in the Borough of Manhattan, The City of New York, and initially appoints Texas Commerce Trust Company of New York, 80 Broad Street, Suite 400, New York, New York 10004, as Paying Agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; 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 City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. 52 SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any, on) or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Notes, it will, on or before each due date of the principal of (and premium, if any, on), or interest on, any Notes, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any, on) or interest on Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal (and premium, if any) or interest; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any, on) or interest on any Note and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper 53 published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. CORPORATE EXISTENCE. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory) and franchises of the Company and each Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders. Notwithstanding anything to the contrary in this Section 1004, the Company shall be permitted to consolidate or merge any of its Subsidiaries with or into the Company or any Wholly Owned Subsidiary of the Company. SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (b) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1006. MAINTENANCE OF PROPERTIES. The Company will cause all properties owned by the Company or any Subsidiary or used or held for use in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent the Company from discontinuing the maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 1007. INSURANCE. The Company will at all times keep all of its and its Subsidiaries properties which are of an insurable nature insured with insurers, believed by the Company to be responsible, against loss or damage to the extent that property of similar character is usually so insured by corporations similarly situated and owning like properties. 54 SECTION 1008. STATEMENT BY OFFICERS AS TO DEFAULT. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 1008, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. SECTION 1009. PURCHASE OF NOTES UPON A CHANGE OF CONTROL TRIGGERING EVENT. (a) Upon the occurrence of a Change of Control Triggering Event, each Holder shall have the right to require that the Company purchase such Holder's Notes in whole or in part in integral multiples of $1,000 (the "Change of Control Purchase Offer"), at a purchase price (the "Change of Control Purchase Price") in cash in an amount equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase (the "Change of Control Purchase Date"), in accordance with the procedures set forth in paragraphs (c) and (d) of this Section. (b) Upon the occurrence of a Change of Control Triggering Event and prior to the mailing of the notice to Holders provided for in paragraph (c) below, the Company covenants to either (x) repay in full all Indebtedness under the Credit Agreement or offer to repay in full all such Indebtedness and to repay the Indebtedness of each of the Banks that has accepted such offer or (y) obtain any requisite consent under the Credit Agreement to permit the purchase of the Notes as provided for in paragraph (c) below or take any other action as may be required under the Credit Agreement to permit such purchase. (c) Within 30 days following any Change of Control Triggering Event, the Company shall give to each Holder of the Notes in the manner provided in Section 106 a notice stating: (1) that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Company to purchase in whole or in part such Holder's Notes at the Change of Control Purchase Price; (2) the circumstances and relevant facts regarding such Change of Control Triggering Event (including but not limited to information with respect to PRO FORMA historical income, cash flow and capitalization after giving effect to the Change of Control); (3) the Change of Control Purchase Date which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed or such later date as is necessary to comply with the Exchange Act; (4) that any Note, or portion thereof, not tendered will continue to accrue interest; (5) that, unless the Company defaults in the payment of the Change of Control Purchase Price, any Notes accepted for payment of the Change of Control Purchase Price pursuant to the Change of Control Purchase Offer shall cease to accrue interest after the Change of Control Purchase Date; and 55 (6) the instructions a Holder must follow in order to have its Notes purchased in accordance with paragraph (d) of this Section. (d) Holders electing to have Notes purchased will be required to surrender such Notes to the Company at the address specified in the notice at least five Business Days prior to the Change of Control Purchase Date. Holders will be entitled to withdraw their election if the Company receives, not later than five Business Days prior to the Change of Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase by the Holder as to which his election is to be withdrawn and a statement that such Holder is withdrawing his election to have such Notes purchased. Holders whose Notes are purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. (e) The Company will comply with the applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and other applicable securities laws and regulations in connection with a Change of Control Purchase Offer. SECTION 1010. LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any of its Subsidiaries to, create, assume, or directly or indirectly guarantee or in any other manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including any Acquired Indebtedness) other than Permitted Indebtedness, unless, at the time of such event (and after giving effect on a PRO FORMA basis to (i) the incurrence of such Indebtedness; (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired at the beginning of such four-quarter period; and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition had occurred at the beginning of such four-quarter period), the Consolidated Fixed Charge Coverage Ratio of the Company for the four full fiscal quarters immediately preceding such event, taken as one period and calculated on the assumption that such Indebtedness had been incurred on the first day of such four-quarter period and, in the case of Acquired Indebtedness, on the assumption that the related acquisition (whether by means of purchase, merger or otherwise) also had occurred on such date with the appropriate adjustments with respect to such acquisition being included in such PRO FORMA calculation, would have been at least equal to 1.75 to 1. SECTION 1011. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any Subsidiary of the Company to, directly or indirectly: (1) declare or pay any dividend on, or make any distribution to, the holders of, any Capital Stock of the Company (other than dividends or distributions payable solely in shares of Qualified Capital Stock of the Company or in options, warrants or other rights to purchase such Qualified Capital Stock); 56 (2) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any Capital Stock of the Company or any Subsidiary or any options, warrants or other rights to acquire such Capital Stock; (3) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, prior to any scheduled repayment, sinking fund payment or maturity, any Indebtedness of the Company which is subordinate in right of payment to the Notes or of any Subsidiary Guarantor that is subordinate to such Subsidiary Guarantor's Note Guarantee; (4) declare or pay any dividend or distribution on any Capital Stock of any Subsidiary of the Company to any Person (other than the Company or any Wholly Owned Subsidiary of the Company) or purchase, redeem or otherwise acquire or retire for value any Capital Stock of any Subsidiary of the Company held by any Person (other than the Company or any Wholly Owned Subsidiary of the Company); (5) create, assume or suffer to exist any guarantee of Indebtedness of any Affiliate of the Company (other than a Wholly Owned Subsidiary of the Company in accordance with the terms of the Indenture); or (6) make any Investment (other than any Permitted Investment) in any Person (such payments described in clauses (1) through (6) and not excepted therefrom are collectively referred to herein as "Restricted Payments") unless at the time of and immediately after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (i) no Default or Event of Default shall have occurred and be continuing and (ii) the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in accordance with the provisions described under Section 1010. (b) Notwithstanding paragraph (a) above, the Company and its Subsidiaries may take the following actions so long as (with respect to clauses (2), (3), and (4), below) no Default or Event of Default shall have occurred and be continuing: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of paragraph (a) above; (2) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of, a substantially concurrent issuance and sale (other than to a Subsidiary) of shares of Capital Stock of the Company (other than Redeemable Capital Stock, unless the redemption provisions of such Redeemable Capital Stock prohibit the redemption thereof prior to the date on which the Capital Stock to be acquired or retired was by its terms required to be redeemed); (3) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of shares of Capital Stock of the Company (other than 57 Redeemable Capital Stock, unless the redemption provisions of such Redeemable Capital Stock prohibit the redemption thereof prior to the Stated Maturity of the Subordinated Indebtedness to be acquired or retired); and (4) the purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for, or out of the net cash proceeds of a substantially concurrent incurrence or sale (other than to a Subsidiary) of, new Subordinated Indebtedness of the Company so long as (A) the principal amount of such new Subordinated Indebtedness does not exceed the principal amount (or, if such Subordinated Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Subordinated Indebtedness being so purchased, redeemed, defeased, acquired or retired, PLUS the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Subordinated Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, PLUS the amount of expenses of the Company incurred in connection with such refinancing, (B) such new Subordinated Indebtedness is subordinated to the Notes to the same extent as such Subordinated Indebtedness so purchased, redeemed, defeased, acquired or retired, and (C) such new Subordinated Indebtedness has an Average Life longer than the Average Life of the Notes and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Notes. SECTION 1012. LIMITATION ON LIENS. The Company will not, and will not permit any Subsidiary of the Company to, directly or indirectly, create, incur, assume or suffer to exist any Lien (other than Permitted Liens) of any kind upon any Principal Property or upon any shares of stock or indebtedness of any Subsidiary of the Company now owned or acquired after the date of this Indenture, or any income or profits therefrom, unless (a) the Notes are directly secured equally and ratably with (or prior to in the case of Liens with respect to Subordinated Indebtedness) the obligation or liability secured by such Lien or (b) any such Lien is in favor of the Company or any Subsidiary Guarantor. SECTION 1013. ADDITIONAL GUARANTEES. If the Company or any of its Subsidiaries shall acquire or form a Subsidiary, the Company will cause any such Subsidiary (other than an Equity Store or Business Development Venture, PROVIDED that such Equity Store or Business Development Venture does not guarantee the Senior Indebtedness of any other Person) that is or becomes a Significant Subsidiary or that guarantees any Senior Indebtedness of the Company or of any Subsidiary Guarantor to become a Subsidiary Guarantor with respect to the Notes. Any such Subsidiary shall become a Subsidiary Guarantor by (i) executing and delivering to the Trustee a supplemental indenture in form and substance reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall guarantee all of the obligations of the Company with respect to 58 the Notes issued under this Indenture on a senior basis and (ii) delivering to the Trustee an Opinion of Counsel reasonably satisfactory to the Trustee to the effect that a supplemental indenture has been duly executed and delivered by such Subsidiary and is in compliance with the terms of this Indenture. SECTION 1014. PROVISION OF FINANCIAL STATEMENTS. Whether or not the Company is subject to Section 13(a), 13(c) or 15(d) of the Exchange Act, the Company will file with the Commission the annual reports, quarterly reports and other documents that the Company is or would have been required to file with the Commission pursuant to such Section 13(a), 13(c) or 15(d) of the Exchange Act if the Company were so subject, such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required so to file such documents if the Company were so subject. The Company will also in any event within 15 days of each Required Filing Date (within 30 days of such Required Filing Date for any reports filed on Form 10-K) (i) transmit by mail to each Holder, as its name and address appears in the security register, without cost to such holder and (ii) file with the Trustee copies of the annual reports, quarterly reports and other documents which the Company is or would have been required to file with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act if the Company were so subject. SECTION 1015. WAIVER OF CERTAIN COVENANTS. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 803 or Sections 1007 through 1014, inclusive, if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Notes, by Act of such Holders, waive such compliance in such instance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF NOTES SECTION 1101. RIGHT OF REDEMPTION. The Notes may be redeemed, at the option of the Company, as a whole or from time to time in part, at any time on or after December 15, 1999, subject to the conditions and at the Redemption Prices specified in the form of Note, together with accrued interest to the Redemption Date. Up to 20% of the initial aggregate principal amount of the Notes may be redeemed on or prior to December 15, 1997, at the option of the Company, within 180 days of a Public Equity Offering with the net proceeds of such offering at a redemption price equal to 110% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of redemption (subject to the right of holders of record on relevant record dates to receive 59 interest due on relevant interest payment dates); PROVIDED that after giving effect to such redemption at least $200 million aggregate principal amount of the Notes remain outstanding. SECTION 1102. APPLICABILITY OF ARTICLE. Redemption of Notes at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem any Notes pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Notes to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Notes to be redeemed pursuant to Section 1104. SECTION 1104. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED. If less than all the Notes are to be redeemed, the particular Notes to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Notes not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions of the principal of Notes; PROVIDED, HOWEVER, that no such partial redemption shall reduce the portion of the principal amount of a Note not redeemed to less than $1,000. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed. SECTION 1105. NOTICE OF REDEMPTION. Notice of redemption shall be given in the manner provided for in Section 106 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Notes to be redeemed. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all Outstanding Notes are to be redeemed, the identification by CUSIP Numbers, if any, (and, in the case of a partial redemption, the principal amounts) of the particular Notes to be redeemed, 60 (4) that on the Redemption Date the Redemption Price (together with accrued interest, if any, to the Redemption Date payable as provided in Section 1107) will become due and payable upon each such Note, or the portion thereof, to be redeemed, and that interest thereon will cease to accrue on and after said date, and (5) the place or places where such Notes are to be surrendered for payment of the Redemption Price. Notice of redemption of Notes to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1106. DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, any Notes, or any portions thereof, to be redeemed on that date. SECTION 1107. NOTES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Notes, or portions thereof, shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; PROVIDED, HOWEVER, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Notes. SECTION 1108. NOTES REDEEMED IN PART. Any Note which is to be redeemed only in part (pursuant to the provisions of this Article shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holders attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered. 61 ARTICLE TWELVE NOTE GUARANTEES SECTION 1201. NOTE GUARANTEES. Subject to the provisions of this Article Twelve, each Subsidiary Guarantor hereby irrevocably and unconditionally guarantees, jointly and severally, on a senior basis to each Holder and to the Trustee, on behalf of the Holders, (i) the due and punctual payment of the principal of and interest on each Note, when and as the same shall become due and payable, whether at Stated Maturity or purchase upon a Change of Control Triggering Event, and whether by declaration of acceleration, Change of Control Triggering Event, call for redemption or otherwise, the due and punctual payment of interest on the overdue principal of and interest, if any, on the Notes, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of such Note and this Indenture and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at Stated Maturity or purchase upon a Change of Control Triggering Event, and whether by declaration of acceleration, Change of Control Triggering Event, call for redemption or otherwise (the obligations in clauses (i) and (ii) hereof being the "Guaranteed Obligations"). Without limiting the generality of the foregoing, each Subsidiary Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Company to the Holders or the Trustee under the Notes and the Indenture but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company. The Subsidiary Guarantors hereby agree that their obligations hereunder shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any such Note or this Indenture, any failure to enforce the provisions of any such Note or this Indenture, any waiver, modification or indulgence granted to the Company with respect thereto, by any Holder or any other circumstances which may otherwise constitute a legal or equitable discharge or defense of the Company or a surety or guarantor. The Subsidiary Guarantors hereby waive diligence, presentment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, the benefit of discussion, protest or notice with respect to any such Note or the Indebtedness evidenced thereby and all demands whatsoever (except as specified above), and covenant that the Guaranteed Obligations will not be discharged as to any such Note except by payment in full of such Guaranteed Obligations and as provided in Sections 401, 1102 and 1205. Each Subsidiary Guarantor further agrees that, as between such Subsidiary Guarantor and the Holders, (i) the maturity of the Guaranteed Obligations may be accelerated as provided in Article Five, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Company or any other Subsidiary Guarantor in respect of the Guaranteed Obligations, and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article Five, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by each Subsidiary 62 Guarantor. In addition, without limiting the foregoing provisions, upon the effectiveness of an acceleration under Article Five, the Trustee shall promptly make a demand for payment on any Notes in respect of which the Guaranteed Obligations provided for in this Article Twelve are not discharged. Each Subsidiary Guarantor hereby irrevocably waives any claim or other rights that it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Subsidiary Guarantor's obligations under this Indenture, or any other document or instrument including, without limitation, any right of reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Holders against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or in any other manner, payment or security on account of such claim or other rights. Each Subsidiary Guarantor shall be subrogated to all rights of the Holders of the Notes pursuant to any Note Guarantee against the Company in respect of any amounts paid by such Subsidiary Guarantor on account of such Note pursuant to the provisions of this Indenture; PROVIDED, HOWEVER, that no Subsidiary Guarantor shall be entitled to enforce or to receive any payments arising out of, or based upon such right of subrogation until the principal of (and premium, if any) and interest on all Notes issued hereunder shall have been paid in full to the Holders entitled thereto. If any amount shall be paid to any Subsidiary Guarantor in violation of this paragraph and the Guaranteed Obligations shall not have been paid in full, such amount shall be deemed to have been paid to such Subsidiary Guarantor for the benefit of, and held in trust for the benefit of, the Holders, and shall forthwith be paid to the Trustee. Each Subsidiary Guarantor acknowledges that it will receive direct and indirect benefits from the issuance of the Notes and that the waiver set forth in this Section 1201 is knowingly made in contemplation of such benefits. Without limiting the generality of the foregoing, the Subsidiary Guarantors hereby expressly and specifically waive the benefits of Section 26-7 through 26-9 of the General Statutes of North Carolina, as amended from time to time, and any similar statute or law of any other jurisdiction, as the same may be amended from time to time. SECTION 1202. OBLIGATIONS OF THE SUBSIDIARY GUARANTORS UNCONDITIONAL. Nothing contained in this Article Twelve, elsewhere in this Indenture or in any Note is intended to or shall impair, as between the Subsidiary Guarantors and the Holders, the obligation of the Subsidiary Guarantors, which obligations are independent of the obligations of the Company under the Notes and this Indenture and are absolute and unconditional, to pay to the Holders the Guaranteed Obligations as and when the same shall become due and payable in accordance with the provisions of this Indenture, or is intended to or shall affect the relative rights of the Holders and creditors of the Subsidiary Guarantors, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture. Each payment to be made by any Subsidiary Guarantor hereunder in respect of the Guaranteed Obligations shall be payable in the currency or currencies in which such Guaranteed Obligations are denominated. 63 SECTION 1203. RANKING OF NOTE GUARANTEES. Each Subsidiary Guarantor covenants and agrees, and each Holder of a Note by his acceptance thereof likewise covenants and agrees, that each Note Guarantee will be an unsecured senior obligation of the Subsidiary Guarantor issuing such Note Guarantee, ranking PARI PASSU in right of payment with all other existing and future Senior Indebtedness of such Subsidiary Guarantor and senior in right of payment to any future Indebtedness of such Subsidiary Guarantor that is expressly subordinated to Senior Indebtedness of such Subsidiary Guarantor. SECTION 1204. LIMITATION OF NOTE GUARANTEES. The Company and each Subsidiary Guarantor, and each Holder of a Note by his acceptance thereof, hereby confirm that it is the intention of all such parties that each Subsidiary Guarantor shall be liable under this Indenture only for amounts aggregating up to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. To effectuate the foregoing intention, the Holders hereby irrevocably agree that in the event that any such Note Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of the Subsidiary Guarantor under such Note Guarantee shall be reduced to the maximum amount, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor, permissible under the applicable fraudulent conveyance or similar law. SECTION 1205. RELEASE OF SUBSIDIARY GUARANTORS. (a) Any Subsidiary Guarantor shall be released from and relieved of its obligations under this Article Twelve (1) upon defeasance in accordance with Section 1302, (2) upon the payment in full of all the Guaranteed Obligations or (3) upon the sale by the Company or any Subsidiary of such Subsidiary Guarantor to any Person other than a Subsidiary of the Company provided that such sale does not result in a sale, assignment, transfer, lease or disposal of all or substantially all of the properties and assets of the Company and its Subsidiaries on a Consolidated basis. Upon the delivery by the Company to the Trustee of an Officers' Certificate and, if requested by the Trustee, an Opinion of Counsel to the effect that the transaction giving rise to the release of such obligations was made by the Company in accordance with the provisions of this Indenture and the Notes, the Trustee shall execute any documents reasonably required in order to evidence the release of the Subsidiary Guarantors from their obligations. If any of the Guaranteed Obligations are revived and reinstated after the termination of such Note Guarantee, then all of the obligations of the Subsidiary Guarantors under such Note Guarantee shall be revived and reinstated as if such Note Guarantee had not been terminated until such time as the Guaranteed Obligations are paid in full, and the Subsidiary Guarantors shall execute any documents reasonably satisfactory to the Trustee evidencing such revival and reinstatement. (b) Upon (i) the sale or disposition of all of the Common Stock of a Subsidiary Guarantor (by merger or otherwise) to a Person other than the Company and which sale or disposition is otherwise in compliance with the terms of this Indenture, or (ii) the unconditional and full release in writing as provided herein of such Subsidiary Guarantor from all 64 Indebtedness arising hereunder, such Subsidiary Guarantor shall be deemed released from all obligations under this Article Twelve; PROVIDED, HOWEVER, that any such termination upon such sale or disposition shall occur if and only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure, Indebtedness of the Company or any Subsidiary, shall also terminate upon such sale or disposition. Upon the delivery by the Company to the Trustee of an Officers' Certificate and, if requested by the Trustee, an Opinion of Counsel to the effect that the transaction giving rise to the release of such obligations was made in accordance with the provisions of this Indenture and the Notes, the Trustee shall execute any documents reasonably required in order to evidence the release of such Subsidiary Guarantor from its obligations. Any Subsidiary Guarantor not so released remains liable for the full amount of principal of (and premium, if any) and interest on the Notes as provided in this Article Twelve. SECTION 1206. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. Except as set forth in Section 1205 and in Articles Eight and Ten hereof, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or a Subsidiary Guarantor or shall prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety to the Company or a Subsidiary Guarantor. ARTICLE THIRTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at its option and at any time, with respect to the Notes, elect to have either Section 1302 or Section 1303 be applied to all Outstanding Notes upon compliance with the conditions set forth below in this Article Thirteen. SECTION 1302. DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 1301 of the option applicable to this Section 1302, the Company shall be deemed to have been discharged from its obligations with respect to all Outstanding Notes on the date the conditions set forth in Section 1304 are satisfied (hereinafter, "defeasance"). For this purpose, such 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 1305 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 insofar as such Notes are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Notes to receive payments in respect of the principal of (and premium, if any, on) and interest on such Notes when such payments are due or on the Redemption Date with respect to such Notes, as the case may be, (B) the Company's obligations with respect to such Notes under Sections 304, 305, 306, 1002 and 1003, (C) the rights, 65 powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article Thirteen. Subject to compliance with this Article Thirteen, the Company may exercise its option under this Section 1302 notwithstanding the prior exercise of its option under Section 1303 with respect to the Notes. SECTION 1303. COVENANT DEFEASANCE. Upon the Company's exercise under Section 1301 of the option applicable to this Section 1303, the Company shall be released from its obligations under any covenant contained in Section 801(3) and Section 803 and in Sections 1007 through 1015 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 to be "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. For this purpose, such covenant defeasance means that, with respect to the Outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501(3), but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to application of either Section 1302 or Section 1303 to the Outstanding Notes: (1) the Company shall irrevocably have deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall agree to comply with the provisions of this Article Thirteen applicable to it) in trust, for the benefit of the Holders, cash in United States dollars, U.S. Government Obligations or a combination thereof in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the principal of, and premium, if any, and interest on the Outstanding Notes on the Stated Maturity or on an optional redemption date (such date being referred to as the "Defeasance Redemption Date"), as the case may be, if in the case of a Defeasance Redemption Date prior to electing to exercise either defeasance or covenant defeasance, the Company has delivered to the Trustee an irrevocable notice to redeem all of the outstanding Notes on such Defeasance Redemption Date; (2) in the case of an election under Section 1302, the Company shall have delivered to the Trustee an opinion of independent counsel in the United States stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (y) 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 in the United States shall confirm that, the Holders of the 66 Outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such 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 defeasance had not occurred; (3) in the case of an election under Section 1303, the Company shall have delivered to the Trustee an opinion of independent counsel in the United States to the effect that the Holders of the Outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (4) no Default or Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit or, insofar as paragraphs (8) and (9) of Section 501 hereof are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (5) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default under, this Indenture or any other material agreement or instrument to which the Company or any Subsidiary Guarantor is a party or by which it is bound; (6) 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 or any Subsidiary Guarantor over the other creditors of the Company or any Subsidiary Guarantor or with the intent of defecting, hindering, delaying or defrauding creditors of the Company, any Subsidiary Guarantor or others; and (7) the Company shall have delivered to the Trustee an Officers' Certificate stating that all conditions precedent provided for relating to either the defeasance under Section 1302 or the covenant defeasance under Section 1303 (as the case may be) have been complied with. SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee -- collectively for purposes of this Section 1305, the "Trustee") pursuant to Section 1304 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 its own 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 (and 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 U.S. Governmental Obligations deposited pursuant to 67 Section 1304 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Notes. Anything in this Article Thirteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1304 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance, as applicable, in accordance with this Article. SECTION 1306. REINSTATEMENT. If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 1305 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 1302 or 1303, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1305, and the Company shall execute all documents reasonably satisfactory to the Trustee evidencing such revival and reinstatement; PROVIDED, HOWEVER, that if the Company makes any payment of principal of (or premium, if any, on) 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. This Indenture may be signed in any number of counterparts each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Indenture. 68 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. FLEMING COMPANIES, INC. SEAL By /s/ David R. Almond ----------------------------------- Title: Senior Vice President - General Counsel and Secretary Attest: /s/ John M. Thompson --------------------------- Title: Vice President, Treasurer and Assistant Secretary TEXAS COMMERCE BANK NATIONAL ASSOCIATION By /s/ ----------------------------------- Title: Assistant Vice President and Trust Officer Attest: /s/ --------------------------- Title: Vice President and Trust Officer ATI, Inc. Badger Markets, Inc. Baker's Supermarkets, Inc. Ball Motor Service, Inc. Boogaart Stores of Nebraska, Inc. Central Park Super Duper, Inc. Commercial Cold/Dry Storage Company Consumers Markets, Inc. D.L. Food Stores, Inc. Del-Arrow Super Duper, Inc. Festival Foods, Inc. Fleming Direct Sales Corporation Fleming Foods East, Inc. Fleming Foods of Alabama, Inc. Fleming Foods of Ohio, Inc. Fleming Foods of Tennessee, Inc. Fleming Foods of Texas, Inc. Fleming Foods of Virginia, Inc. Fleming Foods South, Inc. Fleming Foods West, Inc. Fleming Foreign Sales Corporation Fleming Franchising, Inc. Fleming Holdings, Inc. Fleming International, Ltd. 69 Fleming Site Media, Inc. Fleming Supermarkets of Florida, Inc. Fleming Technology Leasing Company, Inc. Fleming Transportation Service, Inc. Food Brands, Inc. Food-4-Less, Inc. Food Holdings, Inc. Food Saver of Iowa, Inc. Gateway Development Co., Inc. Gateway Food Distributors, Inc. Gateway Foods, Inc. Gateway Foods of Altoona, Inc. Gateway Foods of Pennsylvania, Inc. Gateway Foods of Twin Ports, Inc. Gateway Foods Service Corporation Grand Central Leasing Corporation Great Bend Supermarkets, Inc. Hub City Transportation, Inc. Kensington and Harlem, Inc. LAS, Inc. Ladysmith East IGA, Inc. Ladysmith IGA, Inc. Lake Markets, Inc. M&H Desoto, Inc. M&H Financial Corp. M&H Realty Corp. Malone & Hyde, Inc. Malone & Hyde of Lafayette, Inc. Manitowoc IGA, Inc. Moberly Foods, Inc. Mt. Morris Super Duper, Inc. Niagara Falls Super Duper, Inc. Northern Supermarkets of Oregon, Inc. Northgate Plaza, Inc. 109 West Main Street, Inc. 121 East Main Street, Inc. Peshtigo IGA, Inc. Piggly Wiggly Corporation Quality Incentive Company, Inc. Rainbow Transportation Services, Inc. Route 16, Inc. Route 219, Inc. Route 417, Inc. Richland Center IGA, Inc. Scrivner, Inc. Scrivner-Food Holdings, Inc. 70 Scrivner of Alabama, Inc. Scrivner of Illinois, Inc. Scrivner of Iowa, Inc. Scrivner of Kansas, Inc. Scrivner of New York, Inc. Scrivner of North Carolina, Inc. Scrivner of Pennsylvania, Inc. Scrivner of Tennessee, Inc. Scrivner of Texas, Inc. Scrivner Super Stores of Illinois, Inc. Scrivner Super Stores of Iowa, Inc. Scrivner Transportation, Inc. Sehon Foods, Inc. Selected Products, Inc. Sentry Markets, Inc. Smar Trans, Inc. Southern Supermarkets, Inc. (TX) Southern Supermarkets, Inc. (OK) Southern Supermarkets of Louisiana, Inc. Star Groceries, Inc. Store Equipment, Inc. Sundries Service, Inc. Switzer Foods, Inc. 35 Church Street, Inc. Thompson Food Basket, Inc. 29 Super Market, Inc. 27 Slayton Avenue, Inc. WPC, Inc. Each, a Subsidiary Guarantor By /s/ John M. Thompson ----------------------------------- Name: John M. Thompson Title: Vice President and Treasurer (Chief Financial Officer) Attest: /s/ David R. Almond - ---------------------------------- [Secretary] EX-4.10 5 FLOAT RATE IND. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FLEMING COMPANIES, INC. ISSUER TO TEXAS COMMERCE BANK NATIONAL ASSOCIATION TRUSTEE THE SUBSIDIARY GUARANTORS NAMED HEREIN GUARANTORS ------------------------ Indenture Dated as of December 15, 1994 ------------------------ $200,000,000 Floating Rate Senior Notes due 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FLEMING COMPANIES, INC. RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND INDENTURE, DATED AS OF , 1994
TRUST INDENTURE ACT SECTION INDENTURE SECTION - ----------------------- ---------------------- Section310 (a)(1) .................................................................................... 607[(a)] (a)(2) .................................................................................... 607[(a)] (b) .................................................................................... [607(b),] 608 Section312 (c) .................................................................................... 701 Section314 (a) .................................................................................... 703 (a)(4) .................................................................................... 1008(a) (c)(1) .................................................................................... 102 (c)(2) .................................................................................... 102 (e) .................................................................................... 102 Section315 (b) .................................................................................... 601 Section316 (a)(last sentence) .................................................................................... 101 ("Outstanding") (a)(1)(A) .................................................................................... 502, 512 (a)(1)(B) .................................................................................... 513 (b) .................................................................................... 508 (c) .................................................................................... 104(d) Section317 (a)(1) .................................................................................... 503 (a)(2) .................................................................................... 504 (b) .................................................................................... 1003 Section318 (a) .................................................................................... 111
- ------------------------ Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. TABLE OF CONTENTS
SECTION PAGE - --------------------- ----- PARTIES.............................................................................. 1 RECITALS OF THE COMPANY.............................................................. 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions.......................................................................... 1 Acquired Indebtedness................................................................ 2 Act.................................................................................. 2 Affiliate............................................................................ 2 Applicable LIBOR Rate................................................................ 2 Average Life to Stated Maturity...................................................... 3 Bankruptcy Law....................................................................... 3 Banks................................................................................ 3 Board of Directors................................................................... 3 Board Resolution..................................................................... 3 Business Day......................................................................... 3 Business Development Program......................................................... 3 Business Development Venture......................................................... 3 Capital Lease Obligation............................................................. 4 Capital Stock........................................................................ 4 Change of Control.................................................................... 4 Change of Control Purchase Date...................................................... 4 Change of Control Purchase Offer..................................................... 4 Change of Control Purchase Price..................................................... 4 Change of Control Triggering Event................................................... 5 Commission........................................................................... 5 Common Stock......................................................................... 5 Company.............................................................................. 5 Company Request or Company Order..................................................... 5 Consolidated......................................................................... 5 Consolidated Fixed Charge Coverage Ratio............................................. 5 Consolidated Income Tax Expense...................................................... 5 Consolidated Interest Expense........................................................ 6 Consolidated Net Income.............................................................. 6
- ------------------------ Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. ii
SECTION PAGE - --------------------- ----- Consolidated Net Tangible Assets..................................................... 6 Consolidated Non-Cash Charges........................................................ 6 Corporate Trust Office............................................................... 6 Corporation.......................................................................... 6 Credit Agreement..................................................................... 7 Currency Agreements.................................................................. 7 Default.............................................................................. 7 Defaulted Interest................................................................... 7 Equity Store......................................................................... 7 Event of Default..................................................................... 7 Exchange Act......................................................................... 7 Floating Rate Note Indenture......................................................... 7 Floating Rate Interest Payment Date.................................................. 7 Fixed Rate Notes..................................................................... 7 Generally Accepted Accounting Principles............................................. 7 Guaranteed Debt...................................................................... 7 Guaranteed Obligations............................................................... 8 Holder............................................................................... 8 Indebtedness......................................................................... 8 Indenture............................................................................ 8 Initial Quarterly Period............................................................. 8 Interest Payment Date................................................................ 9 Interest Rate Agreements............................................................. 9 Interest Rate Determination Date..................................................... 9 Investment........................................................................... 9 Investment Grade..................................................................... 9 LIBOR Fraction....................................................................... 9 LIBOR Rate........................................................................... 9 Lien................................................................................. 9 Managing Agent....................................................................... 9 Maturity............................................................................. 9 Moody's.............................................................................. 9 Note Guarantee....................................................................... 9 Notes................................................................................ 10 Offering............................................................................. 10 Officers' Certificate................................................................ 10 Opinion of Counsel................................................................... 10
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SECTION PAGE - --------------------- ----- Outstanding.......................................................................... 10 Paying Agent......................................................................... 11 Permitted Indebtedness............................................................... 11 Permitted Investment................................................................. 12 Permitted Liens...................................................................... 13 Permitted Receivables Financing...................................................... 15 Person............................................................................... 15 Predecessor Note..................................................................... 15 Preferred Stock...................................................................... 15 Principal Property................................................................... 15 Prior Indentures..................................................................... 15 Public Equity Offering............................................................... 15 Qualified Capital Stock.............................................................. 15 Quarterly Period..................................................................... 15 Rating Agency........................................................................ 16 Rating Category...................................................................... 16 Rating Decline....................................................................... 16 Redeemable Capital Stock............................................................. 16 Redemption Date...................................................................... 16 Redemption Price..................................................................... 16 Reference Banks...................................................................... 16 Regular Record Date.................................................................. 17 Responsible Officer.................................................................. 17 Reuters Screen LIBO Page............................................................. 17 Securities Act....................................................................... 17 Security Register and Security Registrar............................................. 17 Senior Indebtedness.................................................................. 17 Significant Subsidiary............................................................... 17 S&P.................................................................................. 17 Special Record Date.................................................................. 17 Stated Maturity...................................................................... 17 Subordinated Indebtedness............................................................ 17 Subsidiary........................................................................... 18 Subsidiary Guarantor................................................................. 18 Temporary Cash Investments........................................................... 18 Transferred Receivables.............................................................. 19 Trust Indenture Act or TIA........................................................... 19
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SECTION PAGE - --------------------- ----- Trustee.............................................................................. 19 U.S. Government Obligations.......................................................... 19 Vice President....................................................................... 19 Voting Stock......................................................................... 19 Wholly Owned Subsidiary.............................................................. 20 Working Day.......................................................................... 20 SECTION 102. Compliance Certificates and Opinions................................................. 20 103. Form of Documents Delivered to Trustee............................................... 20 104. Acts of Holders...................................................................... 21 105. Notices, Etc., to Trustee, Company and Subsidiary Guarantors......................... 22 106. Notice to Holders; Waiver............................................................ 22 107. Effect of Headings and Table of Contents............................................. 23 108. Successors and Assigns............................................................... 23 109. Separability Clause.................................................................. 23 110. Benefits of Indenture................................................................ 23 111. Governing Law........................................................................ 23 112. Legal Holidays....................................................................... 23 ARTICLE TWO NOTE FORMS SECTION 201. Forms Generally...................................................................... 24 202. Form of Face of Note................................................................. 24 203. Form of Reverse of Note.............................................................. 25 204. Form of Trustee's Certificate of Authentication...................................... 28 ARTICLE THREE THE NOTES SECTION 301. Title and Terms...................................................................... 28 302. Denominations........................................................................ 29 303. Execution, Authentication, Delivery and Dating....................................... 29 304. Temporary Notes...................................................................... 30 305. Registration, Registration of Transfer and Exchange.................................. 30 306. Mutilated, Destroyed, Lost and Stolen Notes.......................................... 31 307. Payment of Interest; Interest Rights Preserved....................................... 32 308. Persons Deemed Owners................................................................ 33 309. Cancellation......................................................................... 33 310. CUSIP Numbers........................................................................ 34
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SECTION PAGE - --------------------- ----- ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture.............................................. 34 402. Application of Trust Money........................................................... 35 ARTICLE FIVE REMEDIES SECTION 501. Events of Default.................................................................... 35 502. Acceleration of Maturity; Rescission and Annulment................................... 37 503. Collection of Indebtedness and Suits for Enforcement by Trustee...................... 38 504. Trustee May File Proofs of Claim..................................................... 38 505. Trustee May Enforce Claims Without Possession of Notes............................... 39 506. Application of Money Collected....................................................... 39 507. Limitation on Suits.................................................................. 40 508. Unconditional Right of Holders to Receive Principal, Premium and Interest............ 40 509. Restoration of Rights and Remedies................................................... 40 510. Rights and Remedies Cumulative....................................................... 41 511. Delay or Omission Not Waiver......................................................... 41 512. Control by Holders................................................................... 41 513. Waiver of Past Defaults.............................................................. 41 514. Waiver of Stay or Extension Laws..................................................... 42 515. Notice of Defaults................................................................... 42 ARTICLE SIX THE TRUSTEE SECTION 601. Notice of Defaults................................................................... 42 602. Certain Rights of Trustee............................................................ 42 603. Trustee Not Responsible for Recitals or Issuance of Notes............................ 43 604. May Hold Notes....................................................................... 44 605. Money Held in Trust.................................................................. 44 606. Compensation and Reimbursement....................................................... 44 607. Corporate Trustee Required; Eligibility.............................................. 44 608. Resignation and Removal; Appointment of Successor.................................... 45 609. Acceptance of Appointment by Successor............................................... 46 610. Merger, Conversion, Consolidation or Succession to Business.......................... 46
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SECTION PAGE - --------------------- ----- ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND SUBSIDIARY GUARANTORS SECTION 701. Disclosure of Names and Addresses of Holders......................................... 47 702. Reports by Trustee................................................................... 47 703. Reports by Company and Subsidiary Guarantors......................................... 47 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms................................. 48 802. Successor Substituted................................................................ 49 803. Notes to Be Secured in Certain Events................................................ 49 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders................................... 50 902. Supplemental Indentures With Consent of Holders...................................... 50 903. Execution of Supplemental Indentures................................................. 51 904. Effect of Supplemental Indentures.................................................... 51 905. Conformity with Trust Indenture Act.................................................. 51 906. Reference in Notes to Supplemental Indentures........................................ 51 907. Notice of Supplemental Indentures.................................................... 52 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium, If Any, and Interest.................................. 52 1002. Maintenance of Office or Agency...................................................... 52 1003. Money for Note Payments to Be Held in Trust.......................................... 53 1004. Corporate Existence.................................................................. 54 1005. Payment of Taxes and Other Claims.................................................... 54 1006. Maintenance of Properties............................................................ 54 1007. Insurance............................................................................ 54 1008. Statement by Officers as to Default.................................................. 55 1009. Purchase of Notes Upon a Change of Control Triggering Event.......................... 55 1010. Limitation on Indebtedness........................................................... 56 1011. Limitation on Restricted Payments.................................................... 56 1012. Limitation on Liens.................................................................. 58 1013. Additional Guarantees................................................................ 58 1014. Provision of Financial Statements.................................................... 59 1015. Waiver of Certain Covenants.......................................................... 59
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SECTION PAGE - --------------------- ----- ARTICLE ELEVEN REDEMPTION OF NOTES SECTION 1101. Right of Redemption.................................................................. 59 1102. Applicability of Article............................................................. 59 1103. Election to Redeem; Notice to Trustee................................................ 59 1104. Selection by Trustee of Notes to Be Redeemed......................................... 60 1105. Notice of Redemption................................................................. 60 1106. Deposit of Redemption Price.......................................................... 60 1107. Notes Payable on Redemption Date..................................................... 61 1108. Notes Redeemed in Part............................................................... 61 ARTICLE TWELVE NOTE GUARANTEES SECTION 1201. Note Guarantees...................................................................... 61 1202. Obligations of the Subsidiary Guarantors Unconditional............................... 63 1203. Ranking of Note Guarantee............................................................ 63 1204. Limitation of Note Guarantees........................................................ 63 1205. Release of Subsidiary Guarantors..................................................... 64 1206. Subsidiary Guarantors May Consolidate, Etc. on Certain Terms......................... 65 ARTICLE THIRTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance......................... 65 1302. Defeasance and Discharge............................................................. 65 1303. Covenant Defeasance.................................................................. 65 1304. Conditions to Defeasance or Covenant Defeasance...................................... 66 1305. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions............................................................ 67 1306. Reinstatement........................................................................ 68 ARTICLE FOURTEEN SINKING FUND SECTION 1401. Mandatory Sinking Fund Payments...................................................... 68 1402. Satisfaction of Sinking Fund Payments with Notes..................................... 68 1403. Redemption of Notes for Sinking Fund................................................. 68
INDENTURE, dated as of December 15, 1994 among FLEMING COMPANIES, INC., a corporation duly organized and existing under the laws of the State of Oklahoma (herein called the "Company"), having its principal office at 6301 Waterford Boulevard, P.O. Box 26647, Oklahoma City, Oklahoma 73126, each of the Subsidiary Guarantors (as hereinafter defined), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States, Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of Floating Rate Senior Notes due 2001 (herein called the "Notes"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. This Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended and shall, to the extent applicable, be governed by such provisions. The Company, directly or indirectly, owns beneficially and of record 100% of the Capital Stock of the Subsidiary Guarantors; the Company and the Subsidiary Guarantors are members of the same consolidated group of companies; the Subsidiary Guarantors will derive direct and indirect economic benefit from the issuance of the Notes; accordingly, the Subsidiary Guarantors have each duly authorized the execution and delivery of this Indenture to provide for the Guarantee by each of them with respect to the Notes as set forth in this Indenture. All things necessary have been done to make the Notes, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, to make the Note Guarantees of each of the Subsidiary Guarantors, when executed by the respective Subsidiary Guarantors and delivered hereunder, the valid obligations of the respective Subsidiary Guarantors, and to make this Indenture a valid agreement of the Company and each of the Subsidiary Guarantors, in accordance with their and its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; 2 (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms "cash transaction" and "self-liquidating paper", as used in TIA Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; PROVIDED, HOWEVER, that with respect to any computation required pursuant to Sections 1009, 1010, 1011 and 1012, such term shall mean such accounting principles as are generally accepted as of the date of the Indenture; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Acquired Indebtedness" means Indebtedness of a Person (i) existing at the time such Person becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case, other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Subsidiary or such acquisition. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable LIBOR Rate" means for the Initial Quarterly Period and for each Quarterly Period during which any Floating Rate Note is outstanding, 225 basis points over the "LIBOR Rate", which shall be the rate determined by the Company (notice of such rate to be sent to the Trustee by the Company on the date of determination thereof) equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the offered rates for deposits in U.S. dollars for a period of three months, as set forth on the Reuters Screen LIBO Page as of 11:00 a.m., London time, on the applicable Interest Rate Determination Date; PROVIDED, HOWEVER, that if only one such offered rate appears on the Reuters Screen LIBO Page, the LIBOR Rate will mean such offered rate. If such rate is not available at 11:00 a.m., London time, on the applicable Interest Rate Determination Date, then the LIBOR Rate will mean the arithmetic mean (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the interest rates per annum at which deposits in amounts equal to $1 million in U.S. dollars are offered by the Reference Banks to leading banks in the London Interbank Market for a period of three months as of 11:00 a.m., London time, on the applicable Interest Rate Determination Date. If on any Interest Rate Determination Date, at least two of the Reference Banks provide such offered quotations, then the LIBOR Rate will be determined in 3 accordance with the preceding sentence on the basis of the offered quotations of those Reference Banks providing such quotations; PROVIDED, HOWEVER, that if fewer than two of the Reference Banks are so quoting such interest rates as mentioned above, the Applicable LIBOR Rate shall be deemed to be the Applicable LIBOR Rate for the next preceding Quarterly Period and in the case of the Quarterly Period next succeeding the Initial Quarterly Period, the Applicable LIBOR Rate shall be the Applicable LIBOR Rate for the Initial Quarterly Period and in the case of the Initial Quarterly Period, the Applicable LIBOR Rate shall be 8.625%. "Average Life to Stated Maturity" means, as of the date of determination with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of (A) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (B) the amount of each such principal payment by (ii) the sum of all such principal payments. "Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law. "Banks" means the banks or other financial institutions from time to time that are lenders under the Credit Agreement. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board, and, with respect to any Subsidiary Guarantor, either the board of directors of such Subsidiary Guarantor or any duly authorized committee of that board. "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, and delivered to the Trustee, and, with respect to a Subsidiary Guarantor, a copy of a resolution certified by the Secretary or an Assistant Secretary of the Subsidiary Guarantor to have been duly adopted by its Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. "Business Development Program" means the business practice of the Company and its Subsidiaries of making or guaranteeing loans to, or making equity investments in, third parties engaged in the retail grocery business in exchange for long-term supply agreements with the Company or any Subsidiary. "Business Development Venture" means any Person participating in the Business Development Program and BFL of Tulsa, Inc., Butch's Finer Foods, Inc., South Ogden Super Duper, Inc., Stores located at 301 South Main, Smith Center, KS 66967, 109 West Main Street, Inc., Route 417, Inc., Route 16, Inc. and Route 219, Inc. 4 "Capital Lease Obligation" means, with respect to any Person, any obligations of such Person and its Subsidiaries on a Consolidated basis under any capital lease of real or personal property which, in accordance with GAAP, has been recorded as a capitalized lease obligation. "Capital Stock" of any Person means any and all shares, interests, partnership interests, participations or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the date hereof, including, without limitation, all Common Stock and Preferred Stock of such Person. "Change of Control" means the occurrence of any of the following events: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total outstanding Voting Stock of the Company; (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election to such Board of Directors, or whose nomination for election by the shareholders of the Company, was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors then in office; (iii) the Company consolidates with or merges with or into any Person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with or merges into or with the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is changed into or exchanged for cash, securities or other property, other than any such transaction where the outstanding Voting Stock of the Company is not changed or exchanged at all (except to the extent necessary to reflect a change in the jurisdiction of incorporation of the Company) or where (A) the outstanding Voting Stock of the Company is changed into or exchanged for (x) Voting Stock of the surviving corporation which is not Redeemable Capital Stock or (y) cash, securities or other property (other than Capital Stock of the surviving corporation) in an amount which could be paid by the Company as a Restricted Payment under Section 1011 (and such amount shall be treated as a Restricted Payment subject to Section 1011) and (B) immediately after such transaction no "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have beneficial ownership of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total outstanding Voting Stock of the surviving corporation; or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with Section 801. "Change of Control Purchase Date" has the meaning specified in Section 1009. "Change of Control Purchase Offer" has the meaning specified in Section 1009. "Change of Control Purchase Price" has the meaning specified in Section 1009. 5 "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Rating Decline. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act then the body performing such duties at such time. "Common Stock" means, with respect to any Person, any and all shares, interests, participations and other equivalents (however designated, whether voting or non-voting) of such Person's common stock, whether now outstanding or issued after the date of this Indenture, including, without limitation, all series and classes of such common stock. "Company" means the Person named as the "Company" in the first paragraph of this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman, any Vice Chairman, its President, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Trustee. "Consolidated" means, with respect to any Person, the consolidation of the accounts of such Person and each of its subsidiaries if and to the extent the accounts of such Person and each of its subsidiaries would normally be consolidated with those of such Person, all in accordance with GAAP consistently applied. "Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of (a) the sum of Consolidated Net Income, Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash Charges deducted in computing Consolidated Net Income, in each case, for such period, of the Company and its Subsidiaries on a Consolidated basis, all determined in accordance with GAAP to (b) Consolidated Interest Expense for such period; PROVIDED that (i) in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a PRO FORMA basis and (A) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (B) which was not outstanding during the period for which the computation is being made but which bears, at the option of the Company, a fixed or floating rate of interest, shall be computed by applying, at the option of the Company, either the fixed or floating rate; (ii) in making such computation, Consolidated Interest Expense attributable to interest on any Indebtedness under a revolving credit facility computed on a PRO FORMA basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period; and (iii) in making such computation, Consolidated Interest Expense attributable to interest on Indebtedness constituting obligations in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities computed on a PRO FORMA basis shall be computed excluding any contingent obligations and without assuming that any undrawn letter of credit has been drawn. "Consolidated Income Tax Expense" means for any period the provision for federal, state, local and foreign income taxes of the Company and its Subsidiaries for such period as determined on a Consolidated basis in accordance with GAAP. 6 "Consolidated Interest Expense" means, without duplication, for any period, the sum of (a) the interest expense of the Company and its Subsidiaries for such period, as determined on a Consolidated basis in accordance with GAAP including, without limitation, (i) amortization of debt discount, (ii) the net cost under Interest Rate Agreements (including amortization of discount), (iii) the interest portion of any deferred payment obligation and (iv) accrued interest, plus (b) the aggregate amount for such period of dividends on any Redeemable Capital Stock or Preferred Stock of the Company and its Subsidiaries, (c) the interest component of the Capital Lease Obligations paid, accrued and/or scheduled to be paid, or accrued by such Person during such period and (d) all capitalized interest of the Company and its Subsidiaries determined on a Consolidated basis in accordance with GAAP. "Consolidated Net Income" means, for any period, the Consolidated net income (or loss) of the Company and its Subsidiaries for such period as determined on a Consolidated basis in accordance with GAAP, adjusted, to the extent included in calculating such net income (loss), by excluding, without duplication, (i) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (ii) the $101.3 million facilities consolidation and restructuring charge originally reflected in the Company's audited Consolidated statement of earnings for the year ended December 25, 1993, (iii) the portion of net income (or loss) of the Company and its Subsidiaries determined on a Consolidated basis allocable to minority interests in unconsolidated Persons to the extent that cash dividends or distributions have not actually been received by the Company or any Subsidiary, (iv) net income (or loss) of any Person combined with the Company or any Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination, (v) net gains or losses (less all fees and expenses relating thereto) in respect of dispositions of assets other than in the ordinary course of business and (vi) the net income of any Subsidiary to the extent that the declaration of dividends or similar distributions by that Subsidiary of that income is not at the time permitted, 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 Subsidiary or its shareholders. "Consolidated Net Tangible Assets" means the total of all the assets appearing on the Consolidated balance sheet of the Company and its Consolidated Subsidiaries, less the following: (1) current liabilities; (2) reserves for depreciation and other asset valuation reserves; (3) intangible assets including, without limitation, items such as goodwill, trademarks, trade names, patents and unamortized debt discount and expense; and (4) appropriate adjustments on account of minority interests of other Persons holding stock in any majority-owned Subsidiary of the Company. "Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization and other non-cash charges of the Company and its Subsidiaries for such period, as determined on a Consolidated basis in accordance with GAAP (excluding any non-cash charges which require an accrual or reserve for any future period). "Corporate Trust Office" means a corporate trust office of the Trustee, at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at 2200 Ross Avenue, 5th Floor, Dallas, Texas 75201. "Corporation" includes corporations, associations, companies and business trusts. 7 "Credit Agreement" means the Credit Agreement, dated as of July 19, 1994, among the Company, the Banks, the Agents listed therein and the Managing Agent, as such agreement may be amended, renewed, extended, substituted, refinanced, restructured, replaced, supplemented or otherwise modified from time to time (including, without limitation, any successive renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementations or other modifications of the foregoing). "Currency Agreements" means any spot or forward foreign exchange agreements and currency swap, currency option or other similar financial agreements or arrangements entered into by the Company or any of its Subsidiaries. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 307. "Equity Store" means a Person in which the Company or any of its Subsidiaries has invested capital or to which it has made loans in accordance with the business practice of the Company and its Subsidiaries of making equity investments in Persons, and making or guaranteeing loans to such Persons, for the purpose of assisting such Person in acquiring, remodeling, refurbishing, expanding or operating one or more retail grocery stores and pursuant to which such Person is permitted or required to reduce the Company's or the Subsidiary's equity interest to a minority position over time (usually five to ten years). "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fixed Rate Note Indenture" means the indenture dated as of December 15, 1994 among the Company, each of the Subsidiary Guarantors and Texas Commerce Bank National Association, Trustee covering the Company's Fixed Rate Notes. "Fixed Rate Notes" means the 10 5/8% Rate Senior Notes due 2001 and, more particularly, means any notes authenticated and delivered under the Fixed Rate Note Indenture. "Floating Rate Interest Payment Date" has the meaning specified in Section 301. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, as applied from time to time by the Company in the preparation of its Consolidated financial statements. "Guaranteed Debt" means, with respect to any Person, without duplication, all Indebtedness of any other Person referred to in the definition of "Indebtedness" contained herein guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness other than to the Company, a Wholly Owned Subsidiary of the Company or a Subsidiary Guarantor or to assure the holder of such Indebtedness other than the Company, a Wholly Owned Subsidiary of the Company or a Subsidiary Guarantor against loss, (iii) to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or 8 services without requiring that such property be received or such services be rendered), (iv) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or (v) otherwise to assure a creditor against loss, PROVIDED that the term "guarantee" shall not include endorsements for collection or deposit, in either case in the ordinary course of business. "Guaranteed Obligations" has the meaning specified in Section 1201. "Holder" means a Person in whose name a Note is registered in the Security Register. "Indebtedness" means, with respect to any Person, without duplication, (i) all liabilities of such Person for borrowed money (including overdrafts) or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities arising in the ordinary course of business, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit and acceptances issued under letter of credit facilities, acceptance facilities or other similar facilities, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade payables arising in the ordinary course of business, (iv) all Capital Lease Obligations of such Person, (v) all obligations under Interest Rate Agreements or Currency Agreements of such Person, (vi) all Indebtedness referred to in clauses (i) through (v) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or with respect to property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, (vii) all Guaranteed Debt of such Person, (viii) all Redeemable Capital Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends, and (ix) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing of any liability of the types referred to in clauses (i) through (viii) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Redeemable Capital Stock, such fair market value is to be determined in good faith by the Board of Directors of the issuer of such Redeemable Capital Stock. "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Initial Quarterly Period" means the period from and including December 15, 1994 through and including March 14, 1995. 9 "Interest Payment Date" means the Stated Maturity of an installment of interest on the Notes. "Interest Rate Agreements" means any interest rate protection agreements and other types of interest rate hedging agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements). "Interest Rate Determination Date" means, with respect to the Initial Quarterly Period, December 13, 1994, and with respect to each Quarterly Period, the second Working Day prior to the first day of such Quarterly Period. "Investment" means, with respect to any Person, directly or indirectly, any advance (other than advances to customers in the ordinary course of business, which are recorded as accounts receivable on the balance sheet of the Company and its Subsidiaries), loan or other extension of credit or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities issued by any other Person. "Investment Grade" means BBB- or higher by S&P or Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's or in the event Moody's or S&P shall cease rating the Notes and the Company shall select any other Rating Agency, the equivalent of such ratings by such other Rating Agency. "LIBOR Fraction" means the actual number of days in the Initial Quarterly Period or Quarterly Period, as applicable, divided by 360; PROVIDED, HOWEVER, that the number of days in the Initial Quarterly Period and each Quarterly Period shall be calculated by including the first day of such Initial Quarterly Period or Quarterly Period and excluding the last. "LIBOR Rate" has the meaning specified in the definition of "Applicable LIBOR Rate" contained herein. "Lien" means any mortgage or deed of trust, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation or other encumbrance upon or with respect to any property or assets of any kind, real or personal, movable or immovable. "Managing Agent" means Morgan Guaranty Trust Company of New York as managing agent under the Credit Agreement and any future managing agent under the Credit Agreement. "Maturity", when used with respect to the Notes, means the date on which the principal of the Notes becomes due and payable as therein provided or as provided in this Indenture, whether at Stated Maturity, purchase upon a Change of Control Triggering Event or redemption date, and whether by declaration of acceleration, Change of Control, call for redemption or purchase or otherwise. "Moody's" means Moody's Investors Service, Inc. or any successor rating agency. "Note Guarantee" means any guarantee by a Subsidiary Guarantor of the Company's obligations under this Indenture as set forth in Article Twelve of this Indenture and any additional guarantee of the Notes pursuant to Section 1013 hereof. 10 "Notes" has the meaning stated in the first recital of this Indenture and, more particularly, means any Notes authenticated and delivered under this Indenture. "Offering" means the sale of the Notes by the Company to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc., as underwriters. "Officers' Certificate" means a certificate signed by the Chairman, any Vice Chairman, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, including an officer or employee of the Company, and who shall be acceptable to the Trustee. "Outstanding", when used with respect to the Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except: (i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Notes; PROVIDED that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Notes, except to the extent provided in Sections 1302 and 1303, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Thirteen; and (iv) Notes which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands the Notes are valid obligations of the Company; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, consent, notice or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Notes owned by the Company or any other obligor upon the Notes or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the Company or such other obligor. 11 "Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal of (and premium, if any, on) or interest on any Notes on behalf of the Company. "Permitted Indebtedness" means any of the following Indebtedness of the Company or any Subsidiary, as the case may be: (i) Indebtedness of the Company and guarantees of the Subsidiary Guarantors under the Credit Agreement (including Indebtedness of the Company under Tranche A of the Credit Agreement to the extent that the aggregate commitment thereunder does not exceed $900 million, the maximum aggregate commitment for such facility on the date of this Indenture, and any guarantees with respect thereto outstanding on the date of this Indenture and any additional guarantees executed in connection therewith) in an aggregate principal amount, together with Indebtedness, if any, incurred pursuant to clauses (ii) and (xi) of this definition of "Permitted Indebtedness", at any one time outstanding not to exceed $1.7 billion (after giving PRO FORMA effect to the use of proceeds of the Offering) less mandatory repayments actually made in respect of any term Indebtedness thereunder; (ii) Indebtedness of the Company under uncommitted bank lines of credit; PROVIDED, HOWEVER, that the aggregate principal amount of Indebtedness incurred pursuant to clauses (i), (ii) and (xi) of this definition of "Permitted Indebtedness" does not exceed $1.7 billion (after giving PRO FORMA effect to the use of proceeds of the Offering) less mandatory repayments actually made in respect of any term Indebtedness thereunder; (iii) Indebtedness of the Company evidenced by the Notes and the Note Guarantees with respect thereto under this Indenture; (iv) Indebtedness of the Company evidenced by the Fixed Rate Notes and the Note Guarantees (as defined in the Fixed Rate Note Indenture) with respect thereto under the Fixed Rate Note Indenture; (v) Indebtedness of the Company or any Subsidiary outstanding on the date of this Indenture and listed on Schedule A hereto; (vi) obligations of the Company or any Subsidiary entered into in the ordinary course of business (a) pursuant to Interest Rate Agreements designed to protect against or manage exposure to fluctuations in interest rates in respect of Indebtedness or retailer notes receivables, which, if related to Indebtedness or retailer notes receivables, as the case may be, do not exceed the aggregate notional principal amount of such Indebtedness to which such Interest Rate Agreements relate, or (b) under any Currency Agreements in the ordinary course of business and designed to protect against or manage exposure to fluctuations in foreign currency exchange rates which, if related to Indebtedness, do not increase the amount of such Indebtedness other than as a result of foreign exchange fluctuations; (vii) Indebtedness of the Company owing to a Wholly Owned Subsidiary or of any Subsidiary owing to the Company or any Wholly Owned Subsidiary; PROVIDED that any disposition, pledge (except any pledge under the Credit Agreement or the Prior Indentures) or transfer of any such Indebtedness to a Person (other than the Company or 12 another Wholly Owned Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company or Subsidiary, as the case may be, not permitted by this clause (vii); (viii) Indebtedness in respect of letters of credit, surety bonds and performance bonds provided in the ordinary course of business; (ix) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business; PROVIDED that such Indebtedness is extinguished within five Business Days of its incurrence; (x) Indebtedness of the Company or any Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets; (xi) Indebtedness of the Company evidenced by commercial paper issued by the Company; PROVIDED, HOWEVER, that the aggregate principal amount of Indebtedness incurred pursuant to clauses (i), (ii) and (xi) of this definition of "Permitted Indebtedness" does not exceed $1.7 billion (after giving PRO FORMA effect to the use of proceeds of the Offering) less mandatory repayments actually made in respect of any term Indebtedness thereunder; (xii) Indebtedness of the Company pursuant to guarantees by the Company or any Subsidiary Guarantor in connection with any Permitted Receivables Financing; PROVIDED, HOWEVER, that such Indebtedness shall not exceed 15% of the book value of the Transferred Receivables or, in the case of receivables arising from direct financing leases for retail electronics systems, 30% of the book value thereof; (xiii) Indebtedness of the Company and its Subsidiaries in addition to that described in clauses (i) through (xii) of this definition of "Permitted Indebtedness," together with any other outstanding Indebtedness incurred pursuant to this clause (xiii), not to exceed $100 million at any time outstanding in the aggregate; and (xiv) any renewals, extensions, substitutions, refundings, refinancings or replacements (each, a "refinancing") of any Indebtedness described in clauses (iii), (iv) and (v) of this definition of "Permitted Indebtedness", including any successive refinancings, so long as (A) the aggregate principal amount of Indebtedness represented thereby is not increased by such refinancing to an amount greater than such principal amount plus the lesser of (x) the stated amount of any premium or other payment required to be paid in connection with such a refinancing pursuant to the terms of the Indebtedness being refinanced or (y) the amount of premium or other payment actually paid at such time to refinance the Indebtedness, plus, in either case, the amount of expenses of the Company or Subsidiary, as the case may be, incurred in connection with such refinancing and (B) such refinancing does not reduce the Average Life to Stated Maturity or the Stated Maturity of such Indebtedness. "Permitted Investment" means (i) Investment in any Wholly Owned Subsidiary or any Investment in any Person by the Company or any Wholly Owned Subsidiary as a result of which such Person becomes a Wholly Owned Subsidiary or any Investment in the Company 13 by a Wholly Owned Subsidiary; (ii) intercompany Indebtedness to the extent permitted under clause (vii) of the definition of "Permitted Indebtedness"; (iii) Temporary Cash Investments; (iv) sales of goods on trade credit terms consistent with the Company's past practices or otherwise consistent with trade credit terms in common use in the industry; (v) Investments in direct financing leases for equipment owned by the Company and leased to its customers in the ordinary course of business consistent with past practice; (vi) Investments in existence on the date of this Indenture; and (vii) any substitutions or replacements of any Investment so long as the aggregate amount of such Investment is not increased by such substitution or replacement. "Permitted Liens" means, with respect to any Person: (a) any Lien existing as of the date of this Indenture; (b) any Lien arising by reason of (1) any judgment, decree or order of any court, so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (2) taxes, assessments, governmental charges or levies not yet delinquent or which are being contested in good faith; (3) security for payment of workers compensation or other insurance; (4) security for the performance of tenders, leases (including, without limitation, statutory and common law landlord's liens) and contracts (other than contracts for the payment of money); (5) zoning restrictions, easements, licenses, reservations, title defects, rights of others for rights-of-way for utilities, sewers, electric lines, telephone or telegraph lines and other similar purposes, provisions, covenants, conditions, waivers and restrictions on the use of 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 or owner of the leased property, with or without consent of the lessee), none of which materially impairs the use of any parcel of property material to the operation of the business of the Company or any Subsidiary or the value of such property for the purpose of such business; (6) deposits to secure public or statutory obligations; (7) operation of law in favor of growers, dealers and suppliers of fresh fruits and vegetables, carriers, mechanics, materialmen, laborers, employees or suppliers, incurred in the ordinary course of business for sums which are not yet delinquent or are being contested in good faith by negotiations or by appropriate proceedings which suspend the collection thereof; (8) the grant by the Company to licensees, pursuant to security agreements, of security interests in trademarks and goodwill, patents and trade secrets of the Company to secure the damages, if any, of such licensees, resulting from the rejection of the license of such licensees in a bankruptcy, reorganization or similar proceeding with respect to the Company; or (9) security for surety or appeal bonds; (c) any extension, renewal, refinancing or replacement of any Lien on property of the Company or any Subsidiary existing as of the date of this Indenture and securing the Indebtedness under the Credit Agreement or the Prior Indenture in an aggregate principal amount not to exceed the principal amount of the Indebtedness outstanding as 14 permitted by clause (i) of the definition of "Permitted Indebtedness" so long as no additional collateral is granted as security thereby; PROVIDED that this clause (c) shall not apply to any Lien on such property that has not been subject to a Lien for 30 days; (d) any Lien on any property or assets of a Subsidiary in favor of the Company or any Wholly Owned Subsidiary; (e) any Lien securing Acquired Indebtedness created prior to (and not created in connection with, or in contemplation of) the incurrence of such Indebtedness by the Company or any Subsidiary; PROVIDED that such Lien does not extend to any assets of the Company or any Subsidiary other than the assets acquired in the transaction resulting in such Acquired Indebtedness being incurred by the Company or Subsidiary, as the case may be; (f) any Lien to secure the performance of bids, trade contracts, letters of credit and other obligations of a like nature and incurred in the ordinary course of business of the Company or any Subsidiary; (g) any Lien securing any Interest Rate Agreements or Currency Agreements permitted to be incurred pursuant to clause (v) of the definition of "Permitted Indebtedness" or any collateral for the Indebtedness to which such Interest Rate Agreements or Currency Agreements relate; (h) any Lien securing the Notes; (i) any Lien on an asset securing Indebtedness (including Capital Lease Obligations) incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset; PROVIDED that such Lien attaches to such asset concurrently or within 180 days after the acquisition or completion of construction thereof; and (j) any Lien on real or personal property securing Capital Lease Obligations of the Company or any Subsidiary as lessee with respect to such real or personal property (1) to the extent that the Company or such Subsidiary has entered into (and not terminated), or has a binding commitment for, subleases on terms which, to the Company, are at least as favorable, on a current basis, as the terms of the corresponding capital lease or (2) under which the aggregate principal component of the annual rent payable does not exceed $5 million; (k) any Lien on a Financing Receivable or other receivable that is transferred in a Permitted Receivables Financing; (l) any Lien consisting of any pledge to any Person of Indebtedness owed by any Subsidiary to the Company or any Wholly Owned Subsidiary; PROVIDED that (i) such Subsidiary is a Subsidiary Guarantor and (ii) the principal amount pledged does not exceed the Indebtedness secured by such pledge; and (m) any extension, renewal, refinancing or replacement, in whole or in part, of any Lien described in the foregoing clause (a) so long as no additional collateral is granted as security thereby. 15 "Permitted Receivables Financing" means any transaction involving the transfer (by way of sale, pledge or otherwise) by the Company or any of its Subsidiaries of receivables to any other Person, PROVIDED that after giving effect to such transaction the sum of (i) the aggregate uncollected balances of the receivables so transferred ("Transferred Receivables") PLUS (ii) the aggregate amount of all collections on Transferred Receivables theretofore received by the seller but not yet remitted to the purchaser, in each case at the date of determination, would not exceed $750 million. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Note" of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 306 in exchange for a mutilated security or in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's preferred stock whether now outstanding or issued after the date of this Indenture, including, without limitation, all classes and series of preferred or preference stock of such Person. "Principal Property" means any manufacturing or processing plant, office facility, retail store, warehouse or distribution center, including, in each case, the fixtures appurtenant thereto, located within the continental United States and owned and operated now or hereafter by the Company or any Subsidiary (other than an Equity Store or a Business Development Venture) and having a book value on the date as of which the determination is being made of more than 2% of Consolidated Net Tangible Assets. "Prior Indentures" means the Indenture, dated March 15, 1986, between the Company and Morgan Guaranty Trust Company of New York, as Trustee, covering $100 million aggregate principal amount of the Company's 9 1/2% Debentures due 2016 and the Indenture, dated December 1, 1989, between the Company and Morgan Guaranty Trust Company of New York, as Trustee, covering $275 million aggregate principal amount of the Company's Medium-Term Notes. "Public Equity Offering" means a primary public offering of equity securities of the Company pursuant to an effective registration statement under the Securities Act with net cash proceeds of at least $50 million. "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock. "Quarterly Period" means the period from and including a scheduled Floating Rate Interest Payment Date through the day next preceding the following scheduled Floating Rate Interest Payment Date. 16 "Rating Agency" means any of (i) S&P, (ii) Moody's or (iii) if S&P or Moody's or both shall not make a rating of the Notes publicly available, a security rating agency or agencies, as the case may be, nationally recognized in the United States, selected by the Company, which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Category" means (i) with respect to S&P, any of the following categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect to Moody's, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradation, gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (E.G., with respect to S&P, a decline in rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one gradation). "Rating Decline" means the occurrence on, or within 90 days after, the date of public notice of the occurrence of a Change of Control or of the intention of the Company or Persons controlling the Company to effect a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of the following: (i) if the Notes are rated by either Rating Agency as Investment Grade immediately prior to the beginning of such period, the rating of the Notes by both Rating Agencies shall be below Investment Grade; or (ii) if the Notes are rated below Investment Grade by both Rating Agencies immediately prior to the beginning of such period, the rating of the Notes by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "Redeemable Capital Stock" means any Capital Stock that, either by its terms or by the terms of any security into which it is convertible or exchangeable or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to any Stated Maturity of the principal of the Notes or is redeemable at the option of the holder thereof at any time prior to any such Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to any such Stated Maturity at the option of the holder thereof. "Redemption Date", when used with respect to any Note to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Reference Banks" means each of Barclays Bank PLC, London Branch, the Bank of Tokyo, Ltd., London Branch, Bankers Trust Company, London Branch, and National Westminster Bank PLC, London Branch, and any such replacement bank thereof as listed on the Reuters Screen LIBO Page and their respective successors, and if any of such banks are not at the applicable time providing interest rates as contemplated within the definition of the "Applicable LIBOR Rate," Reference Banks shall mean the remaining bank or banks so providing such rates. In the event that fewer than two of such banks are providing such rates, the Company shall use reasonable efforts to appoint additional Reference Banks so 17 that there are at least two such banks providing such rates; PROVIDED, HOWEVER, that such banks appointed by the Company shall be London offices of leading banks engaged in the Eurodollar market (the market in which U.S. currency, which is deposited by corporations and national governments in banks outside the United States, is used for settling interna- tional transactions). "Regular Record Date" for the interest payable on any Interest Payment Date means the March 1, June 1, September 1, or December 1, (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above-designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuter Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London Interbank Offered Rates of leading banks). "Securities Act" means the Securities Act of 1933, as amended. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means Indebtedness of the Company other than Subordinated Indebtedness. "Significant Subsidiary" of the Company means any Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1.02(v) of Regulation S-X under the Securities Act. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill Inc., a New York corporation, or any successor rating agency. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity" when used with respect to any Indebtedness or any installment of interest thereon, means the date specified in such Indebtedness as the fixed date on which the principal of or premium on such Indebtedness or such installment of interest is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company subordinated in right of payment to the Notes. 18 "Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. "Subsidiary Guarantor" means any Person that is required pursuant to Section 1013, on or after the date of this Indenture, to execute a Note Guarantee of the Notes until a successor replaces any such party pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor, and the following Subsidiaries of the Company: ATI, Inc., Badger Markets, Inc., Baker's Supermarkets, Inc., Ball Motor Service, Inc., Boogaart Stores of Nebraska, Inc., Central Park Super Duper, Inc., Commercial Cold/Dry Storage Company, Consumers Markets, Inc., D.L. Food Stores, Inc., Del-Arrow Super Duper, Inc., Festival Foods, Inc., Fleming Direct Sales Corporation, Fleming Foods East, Inc., Fleming Foods of Alabama, Inc., Fleming Foods of Ohio, Inc., Fleming Foods of Tennessee, Inc., Fleming Foods of Texas, Inc., Fleming Foods of Virginia, Inc., Fleming Foods South, Inc., Fleming Foods West, Inc., Fleming Foreign Sales Corporation, Fleming Franchising, Inc., Fleming Holdings, Inc., Fleming International, Ltd., Fleming Site Media, Inc., Fleming Supermarkets of Florida, Inc., Fleming Technology Leasing Company, Inc., Fleming Transportation Service, Inc., Food Brands, Inc., Food-4-Less, Inc., Food Holdings, Inc., Food Saver of Iowa, Inc., Gateway Development Co., Inc., Gateway Food Distributors, Inc., Gateway Foods, Inc., Gateway Foods of Altoona, Inc., Gateway Foods of Pennsylvania, Inc., Gateway Foods of Twin Ports, Inc., Gateway Foods Service Corporation, Grand Central Leasing Corporation, Great Bend Supermarkets, Inc., Hub City Transportation, Inc., Kensington and Harlem, Inc., LAS, Inc., Ladysmith East IGA, Inc., Ladysmith IGA, Inc., Lake Markets, Inc., M&H Desoto, Inc., M&H Financial Corp., M&H Realty Corp., Malone & Hyde, Inc., Malone & Hyde of Lafayette, Inc., Manitowoc IGA, Inc., Moberly Foods, Inc., Mt. Morris Super Duper, Inc., Niagara Falls Super Duper, Inc., Northern Supermarkets of Oregon, Inc., Northgate Plaza, Inc., 109 West Main Street, Inc., 121 East Main Street, Inc., Peshtigo IGA, Inc., Piggly Wiggly Corporation, Quality Incentive Company, Inc., Rainbow Transportation Services, Inc., Route 16, Inc., Route 219, Inc., Route 417, Inc., Richland Center IGA, Inc, Scrivner, Inc., Scrivner-Food Holdings, Inc., Scrivner of Alabama, Inc., Scrivner of Illinois, Inc., Scrivner of Iowa, Inc., Scrivner of Kansas, Inc., Scrivner of New York, Inc., Scrivner of North Carolina, Inc., Scrivner of Pennsylvania, Inc., Scrivner of Tennessee, Inc., Scrivner of Texas, Inc., Scrivner Super Stores of Illinois, Inc., Scrivner Super Stores of Iowa, Inc., Scrivner Transportation, Inc., Sehon Foods, Inc., Selected Products, Inc., Sentry Markets, Inc., Smar Trans, Inc., Southern Supermarkets, Inc. (TX), Southern Supermarkets, Inc. (OK), Southern Supermarkets of Louisiana, Inc., Star Groceries, Inc., Store Equipment, Inc., Sundries Service, Inc., Switzer Foods, Inc., 35 Church Street, Inc., Thompson Food Basket, Inc., 29 Super Market, Inc., 27 Slayton Avenue, Inc. and WPC, Inc. "Temporary Cash Investments" means (i) any evidence of Indebtedness issued by the United States, or an instrumentality or agency thereof, and guaranteed fully as to principal, premium, if any, and interest by the United States, (ii) any certificate of deposit issued by, or time deposit of, a bank or trust company in the United States having combined capital and surplus and undivided profits of not less than $500 million, whose debt has a rating, at the time as of which any investment therein is made, of "A" (or higher) according to Moody's or "A" (or higher) according to S&P, (iii) commercial paper issued by an entity (other than an 19 Affiliate or Subsidiary of the Company) with a rating, at the time as of which any investment therein is made, of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, (iv) any money market deposit accounts issued or offered by a financial institution in the United States having capital and surplus in excess of $500 million, (v) short term tax exempt bonds with a rating, at the time as of which any investment is made therein, of "Aa2" (or higher) according to Moody's or "AA" (or higher) according to S&P, (vi) shares in a mutual fund, the investment objectives and policies of which require it to invest substantially all of its assets in investments of the type described in clause (v) and (vii) repurchase and reverse repurchase obligations underlying securities of the types described in clauses (i) and (ii) entered into with any financial institution meeting the qualifications specified in clause (ii); PROVIDED that in the case of clauses (i), (ii), (iii), (v) and (vii), such investment matures within one year from the date of acquisition thereof. "Transferred Receivables" has the meaning specified in the definition of "Permitted Receivables Financing" in this Section. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this Indenture was executed, except as provided in Section 905. "Trustee" means the Person named as the Trustee in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; PROVIDED that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" means stock of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). 20 "Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock (other than directors' qualifying shares) of which is owned by the Company or another Wholly Owned Subsidiary. "Working Day" means any day which is not a Saturday, Sunday or a day on which banking institutions in New York, New York or London, England are authorized or obligated by law or executive order to close. SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Section 1008) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. In giving such opinion, such counsel may rely upon opinions of local counsel reasonably satisfactory to the Trustee. Any such certificate or Opinion of Counsel 21 may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The principal amount and serial numbers of Notes held by any Person, and the date of holding the same, shall be proved by the Security Register. (d) If the Company shall solicit from the Holders of Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite 22 proportion of Outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Notes shall be computed as of such record date; PROVIDED that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than 330 days after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 105. NOTICES, ETC., TO TRUSTEE, COMPANY AND SUBSIDIARY GUARANTORS. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Department, or (2) the Company or any Subsidiary Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture, or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides notice of any event to Holders by the Company, any Subsidiary Guarantor or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder when so mailed, whether or not such Holder actually receives such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event to Holders 23 when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice for every purpose hereunder. SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 108. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company and the Subsidiary Guarantors shall bind their respective successors and assigns, whether so expressed or not. SECTION 109. SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Notes or the Note Guarantees 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 110. BENEFITS OF INDENTURE. Nothing in this Indenture, in the Notes or the Note Guarantees, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Securities Registrar and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 111. GOVERNING LAW. This Indenture, the Notes and the Note Guarantees shall be governed by and construed in accordance with the law of the State of New York. This Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended and shall, to the extent applicable, be governed by such provisions. SECTION 112. LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date or Stated Maturity or Maturity of any Note shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date, or at the Stated Maturity or Maturity; PROVIDED that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be. 24 ARTICLE TWO NOTE FORMS SECTION 201. FORMS GENERALLY. The Notes and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. The definitive Notes shall be printed, lithographed or engraved on steel-engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing such Notes, as evidenced by their execution of such Notes; PROVIDED, HOWEVER, that if the Notes are listed on any securities exchange such manner is permitted by the rules of such securities exchange. SECTION 202. FORM OF FACE OF NOTE. FLEMING COMPANIES, INC. FLOATING RATE SENIOR NOTE DUE 2001 CUSIP NO. $ Fleming Companies, Inc., an Oklahoma corporation (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to or registered assigns, the principal sum of Dollars on December 15, 2001, at the office or agency of the Company referred to below, and to pay interest thereon from December 15, 1994, or from the most recent Floating Rate Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears, on March 15, June 15, September 15 and December 15 of each year, commencing March 15, 1995, at a rate per annum determined on each Interest Rate Determination Date by multiplying the principal amount of the Notes outstanding as of the first day of the respective Quarterly Period or the Initial Quarterly Period, as the case may be, by the Applicable LIBOR Rate and multiplying such product by the LIBOR Fraction, until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Notes from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Floating Rate Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be the March 1, June 1, September 1 and December 1 (whether or not a Business Day), as the case may be, next preceding such Floating Rate Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular 25 Record Date, and such Defaulted Interest, and (to the extent lawful) interest on such Defaulted Interest at the rate borne by the Notes, may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any, on) and interest on this Note will be made at the office or agency of the Company maintained for that purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose, 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; PROVIDED, HOWEVER, that payment of interest may be made at the option of the Company (i) by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register or (ii) if requested in writing at least 10 days prior to a Regular Record Date or a Special Record Date, as the case may be, by a Person who is entitled thereto with respect to at least $1 million in principal amount of the Notes, by transfer to an account maintained by such Person at a bank located in the United States. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: FLEMING COMPANIES, INC. By ___________________________________ Attest: ___________________________________ Secretary SECTION 203. FORM OF REVERSE OF NOTE. This Note is one of a duly authorized issue of securities of the Company designated as its Floating Rate Senior Notes due 2001 (herein called the "Notes"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $200,000,000, which may be issued under an indenture (herein called the "Indenture") dated as of December 15, 1994, among the Company, the Subsidiary Guarantors named 26 therein and Texas Commerce Bank National Association, trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Subsidiary Guarantors, the Trustee and the Holders of the Notes, and of the terms upon which the Notes are, and are to be, authenticated and delivered. The Notes are subject to redemption at the option of the Company, on any Floating Rate Interest Payment Date, upon not less than 30 nor more than 60 days' notice on or after December 15, 1995 and on or prior to December 14, 1999, as a whole or in part, at the election of the Company, at a Redemption Price equal to 100.5% of the principal amount of the Notes together with accrued and unpaid interest, if any, to the Redemption Date, and after December 14, 1999 at a Redemption Price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant record dates to receive accrued interest due on an Interest Payment Date), all as provided in the Indenture. Upon the occurrence of a Change of Control Triggering Event, the Holder of this Note may require the Company, subject to certain limitations provided in the Indenture, to purchase this Note at a purchase price in cash in an amount equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. In the case of any redemption of Notes, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Notes, or one or more Predecessor Notes, of record at the close of business on the relevant Record Date referred to on the face hereof. Notes (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. In the event of redemption of this Note in part only, a new Note or Notes for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, the principal of all the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company and any Subsidiary Guarantor on this Note and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company and the Subsidiary Guarantors with certain conditions set forth therein, which provisions apply to this Note. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the Subsidiary Guarantors and the rights of the Holders under the Indenture at any time by the Company, the Subsidiary Guarantors and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to waive compliance by the Company and the Subsidiary Guarantors with certain provisions of 27 the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any, on) and interest on this Note at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registerable on the Security Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the time of due presentment of this Note for registration of transfer, the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company, the Subsidiary Guarantors or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Subsidiary Guarantors, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. FORM OF ASSIGNMENT FOR VALUE RECEIVED ___________________ hereby sell(s), assign(s) and transfer(s) unto ______________ ______________ ______________ (please insert social security or other identifying number of assignee) the within Note and hereby irrevocably constitutes and appoints ______________ ______________ as agent to transfer the said Note on the books of the Company with the full power of substitution in the premises. 28 Dated: ______________________________________ Signature(s) Signature must be guaranteed by a bank or trust company or a member firm of a major stock exchange ______________________________________ Signature Guarantee NOTICE: The signature on the assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever. SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication shall be in substantially the following form: TRUSTEE'S CERTIFICATE OF AUTHENTICATION. This is one of the Notes referred to in the within-mentioned Indenture. TEXAS COMMERCE BANK NATIONAL ASSOCIATION as Trustee By ___________________________________ Authorized Signatory ARTICLE THREE THE NOTES SECTION 301. TITLE AND TERMS. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to $200,000,000, except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 303, 304, 305, 306, 801, 906, 1009 or 1108. The Notes shall be known and designated as the "Floating Rate Senior Notes due 2001" of the Company. Their Stated Maturity shall be December 15, 2001, and they shall bear interest from December 15, 1994, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable quarterly on March 15, June 15, September 15 and December 15 of each year, commencing March 15, 1995 and at said Stated Maturity, until the principal thereof is paid or duly provided for. 29 Interest on the Notes will accrue at a rate equal to the Applicable LIBOR Rate and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year (each a "Floating Rate Interest Payment Date"), or if any such day is not a Business Day, on the next succeeding Business Day, commencing on March 15, 1995 to holders of record on the immediately preceding March 1, June 1, September 1 and December 1. Interest on the Notes will be calculated on a formula basis by multiplying the principal amount of the Notes outstanding as of the first day of a Quarterly Period or the Initial Quarterly Period, as the case may be, by the Applicable LIBOR Rate and multiplying such product by the LIBOR Fraction. The principal of (and premium, if any, on) and interest on the Notes shall be payable at the office or agency of the Company maintained for such purpose in The City of New York, or at such other office or agency of the Company as may be maintained for such purpose; PROVIDED, HOWEVER, that, at the option of the Company, interest may be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears in the Security Register or (ii) if requested in writing at least 10 days prior to a Regular Record Date or a Special Record Date, as the case may be, by a Person who is entitled thereto with respect to at least $1 million in principal amount of the Notes, by transfer to an account maintained by such Person at a bank located in the United States. The Notes shall be redeemable as provided in Article Eleven. SECTION 302. DENOMINATIONS. The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Notes shall be executed on behalf of the Company by its Chairman, any Vice Chairman, its President or a Vice President, under its corporate seal reproduced thereon and attested by its Secretary or an Assistant Secretary. The signature of any of these officers on the Notes may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Notes. Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Company Order shall authenticate and deliver such Notes. Each Note shall be dated the date of its authentication. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of a 30 Responsible Officer, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company, pursuant to Article Eight, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Notes authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person, be exchanged for other Notes executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Notes surrendered for such exchange and of like principal amount; and the Trustee, upon Company Request of the successor Person, shall authenticate and deliver Notes as specified in such request for the purpose of such exchange. If Notes shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Notes, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Notes at the time Outstanding for Notes authenticated and delivered in such new name. SECTION 304. TEMPORARY NOTES. Pending the preparation of definitive Notes, the Company may execute and upon Company Order the Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Notes may determine, as conclusively evidenced by their execution of such Notes. If temporary Notes are issued, the Company will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company shall execute and upon Company Order the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes. SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Security Register shall be in 31 written form or any other form capable of being converted into written form within a reasonable time. At all reasonable times, the Security Register shall be open to inspection by the Trustee. The Trustee is hereby initially appointed as security registrar (the "Security Registrar") for the purpose of registering Notes and transfers of Notes as herein provided. Upon surrender for registration of transfer of any Note at the office or agency of the Company designated pursuant to Section 1002, the Company shall execute and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denomination or denominations of a like aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Company shall execute and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company and, pursuant to the Note Guarantees, the Subsidiary Guarantors, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed, or be accompanied by a written instrument of transfer, in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange or redemption of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 303, 304, 801, 906, 1108 or 1009 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the selection of Notes to be redeemed under Section 1104 and ending at the close of business on the day of such mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If (i) any mutilated Note is surrendered to the Trustee, or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of actual notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding. 32 In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any new Note under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company and, pursuant to the Note Guarantees, the Subsidiary Guarantors, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; PROVIDED, HOWEVER, that each installment of interest may at the Company's option be paid by (i) mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears in the Security Register or (ii) if requested in writing at least 10 days prior to a Regular Record Date or a Special Record Date, as the case may be, by a Person who is entitled thereto with respect to at least $1 million in principal amount of the Notes, by transfer to an account maintained by such Person at a bank located in the United States. Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the Holder on the Regular Record Date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Notes (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when 33 deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given in the manner provided for in Section 106, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, such Defaulted Interest shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. SECTION 308. PERSONS DEEMED OWNERS. Prior to the due presentment of a Note for registration of transfer, the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company, the Subsidiary Guarantors or the Trustee may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of (and premium, if any, on) and (subject to Sections 305 and 307) interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Company, any Subsidiary Guarantor, the Trustee or any agent of the Company, any Subsidiary Guarantor or the Trustee shall be affected by notice to the contrary. SECTION 309. CANCELLATION. All Notes surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Notes previously authenticated hereunder which the Company has not issued and sold, and all Notes so delivered shall be promptly cancelled by the Trustee. If the Company shall so acquire any of the Notes, 34 however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures and certification of their disposal delivered to the Company unless by Company Order the Company shall direct that cancelled Notes be returned to it. SECTION 310. CUSIP NUMBERS. The Company may use "CUSIP" numbers in issuing the Notes (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that no representation is made as to the correctness of such "CUSIP" numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such "CUSIP" numbers. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall upon Company Request cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Notes issued under this Indenture) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture when (1) either (A) all Notes theretofore authenticated and delivered (except (i) lost, stolen or destroyed Notes which have been replaced or paid as provided in Section 306 and (ii) Notes for whose payment funds have theretofore been deposited in trust by the Company with the Trustee or any Paying Agent or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, and either the Company or any Subsidiary Guarantor has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for principal, premium, if any, and interest to the date of such deposit; (2) the Company or any Subsidiary Guarantor has paid all other sums payable hereunder by the Company and any Subsidiary Guarantors; and 35 (3) 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 the satisfaction and discharge of this Indenture have been complied with and that such satisfaction and discharge will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company or any Subsidiary Guarantor is a party or by which it is bound. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. ARTICLE FIVE REMEDIES SECTION 501. EVENTS OF DEFAULT. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest on any Note issued under this Indenture when such interest becomes due and payable, and continuance of such default for a period of 60 days; or (2) default in the payment of the principal of (or premium, if any, on) any Note at its Stated Maturity; or (3) (A) default in the performance, or breach, of any covenant or agreement of the Company or any Subsidiary Guarantor under this Indenture (other than a default in the performance, or breach, of a covenant or agreement which is specifically dealt with in the immediately preceding clauses (1) and (2) or clauses (B) and (C) of this clause (3), and such default or breach shall continue for a period of 60 days after written notice has been given, by certified mail, (x) to the Company by the Trustee or (y) to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Notes specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (B) default in the performance or breach 36 of the provisions in Section 801; or (C) the Company shall have failed to make or consummate a Change of Control Purchase Offer in accordance with the provisions of Section 1009; or (4) (A) there shall have occurred any default in the payment of principal of any Indebtedness under any agreements, indentures (including any such default under the Fixed Rate Note Indenture) or instruments under which the Company or any Subsidiary of the Company then has outstanding Indebtedness in excess of $50 million, when the same shall become due and payable in full and such default shall have continued after any applicable grace period and shall not have been cured or waived or (B) an event of default as defined in any of the agreements, indentures or instruments described in clause (A) of this clause (4) shall have occurred and the Indebtedness thereunder, if not already matured at its final maturity in accordance with its terms, shall have been accelerated or otherwise declared due and payable, or required to be prepaid or repurchased (other than by regularly scheduled required prepayment), prior to the stated maturity thereof; or (5) any Person entitled to take the actions described in this clause (5), after the occurrence of any event of default on Indebtedness in excess of $50 million in the aggregate of the Company or any Subsidiary, shall notify the Trustee of the intended sale or disposition of any assets of the Company or any Subsidiary that have been pledged to or for the benefit of such Person to secure such Indebtedness or shall commence proceedings, or take any action (including by way of set-off) to retain in satisfaction of any Indebtedness, or to collect on, seize, dispose of or apply, any such assets of the Company or any Subsidiary (including funds on deposit or held pursuant to lock-box and other similar arrangements), pursuant to the terms of any agreement or instrument evidencing any such Indebtedness or in accordance with applicable law; or (6) any Note Guarantee of any Significant Subsidiary individually or any other Subsidiaries if such Subsidiaries in the aggregate represent 15% or more of the assets of the Company and its Subsidiaries on a Consolidated basis with respect to such Notes shall for any reason cease to be, or be asserted in writing by the Company, any Subsidiary Guarantor or any other Subsidiary of the Company, as applicable, not to be, in full force and effect, enforceable in accordance with its terms, except pursuant to the release of any such Note Guarantee in accordance with this Indenture; or (7) one or more judgments, orders or decrees for the payment of money in excess of $50 million (net of amounts covered by insurance, bond or similar instrument), either individually or in an aggregate amount, entered against the Company or any Subsidiary or any of their respective properties which is not discharged and either (i) any creditor shall have commenced an enforcement proceeding upon such judgment, order or decree or (ii) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of pending appeal or otherwise, shall not be in effect; or (8) the entry by a court of competent jurisdiction of (A) a decree or order for relief in respect of the Company or any Significant Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy Law or (B) a decree or order adjudging the 37 Company or any Significant Subsidiary bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or any Significant Subsidiary under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Significant Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order for relief shall continue to be in effect, or any such other decree or order shall be unstayed and in effect, for a period of 60 consecutive days; or (9) (A) the commencement by the Company or any Significant Subsidiary of a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent, (B) the Company or any Significant Subsidiary consents to the entry of a decree or order for relief in respect of the Company or such Significant Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy Law or to the commencement of any bankruptcy or insolvency case or proceeding against it, (C) the Company or any Significant Subsidiary files a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, (D) the Company or any Significant Subsidiary (x) consents to the filing of such petition or the appointment of, or taking possession by, a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or such Significant Subsidiary or of any substantial part of its property, (y) makes an assignment for the benefit of creditors or (z) admits in writing its inability to pay its debts generally as they become due or (E) the Company or any Significant Subsidiary takes any corporate action in furtherance of any such actions in this clause (9). SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default (other than an Event of Default specified in Section 501(8) or 501(9)) shall occur and be continuing, then and in every such case the Trustee, by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes Outstanding may declare all amounts payable in respect of such Notes to be due and payable immediately, by a notice in writing to the Company and to the Trustee, and upon any such declaration such amounts shall become immediately due and payable. If an Event of Default specified in Section 501(8) or 501(9) occurs, then all amounts payable in respect of such Notes shall IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Notes Outstanding, by written notice to the Company and the Trustee, may rescind or annul such declaration if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (B) all overdue interest on all Outstanding Notes, and 38 (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes; and (2) all Events of Default, other than the non-payment of principal of such Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission or annulment shall affect any subsequent default or impair any right consequent thereon. SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if (a) default is made in the payment of any installment of interest on any Note when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Note at the Maturity thereof, the Company will, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal (and premium, if any) and interest, and interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installment of interest, at the rate borne by the Notes, and, in addition thereto, 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. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Notes, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Notes or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and 39 irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium, if any, or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due 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 606. 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 thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES. All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered. SECTION 506. APPLICATION OF MONEY COLLECTED. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 606; SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any, on) and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal (and premium, if any) and interest, respectively; and 40 THIRD: The balance, if any, to the Person or Persons entitled thereto. SECTION 507. LIMITATION ON SUITS. No Holder of any Notes shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee, for 60 days after its receipt of such notice, request and offer of reasonably satisfactory indemnity, has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority or more in principal amount of the Outstanding Notes; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST. Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment, as provided herein (including, if applicable, Article Thirteen) and in such Note, of the principal of (and premium, if any, on) and (subject to Section 307) interest on, such Note on the respective Stated Maturities expressed in such Note (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Subsidiary Guarantors, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. 41 SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and, subject to the provisions of Section 507, every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. CONTROL BY HOLDERS. The Holders of not less than a majority in principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, PROVIDED that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) the Trustee need not take any action which might involve it in personal liability or be unjustly prejudicial to the Holders not consenting. SECTION 513. WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in principal amount of the Outstanding Notes may on behalf of the Holders of all the Notes waive any past default hereunder and its consequences, except a default (1) in respect of the payment of the principal of (or premium, if any, on) or interest on any Note, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Note affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. 42 SECTION 514. WAIVER OF STAY OR EXTENSION LAWS. Each of the Company and the Subsidiary Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each of the Company and the Subsidiary Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 515. NOTICE OF DEFAULTS. Within ten days after the occurrence of any Default hereunder, the Company shall transmit in the manner and to the extent provided in TIA Section 313(c), notice to the Trustee of such Default hereunder known to the Company or any Subsidiary Guarantor, unless such Default shall have been cured or waived. ARTICLE SIX THE TRUSTEE SECTION 601. NOTICE OF DEFAULTS. Within 90 days after the occurrence of any Default hereunder, the Trustee shall transmit in the manner and to the extent provided in TIA Section 313(c), notice of such Default hereunder known to the Trustee, unless such Default shall have been cured or waived; PROVIDED, HOWEVER, that, except in the case of a Default in the payment of the principal of (or premium, if any, on) or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and PROVIDED FURTHER that in the case of any Default of the character specified in Section 501(3) no such notice to Holders shall be given until at least 30 days after the occurrence thereof. SECTION 602. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of TIA Sections 315(a) through 315(d): (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; 43 (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled at all reasonable times to examine the books, records and premises of the Company and the Subsidiary Guarantors, personally or by agent or attorney; (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (8) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 603. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES. The recitals contained herein and in the Notes, except for the Trustee's certificates of authentication, shall be taken as the statements of the Company or the Subsidiary Guarantors, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility of Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company of Notes or the proceeds thereof. 44 SECTION 604. MAY HOLD NOTES. The Trustee, any Paying Agent, any Security Registrar or any other agent of the Company or of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company and any Subsidiary Guarantor with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar or such other agent. SECTION 605. MONEY HELD IN TRUST. Cash in United States dollars or U.S. Government Obligations held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any such cash or U.S. Government Obligations received by it hereunder except as otherwise agreed in writing with the Company or any Subsidiary Guarantor. SECTION 606. COMPENSATION AND REIMBURSEMENT. The Company agrees: (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance, administration or enforcement of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute indebtedness and shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Company, the Trustee shall have a claim prior to the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any, on) or interest on particular Notes. SECTION 607. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50 million. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus 45 of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 608. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609. (b) The Trustee may resign at any time by giving written notice thereof to the Company addressed to the Company and the Subsidiary Guarantors. If the instrument of acceptance by a successor Trustee required by Section 609 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of not less than a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Company addressed to the Company and the Subsidiary Guarantors. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company, any Subsidiary Guarantor or by any Holder who has been a bona fide Holder of a Note for at least six months, or (2) the Trustee shall cease to be eligible under Section 607 and shall fail to resign after written request therefor by the Company, any Subsidiary Guarantor or by any Holder who has been a bona fide Holder of a Note for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company, by a Board Resolution, may remove the Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Company, the Subsidiary Guarantors and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted 46 appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to the Holders of Notes in the manner provided for in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 609. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 610. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, PROVIDED such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes; and in case at that time any of the Notes shall not have been authenticated, any successor Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor 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; PROVIDED, HOWEVER, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. 47 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND SUBSIDIARY GUARANTORS SECTION 701. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS. Every Holder of Notes, by receiving and holding the same, agrees with the Company and the Trustee that none of the Company or the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b). SECTION 702. REPORTS BY TRUSTEE. Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Notes, the Trustee shall transmit to the Holders, in the manner and to the extent provided in TIA Section 313(c), a brief report dated as of such May 15 if required by TIA Section 313(a). SECTION 703. REPORTS BY COMPANY AND SUBSIDIARY GUARANTORS. The Company and each of the Subsidiary Guarantors shall: (1) file with the Trustee, within 15 days after the Company or such Subsidiary Guarantor is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company or such Subsidiary Guarantor may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company or any of the Subsidiary Guarantors is not required to file information, documents or reports pursuant to either of said Sections, then they shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (3) transmit by mail to all Holders, in the manner and to the extent provided in TIA Section 313(c), within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; PROVIDED, HOWEVER, that any Subsidiary Guarantor shall be relieved of its obligations under clauses (1) and (2) of this Section to the extent that it is relieved of its obligations 48 under Section 13 or Section 15(d) of the Exchange Act by the Commission pursuant to the terms of any no-action letter addressed to the Company or such Subsidiary Guarantor from the staff of the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not, in a single transaction or a series of related transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of affiliated Persons, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions, in the aggregate, would result in a sale, assignment, transfer, lease or disposal of all or substantially all of the properties and assets of the Company and its Subsidiaries on a Consolidated basis to any other Person or group of affiliated Persons, unless at the time and after giving effect thereto: (1) either (A) the Company shall be the surviving or continuing corporation or (B) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, conveyance, transfer, lease or disposition, the properties and assets of the Company substantially as an entirety (the "Surviving Entity") (i) shall be a corporation duly organized and validly existing under the laws of the United States, any state thereof or the District of Columbia and (ii) shall, in any case, expressly assume, by a supplement indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company under the Notes and this Indenture, and this Indenture shall remain in full force and effect; (2) immediately before and immediately after giving effect to such transaction on a PRO FORMA basis (and treating any Indebtedness which becomes an obligation of the Company or any of its Subsidiaries in connection with or as a result of such transaction as having been incurred at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; (3) immediately before and immediately after giving effect to such transaction on a PRO FORMA basis (on the assumption that the transaction occurred on the first day of the four-quarter period immediately prior to the consummation of such transaction with the appropriate adjustments with respect to the transaction being included in such PRO FORMA calculation), the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions of Section 1010; 49 (4) each Subsidiary Guarantor, unless it is the other party to the transactions described above, shall have, by supplemental indenture to this Indenture, confirmed that its respective Note Guarantees with respect to the Notes shall apply to such Person's obligations under this Indenture and the Notes; (5) if any property or assets of the Company or any of its Subsidiaries would thereupon become subject to any Lien, the provisions of Section 1012 are complied with; and (6) the Company shall have delivered, or caused to be delivered, to the Trustee an Officer's Certificate and an Opinion of Counsel, each to the effect that such consolidation, merger, sale, assignment, conveyance, transfer, lease or other transaction and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 802. SUCCESSOR SUBSTITUTED. Upon any consolidation, merger, sale, assignment, conveyance, transfer, lease or other transaction described in, and complying with the provisions of, Section 801 in which the Company is not the continuing corporation, the successor Person formed or remaining shall succeed to, and be substituted for, and may exercise every right and power of, the Company, as the case may be, and the Company shall be discharged from all obligations and covenants under this Indenture and the Notes, PROVIDED that, in the case of a transfer by lease, the predecessor shall not be released from its obligations with respect to the payment of principal (premium, if any) and interest on the Notes. SECTION 803. NOTES TO BE SECURED IN CERTAIN EVENTS. If, upon any such consolidation of the Company with or merger of the Company into any other corporation, or upon any conveyance, lease or transfer of the property of the Company substantially as an entirety to any other Person, any property or assets of the Company would thereupon become subject to any Lien, then unless such Lien could be created pursuant to Section 1012 without equally and ratably securing the Notes, the Company, prior to or simultaneously with such consolidation, merger, conveyance, lease or transfer, will as to such property or assets, secure the Notes Outstanding (together with, if the Company shall so determine any other Indebtedness of the Company now existing or hereinafter created which is not subordinate in right of payment to the Notes) equally and ratably with (or prior to) the Indebtedness which upon such consolidation, merger, conveyance, lease or transfer is to become secured as to such property or assets by such Lien, or will cause such Notes to be so secured. 50 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders, the Company, the Subsidiary Guarantors, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained herein and in the Notes; or (2) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default; or (4) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee pursuant to the requirements of Section 609; or (5) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; PROVIDED that such action shall not adversely affect the interests of the Holders in any material respect; (6) to add new Subsidiary Guarantors pursuant to Section 1013; (7) to secure the Notes pursuant to the requirements of Section 803 or otherwise; or (8) to comply with any requirements of the Commission in order to effect and maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Notes, by Act of said Holders delivered to the Company, the Subsidiary Guarantors and the Trustee, the Company, when authorized by a Board Resolution, the Subsidiary Guarantors and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (1) change the Stated Maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption or purchase thereof, or change the coin or currency in which any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or 51 (2) reduce the percentage in principal amount of the Outstanding Notes, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or (3) modify any of the provisions of this Section or Sections 513 and 1015, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. (a) In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. (b) Each Subsidiary Guarantor hereby appoints the Company as its attorney-in-fact to execute, on its behalf, any indenture supplemental hereto to be entered into solely for the purpose specified in Section 901(6). SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to the Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company and the Subsidiary Guarantors shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Company and the Subsidiary Guarantors, to any such supplemental indenture may be prepared and executed by the Company and the Subsidiary Guarantors and authenticated and delivered by the Trustee in exchange for Outstanding Notes. 52 SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Sections 901 and 902, the Company shall give notice thereof to the Holders of each Outstanding Note affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture; PROVIDED, HOWEVER, that the Company shall not be required to give notice of any indenture supplemental hereto entered into solely for the purpose specified in Section 901(5), (6) or (8), notice with respect to which shall be given by the Company when it is next required to give notice pursuant to this Section. ARTICLE TEN COVENANTS SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. The Company covenants and agrees for the benefit of the Holders that it will duly and punctually pay the principal of (and premium, if any, on) and interest on the Notes in accordance with the terms of the Notes and this Indenture. SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in The City of New York, an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company or any Subsidiary Guarantor in respect of the Notes and this Indenture may be served. The Corporate Trust Office of the Trustee shall be such office or agency of the Company, unless the Company shall designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any 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, and the Company and each of the Subsidiary Guarantors hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified with respect to the Notes as contemplated by Section 301, the Company hereby designates as a Place of Payment for the Notes the office or agency of the Trustee in the Borough of Manhattan, The City of New York, and initially appoints Texas Commerce Trust Company of New York, 80 Broad Street, Suite 400, New York, New York 10004, as Paying Agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; 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 City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. 53 SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any, on) or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for the Notes, it will, on or before each due date of the principal of (and premium, if any, on), or interest on, any Notes, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any, on) or interest on Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal (and premium, if any) or interest; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any, on) or interest on any Note and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper 54 published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. CORPORATE EXISTENCE. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory) and franchises of the Company and each Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders. Notwithstanding anything to the contrary in this Section 1004, the Company shall be permitted to consolidate or merge any of its Subsidiaries with or into the Company or any Wholly Owned Subsidiary of the Company. SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (b) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1006. MAINTENANCE OF PROPERTIES. The Company will cause all properties owned by the Company or any Subsidiary or used or held for use in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent the Company from discontinuing the maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. SECTION 1007. INSURANCE. The Company will at all times keep all of its and its Subsidiaries' properties which are of an insurable nature insured with insurers, believed by the Company to be responsible, against loss or damage to the extent that property of similar character is usually so insured by corporations similarly situated and owning like properties. 55 SECTION 1008. STATEMENT BY OFFICERS AS TO DEFAULT. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 1008, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture. SECTION 1009. PURCHASE OF NOTES UPON A CHANGE OF CONTROL TRIGGERING EVENT. (a) Upon the occurrence of a Change of Control Triggering Event, each Holder shall have the right to require that the Company purchase such Holder's Notes in whole or in part in integral multiples of $1,000 (the "Change of Control Purchase Offer"), at a purchase price (the "Change of Control Purchase Price") in cash in an amount equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase (the "Change of Control Purchase Date"), in accordance with the procedures set forth in paragraphs (c) and (d) of this Section. (b) Upon the occurrence of a Change of Control Triggering Event and prior to the mailing of the notice to Holders provided for in paragraph (c) below, the Company covenants to either (x) repay in full all Indebtedness under the Credit Agreement or offer to repay in full all such Indebtedness and to repay the Indebtedness of each of the Banks that has accepted such offer or (y) obtain any requisite consent under the Credit Agreement to permit the purchase of the Notes as provided for in paragraph (c) below or take any other action as may be required under the Credit Agreement to permit such purchase. (c) Within 30 days following any Change of Control Triggering Event, the Company shall give to each Holder of the Notes in the manner provided in Section 106 a notice stating: (1) that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Company to purchase in whole or in part such Holder's Notes at the Change of Control Purchase Price; (2) the circumstances and relevant facts regarding such Change of Control Triggering Event (including but not limited to information with respect to PRO FORMA historical income, cash flow and capitalization after giving effect to the Change of Control); (3) the Change of Control Purchase Date which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed or such later date as is necessary to comply with the Exchange Act; (4) that any Note, or portion thereof, not tendered will continue to accrue interest; (5) that, unless the Company defaults in the payment of the Change of Control Purchase Price, any Notes accepted for payment of the Change of Control Purchase Price pursuant to the Change of Control Purchase Offer shall cease to accrue interest after the Change of Control Purchase Date; and 56 (6) the instructions a Holder must follow in order to have its Notes purchased in accordance with paragraph (d) of this Section. (d) Holders electing to have Notes purchased will be required to surrender such Notes to the Company at the address specified in the notice at least five Business Days prior to the Change of Control Purchase Date. Holders will be entitled to withdraw their election if the Company receives, not later than five Business Days prior to the Change of Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase by the Holder as to which his election is to be withdrawn and a statement that such Holder is withdrawing his election to have such Notes purchased. Holders whose Notes are purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. (e) The Company will comply with the applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and other applicable securities laws and regulations in connection with a Change of Control Purchase Offer. SECTION 1010. LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any of its Subsidiaries to, create, assume, or directly or indirectly guarantee or in any other manner become directly or indirectly liable for the payment of, or otherwise incur (collectively, "incur"), any Indebtedness (including any Acquired Indebtedness) other than Permitted Indebtedness, unless, at the time of such event (and after giving effect on a PRO FORMA basis to (i) the incurrence of such Indebtedness; (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Subsidiaries since the first day of such four-quarter period as if such Indebtedness was incurred, repaid or retired at the beginning of such four-quarter period; and (iii) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any company, entity or business acquired or disposed of by the Company or its Subsidiaries, as the case may be, since the first day of such four-quarter period, as if such acquisition or disposition had occurred at the beginning of such four-quarter period), the Consolidated Fixed Charge Coverage Ratio of the Company for the four full fiscal quarters immediately preceding such event, taken as one period and calculated on the assumption that such Indebtedness had been incurred on the first day of such four-quarter period and, in the case of Acquired Indebtedness, on the assumption that the related acquisition (whether by means of purchase, merger or otherwise) also had occurred on such date with the appropriate adjustments with respect to such acquisition being included in such PRO FORMA calculation, would have been at least equal to 1.75 to 1. SECTION 1011. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any Subsidiary of the Company to, directly or indirectly: (1) declare or pay any dividend on, or make any distribution to, the holders of, any Capital Stock of the Company (other than dividends or distributions payable solely in shares of Qualified Capital Stock of the Company or in options, warrants or other rights to purchase such Qualified Capital Stock); 57 (2) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any Capital Stock of the Company or any Subsidiary or any options, warrants or other rights to acquire such Capital Stock; (3) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, prior to any scheduled repayment, sinking fund payment or maturity, any Indebtedness of the Company which is subordinate in right of payment to the Notes or of any Subsidiary Guarantor that is subordinate to such Subsidiary Guarantor's Note Guarantee; (4) declare or pay any dividend or distribution on any Capital Stock of any Subsidiary of the Company to any Person (other than the Company or any Wholly Owned Subsidiary of the Company) or purchase, redeem or otherwise acquire or retire for value any Capital Stock of any Subsidiary of the Company held by any Person (other than the Company or any Wholly Owned Subsidiary of the Company); (5) create, assume or suffer to exist any guarantee of Indebtedness of any Affiliate of the Company (other than a Wholly Owned Subsidiary of the Company in accordance with the terms of the Indenture); or (6) make any Investment (other than any Permitted Investment) in any Person (such payments described in clauses (1) through (6) and not excepted therefrom are collectively referred to herein as "Restricted Payments") unless at the time of and immediately after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, as determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), (i) no Default or Event of Default shall have occurred and be continuing and (ii) the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in accordance with the provisions described under Section 1010. (b) Notwithstanding paragraph (a) above, the Company and its Subsidiaries may take the following actions so long as (with respect to clauses (2), (3), and (4), below) no Default or Event of Default shall have occurred and be continuing: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of paragraph (a) above; (2) the purchase, redemption or other acquisition or retirement for value of any shares of Capital Stock of the Company, in exchange for, or out of the net cash proceeds of, a substantially concurrent issuance and sale (other than to a Subsidiary) of shares of Capital Stock of the Company (other than Redeemable Capital Stock, unless the redemption provisions of such Redeemable Capital Stock prohibit the redemption thereof prior to the date on which the Capital Stock to be acquired or retired was by its terms required to be redeemed); (3) the purchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for or out of the net cash proceeds of a substantially concurrent issuance and sale (other than to a Subsidiary) of shares of Capital Stock of the Company (other than 58 Redeemable Capital Stock, unless the redemption provisions of such Redeemable Capital Stock prohibit the redemption thereof prior to the Stated Maturity of the Subordinated Indebtedness to be acquired or retired); and (4) the purchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Indebtedness (other than Redeemable Capital Stock) in exchange for, or out of the net cash proceeds of a substantially concurrent incurrence or sale (other than to a Subsidiary) of, new Subordinated Indebtedness of the Company so long as (A) the principal amount of such new Subordinated Indebtedness does not exceed the principal amount (or, if such Subordinated Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Subordinated Indebtedness being so purchased, redeemed, defeased, acquired or retired, PLUS the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Subordinated Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, PLUS the amount of expenses of the Company incurred in connection with such refinancing, (B) such new Subordinated Indebtedness is subordinated to the Notes to the same extent as such Subordinated Indebtedness so purchased, redeemed, defeased, acquired or retired, and (C) such new Subordinated Indebtedness has an Average Life longer than the Average Life of the Notes and a final Stated Maturity of principal later than the final Stated Maturity of principal of the Notes. SECTION 1012. LIMITATION ON LIENS. The Company will not, and will not permit any Subsidiary of the Company to, directly or indirectly, create, incur, assume or suffer to exist any Lien (other than Permitted Liens) of any kind upon any Principal Property or upon any shares of stock or indebtedness of any Subsidiary of the Company now owned or acquired after the date of this Indenture, or any income or profits therefrom, unless (a) the Notes are directly secured equally and ratably with (or prior to in the case of Liens with respect to Subordinated Indebtedness) the obligation or liability secured by such Lien or (b) any such Lien is in favor of the Company or any Subsidiary Guarantor. SECTION 1013. ADDITIONAL GUARANTEES. If the Company or any of its Subsidiaries shall acquire or form a Subsidiary, the Company will cause any such Subsidiary (other than an Equity Store or Business Development Venture, PROVIDED that such Equity Store or Business Development Venture does not guarantee the Senior Indebtedness of any other Person) that is or becomes a Significant Subsidiary or that guarantees any Senior Indebtedness of the Company or of any Subsidiary Guarantor to become a Subsidiary Guarantor with respect to the Notes. Any such Subsidiary shall become a Subsidiary Guarantor by (i) executing and delivering to the Trustee a supplemental indenture in form and substance reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall guarantee all of the obligations of the Company with respect to 59 the Notes issued under this Indenture on a senior basis and (ii) delivering to the Trustee an Opinion of Counsel reasonably satisfactory to the Trustee to the effect that a supplemental indenture has been duly executed and delivered by such Subsidiary and is in compliance with the terms of this Indenture. SECTION 1014. PROVISION OF FINANCIAL STATEMENTS. Whether or not the Company is subject to Section 13(a), 13(c) or 15(d) of the Exchange Act, the Company will file with the Commission the annual reports, quarterly reports and other documents that the Company is or would have been required to file with the Commission pursuant to such Section 13(a), 13(c) or 15(d) of the Exchange Act if the Company were so subject, such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required so to file such documents if the Company were so subject. The Company will also in any event within 15 days of each Required Filing Date (within 30 days of such Required Filing Date for any reports filed on Form 10-K) (i) transmit by mail to each Holder, as its name and address appears in the security register, without cost to such holder and (ii) file with the Trustee copies of the annual reports, quarterly reports and other documents which the Company is or would have been required to file with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act if the Company were so subject. SECTION 1015. WAIVER OF CERTAIN COVENANTS. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 803 or Sections 1007 through 1014, inclusive, if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Notes, by Act of such Holders, waive such compliance in such instance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE ELEVEN REDEMPTION OF NOTES SECTION 1101. RIGHT OF REDEMPTION. The Notes may be redeemed, at the option of the Company, as a whole or from time to time in part, at any time on or after December 15, 1995, subject to the conditions and at the Redemption Prices specified in the form of Note, together with accrued interest to the Redemption Date. SECTION 1102. APPLICABILITY OF ARTICLE. Redemption of Notes at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. 60 SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem any Notes pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Notes to be redeemed and shall deliver to the Trustee such documentation and records as shall enable the Trustee to select the Notes to be redeemed pursuant to Section 1104. SECTION 1104. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED. If less than all the Notes are to be redeemed, the particular Notes to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Notes not previously called for redemption, pro rata unless prohibited by applicable law, in which case by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions of the principal of Notes; PROVIDED, HOWEVER, that no such partial redemption shall reduce the portion of the principal amount of a Note not redeemed to less than $1,000. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed. SECTION 1105. NOTICE OF REDEMPTION. Notice of redemption shall be given in the manner provided for in Section 106 not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Notes to be redeemed. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all Outstanding Notes are to be redeemed, the identification by CUSIP Numbers, if any (and, in the case of a partial redemption, the principal amounts), of the particular Notes to be redeemed, (4) that on the Redemption Date the Redemption Price (together with accrued interest, if any, to the Redemption Date payable as provided in Section 1107) will become due and payable upon each such Note, or the portion thereof, to be redeemed, and that interest thereon will cease to accrue on and after said date, and (5) the place or places where such Notes are to be surrendered for payment of the Redemption Price. 61 Notice of redemption of Notes to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1106. DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, any Notes, or any portions thereof, to be redeemed on that date. SECTION 1107. NOTES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Notes so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Notes, or portions thereof, shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; PROVIDED, HOWEVER, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Notes. SECTION 1108. NOTES REDEEMED IN PART. Any Note which is to be redeemed only in part (pursuant to the provisions of this Article shall be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Note so surrendered. ARTICLE TWELVE NOTE GUARANTEES SECTION 1201. NOTE GUARANTEES. Subject to the provisions of this Article Twelve, each Subsidiary Guarantor hereby irrevocably and unconditionally guarantees, jointly and severally, on a senior basis to each Holder and to the Trustee, on behalf of the Holders, (i) the due and punctual payment of the 62 principal of and interest on each Note, when and as the same shall become due and payable, whether at Stated Maturity or purchase upon a Change of Control Triggering Event, and whether by declaration of acceleration, Change of Control Triggering Event, call for redemption or otherwise, the due and punctual payment of interest on the overdue principal of and interest, if any, on the Notes, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of such Note and this Indenture and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, at Stated Maturity or purchase upon a Change of Control Triggering Event, and whether by declaration of acceleration, Change of Control Triggering Event, call for redemption or otherwise (the obligations in clauses (i) and (ii) hereof being the "Guaranteed Obligations"). Without limiting the generality of the foregoing, each Subsidiary Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Company to the Holders or the Trustee under the Notes and the Indenture but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company. The Subsidiary Guarantors hereby agree that their obligations hereunder shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any such Note or this Indenture, any failure to enforce the provisions of any such Note or this Indenture, any waiver, modification or indulgence granted to the Company with respect thereto, by any Holder or any other circumstances which may otherwise constitute a legal or equitable discharge or defense of the Company or a surety or guarantor. The Subsidiary Guarantors hereby waive diligence, presentment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right to require a proceeding first against the Company, the benefit of discussion, protest or notice with respect to any such Note or the Indebtedness evidenced thereby and all demands whatsoever (except as specified above), and covenant that the Guaranteed Obligations will not be discharged as to any such Note except by payment in full of such Guaranteed Obligations and as provided in Sections 401, 1102 and 1205. Each Subsidiary Guarantor further agrees that, as between such Subsidiary Guarantor and the Holders, (i) the maturity of the Guaranteed Obligations may be accelerated as provided in Article Five, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Company or any other Subsidiary Guarantor in respect of the Guaranteed Obligations, and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article Five, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by each Subsidiary Guarantor. In addition, without limiting the foregoing provisions, upon the effectiveness of an acceleration under Article Five, the Trustee shall promptly make a demand for payment on any Notes in respect of which the Guaranteed Obligations provided for in this Article Twelve are not discharged. Each Subsidiary Guarantor hereby irrevocably waives any claim or other rights that it may now or hereafter acquire against the Company that arise from the existence, payment, 63 performance or enforcement of such Subsidiary Guarantor's obligations under this Indenture, or any other document or instrument including, without limitation, any right of reimbursement, exoneration, contribution, indemnification, any right to participate in any claim or remedy of the Holders against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or in any other manner, payment or security on account of such claim or other rights. Each Subsidiary Guarantor shall be subrogated to all rights of the Holders of the Notes pursuant to any Note Guarantee against the Company in respect of any amounts paid by such Subsidiary Guarantor on account of such Note pursuant to the provisions of this Indenture; PROVIDED, HOWEVER, that no Subsidiary Guarantor shall be entitled to enforce or to receive any payments arising out of, or based upon such right of subrogation until the principal of (and premium, if any) and interest on all Notes issued hereunder shall have been paid in full to the Holders entitled thereto. If any amount shall be paid to any Subsidiary Guarantor in violation of this paragraph and the Guaranteed Obligations shall not have been paid in full, such amount shall be deemed to have been paid to such Subsidiary Guarantor for the benefit of, and held in trust for the benefit of, the Holders, and shall forthwith be paid to the Trustee. Each Subsidiary Guarantor acknowledges that it will receive direct and indirect benefits from the issuance of the Notes and that the waiver set forth in this Section 1201 is knowingly made in contemplation of such benefits. Without limiting the generality of the foregoing, the Subsidiary Guarantors hereby expressly and specifically waive the benefits of Section 26-7 through 26-9 of the General Statutes of North Carolina, as amended from time to time, and any similar statute or law of any other jurisdiction, as the same may be amended from time to time. SECTION 1202. OBLIGATIONS OF THE SUBSIDIARY GUARANTORS UNCONDITIONAL. Nothing contained in this Article Twelve, elsewhere in this Indenture or in any Note is intended to or shall impair, as between the Subsidiary Guarantors and the Holders, the obligation of the Subsidiary Guarantors, which obligations are independent of the obligations of the Company under the Notes and this Indenture and are absolute and unconditional, to pay to the Holders the Guaranteed Obligations as and when the same shall become due and payable in accordance with the provisions of this Indenture, or is intended to or shall affect the relative rights of the Holders and creditors of the Subsidiary Guarantors, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture. Each payment to be made by any Subsidiary Guarantor hereunder in respect of the Guaranteed Obligations shall be payable in the currency or currencies in which such Guaranteed Obligations are denominated. SECTION 1203. RANKING OF NOTE GUARANTEES. Each Subsidiary Guarantor covenants and agrees, and each Holder of a Note by his acceptance thereof likewise covenants and agrees, that each Note Guarantee will be an unsecured senior obligation of the Subsidiary Guarantor issuing such Note Guarantee, 64 ranking PARI PASSU in right of payment with all other existing and future Senior Indebtedness of such Subsidiary Guarantor and senior in right of payment to any future Indebtedness of such Subsidiary Guarantor that is expressly subordinated to Senior Indebtedness of such Subsidiary Guarantor. SECTION 1204. LIMITATION OF NOTE GUARANTEES. The Company and each Subsidiary Guarantor, and each Holder of a Note by his acceptance thereof, hereby confirm that it is the intention of all such parties that each Subsidiary Guarantor shall be liable under this Indenture only for amounts aggregating up to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. To effectuate the foregoing intention, the Holders hereby irrevocably agree that in the event that any such Note Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law of any relevant jurisdiction, the liability of the Subsidiary Guarantor under such Note Guarantee shall be reduced to the maximum amount, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor, permissible under the applicable fraudulent conveyance or similar law. SECTION 1205. RELEASE OF SUBSIDIARY GUARANTORS. (a) Any Subsidiary Guarantor shall be released from and relieved of its obligations under this Article Twelve (1) upon defeasance in accordance with Section 1302, (2) upon the payment in full of all the Guaranteed Obligations or (3) upon the sale by the Company or any Subsidiary of such Subsidiary Guarantor to any Person other than a Subsidiary of the Company provided that such sale does not result in a sale, assignment, transfer, lease or disposal of all or substantially all of the properties and assets of the Company and its Subsidiaries on a Consolidated basis. Upon the delivery by the Company to the Trustee of an Officers' Certificate and, if requested by the Trustee, an Opinion of Counsel to the effect that the transaction giving rise to the release of such obligations was made by the Company in accordance with the provisions of this Indenture and the Notes, the Trustee shall execute any documents reasonably required in order to evidence the release of the Subsidiary Guarantors from their obligations. If any of the Guaranteed Obligations are revived and reinstated after the termination of such Note Guarantee, then all of the obligations of the Subsidiary Guarantors under such Note Guarantee shall be revived and reinstated as if such Note Guarantee had not been terminated until such time as the Guaranteed Obligations are paid in full, and the Subsidiary Guarantors shall execute any documents reasonably satisfactory to the Trustee evidencing such revival and reinstatement. (b) Upon (i) the sale or disposition of all of the Common Stock of a Subsidiary Guarantor (by merger or otherwise) to a Person other than the Company and which sale or disposition is otherwise in compliance with the terms of this Indenture, or (ii) the unconditional and full release in writing as provided herein of such Subsidiary Guarantor from all Indebtedness arising hereunder, such Subsidiary Guarantor shall be deemed released from all obligations under this Article Twelve; PROVIDED, HOWEVER, that any such termination upon such sale or disposition shall occur if and only to the extent that all obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or 65 other security interests which secure, Indebtedness of the Company or any Subsidiary, shall also terminate upon such sale or disposition. Upon the delivery by the Company to the Trustee of an Officers' Certificate and, if requested by the Trustee, an Opinion of Counsel to the effect that the transaction giving rise to the release of such obligations was made in accordance with the provisions of this Indenture and the Notes, the Trustee shall execute any documents reasonably required in order to evidence the release of such Subsidiary Guarantor from its obligations. Any Subsidiary Guarantor not so released remains liable for the full amount of principal of (and premium, if any) and interest on the Notes as provided in this Article Twelve. SECTION 1206. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. Except as set forth in Section 1205 and in Articles Eight and Ten hereof, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or a Subsidiary Guarantor or shall prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety to the Company or a Subsidiary Guarantor. ARTICLE THIRTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at its option and at any time, with respect to the Notes, elect to have either Section 1302 or Section 1303 be applied to all Outstanding Notes upon compliance with the conditions set forth below in this Article Thirteen. SECTION 1302. DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 1301 of the option applicable to this Section 1302, the Company shall be deemed to have been discharged from its obligations with respect to all Outstanding Notes on the date the conditions set forth in Section 1304 are satisfied (hereinafter, "defeasance"). For this purpose, such 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 1305 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 insofar as such Notes are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Notes to receive payments in respect of the principal of (and premium, if any, on) and interest on such Notes when such payments are due or on the Redemption Date with respect to such Notes, as the case may be, (B) the Company's obligations with respect to such Notes under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article Thirteen. Subject to compliance with this Article Thirteen, the Company may exercise its option under this Section 1302 notwithstanding the prior exercise of its option under Section 1303 with respect to the Notes. 66 SECTION 1303. COVENANT DEFEASANCE. Upon the Company's exercise under Section 1301 of the option applicable to this Section 1303, the Company shall be released from its obligations under any covenant contained in Section 801(3) and Section 803 and in Sections 1007 through 1015 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 to be "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. For this purpose, such covenant defeasance means that, with respect to the Outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501(3), but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to application of either Section 1302 or Section 1303 to the Outstanding Notes: (1) the Company shall irrevocably have deposited with the Trustee (or another trustee satisfying the requirements of Section 607 who shall agree to comply with the provisions of this Article Thirteen applicable to it) in trust, for the benefit of the Holders, cash in United States dollars, U.S. Government Obligations or a combination thereof in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the principal of, and premium, if any, and interest on the Outstanding Notes on the Stated Maturity or on an optional redemption date (such date being referred to as the "Defeasance Redemption Date"), as the case may be, if in the case of a Defeasance Redemption Date prior to electing to exercise either defeasance or covenant defeasance, the Company has delivered to the Trustee an irrevocable notice to redeem all of the outstanding Notes on such Defeasance Redemption Date; (2) in the case of an election under Section 1302, the Company shall have delivered to the Trustee an opinion of independent counsel in the United States stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (y) 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 in the United States shall confirm that, the Holders of the Outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such 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 defeasance had not occurred; (3) in the case of an election under Section 1303, the Company shall have delivered to the Trustee an opinion of independent counsel in the United States to the effect that 67 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; (4) no Default or Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit or, insofar as paragraphs (8) and (9) of Section 501 hereof are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (5) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default under, this Indenture or any other material agreement or instrument to which the Company or any Subsidiary Guarantor is a party or by which it is bound; (6) 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 or any Subsidiary Guarantor over the other creditors of the Company or any Subsidiary Guarantor or with the intent of defecting, hindering, delaying or defrauding creditors of the Company, any Subsidiary Guarantor or others; and (7) the Company shall have delivered to the Trustee an Officers' Certificate stating that all conditions precedent provided for relating to either the defeasance under Section 1302 or the covenant defeasance under Section 1303 (as the case may be) have been complied with. SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee -- collectively for purposes of this Section 1305, the "Trustee") pursuant to Section 1304 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 its own 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 (and 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 U.S. Governmental Obligations deposited pursuant to Section 1304 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Notes. Anything in this Article Thirteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1304 which, in the opinion of a 68 nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance, as applicable, in accordance with this Article. SECTION 1306. REINSTATEMENT. If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 1305 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 1302 or 1303, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1305, and the Company shall execute all documents reasonably satisfactory to the Trustee evidencing such revival and reinstatement; PROVIDED, HOWEVER, that if the Company makes any payment of principal of (or premium, if any, on) 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 FOURTEEN SINKING FUND SECTION 1401. MANDATORY SINKING FUND PAYMENTS. As a mandatory sinking fund for the retirement of certain of the Notes, the Company will, until all such Notes shall have been paid, or payment thereof duly provided for, pay to the Trustee, on each of December 15, 1999 and December 15, 2000 (each such date a "sinking fund payment date"), an amount sufficient to redeem $1 million principal amount of Notes, at a Redemption Price equal to 100% of their principal amount. The cash amount of any sinking fund payment is subject to reduction as provided in Section 1402. Each sinking fund payment shall be applied to the redemption of Notes on such sinking fund payment date as herein provided. SECTION 1402. SATISFACTION OF SINKING FUND PAYMENTS WITH NOTES. Subject to Section 1403, in lieu of making all or any part of any sinking fund payment in cash, the Company may at its option (1) deliver to the Trustee Outstanding Notes (other than any previously called for redemption) theretofore purchased or otherwise acquired by the Company and/or (2) receive credit for the principal amount of Notes which have been redeemed at the election of the Company pursuant to Section 1101, in each case in satisfaction of all or any part of any sinking fund payment required to be made pursuant to Section 1401; PROVIDED, HOWEVER, that such Notes have not been previously so credited. Such Notes shall be received and credited for such purpose by the Trustee at the Redemption Price specified in the form of Note for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. 69 SECTION 1403. REDEMPTION OF NOTES FOR SINKING FUND. Not less than 60 days prior to each sinking fund payment date, the Company will deliver to the Trustee an Officer's Certificate specifying the amount of the next ensuing sinking fund payment, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering or crediting Notes pursuant to Section 1402 (which Notes will, if not previously delivered, accompany such certificate). Such certificate shall be irrevocable and, upon its delivery, the Company shall be obligated to make the cash payment or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. In the case of the failure of the Company to deliver such certificate, the sinking fund payment due on the next succeeding sinking fund payment date shall be paid entirely in cash and shall be sufficient to redeem the principal amount of such Notes subject to such sinking fund payment without the option to deliver or credit Notes as provided in Section 1402. Not more than 60 days before each such sinking fund payment date, the Trustee shall select the Notes to be redeemed upon such sinking fund payment date in the manner specified in Section 1104 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1105. Such notice having been duly given, the redemption of such Notes shall be made upon the terms and in the manner stated in Sections 1107 and 1108. Prior to any sinking fund payment date, the Company shall pay to the Trustee or a Paying Agent a sum in cash equal to any interest that will accrue to the date fixed for redemption of Notes or portions thereof to be redeemed on such sinking fund payment date pursuant to this Section 1403. Notwithstanding the foregoing, if at any time the amount of cash to be paid into such sinking fund on the next succeeding sinking fund payment date, together with any unused balance of any preceding sinking fund payment or payments, does not exceed in the aggregate $100,000, the Trustee, unless requested by the Company, shall not give the next succeeding notice of the redemption of Notes through the operation of the sinking fund. Any such unused balance of moneys deposited in such sinking fund shall be added to the sinking fund payment to be made in cash on the next succeeding sinking fund payment date or, at the request of the Company, shall be applied at any time or from time to time to the purchase of Notes, by public or private purchase, in the open market or otherwise, at a purchase price for such Notes (excluding accrued interest and brokerage commissions, for which the Trustee or any Paying Agent will be reimbursed by the Company) not in excess of the principal amount thereof. In the absence of such written request, the Trustee shall be under no duty to make such purchases or otherwise invest such unused balance. 70 This Indenture may be signed in any number of counterparts each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Indenture. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. FLEMING COMPANIES, INC. SEAL By /s/ David R. Almond ----------------------------------- Title: Senior Vice President - General Counsel and Secretary Attest: /s/ John M. Thompson --------------------------- Title: Vice President, Treasurer and Assistant Secretary TEXAS COMMERCE BANK NATIONAL ASSOCIATION By /s/ ----------------------------------- Title: Assistant Vice President and Trust Officer Attest: /s/ --------------------------- Title: Vice President and Trust Officer ATI, Inc. Badger Markets, Inc. Baker's Supermarkets, Inc. Ball Motor Service, Inc. Boogaart Stores of Nebraska, Inc. Central Park Super Duper, Inc. Commercial Cold/Dry Storage Company Consumers Markets, Inc. D.L. Food Stores, Inc. Del-Arrow Super Duper, Inc. Festival Foods, Inc. Fleming Direct Sales Corporation Fleming Foods East, Inc. Fleming Foods of Alabama, Inc. Fleming Foods of Ohio, Inc. Fleming Foods of Tennessee, Inc. Fleming Foods of Texas, Inc. Fleming Foods of Virginia, Inc. Fleming Foods South, Inc. Fleming Foods West, Inc. 71 Fleming Foreign Sales Corporation Fleming Franchising, Inc. Fleming Holdings, Inc. Fleming International, Ltd. Fleming Site Media, Inc. Fleming Supermarkets of Florida, Inc. Fleming Technology Leasing Company, Inc. Fleming Transportation Service, Inc. Food Brands, Inc. Food-4-Less, Inc. Food Holdings, Inc. Food Saver of Iowa, Inc. Gateway Development Co., Inc. Gateway Food Distributors, Inc. Gateway Foods, Inc. Gateway Foods of Altoona, Inc. Gateway Foods of Pennsylvania, Inc. Gateway Foods of Twin Ports, Inc. Gateway Foods Service Corporation Grand Central Leasing Corporation Great Bend Supermarkets, Inc. Hub City Transportation, Inc. Kensington and Harlem, Inc. LAS, Inc. Ladysmith East IGA, Inc. Ladysmith IGA, Inc. Lake Markets, Inc. M&H Desoto, Inc. M&H Financial Corp. M&H Realty Corp. Malone & Hyde, Inc. Malone & Hyde of Lafayette, Inc. Manitowoc IGA, Inc. Moberly Foods, Inc. Mt. Morris Super Duper, Inc. Niagara Falls Super Duper, Inc. Northern Supermarkets of Oregon, Inc. Northgate Plaza, Inc. 109 West Main Street, Inc. 121 East Main Street, Inc. Peshtigo IGA, Inc. Piggly Wiggly Corporation Quality Incentive Company, Inc. Rainbow Transportation Services, Inc. Route 16, Inc. Route 219, Inc. 72 Route 417, Inc. Richland Center IGA, Inc. Scrivner, Inc. Scrivner-Food Holdings, Inc. Scrivner of Alabama, Inc. Scrivner of Illinois, Inc. Scrivner of Iowa, Inc. Scrivner of Kansas, Inc. Scrivner of New York, Inc. Scrivner of North Carolina, Inc. Scrivner of Pennsylvania, Inc. Scrivner of Tennessee, Inc. Scrivner of Texas, Inc. Scrivner Super Stores of Illinois, Inc. Scrivner Super Stores of Iowa, Inc. Scrivner Transportation, Inc. Sehon Foods, Inc. Selected Products, Inc. Sentry Markets, Inc. Smar Trans, Inc. Southern Supermarkets, Inc. (TX) Southern Supermarkets, Inc. (OK) Southern Supermarkets of Louisiana, Inc. Star Groceries, Inc. Store Equipment, Inc. Sundries Service, Inc. Switzer Foods, Inc. 35 Church Street, Inc. Thompson Food Basket, Inc. 29 Super Market, Inc. 27 Slayton Avenue, Inc. WPC, Inc. Each, a Subsidiary Guarantor By /s/ John M. Thompson ------------------------------------ Name: John M. Thompson Title: Vice President and Treasurer (Chief Financial Officer) Attest: /s/ David R. Almond - ---------------------------------- [Secretary] EX-10.10 6 SUPP. RETIR. PLAN AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT INCOME PLAN OF FLEMING COMPANIES, INC. AND ITS SUBSIDIARIES (Amended and Restated Effective January 1, 1995) (Execution Date: March 2, 1995) AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT INCOME PLAN OF FLEMING COMPANIES, INC. AND ITS SUBSIDIARIES TABLE OF CONTENTS PAGE ARTICLE I Name and Purpose of Plan. . . . . . . . . . . 1 1.1 Name of Plan . . . . . . . . . . . . . . . . 1 1.2 Purpose of Plan . . . . . . . . . . . . . . . 1 ARTICLE II Definitions and Construction . . . . . . . . 1 2.1 Definitions . . . . . . . . . . . . . . . . . 1 2.2 Construction . . . . . . . . . . . . . . . . 8 ARTICLE III Participation . . . . . . . . . . . . . . . . 8 3.1 Selection for Participation . . . . . . . . . 8 3.2 Participation in Consideration for Future Services Only . . . . . . . . . . 8 3.3 Other Agreements . . . . . . . . . . . . . . 9 3.4 Continuation of Participation While on Authorized Leave of Absence or After Disability . . . . . . . . . 9 ARTICLE IV Contributions . . . . . . . . . . . . . . . . 9 4.1 Payments by the Company and/or Subsidiary . . . . . . . . . . . . . . . . . 9 ARTICLE V Supplemental Normal Retirement Benefit . . . 9 5.1 Calculation of Supplemental Normal Retirement Income . . . . . . . . . . . . . . 9 5.2 Postponed Retirement Date . . . . . . . . . . 10 5.3 Payment of Supplemental Normal Retirement Income . . . . . . . . . . . . . . 10 -i- ARTICLE VI Death of a Participant. . . . . . . . . . . . 11 6.1 Payment of Death Benefit . . . . . . . . . . 11 6.2 Beneficiary Designation . . . . . . . . . . . 12 ARTICLE VII Early Retirement . . . . . . . . . . . . . . 12 7.1 Supplemental Early Retirement Income . . . . 12 ARTICLE VIII Disability . . . . . . . . . . . . . . . . . 13 8.1 Supplemental Disability Retirement Income . . . . . . . . . . . . . . . . . . . 13 8.2 Proof of Disability . . . . . . . . . . . . . 13 ARTICLE IX Termination of Employment . . . . . . . . . . 14 9.1 Termination of Employment Prior to Retirement Date . . . . . . . . . . . . . 14 9.2 Acceleration of Accrual of Target Benefit Upon Change in Control . . . . . . . . . . . . . . . . . 14 ARTICLE X Manner of Payment of Benefits . . . . . . . . 18 10.1 Payment at Actual Retirement . . . . . . . . 18 10.2 Participant to Elect Method of Distribution . . . . . . . . . . . . . . . 18 ARTICLE XI General Benefit Provisions . . . . . . . . . 18 11.1 Reemployed Participants Who Had Been Receiving Pension Benefits . . . . . . . 18 11.2 Restrictions on Alienation of Benefits . . . . . . . . . . . . . . . . . 19 11.3 No Trust . . . . . . . . . . . . . . . . . . 19 11.4 Withholding and Other Employment Taxes . . . . . . . . . . . . . . 19 -ii- ARTICLE XII Provisions Relating to Participants . . . . . 19 12.1 Information Required of Participants . . . . 19 12.2 Abandonment of Benefits . . . . . . . . . . . 20 12.3 Benefits Payable to Incompetents . . . . . . 20 12.4 Conditions of Employment Not Affected by Plan . . . . . . . . . . . . . . 20 ARTICLE XIII Administration and Associate Benefits Committee . . . . . . . . . . . . . . . . . . 21 13.1 Allocation of Responsibility for Plan Administration . . . . . . . . . . . 21 13.2 Appointment of Committee . . . . . . . . . . 21 13.3 Claims Procedure . . . . . . . . . . . . . . 21 13.4 Review Procedure . . . . . . . . . . . . . . 21 13.5 Records and Reports . . . . . . . . . . . . . 22 13.6 Other Committee Powers and Duties . . . . . . 22 13.7 Rules and Decisions . . . . . . . . . . . . . 23 13.8 Committee Procedures . . . . . . . . . . . . 23 ARTICLE XIV Amendment and Termination . . . . . . . . . . 23 14.1 Right to Amend or Alter Plan . . . . . . . . 23 14.2 Right to Terminate Plan . . . . . . . . . . . 23 14.3 Merger or Termination of Qualified Retirement Plan . . . . . . . . . . . . . . . 24 14.4 Forfeiture of All Benefits . . . . . . . . . 24 ARTICLE XV Miscellaneous Provisions . . . . . . . . . . 25 15.1 Articles and Section Titles and Headings . . . . . . . . . . . . . . . . 25 15.2 Laws of Oklahoma to Govern . . . . . . . . . 25 -iii- AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT INCOME PLAN OF FLEMING COMPANIES, INC. AND ITS SUBSIDIARIES FLEMING COMPANIES, INC., an Oklahoma corporation, hereby adopts the Amended and Restated Supplemental Retirement Income Plan of Fleming Companies, Inc. and Its Subsidiaries upon the following terms and conditions. This Plan shall serve as an amendment, restatement and continuation of that certain nonqualified retirement plan entitled "Supplemental Retirement Income Plan of Fleming Companies, Inc. and Its Subsidiaries" originally adopted effective March 1, 1985. ARTICLE I NAME AND PURPOSE OF PLAN 1.1 NAME OF PLAN. This Plan shall be hereafter known as the AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT INCOME PLAN OF FLEMING COMPANIES, INC. AND ITS SUBSIDIARIES. 1.2 PURPOSE OF PLAN. This Plan shall be considered as a "nonqualified deferred compensation plan" which is to be sponsored by the Company solely for the purpose of providing a supplemental retirement income for a select group of management and highly compensated Associates who contribute materially to the continued growth, development and future business success of the Company and its Subsidiaries. It is the intention of the Company that this Plan and any Agreements entered into pursuant hereto be administered as unfunded benefit plans established and maintained for a select group of management and highly compensated Associates. ARTICLE II DEFINITIONS AND CONSTRUCTION 2.1 DEFINITIONS. Where the following capitalized words and phrases appear in this instrument, they shall have the respective meanings set forth below unless a different context is clearly expressed herein. (a) ACTUARIAL EQUIVALENT: The words "Actuarial Equivalent" shall mean the equivalent of Supplemental Normal Retirement Income as of the applicable Retirement Date otherwise payable to a Participant in the mode of a single life annuity commencing on his Normal Retirement Date, determined using only mortality and interest assumptions. The rates of mortality are contained in the -1- Qualified Retirement Plan. The rate of interest shall be the rate determined by the Pension Benefit Guaranty Corporation for valuing immediate annuities effective for defined benefit plans that terminate on the December 31 of the calendar year immediately preceding the date of calculation of actuarial equivalence. (b) ACT: The word "Act" shall mean Public Law. No. 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time. (c) ACTUARY: The word "Actuary" shall mean an enrolled actuary selected by the Committee to provide actuarial services for the Plan. (d) AGREEMENT: The word "Agreement" shall mean that certain "Agreement for Supplemental Retirement Income" which will be entered into by and between the Company and the Participant. (e) ASSOCIATE: The word "Associate" shall mean any person, employed by the Employer on the basis of an employer-employee relationship, who receives remuneration for personal services rendered to the Employer. (f) AUTHORIZED LEAVE OF ABSENCE: The words "Authorized Leave of Absence" shall mean any extraordinary absence authorized by the Committee within its sole discretion. (g) ANNUAL FINAL COMPENSATION: The words "Annual Final Compensation" shall mean the highest annual total compensation earned by a Participant during any of the three consecutive calendar years of his employment immediately preceding his Normal Retirement Date or his earlier termination of employment, as the case may be, which shall include the following: (i) the total of all amounts paid to a Participant by the Employer as regular salary or wages including overtime, commissions, bonuses, jury pay, vacation pay, sick pay and holiday pay, but excluding other forms of extraordinary compensation reported on the Participant's Form W-2 to the Internal Revenue Service such as final payments of the balance of the bonus bank under the Economic Value Added Incentive Bonus Plan for Fleming Companies, Inc. and Its Subsidiaries, allowances or reimbursement for moving expenses, automobiles, income recognized on the exercise of stock options or upon receipt -2- of an award of stock; provided, Annual Final Compensation shall further be adjusted to include or be limited by the amounts provided in the following Subsection (ii); and (ii) any amount deferred by a Participant pursuant to (x) Section 401(k) of the Code with respect to an employee benefit plan sponsored by the Employer or (y) Section 125 of the Code with respect to a "cafeteria plan" sponsored by the Employer. (h) BASIC RETIREMENT INCOME: The words "Basic Retirement Income" shall mean the retirement benefits which have been paid, or are otherwise payable on his Normal Retirement Date to a Participant, or his dependents, spouse, former spouse pursuant to a "qualified domestic relations order", or such other beneficiary as designated under the Qualified Retirement Plan of the Company. (i) BENEFICIARY: The words "Beneficiary" shall mean that person designated by the Participant pursuant to Section 6.2 hereof who would be entitled to receive his Supplemental Retirement Income upon the death of the Participant. (j) CATEGORY I ASSOCIATES: The words "Category I Associates" shall mean the Chief Executive Officer, President, Executive Vice Presidents and Senior Vice Presidents of the Company. (k) CATEGORY II ASSOCIATES: The words "Category II Associates" shall mean Vice Presidents and any other key management Associates of the Company and its Subsidiaries. (l) CAUSE: The word "Cause" when used in connection with a termination from employment after a Change of Control shall mean termination for one of the following reasons: (i) the conviction of the Participant of a felony by a federal or state court of competent jurisdiction; (ii) an act or acts of dishonesty taken by the Participant and intended to result in substantial personal enrichment of the Participant at the expense of the Company; (iii) the Participant's "willful" failure to follow a direct, reasonable and lawful written order from his supervisor, within the reasonable scope of the Participant's duties, which failure is not cured -3- within 30 days; or (iv) the Participant's failure to perform his specified duties and responsibilities for a period of 45 days as determined by his supervisor after a warning in writing. Further, for purposes of this Section (b): (1) No act or failure to act, on the Participant's part shall be deemed "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant's action or omission was in the best interest of the Company. (2) The Participant shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than three-fourths (3/4ths) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Participant was guilty of conduct set forth in clauses (i), (ii), (iii) or (iv) above and specifying the particulars thereof in detail. (m) CHANGE OF CONTROL: The words "Change of Control" shall have the meaning set forth in Section 9.2 of this Plan. (n) CODE: The word "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (o) COMMITTEE: The word "Committee" shall mean the Compensation and Organization Committee appointed by the Board of Directors of the Company under Article XIII herein to administer the Plan. (p) COMPANY: The word "Company" shall mean Fleming Companies, Inc., or its successor. (q) DISABILITY: The word "Disability" shall mean a condition whereby a Participant has become totally and permanently disabled within the meaning of the Long-Term -4- Disability Plan as in effect as of the Effective Date of this Plan. (r) DISABILITY RETIREMENT DATE: The words "Disability Retirement Date" shall mean the first day of the month after which a Participant terminating employment has satisfied all conditions specified in the foregoing Subsection for Disability. (s) EARLY RETIREMENT DATE: The words "Early Retirement Date" shall mean the first day of the month coinciding with or following the date a Participant terminates employment with the Employer after (i) earning at least 10 Years of Credited Service and (ii) attaining at least age 55. (t) EFFECTIVE DATE: The words "Effective Date" shall mean the 1st day of January, 1995. (u) ELIGIBLE SPOUSE: The words "Eligible Spouse" shall mean the spouse to whom the Participant is married for the one-year period preceding his date of death or the date on which payment of his Supplemental Retirement Income will commence. (v) EMPLOYER: The word "Employer" shall mean either the Company or any Subsidiary of the Company. (w) GOOD REASON: The words "Good Reason" when used in connection with a termination of employment after a Change of Control shall mean: (i) the assignment to the Participant of any duties inconsistent in any respect with the Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as in effect during the 90-day period immediately prior to the Change of Control, or any other action by the Company which results in a diminution in such position, compensation, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; (ii) the Employer's requiring the Participant to be based at any office or location more than 25 miles from where the Participant was employed immediately prior to the Change of Control, except for periodic travel reasonably required in the -5- performance of the Participant's responsibilities; or (iii) the failure by the Company to comply with Section 14.3(a) of this Plan. (x) LONG-TERM DISABILITY PLAN: The words "Long- Term Disability Plan" shall mean the "Long-Term Disability Benefit Plan of Fleming Companies, Inc. and Its Subsidiaries." (y) NORMAL RETIREMENT AGE: The words "Normal Retirement Age" shall mean the 65th birthday of a Participant. (z) NORMAL RETIREMENT DATE: The words "Normal Retirement Date" shall mean the first day of the month coinciding with or following a Participant's Normal Retirement Age. (aa) OFFSET AMOUNTS: The words "Offset Amounts" shall mean that amount of other benefits which will be applied by the Committee in determining the amount of Supplemental Normal Retirement Income for any Participant. The Offset Amounts shall consist of the (i) Basic Retirement Income, (ii) any and all amounts which have been paid, or are due and payable to the Participant (and his dependents) as applied by and provided under Social Security to be calculated assuming the Participant has attained 65 years of age, and (iii) the present value of the "B" Account under the Consolidated Savings Plus Plan of Fleming Companies, Inc. and Its Subsidiaries, if any, attributable or paid to the Participant. The Offset Amounts shall include any amounts which have been paid or which are payable to a spouse, former spouse or his dependents pursuant to a "qualified domestic relations order" as defined in Section 414(p) of the Code. The present value of the "B" Account under the Consolidated Savings Plus Plan of Fleming Companies, Inc. and Its Subsidiaries will be calculated by the Actuary for the Plan to determine the Actuarial Equivalent amount of a single life annuity commencing on the Participant's Normal Retirement Date. If the Participant has accrued a benefit in any retirement plan of the Company or any Subsidiary qualified under Section 401(a) and Section 501(a) of the Code other than the Qualified Retirement Plan, the Committee may consider and apply such accrued benefit as an "offset amount" which will be applied against any Target Benefit which may be provided herein. Provided, however, no accrued benefits attributable to contributions made pursuant to Section 401(k) or Section -6- 401(m) of the Code shall be considered as "Offset Amounts." (bb) PARTICIPANT: The word "Participant" shall mean an Associate who during a Year shall meet the eligibility requirements of Article III herein for participation or reparticipation, as the case may be. (cc) PLAN: The word "Plan" shall mean the Amended and Restated Supplemental Retirement Income Plan of Fleming Companies, Inc. and Its Subsidiaries, as set forth in this instrument, and as hereafter amended from time to time. (dd) POSTPONED RETIREMENT DATE: The words "Postponed Retirement Date" shall mean the first day of the month coinciding with or next following the date that a Participant retires under Section 5.3 herein subsequent to his Normal Retirement Date. (ee) QUALIFIED RETIREMENT PLAN: The words "Qualified Retirement Plan" shall mean the employee pension plan sponsored by the Company which is qualified under Section 401(a) and Section 501(a) of the Code which is known as the "Consolidated Retirement Plan of Fleming Companies, Inc. and Its Subsidiaries." (ff) RETIREMENT DATE: The words "Retirement Date" shall mean a Participant's Early Retirement Date, Disability Retirement Date, Normal Retirement Date, or Postponed Retirement Date, whichever applies. (gg) SUBSIDIARY: The word "Subsidiary" shall mean any corporation with 80% or more of its voting common stock being owned by the Company. (hh) SUPPLEMENTAL DEATH BENEFIT: The words "Supplemental Death Benefit" shall mean that additional benefit which could be paid to the Eligible Spouse or Beneficiary of a deceased Participant all as provided by Article VI hereof. (ii) SUPPLEMENTAL DISABILITY RETIREMENT INCOME: The words "Supplemental Disability Retirement Income" shall mean a monthly pension benefit computed in accordance with Section 8.1 herein. (jj) SUPPLEMENTAL EARLY RETIREMENT INCOME: The words "Supplemental Early Retirement Income" shall mean a monthly pension benefit computed in accordance with Section 7.1 herein. -7- (kk) SUPPLEMENTAL NORMAL RETIREMENT INCOME: The words "Supplemental Normal Retirement Income" shall mean a monthly pension benefit computed in accordance with Section 5.1 herein. (ll) TARGET BENEFIT: The words "Target Benefit" shall mean that aggregate benefit which is "targeted" for a Participant selected by the Committee. The amount of Target Benefit of a Participant will (i) consist of that designated percentage of Annual Final Compensation earned by the Participant pursuant to the terms and provisions of this Plan, and (ii) depend on whether the Participant is a Category I Associate or Category II Associate as of his applicable Retirement Date or other termination of employment. (mm) YEAR: The word "Year" shall mean the annual period beginning on the first day following the last Saturday of December, and ending on the last Saturday of December of the calendar year immediately following. (nn) YEAR OF CREDITED SERVICE: The words "Year of Credited Service" shall have the same meaning and be calculated in the same manner as "Years of Credited Service" are computed under the Qualified Retirement Plan. 2.2 CONSTRUCTION. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender, unless the context clearly indicates to the contrary. Any word appearing herein in the plural shall include the singular, where appropriate, and likewise the singular shall include the plural, unless the context clearly indicates to the contrary. ARTICLE III PARTICIPATION 3.1 SELECTION FOR PARTICIPATION. In order to be eligible for participation in the Plan, an Associate must be selected by the Committee, which in its sole and absolute discretion shall determine eligibility for participation in accordance with the purposes of and to the extent permitted under the Plan. To this end, the only Associates who will be eligible to participate in this Plan will be Associates who are members of a select group of management Associates. 3.2 PARTICIPATION IN CONSIDERATION FOR FUTURE SERVICES ONLY. Selection of an Associate by the Committee for participation in the Plan will be limited to those Associates who meet the qualification requirements heretofore described and will be deemed to be for all purposes in consideration of future services which -8- will be rendered by such Associate to the Company or its Subsidiaries in order to retain such Associates and to ensure the continued growth, development and business of the Company and its Subsidiaries. 3.3 OTHER AGREEMENTS. Any Associate having been selected by the Committee as a Participant, shall, as a condition of participation, complete and return to the Committee any and all other agreements which will relate to the election by the Participant to participate in the Plan and to agree to the terms and conditions thereof. 3.4 CONTINUATION OF PARTICIPATION WHILE ON AUTHORIZED LEAVE OF ABSENCE OR AFTER DISABILITY. In the event that a Participant is on an Authorized Leave of Absence, such Participant shall continue to be eligible to be a Participant hereunder during such period of Authorized Leave of Absence. In the event that a Participant has incurred a Disability, Article VIII hereof shall govern such Participant. ARTICLE IV CONTRIBUTIONS 4.1 PAYMENTS BY THE COMPANY AND/OR SUBSIDIARY. The payments required to fund the cost of the benefits provided by the Plan shall be made solely by the Company and/or any Subsidiary whose Associates are participating in the Plan. ARTICLE V SUPPLEMENTAL NORMAL RETIREMENT INCOME 5.1 CALCULATION OF SUPPLEMENTAL NORMAL RETIREMENT INCOME. (a) GENERAL. Each Associate (either as a Category I Associate or Category II Associate) who has been selected by the Committee to be a Participant in the Plan, is also a participant in the Qualified Retirement Plan sponsored by the Company. Further, each Participant has also earned a benefit in the form of a Basic Retirement Income pursuant to the terms and provisions of the Qualified Retirement Plan as of the Effective Date or a date subsequent thereto. The Supplemental Normal Retirement Income will equal the difference, if any, between (i) the applicable Target Benefit selected for a Participant by the Committee and (ii) the Offset Amounts otherwise payable to the Participant as of his applicable Retirement Date or other termination of employment, as the case may be. -9- (b) GUIDELINES FOR ACCRUAL OF TARGET BENEFIT. Each Participant will be awarded his Target Benefit by the Committee. Entitlement to the Target Benefit will be based upon whether the Participant is a Category I Associate or a Category II Associate, his Annual Final Compensation, and the amount of his Offset Amounts. Further, the applicable amount of Target Benefit to which a Participant may be entitled at any point in time between the date he has been selected for participation in the Plan and his Retirement Date or other termination of employment, as the case may be, shall be subject to the following general guidelines for determining the rate of accrual of such Target Benefit unless otherwise determined by the Committee: Guidelines for Rate of Accrual of Target Benefit YEARS OF CREDITED SERVICE AT NORMAL RETIREMENT DATE CATEGORY I CATEGORY II FIRST, if the Participant has less 0% 0% than 10 Years of Credited Service SECOND, after a Participant has earned at least 10 Years of Credited Service and he has attained the age of at least 55 years, he shall have accrued a Target Benefit which is not less than 50% of his Annual Final Compensation (if a Category I Associate) or 40% of his Annual Final Compensation (if a Category II Associate). For each Year of Credited Service earned after the initial 10 Years of Credited Service has been earned by a Participant, such Participant shall accrue an additional amount of his Target Benefit at the rate of 1% for each additional Year of Credited Service earned by the Participant but in no event shall such amount ever exceed the lesser of (i) the total Target Benefit otherwise payable to the Participant at his Normal Retirement Date or (ii) 80% of his Annual Final Compensation. Provided, the foregoing notwithstanding, the Committee, in its sole discretion, may, subject to the limitation that no Target Benefit may exceed 80% of a Participant's Annual Final Compensation, provide for a Participant's Target Benefit in a manner otherwise than as heretofore provided. 5.2 POSTPONED RETIREMENT DATE. If a Participant continues his employment with the Employer to a date after his Normal Retirement Date ("Postponed Retirement Date"), his Supplemental Normal Retirement Income shall be deferred until his Postponed Retirement Date. Benefits to which he shall be entitled as of his benefit commencement date shall be his Supplemental Normal Retirement Income earned at his Normal Retirement Date without adjustment after such date. 5.3 PAYMENT OF SUPPLEMENTAL NORMAL RETIREMENT INCOME. Notwithstanding any provision contained in this Plan to the -10- contrary and except in the case of a Change of Control as specified in Section 9.2 of this Plan, no portion of Participant's Supplemental Normal Retirement Income to which he may be entitled shall be payable (i) prior to the date that he first satisfies the requirements for retiring on his applicable Retirement Date and (ii) unless he actually terminates employment with the Employer on the applicable Retirement Date. Except as provided in Section 9.2 of this Plan, in the event commencement of benefits commence prior to a Participant's Normal Retirement Date, then, such benefits shall be adjusted as provided in Article VI in the event of a payment of a Supplemental Death Benefit, and as provided in Article VII in the event of a Supplemental Early Retirement Income, and as provided in Article VIII in the event of a Supplemental Disability Retirement Income. ARTICLE VI DEATH OF A PARTICIPANT 6.1 PAYMENT OF DEATH BENEFIT. (a) At any point in time to the extent that a Participant is entitled to receive any portion of his Basic Retirement Income as determined pursuant to the terms and provisions of the Qualified Retirement Plan due to the death of the Participant while employed by the Company or a Subsidiary, the Eligible Spouse or Beneficiary of such Participant, as the case may be, shall be entitled to receive a Supplemental Death Benefit to be calculated as provided in Article V hereof and will be based upon the percentage of the Target Benefit earned by the Participant as of his date of death. Provided, however, in making such calculation under Article V hereof, the Participant shall be credited with Years of Credited Service equal to the greater of his actual Years of Credited Service or ten (10) Years of Credited Service. The Supplemental Death Benefit will be paid in the same manner as he has previously elected in his Agreement. (b) The foregoing Subsection (a) notwithstanding, in the event of the death of Participant who is in the employ of the Company or a Subsidiary prior to his first eligible Early Retirement Date, no benefit will be paid to either the Eligible Spouse or the Beneficiary of Participant in the form of a Supplemental Death Benefit until the date such Participant would have otherwise attained his first eligible Early Retirement Date assuming he had continued in the employ of the Company. In the event of the death of the Eligible Spouse or the Beneficiary, as the case may be, prior to such date, then -11- no Supplemental Death Benefit will be paid pursuant to the terms of this Agreement or the Plan. In the event of the death of the Participant on or after his first eligible Early Retirement Date, then his Supplemental Death Benefit will be paid as hereinabove provided. Provided further, unless the Participant is in the employ of the Company as of the date of his death or unless he has previously terminated employment and commenced receipt of benefits, then, no Supplemental Death Benefit shall be paid to the Participant pursuant to the terms of this Agreement or the Supplemental Plan due to his death. 6.2 BENEFICIARY DESIGNATION. In the event that the Eligible Spouse is not otherwise designated to receive the Supplemental Death Benefit otherwise payable to a Participant hereunder, then, such Supplemental Death Benefit shall be paid to the Beneficiary designated by the Participant who is then surviving and if there is no Beneficiary then surviving, such benefits will automatically be paid to the surviving Eligible Spouse of such Participant, or otherwise to the estate of such Participant. ARTICLE VII EARLY RETIREMENT 7.1 SUPPLEMENTAL EARLY RETIREMENT INCOME. A Participant who has attained his Early Retirement Date may, with the consent of the Company, retire early and apply for a Supplemental Early Retirement Income. A Participant's Supplemental Early Retirement Income shall commence as of such Participant's Early Retirement Date. The monthly amount of a Supplemental Early Retirement Income to which a Participant shall be entitled for life shall be based on his Supplemental Normal Retirement Income earned by the Participant as of his Early Retirement Date; provided, that if the payments of such Supplemental Early Retirement Income commence prior to the Participant's Normal Retirement Date, such Supplemental Normal Retirement Income shall be actuarially adjusted as of the date of actual commencement of payments by multiplying the Participant's Supplemental Normal Retirement Income by the appropriate "early retirement adjustment factors" shown below based upon the Participant's age in years and completed months (calculated proportionately) at the date of actual commencement of payments; provided, however, that the Committee may in its sole discretion waive the application of the Early Retirement Adjustment Factors. -12-
Early Retirement Adjustment Factors ------------------- Percentage of Adjusted Target Benefit Age for Participant --- ---------------------- 62-65 100% 61 94% 60 88% 59 82% 58 76% 57 70% 56 64% 55 58%
ARTICLE VIII DISABILITY 8.1 SUPPLEMENTAL DISABILITY RETIREMENT INCOME. If a Participant has satisfied all conditions of Disability, he shall be entitled to his Supplemental Disability Retirement Income. The monthly amount of a Supplemental Disability Retirement Income to which a Participant shall be entitled for life shall be based on his Supplemental Normal Retirement Income earned by the Participant as of his Disability Retirement Date. Payment of a Supplemental Disability Retirement Income payments shall not commence (i) prior to his first eligible Early Retirement Date assuming such Participant continued in the employ of the Employer, and (ii) until such Participant is no longer receiving benefits pursuant to the Long-Term Disability Plan. A Participant's Supplemental Disability Retirement Income will be adjusted like a Supplemental Early Retirement Income as provided in Section 7.1 hereof if benefits commence prior to attainment of the age of 62 years. 8.2 PROOF OF DISABILITY. After a Participant's Disability Retirement Date the Committee may require that the Participant's continuing Disability be verified by medical examination at a location convenient to the Participant; provided, such Participant shall not be required to submit to more than one examination in a 12 month period. If, at any time prior to the Participant's Normal Retirement Age, the Committee determines that he no longer has a Disability, or if the Participant shall refuse to submit to a physical examination, the Committee shall direct that in computing such Participant's Supplemental Disability Retirement Income, only "Years of Credited Service" earned prior to such determination by the Committee be considered. -13- ARTICLE IX TERMINATION OF EMPLOYMENT 9.1 TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT DATE. In the event that a Participant for any reason other than death or approved retirement by the Employer on or after his applicable Early Retirement Date terminates his employment with the Employer prior to his Normal Retirement Date, then, except as provided in Section 9.2 below, such Participant shall have no rights of any kind whatsoever in any Supplemental Normal Retirement Income (or any other benefit) otherwise to be paid pursuant to the terms of this Plan. 9.2 ACCELERATION OF ACCRUAL OF TARGET BENEFIT UPON CHANGE OF CONTROL. In the event that there is a "change of control" as defined below of the Company, and within three years following such change of control, a Participant is terminated other than for Cause or death or Disability or terminates his employment for Good Reason, then, such Participant shall be fully vested and entitled to his full Supplemental Normal Retirement Income earned by such Participant as of his date of termination of employment with such Supplemental Retirement Income to be paid beginning immediately. Such Supplemental Normal Retirement Income shall not be reduced by any Early Retirement Adjustment Factors as provided in Article VII hereof and shall be calculated based upon such Participant's actual Annual Final Compensation earned by such Participant as of his termination of employment and the greater of such Participant's actual Years of Credited Service or ten (10) Years of Credited Service. In each case, the Participant shall have been deemed to have reached 65 years of age. Anything in this Plan to the contrary notwithstanding, if a Participant's employment with the Employer is terminated prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Plan as to such terminated Participant, a Change of Control shall mean the date immediately prior to the date of such termination. For the purposes of this Plan, the term "change of control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more (the "Triggering Percentage") of either (i) the then outstanding shares of Common Stock of the Company (the "Outstanding Company Common -14- Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, in the event the "Incumbent Board" (as such term is hereinafter defined) pursuant to Section 7 of the Rights Agreement between the Company and The Liberty National Bank and Trust Company of Oklahoma City dated as of July 7, 1986 together with any additional amendments thereto (the "Rights Agreement") lowers the threshold amounts set forth in Section 1(a) or 3(a) of the Rights Agreement, the Triggering Percentage shall be automatically reduced to equal the threshold set pursuant to Section 7 of the Rights Agreement; and provided, further, however, that the following acquisitions shall not constitute a change of control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (iv) any acquisition previously approved by at least a majority of the members of the Incumbent Board, (v) any acquisition approved by at least a majority of the members of the Incumbent Board within five (5) business days after the Company has notice of such acquisition, or (vi) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii), and (iii) of subsection (c) of this Section 9.2; or (b) Individuals who, as of the date hereof, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, appointment or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for purposes of this definition, any such individual whose initial assumption of office -15 occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the shareholders of the Company of a reorganization, share exchange, merger or consolidation (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 70% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination -16- or were elected, appointed or nominated by the Board; or (d) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or, (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 70% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportions as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) less than 20% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by any Person (excluding any employee benefit plan (or related trust) of the Company or such corporation), except to the extent that such Person owned 20% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities prior to the sale or disposition, and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such sale or other disposition of assets of the Company or were elected, appointed or nominated by the Board. -17- ARTICLE X MANNER OF PAYMENT OF BENEFITS 10.1 PAYMENT AT ACTUAL RETIREMENT. Upon the Participant terminating his employment with the Company on his applicable Retirement Date, then, such Participant shall be paid a benefit calculated as provided herein; and, such benefit shall be paid as Supplemental Early Retirement Income, Supplemental Disability Retirement Income or Supplemental Normal Retirement Income, as the case may be. Such Supplemental Normal Retirement income will be paid monthly on a single life basis for the life of the Participant unless an optional form of payment is selected by Participant. Provided, such selections are irrevocable and will be made by the Participant on the date the Participant becomes a participant in the Plan. The optional forms of payment permitted under the Plan are as follows: OPTIONAL FORM OF PAYMENT 50% spouse survivor benefit 75% spouse survivor benefit 100% spouse survivor benefit 5 year certain 10 year certain 15 year certain In the event that a Participant elects an optional form of payment as herein provided, the Actuary for the Plan shall actuarially adjust the amount of Supplemental Normal Retirement Income otherwise payable to the Participant if such payment was to be made on a single life basis to reflect the age of the Participant, his Beneficiary or his Eligible Spouse, as the case may be. 10.2 PARTICIPANT TO ELECT METHOD OF DISTRIBUTION. On or about the time a Participant has been selected by the Committee to participate in the Plan, the Participant shall elect the method of distribution as described in Subsection 10.1 with respect to the time and the manner in which his Supplemental Retirement Income will be distributed. After the death of a Participant, a Beneficiary may not elect an alternate form of distribution. ARTICLE XI GENERAL BENEFIT PROVISIONS 11.1 REEMPLOYED PARTICIPANTS WHO HAD BEEN RECEIVING PENSION BENEFITS. In the event that a Participant who was previously receiving any benefits under any provision of this Plan, and such Participant is reemployed with the Employer and if the Participant is again selected for participation in the Plan, the -18- amount of previous benefits paid shall be taken into account and shall serve to actuarially reduce the Participant's Supplemental Normal Retirement Income payable at his subsequent Retirement Date. 11.2 RESTRICTIONS ON ALIENATION OF BENEFITS. No right or benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefit. If any Participant or Beneficiary under this Plan should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right to a benefit under this Plan, then such right or benefit shall, in the discretion of the Committee, be held or applied for the benefit of such Participant or Beneficiary, his or her spouse, children, or other dependents, or any of them, in such manner and in such portion as the Committee, in its sole and absolute discretion, may deem proper. 11.3 NO TRUST. No action under this Plan by the Company, its Board of Directors or the Committee shall be construed as creating a trust, escrow or other secured or segregated fund in favor of the Participant, his Beneficiary, or any other persons otherwise entitled to his Supplemental Normal Retirement Income. The status of the Participant and his Beneficiary with respect to any liabilities assumed by the Company hereunder shall be solely those of unsecured creditors of the Employer. Any asset acquired or held by the Company or any Subsidiary in connection with liabilities assumed by it hereunder, shall not be deemed to be held under any trust, escrow or other secured or segregated fund for the benefit of the Participant or his Beneficiaries or to be security for the performance of the obligations of the Company or any Subsidiary, but shall be, and remain a general, unpledged, unrestricted asset of the Company or any Subsidiary at all times subject to the claims of general creditors of the Company or any Subsidiary. 11.4 WITHHOLDING AND OTHER EMPLOYMENT TAXES. The Company shall comply with all federal and state laws and regulations respecting the withholding, deposit and payment of any income or other taxes relating to any payments made under this Plan. ARTICLE XII PROVISIONS RELATING TO PARTICIPANTS 12.1 INFORMATION REQUIRED OF PARTICIPANTS. Payment of Benefits shall begin as of the payments date(s) provided in this Plan and no formal claim shall be required therefor; provided, in the interests of orderly administration of the Plan, the Committee -19- may make reasonable requests of Participants and beneficiaries to furnish information which is reasonably necessary and appropriate to the orderly administration of the Plan, and, to that limited extent, payments under the Plan are conditioned upon the Participants and beneficiaries promptly furnishing true, full and complete information as the Committee may reasonably request. 12.2 ABANDONMENT OF BENEFITS. Each Participant and Beneficiary shall file with the Committee, from time to time in writing, his post office address and each change of post office address, and any communication addressed to a Participant or beneficiary at his last post office address filed with the Committee, or if no such address was filed, then at his last post office address as shown on the Employer's records, shall be binding on the Participant or his Beneficiary for all purposes of the Plan, and the Committee shall not be obliged to search for or ascertain the whereabouts of any Participant or Beneficiary; provided, that the Committee shall mail an annual notice of unpaid pension benefits to such person at such last post office address. If the Committee furnishes such annual notice to any Participant, or Beneficiary of a deceased Participant, that he is entitled to a distribution, and the Participant or Beneficiary fails to claim such distribution or make his whereabouts known to the Committee within three years thereafter, such benefits shall be disposed of as follows: (a) if the whereabouts of such Beneficiary then is known to the Committee, payment shall be made to such beneficiary; or (b) if the whereabouts of such Participant and his Beneficiary is unknown to the Committee, the Committee may direct the distribution of a Participant's pension benefits on the same basis as though the Participant had died without designating a Beneficiary as provided in Subsection 6.2 herein. 12.3 BENEFITS PAYABLE TO INCOMPETENTS. Any benefits payable hereunder to a minor or other person under legal disability may be made, at the discretion of the Committee, (i) directly to the said person, or (ii) to a parent, spouse, relative by blood or marriage, or the legal representative of the said person. The Committee shall not be required to see to the application of any such payment, and the payee's receipt shall be a full and final discharge of the Committee's responsibility hereunder. 12.4 CONDITIONS OF EMPLOYMENT NOT AFFECTED BY PLAN. The establishment and maintenance of the Plan shall not be construed as conferring any legal rights upon any Participant to the continuation of employment with the Employer, nor shall the Plan interfere with the rights of the Employer to discharge any Participant with or without cause. -20- ARTICLE XIII Administration and ASSOCIATE BENEFITS COMMITTEE 13.1 ALLOCATION OF RESPONSIBILITY FOR PLAN ADMINISTRATION. The Committee shall have only those specific powers, duties, responsibilities and obligations as are specifically given them under the Plan. In general, the Company shall have the sole responsibility for appointing and removing Committee members, as provided in Section 13.2 herein. The Company shall have the sole responsibility for amending or terminating, in whole or in part, this Plan. The Committee shall have the sole responsibility for the administration of the Plan which responsibility is specifically described in this Plan. 13.2 APPOINTMENT OF COMMITTEE. The Plan shall be administered by the Committee which shall be appointed by and serve at the pleasure of the Board of Directors of the Company. All usual and reasonable expenses of the Committee may be paid in whole or in part by the Company. 13.3 CLAIMS PROCEDURE. The Committee shall make all determinations as to the right of any person to benefits. If any request for a benefit is wholly or partially denied, the Committee shall notify the person requesting the pension benefits, in writing, of such denial, including in such notification the following information: (a) the specific reason or reasons for such denial; (b) the specific references to the pertinent Plan provisions upon which the denial is based; (c) a description of any additional material and information which may be needed to clarify the request, including an explanation of why such information is required; and (d) an examination of this Plan's review procedure with respect to denial of benefits. Provided, that any such notice to be delivered to any Participant or beneficiary shall be mailed by certified or registered mail and shall be written to the best of the Committee's ability in a manner that may be understood without legal counsel. 13.4 REVIEW PROCEDURE. Any Participant or Beneficiary whose claim has been denied in accordance with Section 13.3 herein may appeal to the Committee for review of such denial by making a written request therefor within 60 days of receipt of the notification of such denial. Such Participant or Beneficiary may -21- examine documents pertinent to the review and may submit to the Committee written issues and comments. Within 60 days after receipt of the request for review, the Committee shall communicate to the claimant, in writing, its decision, and the communication shall set forth the reason or reasons for the decision and specific reference to those Plan provisions upon which the decision is based. 13.5 RECORDS AND REPORTS. The Committee shall exercise such authority and responsibility as it deems appropriate in order to comply with the Act and governmental regulations issued thereunder relating to records of the Participant's accounts and benefits which may be paid under the Plan; and to notify Participants and Beneficiaries as required. 13.6 OTHER COMMITTEE POWERS AND DUTIES. The Committee shall have such duties and powers as may be necessary to discharge its duties hereunder, including, but not by way of limitation, the following: (a) to construe and interpret the Plan in its sole and absolute discretion, decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder; (b) to prescribe procedures to be followed by Participants or Beneficiaries filing applications for benefits; (c) to prepare and distribute, in such manner as the Committee determines to be appropriate, information explaining the Plan; (d) to receive from the Employer and from Participants and Beneficiaries such information as shall be necessary for the proper administration of the Plan; (e) to furnish the Employer, upon request, such reports with respect to the administration of the Plan as are reasonable and appropriate; (f) to appoint and employ individuals and any other agents it deems advisable, including legal counsel, to assist in the administration of the Plan and to render advice with respect to any responsibility of the Committee, or any of its individual members, under the Plan; (g) to allocate among themselves who shall be responsible for specific duties and to designate fiduciaries (other than Committee members) to carry out responsibilities under the Plan; provided that any such -22- allocations shall be reduced to writing, signed by all Committee members, and filed in a permanent Committee minute book; and (h) to maintain continuing review of the Act and the Code, implementing regulations thereto and suggest changes and modifications to the Employer in connection with delegations of responsibility, as appropriate, and amendments to the Plan. 13.7 RULES AND DECISIONS. The Committee may adopt such rules as it deems necessary, desirable, or appropriate. All rules and decisions of the Committee shall be uniformly and consistently applied to all Participants and beneficiaries in similar circumstances. When making a determination or calculation, the Committee shall be entitled to rely upon information furnished by a Participant or Beneficiary, the Employer, the legal counsel of the Company. 13.8 COMMITTEE PROCEDURES. The Committee may act at a meeting or in writing without a meeting. The Committee shall have a chairman, and appoint a secretary, who may or may not be a Committee member. The secretary shall keep a record of all meetings in a permanent Committee minute book and forward all necessary communications to the Employer. The Committee may adopt such bylaws and regulations as it deems desirable for the conduct of its affairs. All decisions of the Committee shall be made by the vote of the majority including actions in writing taken without a meeting. A dissenting Committee member who, within a reasonable time after he has knowledge of any action or failure to act by the majority, registers his dissent in writing delivered to the other Committee members, to the extent permitted by law, shall not be responsible for any such action or failure to act. ARTICLE XIV AMENDMENT AND TERMINATION 14.1 RIGHT TO AMEND OR ALTER PLAN. The Plan may be amended by the Company from time to time in any respect whatever by resolution of the Company specifying such amendment; provided, however, this Plan may not be amended after a Change of Control in any manner which adversely affects any Participant without the consent of the affected Participant. 14.2 RIGHT TO TERMINATE PLAN. The Company expressly reserves the right to terminate this Plan in whole or in part at any time; provided, however, this Plan may not be terminated in the event of a Change of Control without the consent of all of the Participants. -23- 14.3 MERGER OR TERMINATION OF QUALIFIED RETIREMENT PLAN. (a) MERGER OF COMPANY; SUCCESSOR MUST ASSUME PLAN. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform the Company's and any Subsidiary's obligations under this Plan in the same manner and to the same extent that the Company or such Subsidiary would be required to perform if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any succession shall be a breach by the Company of its obligations under this Plan and shall entitle the Participant to compensation from the Company in the same amount and on the same terms as the Participant would be entitled to hereunder if the Participant terminated employment for Good Reason following a Change of Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the date of termination of employment. (b) TERMINATION OF QUALIFIED RETIREMENT PLAN. In the event of the termination of the Company's Qualified Retirement Plan, then, in calculating any Supplemental Normal Retirement Income which would otherwise be paid to Participant under this Plan, the Basic Retirement Income earned by Participant under the Qualified Retirement Plan will be calculated as of such termination date and will be applied at such time to determine the amount of Target Benefit to which Participant would be entitled under this Plan; and the Target Benefit will be paid as otherwise provided under the Agreement and the Plan. 14.4 FORFEITURE OF ALL BENEFITS. In the event that (i) the Participant is discharged from employment service with the Company for acts of dishonesty, fraud, theft, embezzlement, (ii) upon the conviction by a court of competent jurisdiction of a crime that is deemed to be a felony under the laws of the State of Oklahoma (or any other state) or laws of the United States, or (iii) in the event the Participant commits any other act or acts which are injurious and adversely impacts the Company in any manner whatsoever, then, in such events, the Committee, in its sole discretion, may determine that any benefit which would otherwise be provided to the Participant, his Beneficiary or his Eligible Spouse under the Agreement or the Plan shall be forfeited in its entirety, and it shall thereafter be deemed as if the Participant never was selected for participation in the Plan. Provided, however, that the provisions of this Section 14.4 shall not be applicable in the event a Change of Control has occurred. -24 ARTICLE XV MISCELLANEOUS PROVISIONS 15.1 ARTICLES AND SECTION TITLES AND HEADINGS. The titles and headings at the beginning of each Article and Section shall not be considered in construing the meaning of any provisions in this Plan. 15.2 LAWS OF OKLAHOMA TO GOVERN. The provisions of this Plan shall be construed, administered and enforced according to the laws of the State of Oklahoma. All Contributions to the Trust shall be deemed to take place in the State of Oklahoma. EXECUTED as of the 2nd day of March, 1995. FLEMING COMPANIES, INC., a corporation By: /s/ ROBERT E. STAUTH ----------------------------------- Robert E. Stauth, Chairman, President and Chief Executive Officer "COMPANY" -25- EX-10.11 7 SUPP. RETIR. INCOME PLAN AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT INCOME AGREEMENT FOR --------------------- AMENDED AND RESTATED AGREEMENT FOR SUPPLEMENTAL RETIREMENT INCOME THIS AMENDED AND RESTATED AGREEMENT FOR SUPPLEMENTAL RETIREMENT INCOME (the "Agreement") is made as of this 2nd day of March, 1995 by and between 1 , an individual ------------------------ (the "Participant") and FLEMING COMPANIES, INC. (the "Company") with respect to the following: WHEREAS, the Company and the Participant are parties to that certain Agreement for Supplemental Retirement Income (the "Old Agreement") which Agreement was adopted pursuant to the Supplemental Retirement Income Plan of Fleming Companies, Inc. and Its Subsidiaries; and WHEREAS, the Board of Directors of the Company has adopted the Amended and Restated Supplemental Plan effective January 1, 1995 (the "Supplemental Plan"); and WHEREAS, the Company and the Participant desire to terminate the Old Agreement and replace it with this Agreement. NOW, THEREFORE, in consideration of mutual covenants hereinafter contained, the parties hereto agree as follows. All capitalized words used in this Agreement shall have the same meaning as such terms are used in the Supplemental Plan unless specifically denoted otherwise. 1. PURPOSE OF SUPPLEMENTAL PLAN. The purpose of the Supplemental Plan and this Agreement is to provide to you, the Participant, the opportunity to earn a Supplemental Income as provided in this Agreement in order to retain you, as a key management associate, with the Company. Payment of the Supplemental Normal Retirement Income shall be made to you in consideration of future services rendered by you and shall be paid to you or your Beneficiary as hereinafter provided. 2. MAXIMUM AMOUNT OF TARGET BENEFIT. The maximum amount of Target Benefit to which you will be entitled at your Normal Retirement Date will be 2 percent ( 3 %) of your --------- ----- Annual Final Compensation. This is your Target Benefit. This assumes that you will earn 4 years ( 5 ) Years of Credited ------- ----- Service as of your Normal Retirement Date. 3. CALCULATION AND MANNER OF PAYMENT OF SUPPLEMENTAL NORMAL RETIREMENT INCOME. (a) GENERAL. You, as a Participant, are also a participant in the Qualified Retirement Plan sponsored by the Company. Further, you have also earned a benefit in the form of a -2- Basic Retirement Income pursuant to the terms of the Qualified Retirement Plan as of the Effective Date or a date subsequent thereto. Your Supplemental Normal Retirement Income will equal the difference between the applicable Target Benefit selected for you by the Committee and the Offset Amounts otherwise payable to you as of your applicable Retirement Date, consisting of the following: (1) the amount payable to you under Fleming's Qualified Retirement Plan; and (2) Social Security amount payable to you and your spouse. (b) MANNER OF PAYMENT OF SUPPLEMENTAL NORMAL RETIREMENT INCOME. The Supplemental Normal Retirement Income will be paid to you and your Beneficiary, if applicable, in the manner elected by you below: (Check One Box Only) METHODS OF PAYMENT 1. [ ] Life of Participant Only 2. [ ] 50% Joint Annuitant Survivor Benefit 3. [ ] 75% Joint Annuitant Survivor Benefit 4. [ ] 100% Joint Annuitant Survivor Benefit 5. [ ] 5 Year Period Certain 6. [ ] 10 Year Period Certain 7. [ ] 15 Year Period Certain The actual amounts payable at retirement or death will depend upon your age and/or your Beneficiary. Refer to Exhibit "A" for a complete description of the Methods of Payment. (c) CALCULATION. Exhibit "B" hereto contains an example calculation of Supplemental Normal Retirement Income assuming a retirement at age 65 and Exhibit "C" hereto contains an example calculation of Supplemental Early Retirement Income assuming retirement at age 55. 4. COMMENCEMENT OF SUPPLEMENTAL RETIREMENT INCOME. Subject to the provisions of Section 9.2 of the Supplemental Plan, based upon the manner of payment elected by you for payment of your Supplemental Normal Retirement Income, payments shall actually commence as of your Early Retirement Date (only with the consent of the Committee), Normal Retirement Date, Disability Retirement Date, Postponed Retirement Date, or date of death, as the case may be, -3- and shall be payable monthly to you or your Beneficiary, as the case may be, until payments cease as provided hereafter. 5. AMENDMENT OR TERMINATION. This Agreement may be amended or terminated only with the consent of the Company and you, the Participant. 6. EXPENSES. The expenses of administering this Agreement shall be borne by the Company and shall not be charged against your Supplemental Normal Retirement Income. 7. APPLICABLE LAW. The provisions of this Agreement shall be construed, administered and enforced according to the laws of the State of Oklahoma. 8. NO TRUST. No action under this Agreement by the Company or its Board of Directors shall be construed as creating a trust, escrow or other secured or segregated fund, in favor of you or your Beneficiary, or any other person otherwise entitled to your Supplemental Normal Retirement Income and accruals thereon. The status of you and your Beneficiary with respect to any liabilities assumed by the Company hereunder shall be solely those of unsecured creditors of the Company. Any asset acquired or held by the Company in connection with liabilities assumed by it hereunder, shall not be deemed to be held under any trust, escrow or other secured or segregated fund for the benefit of the you or your Beneficiary or to be security for the performance of the obligations of the Company, but shall be, and remain a general, unpledged, unrestricted asset of the Company at all times subject to the claims of general creditors of the Company. 9. NO ASSIGNABILITY. Neither you, your Beneficiary, nor any other person shall acquire any right to or interest in any Supplemental Normal Retirement Income and accruals thereon, otherwise than by actual payment in accordance with the provisions of this Agreement, or have any power to transfer, assign, anticipate, pledge, mortgage or otherwise encumber, alienate or transfer any rights hereunder in advance of any of the payments to be made pursuant to the Agreement or any portion thereof which is expressly declared to be nonassignable and nontransferable. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefit. If you or your Beneficiary should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right to a benefit hereunder or under the Supplemental Plan, then such right or benefit shall, in the discretion of the Committee, cease and terminate, and, in such event, the Committee may hold or apply the same or any part thereof for the benefit of you and your Beneficiary, in such manner and in such portion as the Committee, in its sole and absolute discretion, may deem proper. -4- 10. AGREEMENT DOES NOT GUARANTEE CONTINUED EMPLOYMENT OF PARTICIPANT. The execution of this Agreement by the Company and you, as the Participant, in no way whatsoever guarantees the continuation of employment of you with the Company. Further, notwithstanding any provision contained in this Agreement or the Supplemental Plan which may imply or specify to the contrary, except as provided in the Supplemental Plan, your right to receive a Supplemental Normal Retirement Income (or any other benefit) under this Agreement or the Supplemental Plan shall at all times be forfeitable prior to the specific date that you first satisfy the requirements for actually retiring on your applicable Retirement Date or as of the date of your death, as the case may be. Accordingly, in the event of termination of employment of Participant prior to such applicable date (except as specifically provided in the Supplemental Plan) neither you nor your Beneficiary, or any other person shall be entitled to any benefit pursuant to the terms of this Agreement or the Supplemental Plan. 11. WITHHOLDING. The Company and the Participant shall comply with all federal and state laws and regulations respecting the withholding, deposit and payment of any income, employment or other taxes relating to any payments or rights to payments under this Agreement. 12. DESIGNATION OF BENEFICIARY. (a) You, as the Participant, hereby designate the following individual as your Beneficiary to receive any Supplemental Death Benefit (including any benefit to be paid to such Beneficiary as the surviving "joint annuitant" pursuant to Section 3(b) hereof) payable to you under this Agreement or the Supplemental Plan in the event of your death: Name Address Relationship - -------------------- ------------------------- ------------ ------------------------- (b) You understand that during your lifetime, you may at any time change the Beneficiary designated herein by delivering to the Committee a new designation of a Beneficiary. 13. RELATIONSHIP BETWEEN AGREEMENT AND SUPPLEMENTAL PLAN. This Agreement has been entered into by and between Company and Participant in accordance with and pursuant to authority granted to the Committee pursuant to the terms and provisions of the Supplemental Plan. In the event that there develops a conflict between this Agreement and the terms and provisions of the Supplemental Plan, the terms and provisions of the Supplemental -5- Plan, as interpreted by the Committee in its sole discretion, shall control and be final and conclusive. 14. LIMITATION ON PAYMENT OF BENEFITS. The payment of the Supplemental Normal Retirement Income as provided in this Agreement shall accrue and be payable to you or your Beneficiary, as the case may be, only at such times and upon the occurrence of such conditions as heretofore described. In no event whatsoever shall you or your Beneficiary have any right, claim, or interest of any kind whatsoever in any future payments of such Supplemental Normal Retirement Income and such payments shall accrue and be payable only on a monthly basis as provided hereinabove. In no event may you or your Beneficiary be entitled to receive a lump sum payment or other sum approximating the right to receive any future payments of Supplemental Normal Retirement Income hereunder. 15. TERMINATION OF OLD AGREEMENT. Effective as of the date of the execution and delivery of this Agreement, the Old Agreement shall be terminated and of no further force and effect. 16. EFFECTIVE DATE. This Agreement shall be effective from and after the day and year first above written. DATED the day and year first above written. FLEMING COMPANIES, INC., an Oklahoma corporation By ----------------------------------- Larry A. Wagner, Senior Vice President-Human Resources "COMPANY" ----------------------------------- (6) "PARTICIPANT" -6- EXHIBIT "A" DESCRIPTION OF METHODS OF PAYMENT METHOD 1 - Life of Participant Only: A Supplemental Normal Retirement Income will be paid for your life only. Upon your death, all payments of Supplemental Normal Retirement Income shall cease. METHOD 2 - 50% Joint Annuitant Survivor Benefit: A reduced amount of Supplemental Normal Retirement Income will be paid to you for your life, then, at your death 50% of such amount shall be paid to your surviving Beneficiary. In the event that your surviving Beneficiary has predeceased you, or should otherwise die after your death, then no further payments will be paid under Method 2 or this Agreement. METHOD 3 - 75% Joint Annuitant Survivor Benefit: A reduced amount of Supplemental Normal Retirement Income will be paid to you for your life, then, at your death 75% of such amount shall be paid to your surviving Beneficiary. In the event that your surviving Beneficiary has predeceased you, or should otherwise die after your death, then no further payments will be due under Method 3 or this Agreement. METHOD 4 - 100% Joint Annuitant Survivor Benefit: A reduced amount of Supplemental Normal Retirement Income will be paid to you for your life, then, at your death 100% of such amount shall be paid to your surviving Beneficiary. In the event that your surviving Beneficiary has predeceased you, or should otherwise die after your death, then no further payments will be due under Method 4 or this Agreement.
-1- METHOD 5 - 5 Year Period Certain: A reduced amount of Supplemental Normal Retirement Income will be paid for a period of 5 years certain. After the expiration of such 5 year period, payments shall then continue for your life in the same amount. In the event of your death during the 5 year period certain, then, the balance of such payments due only during such 5 year period will be paid to your surviving Beneficiary. After the expiration of such 5 year period, then all payments shall cease. In the event of the expiration of such 5 year period, and you die, then, no further benefits will be paid under METHOD 5 or this Agreement. METHOD 6 - 10 Year Period Certain: A reduced amount of Supplemental Normal Retirement Income shall be paid for a period of 10 years certain. After the expiration of such 10 year period, payments shall then continue for your life in the same amount. In the event of your death during the 10 year period certain, then, the balance of such payments due only during such 10 year period will be paid to your surviving Beneficiary. After the expiration of such 10 year period, then all payments shall cease. In the event of the expiration of such 10 year period, and you die, then, no further benefits will be paid under METHOD 6 or this Agreement.
-2- METHOD 7 - 15 Year Period Certain: A reduced amount of Supplemental Normal Retirement Income shall be paid for a period of 15 years certain. After the expiration of such 15 year period, payments shall then continue for your life in the same amount. In the event of your death during the 15 year period certain, then, the balance of such payments due only during such 15 year period will be paid to your surviving Beneficiary. After the expiration of such 15 year period, then all payments shall cease. In the event of the expiration of such 15 year period, and you die, then, no further benefits will be paid under METHOD 7 or this Agreement.
-3- EXHIBIT "B" EXAMPLE OF CALCULATION OF SUPPLEMENTAL NORMAL RETIREMENT INCOME ASSUMING RETIREMENT AT AGE 65
ASSUMPTIONS: - Final Average Earnings = $200,000 - Category I Participant - 28 Years Service - Retire at 65 - Estimated SSA = 13,610 - Spousal SSA = 6,805 - "B" Account = 120,000 - Annual Pension = $ 53,582 CALCULATIONS: Final Average Earnings $200,000 SERP Target x .68 -------- $136,000 Less "B" Acct. Equivalent - 14,748 Less Pension - 53,582 Less Age 65 Primary SSA - 13,610 Less Spousal SSA - 6,805 -------- Annual Life Only SERP $ 47,255
-4- EXHIBIT "C" EXAMPLE OF CALCULATION OF SUPPLEMENTAL EARLY RETIREMENT INCOME ASSUMING RETIREMENT AT AGE 55
ASSUMPTIONS: - Final Average Earnings = $200,000 - Category I Participant - 28 Years Service - Retire at 55 - Estimated SSA = 13,610 - Spousal SSA = 6,805 - "B" Account = 120,000 - Annual Pension = $ 24,899 CALCULATIONS: Final Average Earnings $200,000 SERP Target x .68 --------- $136,000 Less 42% Early Retire. Reduct. - 57,120 --------- 78,880 Less "B" Acct. Equivalent - 12,024 Less Pension - 24,899 Less Age 65 Primary SSA - 13,610 Less Spousal SSA - 6,805 -------- Annual Life Only SERP $ 21,542
-5- EX-10.13 8 SEVERANCE AGMT. AMENDED AND RESTATED SEVERANCE AGREEMENT AMENDED AND RESTATED SEVERANCE AGREEMENT (the "Agreement") entered into between Fleming Companies, Inc., an Oklahoma corporation (the "Company"), and 1 , an --------------- individual (the "Executive"), dated as of this 2nd day of March, 1995 (the "Effective Date"). WHEREAS, the Company and the Executive are parties to that a Severance Agreement (the "Old Agreement"); and WHEREAS, the Company and the Executive desire to terminate the Old Agreement and replace it with this Agreement; and WHEREAS, the Company deems the services of the Executive to be of great and unique value to the business of the Company and the Company desires to assure both itself of continuity of management and the Executive of continued employment; and WHEREAS, the Executive is a key management associate of the Company and is presently making and is expected to continue making substantial contributions to the Company; and WHEREAS, it is in the best interests of the Company and its shareholders to induce the Executive to remain in the employ of the Company; and WHEREAS, the Executive presently is serving in his/her capacity as a 2 of the Company; and --------- WHEREAS, the Company desires to provide an additional inducement for the Executive to remain in the employ of the Company as hereinafter provided by providing to him/her additional amounts of compensation as provided in this Agreement in the event of his/her termination of employment for the reasons specified herein. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Executive and the Company hereby agree as provided below. 1. OPERATION OF AGREEMENT. The purpose of this Agreement is to provide to the Executive additional amounts of compensation as provided in this Agreement in the event of his/her termination of employment for the reasons specified herein. Accordingly, the Company and the Executive have entered into this Agreement in accordance with the terms and provisions herein to provide for such protection to the Executive. (a) CONTROL DATE. The "Control Date" shall be the date during the "Change of Control Period" (as defined in Section 1(b)) on which a Change of Control (as defined in Section 1(c)) occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Company is terminated prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Control Date" shall mean the date immediately prior to the date of such termination. (b) CHANGE OF CONTROL PERIOD. The "Change of Control Period" is the period commencing on the Effective Date and ending on the first to occur of (i) the second anniversary of such date or (ii) the first day of the month coinciding with or next following the Executive's attainment of age 65 ("Normal Retirement Date"); provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (the date one year after the date hereof and each annual anniversary of such date, is hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be automatically extended so as to terminate on the first to occur of: (i) two years from such Renewal Date or (ii) the first day of the month coinciding with or next following the Executive's Normal Retirement Date, unless at least 60 days prior to the Renewal Date, the Company shall give notice that the Change of Control Period shall not be so extended, in which event this Agreement shall continue for the remainder of the term of the then current Change of Control Period and terminate as provided herein. (c) DEFINITION OF CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more (the "Triggering Percentage") of either (x) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, in the event the "Incumbent Board" (as such term is hereinafter defined) pursuant to Section 7 of the Rights Agreement between the Company and The Liberty National Bank and Trust Company of Oklahoma City dated as of July 7, 1986 together with any additional amendments thereto (the "Rights Agreement") lowers the threshold amounts set forth in Section 1(a) or 3(a) of the Rights Agreement, the Triggering Percentage shall be automatically reduced to equal the threshold set pursuant to Section 7 of the Rights Agreement; and provided, further, however, that the following acquisitions shall not constitute a change of -2- control: (A) any acquisition directly from the Company, (B) any acquisition by the Company; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (D) any acquisition previously approved by at least a majority of the members of the Incumbent Board, (E) any acquisition approved by at least a majority of the members of the Incumbent Board within five (5) business days after the Company has notice of such acquisition, or (F) any acquisition by any corporation pursuant to a transaction which complies with clauses (x), (y), and (z) of subsection (iii) of this Section 1(c); or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, appointment or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for purposes of this definition, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Approval by the shareholders of the Company of a reorganization, share exchange, merger or consolidation (a "Business Combination"), in each case, unless, following such Business Combination, (x) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 70% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (y) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the -3- Business Combination, and (z) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination or were elected, appointed or nominated by the Board; or (iv) Approval by the shareholders of the Company of (x) a complete liquidation or dissolution of the Company or, (y) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 70% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportions as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) less than 20% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by any Person (excluding any employee benefit plan (or related trust) of the Company or such corporation), except to the extent that such Person owned 20% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities prior to the sale or disposition, and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such sale or other disposition of assets of the Company or were elected, appointed or nominated by the Board. 2. AGREEMENT NOT EMPLOYMENT CONTRACT. This Agreement shall be considered solely as a "severance agreement" obligating the Company to pay to the Executive certain amounts of compensation in the event and only in the event of his termination of employment after the Control Date for the reasons and at the times specified herein. 3. TERMINATION. Except as provided in Section 5 hereof, this Agreement shall terminate upon the first to occur of the following events. (a) DEATH. The date of death of the Executive. -4- (b) CAUSE. The termination of the Executive's employment by the Company for "Cause." For purposes of this Agreement, termination of the Executive's employment by the Company for Cause shall mean termination for one of the following reasons: (i) the conviction of the Executive of a felony by a federal or state court of competent jurisdiction; (ii) an act or acts of dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Company; or (iii) the Executive's "willful" failure to follow a direct, reasonable and lawful written order from his supervisor, within the reasonable scope of the Executive's duties, which failure is not cured within 30 days. Further, for purposes of this Section (b): (1) No act or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. (2) The Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-fourths (3/4ths) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth in clauses (i), (ii) or (iii) above and specifying the particulars thereof in detail. (c) GOOD REASON. The termination of the Executive's employment by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities or any other action by the Company which results in a diminishment in such position, compensation, authority, duties or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Company promptly after receipt of written notice thereof given by the Executive (ii) the Company's requiring the Executive to be based at any office or location more than 25 miles from where the Executive was employed immediately prior to the Change of Control, except for periodic travel -5- reasonably required in the performance of the Executive's responsibilities; or (iii) any failure by the Company to comply with and satisfy Section 11(a) of this agreement. (d) FAILURE TO EXTEND AGREEMENT. The Company gives notice of its intent not to extend the Change of Control Period as provided in Section 1(b) hereof. 4. NOTICE OF TERMINATION. Any termination of employment by the Company for Cause or by the Executive for Good Reason as provided in Section 3, above, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13 of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 15 days after the giving of such notice). 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION FOLLOWING CHANGE OF CONTROL. If (i) within 24 months of the Control Date the Company shall terminate the Executive's employment for any reason other than for Cause or death, or (ii) within 24 months of the Control Date the employment of the Executive shall be terminated by the Executive for Good Reason, then, upon the occurrence of either event as described in clauses (i) and (ii), the Company shall pay to the Executive in a lump sum, in cash, within 30 days after the date of termination of employment an amount equal to 24 times the Base Compensation Rate (defined below) on the Control Date. "Base Compensation Rate" shall mean the monthly rate of compensation of the Executive (before any salary reductions on account of contributions made pursuant to either Sections 401(k) or 125 of the Code, if applicable) in effect as of the Effective Date or such rate as increased but not reduced) from the Effective Date until the Control Date. The Executive's Base Compensation Rate as of the Effective Date is the monthly rate of salary, payable bi-weekly. Provided, in the event the Executive has not attained his Normal Retirement Date as of the Control Date, and if his Normal Retirement Date would occur within 24 months of his Control Date assuming the Executive continued in the employ of the Company until his Normal Retirement Date and then retired, then, in such event, the aforesaid factor "24" shall be reduced to equal the number of months (partial months shall be considered as a whole month) remaining between the Control Date and the Executive's Normal Retirement Date. Provided further, if the Executive has attained his Normal Retirement Date on the Control Date, then, the factor "24" as used in this Section 5 shall be -6- reduced to zero, and such Executive shall be entitled to no payment under this Agreement. 6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANy. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company of the date of vesting or payment or rate of payment under any plan, program or arrangement of the Company (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 6(c), all determinations required to be made under this Section 6, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by Deloitte & Touche LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment which would be subject to the Excise Tax, or such earlier time as is requested by the Company. The initial Gross-Up Payment, if any, as determined pursuant to this Section 6(b), shall be paid to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with an opinion that he has substantial authority not to report any Excise Tax on his federal income tax return. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 6(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be -7- promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross- Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive knows of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the -8- Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other agreements with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its affiliated companies at or subsequent to the date of termination of employment shall be payable in accordance with such plan or program. 8. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others. In no event shall the -9- Executive be obligated to seek other employment by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. 9. CONFIDENTIAL INFORMATION. (a) REQUIREMENT OF EXECUTIVE. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. (b) ADDITIONAL REMEDIES. The Executive agrees that the remedy at law for any breach or threatened breach of any covenant contained in this Section 9 will be inadequate, and that the Company, in addition to such other remedies as may be available to it, in law or in equity, shall be entitled to injunctive relief without bond or other security. 10. TERMINATION OF OLD AGREEMENT. Effective as of March 2, 1995, the date of the execution and delivery of this Agreement, the Old Agreement shall be terminated and of no further force and effect. 11. SUCCESSORS AND BINDING EFFECT. (a) SUCCESSOR MUST ASSUME AGREEMENT. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive terminated employment for Good Reason following a Change of Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the date of -10- termination of employment. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law or otherwise. (b) BINDING EFFECT. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee or, if there is no such designee, to the Executive's estate. 12. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Oklahoma, without reference to principles of conflict of laws. 13. NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE EXECUTIVE: At his last known address evidenced on the Company's payroll records IF TO THE COMPANY: Fleming Companies, Inc. 6301 Waterford Boulevard P. O. Box 26647 Oklahoma City, Oklahoma 73126 Attn: Larry A. Wagner Senior Vice President - Human Resources with a copy to: David R. Almond, Esq. Senior Vice President and General Counsel Fleming Companies, Inc. 6301 Waterford Boulevard P.O. Box 26647 Oklahoma City, Oklahoma 73126 -11- with a copy to: McAfee & Taft A Professional Corporation Tenth Floor Two Leadership Square Oklahoma City, Oklahoma 73102 Attn: John M. Mee, Esq. or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. 14. TAXES TO BE WITHHELD. The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes any and all prior or contemporaneous oral and prior written agreements and understandings. There are no oral promises, conditions, representations, understandings, interpretations or terms of any kind as conditions or inducements to the execution hereof or in effect among the parties. 16. AMENDMENT. This Agreement may not be amended, and no provision hereof shall be waived, except by a writing signed by all parties to this Agreement, or, in the case of a waiver, by the party waiving compliance therewith, which states that it is intended to amend or waive a provision of this Agreement. Any waiver of any rights or failure to act in a specific instance shall relate only to such instance and shall not be construed as an agreement to waive any rights or failure to act in any other instance, whether or not similar. 17. ENFORCEABILITY. Should any provision of this Agreement be unenforceable or prohibited by an applicable law, this Agreement shall be considered divisible as to such provision which shall be inoperative, and the remainder of this Agreement shall be valid and binding as though such provision were not included herein. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 18. COUNTERPARTS. This Agreement may be executed in two or more counterparts with the same effect as if the signatures to all such counterparts were upon the same instrument, and all such counterparts shall constitute but one instrument. 19. HEADINGS. All headings in this Agreement are for convenience only and are not intended to affect the meaning of any provision hereof. -12- 20. NO TRUST. No action under this Agreement by the Company or its Board of Directors shall be construed as creating a trust, escrow or other secured or segregated fund, in favor of the Executive or his beneficiary. The status of the Executive and his beneficiary with respect to any liabilities assumed by the Company hereunder shall be solely those of unsecured creditors of the Company. Any asset acquired or held by the Company in connection with liabilities assumed by it hereunder, shall not be deemed to be held under any trust, escrow or other secured or segregated fund for the benefit of the Executive or his beneficiary or to be security for the performance of the obligations of the Company, but shall be, and remain a general, unpledged, unrestricted asset of the Company at all times subject to the claims of general creditors of the Company. 21. NO ASSIGNABILITY. Neither the Executive nor his beneficiary, nor any other person shall acquire any right to or interest in any payments payable under this Agreement, otherwise than by actual payment in accordance with the provisions of this Agreement, or have any power to transfer, assign, anticipate, pledge, mortgage or otherwise encumber, alienate or transfer any rights hereunder in advance of any of the payments to be made pursuant to this Agreement or any portion thereof which is expressly declared to be nonassignable and nontransferable. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefit. IN WITNESS WHEREOF, the Executive has hereunto set his/her hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf all as of the day and year first above written. ------------------------------------------ 3 "EXECUTIVE" FLEMING COMPANIES, INC., an Oklahoma corporation By -------------------------------------- Robert E. Stauth Chairman, President & Chief Executive Officer "COMPANY" -13- EX-10.20 9 SUPP INCOME TRUST FLEMING COMPANIES, INC. SUPPLEMENTAL INCOME TRUST THIS AGREEMENT FOR THE FLEMING COMPANIES, INC. SUPPLEMENTAL INCOME TRUST (the "Trust Agreement") made as of this 16th day of March, 1995, by and between Fleming Companies, Inc., an Oklahoma corporation (the "Company"), and BANCOKLAHOMA TRUST COMPANY, an Oklahoma corporation (the "Trustee"). This Trust Agreement provides for the establishment of a trust to be known as the "Fleming Companies, Inc. Supplemental Income Trust" (hereinafter called the "Trust") to provide a source for payments required to be made under the contracts, agreements and plans listed on Exhibit "A" as amended from time to time (the "Plans") entered into between the Company and certain of its key management associates (the "Participants"). WHEREAS, Company has adopted the Plans listed on Exhibit A; WHEREAS, Company has incurred or expects to incur liability under the terms of the Plans; and WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of creditors in the event of Company's Insolvency, as herein defined, until paid to Participants and their beneficiaries in such manner and at such times as specified in the Plans; and WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plans as unfunded plans maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; and WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plans; NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: Section 1. ESTABLISHMENT OF TRUST (a) Company hereby deposits with Trustee, in trust, One Hundred Dollars ($100.00), which constitutes the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. (b) The Trust hereby established is revocable by Company; it shall become irrevocable upon a change of control, as such term is defined in the Plans ("Change of Control"). (c) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Participants and their beneficiaries and the general creditors of Company and its subsidiaries as herein set forth. The Participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plans and this Trust Agreement shall be mere unsecured contractual rights of the Participants and their beneficiaries against Company or its subsidiaries whichever is the actual employer of the Participants. Any assets held by the Trust will be subject to the claims of general creditors of the Company or its subsidiaries under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. (e) Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee (which may not include securities issued by Company or its subsidiaries) as provided in this Trust Agreement. In addition, Company may designate such Plans and Participants to be entitled to receive any payments from the amounts so deposited, provided, such payments shall only be made in accordance with the terms and provisions of the designated Plans. Neither Trustee nor any Participant or beneficiary shall have any right to compel such additional deposits. (f) Upon a Change of Control, Company shall, as soon as possible, but in no event longer than sixty (60) days following the Change of Control, make an irrevocable contribution to the Trust in an amount that is sufficient to pay the Participants or their beneficiaries the benefits to which the Participants or their beneficiaries would be entitled pursuant to the terms of the Amended and Restated Supplemental Retirement Income Plan of Fleming Companies, Inc. and Its subsidiaries (the "Supplemental Plan") as of the date on which the Change of Control occurred assuming the -2- Participants have each been terminated other than for "cause" (as such term is defined in the Supplemental Plan ), death or disability or the Participants terminate their employment for "good reason" as such term is defined in the Supplemental Plan. Section 2. PAYMENTS TO PARTICIPANTS AND THEIR BENEFICIARIES. (a) Company shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Participant (and his or her beneficiaries) and provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plans), and the time of commencement for payment of such amounts. Except as otherwise provided herein, Trustee shall make payments to the Participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plans and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Company. (b) The entitlement of a Participant or his or her beneficiaries to benefits under the Plans shall be determined in accordance with the terms of the Plans by Company or such party as it shall designate under the Plans, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plans. (c) Company may make payment of benefits directly to the Participants or their beneficiaries as they become due under the terms of the Plans. Company shall notify Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plans, Company shall make the balance of each such payment as it falls due. Trustee shall notify Company where principal and earnings are not sufficient. Trustee shall not be responsible for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits directly to Participants or their beneficiaries by Company. Section 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT. (a) Trustee shall cease payment of benefits to Participants and their beneficiaries if Company is Insolvent. Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as they become -3- due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of Company shall have the duty to inform trustee in writing of Company's Insolvency. If a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become Insolvent, Trustee shall determine whether Company is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to the Participants or their beneficiaries. (2) Unless Trustee has actual knowledge of Company's Insolvency, or has received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Company is Insolvent. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time Trustee has determined that Company is Insolvent, Trustee shall discontinue payments to the Participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Company's general creditors, including the Participants. Nothing in this Trust Agreement shall in any way diminish any rights of Participants or their beneficiaries to pursue their rights as general creditors of Company with respect to benefits due under the Plans or otherwise. (4) Trustee shall resume the payment of benefits to Participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Participants or their beneficiaries under the terms of the Plans for the period of such discontinuance, less the aggregate amount of any payments made to Participants or their beneficiaries by Company in lieu of the payments provided for hereunder during any such period of discontinuance. -4- Section 4. PAYMENTS TO COMPANY. Except as provided in Section 3 hereof, after the Trust has become irrevocable, Company shall have no right or power to direct Trustee to return to Company or to divert to others any of the Trust assets before all payments of benefits have been made to Participants and their beneficiaries pursuant to the terms of the Plans. Section 5. INVESTMENT AUTHORITY. (a) Trustee may not invest in or hold securities issued by Company or its subsidiaries. All rights associated with assets of the Trust shall be exercised by Trustee or the person designated by Trustee, and shall in no event be exercisable by or rest with Participants. Dividend rights with respect to Trust assets will rest with the Trust. All investment decisions with regard to the investment and reinvestment of the Trust assets will be made by Trustee. (b) Company shall have the right at anytime, and from time to time in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust, provided the asset or assets substituted is acceptable to Trustee. This right is exercisable by Company in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity. (c) Trustee, at its own discretion where Trustee has discretion with respect to investments under this Trust Agreement or applicable law or upon the direction of any person authorized to direct investments under this Trust Agreement, including but not limited to, an investment manager or Company, may invest in the securities of any open-end or closed-end investment management trust or company registered under the Investment Company Act of 1940, as amended from time to time, to the maximum extent permitted by the laws of the State of Oklahoma. Such securities include but are not limited to securities for which Trustee or any of its subsidiaries or affiliated companies serves as an investment advisor, sponsor, distributor, custodian, transfer agent, administrator, registrar, or otherwise. Section 6. - DISPOSITION OF INCOME. During the term of this Trust, all income received by the Trust, net of expenses, payments to Participants and taxes, shall be accumulated and reinvested by Trustee. Section 7. ACCOUNTING BY TRUSTEE. Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions -5- required to be made, including such specific records as shall be agreed upon in writing between Company and Trustee. Within sixty (60) days following the close of each calendar year and within sixty (60) days after the removal or resignation of Trustee, Trustee shall deliver to Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. Section 8. RESPONSIBILITY OF TRUSTEE. (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Company which is contemplated by, and in conformity with, the terms of the Plans or this Trust and is given in writing by Company. In the event of a dispute between Company and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If Trustee undertakes or defends any litigation arising in connection with this Trust, Company agrees to indemnify Trustee against Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. (c) Trustee may consult with legal counsel (who may also be counsel for Company generally) with respect to any of its duties or obligations hereunder. (d) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (e) Trustee shall have, without exclusion, all powers conferred on Trustee by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different -6- form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (f) However, notwithstanding the provisions of Section 8(e) above, Trustee may loan to Company the proceeds of any borrowing against an insurance policy held as an asset of the Trust. (g) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. (h) Trustee shall not be responsible for tax return preparation or filing, nor any reporting to any governmental agency of income earned, but not distributed. Section 9. COMPENSATION AND EXPENSES OF TRUSTEE. Company shall pay all of Trustee's fees and expenses as well as administrative expenses attributable to the Trust. If not so paid, the fees and expenses shall be paid from the Trust. Section 10. RESIGNATION AND REMOVAL OF TRUSTEE. (a) Trustee may resign at any time by written notice to Company, which shall be effective sixty (60) days after receipt of such notice unless Company and Trustee agree otherwise. (b) Trustee may be removed by Company on thirty (30) days notice or upon shorter notice accepted by Trustee. (c) Upon a Change of Control, Trustee may not be removed by Company for five (5) years. (d) If Trustee resigns or is removed within five (5) years of a Change of Control, Company shall apply to a court of competent jurisdiction for the appointment of a successor Trustee or for instructions. (e) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within ninety (90) days after receipt of notice of resignation, removal or transfer, unless Company extends the time limit. (f) If Trustee resigns or is removed, a successor shall be appointed, in accordance with section 11 hereof, as of the -7- effective date of resignation or removal under paragraphs (a) or (b) of this section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. Section 11. APPOINTMENT OF SUCCESSOR. If Trustee resigns or is removed in accordance with Section 10(a) or (b) hereof, Company may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Company or the successor Trustee to evidence the transfer. Section 12. AMENDMENT OR TERMINATION. (a) This Trust Agreement may be amended by a written instrument executed by Trustee and Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plans or shall make the Trust revocable after it has become irrevocable in accordance with Section 1(b) hereof. (b) The Trust shall not terminate until the date on which Participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plans unless sooner revoked in accordance with Section 1(b) hereof. Upon termination of the Trust any assets remaining in the Trust shall be returned to Company. (c) Upon written approval of all Participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plans, Company may terminate this Trust prior to the time all benefit payments under the Plans have been made. All assets in the Trust at termination shall be returned to Company. (d) This Trust Agreement may not be amended by Company for five (5) years following a Change of Control without the consent of all Participants. Section 13. MISCELLANEOUS. (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to Participants and their beneficiaries under this Trust Agreement may not be anticipated, -8- assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with the laws of Oklahoma. Section 14. EFFECTIVE DATE. The effective date of this Trust Agreement shall be as of the date hereof. FLEMING COMPANIES, INC., an Oklahoma corporation By: /s/ Larry A. Wagner -------------------------------------- Larry A. Wagner, Senior Vice President-Associate Support "COMPANY" BANCOKLAHOMA TRUST COMPANY By: /S/ Ellen D. Fleming ------------------------------------ Name: Ellen D. Fleming Title: Senior Vice President & Senior Trust Officer "TRUSTEE" -9- EXHIBIT "A" TO FLEMING COMPANIES, INC. AMENDED AND RESTATED SUPPLEMENTAL INCOME TRUST 1. Amended and Restated Supplemental Retirement Income Plan of Fleming Companies, Inc. and Its subsidiaries. 2. Agreements for Supplemental Retirement Income together with all amendments thereto entered into by the Company under the Amended and Restated Supplemental Retirement Income Plan of Fleming Companies, Inc. and Its subsidiaries. 3. Severance Agreements containing provisions requiring payments upon a change of control together with all amendments thereto entered into by the Company and certain key associates. 4. Employment Agreements containing provisions requiring payments upon a change of control together with all amendments thereto entered into by the Company and certain key executives. -10- EX-10.21 10 EMPL. AGMT. EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into between FLEMING COMPANIES, INC., an Oklahoma corporation (the "Company"), and 1 , an individual (the ---------------------- "Executive"), dated as of the 2nd day of March, 1995. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a "Change of Control" (as defined in Section 2 of this Agreement) of the Company. The Board believes it is important to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control, and to encourage the Executive's full attention and dedication to the affairs of the Company during the term of this Agreement and upon the occurrence of such event. The Board also believes the Company is best served by providing the Executive with compensation arrangements upon a Change of Control which provide the Executive with individual financial security and which are competitive with those of other corporations. In order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall be the first date during the "Change of Control Period" (as defined in Section 1(b) of this Agreement) on which a Change of Control (as defined below) occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Company is terminated prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination. (b) The "Change of Control Period" is the period commencing on the date hereof and ending on the earlier to occur of (i) the third anniversary of such date or (ii) the first day of the month next following the Executive's attainment of age 65 ("Normal Retirement Date"); PROVIDED, HOWEVER, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof is hereinafter referred to as the "Renewal Date"), the Change of Control Period shall be automatically extended so as to terminate on the earlier of (i) three years from such Renewal Date or (ii) the first day of the month coinciding with or next following the Executive's Normal Retirement Date, unless at least 60 days prior to the Renewal Date, the Company shall give notice that the Change of Control Period shall not be so extended in which event this Agreement shall continue for the remainder of its then current term and terminate as provided herein. 2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more (the "Triggering Percentage") of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, in the event the "Incumbent Board" (as such term is hereinafter defined) pursuant to Section 7 of the Rights Agreement between the Company and The Liberty National Bank and Trust Company of Oklahoma City dated as of July 7, 1986 together with any additional amendments thereto (the "Rights Agreement") lowers the threshold amounts set forth in Section 1(a) or 3(a) of the Rights Agreement, the Triggering Percentage shall be automatically reduced to equal the threshold set pursuant to Section 7 of the Rights Agreement; and provided, further, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (iv) any acquisition previously approved by at least a majority of the members of the Incumbent Board, (v) any acquisition approved by at least a majority of the members of the Incumbent Board within five (5) business days after the Company has notice of such acquisition, or (vi) any acquisition by any corporation pursuant to a transaction which complies with clauses (x), (y), and (z) of subsection (iii) of this Section 2; or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, appointment or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the -2- Incumbent Board, but excluding, for purposes of this definition, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Approval by the shareholders of the Company of a reorganization, share exchange, merger or consolidation (a "Business Combination"), in each case, unless, following such Business Combination, (x) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 70% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (y) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (z) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination or were elected, appointed or nominated by the Board; or (iv) Approval by the shareholders of the Company of (x) a complete liquidation or dissolution of the Company or, (y) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 70% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such -3- sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) less than 20% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by any Person (excluding any employee benefit plan (or related trust) of the Company or such corporation), except to the extent that such Person owned 20% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities prior to the sale or disposition, and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such sale or other disposition of assets of the Company or were elected, appointed or nominated by the Board. 3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, for the period commencing on the Effective Date and ending on the earlier to occur of (a) the third anniversary of such date or (b) the first day of the month coinciding with or next following the Executive's Normal Retirement Date (the "Employment Period"). 4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the Employment Period, (A) the Executive's position (including status, offices, secretarial and administrative support, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 25 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) -4- deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an associate of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the Executive shall receive an annual base salary ("Base Salary") at least equal to the greater of (i) his annual base salary in effect immediately prior to the Effective Date or (ii) the highest average annual base salary paid or payable to the Executive by the Company and its subsidiaries during the five fiscal years immediately preceding the fiscal year in which the Effective Date occurs; provided, however, that the three (which need not be consecutive) highest annual base salaries paid or payable during the past five fiscal years which yield the highest annual base salary payable shall be utilized to compute the highest average annual base salary. Such Base Salary shall be payable monthly in cash. Base Salary shall be computed prior to any reductions for (i) any deferrals of compensation made pursuant to Sections 125 or 401(c) of the Code and (ii) any withholding, income or employment taxes. During the Employment Period, the Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary awarded in the ordinary course of business to other key management associates of the Company and its subsidiaries. Any increase in Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Base Salary shall not be reduced after any such increase. (ii) ANNUAL BONUS. In addition to Base Salary, the Executive shall be paid, for each fiscal year during the Employment Period, an annual bonus (an "Annual Bonus") (either pursuant to the incentive compensation plan of the Company or otherwise, including, without limitation, the Economic Value Added Incentive Bonus Plan for Fleming Companies, Inc. and Its Subsidiaries) in cash at least equal to the highest annual bonus paid or payable to the Executive by the Company and its subsidiaries during or for any of the five fiscal years immediately preceding the fiscal year in which the Effective Date occurs. (iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to Base Salary and Annual Bonus, the Executive shall be -5- entitled to participate during the Employment Period in all incentive, savings and retirement plans, practices, supplemental retirement plan policies and programs applicable to other key management associates of the Company and its subsidiaries, in each case providing benefits which are the economic equivalent to those in effect immediately preceding the Effective Date or as subsequently amended. Such plans, practices, policies and programs, in the aggregate, shall provide the Executive with compensation, benefits and reward opportunities at least as favorable as the most favorable of such compensation, benefits and reward opportunities provided by the Company for the Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided at any time thereafter with respect to other key management associates of the Company and its subsidiaries. (iv) WELFARE BENEFIT PLANS. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its subsidiaries (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs), at least as favorable as the most favorable of such plans, practices, policies and programs in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter with respect to other key management associates of the Company and its subsidiaries. (v) EXPENSES. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its subsidiaries in effect at any time during the 90- day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key management associates of the Company and its subsidiaries. (vi) FRINGE BENEFITS. During the Employment Period, the Executive shall be entitled to fringe benefits, including use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its subsidiaries in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key management associates of the Company and its subsidiaries. -6- (vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its subsidiaries at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided at any time thereafter with respect to other key management associates of the Company and its subsidiaries. (viii) VACATION. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its subsidiaries as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key management associates of the Company and its subsidiaries. (ix) EFFECT OF INCREASES. Any increase in Base Salary, Annual Bonus or any other benefit or perquisite described in the foregoing Sections (i)-(viii) shall in no way diminish any obligation of the Company under the Agreement. 5. TERMINATION. (a) DEATH OR DISABILITY. This Agreement shall terminate automatically upon the Executive's death. If the Company determines in good faith that the Disability of the Executive has occurred (pursuant to the definition of "Disability" set forth below), it may give to the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after the date of such notice (the "Disability Effective Date"), provided that, within such time period, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means disability (either physical or mental) which, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) CAUSE. The Company may terminate the Executive's employment for "Cause." For purposes of this Agreement, termination of the Executive's employment by the Company for Cause shall mean termination for one of the following reasons: (i) the conviction of the Executive of a felony by a federal or state court of competent jurisdiction; (ii) an act or acts of dishonesty taken by the Executive and intended to result in -7- substantial personal enrichment of the Executive at the expense of the Company; or (iii) the Executive's "willful" failure to follow a direct, reasonable and lawful written order from his supervisor, within the reasonable scope of the Executive's duties, which failure is not cured within 30 days. Further, for purposes of this Section (b): (1) No act or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's action or omission was in the best interest of the Company. (2) The Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-fourths (3/4ths) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Executive was guilty of conduct set forth in clauses (i), (ii) or (iii) above and specifying the particulars thereof in detail. (c) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, compensation, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than that described in Section 4(a)(i)(B) hereof, except for periodic travel reasonably required in the performance of the Executive's responsibilities; -8- (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 12(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. (d) NOTICE OF TERMINATION. Any termination by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provisions in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. (e) DATE OF TERMINATION. "Date of Termination" means the date of receipt of the Notice of Termination by either the Company or the Executive as the case may be or any later date specified therein; PROVIDED, HOWEVER, that if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than those obligations accrued or earned and vested (if applicable) by the Executive as of the Date of Termination, including, for this purpose (i) the Executive's annual full Base Salary through the Date of Termination at the rate in effect on the Date of Termination or, if higher, at -9- the highest annual rate in effect at any time from the thirty-six month period preceding the Effective Date through the Date of Termination (the "Highest Base Salary"), (ii) the product of the Annual Bonus (defined in Section 4(b)(ii)) paid to the Executive for the last full fiscal year and a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (iii) any compensation previously deferred by the Executive (together with any accrued interest thereon) and not yet paid by the Company and any accrued vacation pay not yet paid by the Company (such amounts specified in clauses (i), (ii) and (iii) are hereinafter referred to as "Accrued Obligations"). All such Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Company and any of its subsidiaries to surviving families of other key management associates of the Company and such subsidiaries under such plans, programs, practices and policies relating to family death benefits, if any, in accordance with the most favorable plans, programs, practices and policies of the Company and its subsidiaries in effect at any time during the 90- day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other key management associates of the Company and its subsidiaries and their families. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability, this Agreement shall terminate without further obligations to the Executive, other than those obligations accrued or earned and vested (if applicable) by the Executive as of the Date of Termination, including for this purpose, all Accrued Obligations. All such Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Company and its subsidiaries to disabled key management associates and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, in accordance with the most favorable plans, programs, practices and policies of the Company and its subsidiaries in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter with respect to other key management associates of the Company and its subsidiaries and their families. -10- (c) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall be terminated for Cause, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive the Highest Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive (together with accrued interest thereon). If the Executive terminates employment other than for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than those obligations accrued or earned and vested (if applicable) by the Executive through the Date of Termination, including for this purpose, all Accrued Obligations. All such Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. (d) GOOD REASON; TERMINATION OTHER THAN FOR CAUSE OR DISABILITY. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Disability, or death or if the Executive shall terminate his employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. to the extent not theretofore paid, the Executive's Highest Base Salary through the Date of Termination; and B. the product of (i) the Annual Bonus paid to the Executive for the last full fiscal year (if any) ending during the Employment Period or, if higher, the Annual Bonus paid to the Executive for the last full fiscal year prior to the Effective Date (as applicable, the "Recent Bonus") and (ii) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination and the denominator of which is 365; and C. the product obtained by multiplying 2.99 times the sum of (i) the Highest Base Salary and (ii) the Recent Bonus; and D. in the case of compensation previously deferred by the Executive, all amounts previously deferred (together with any accrued interest thereon) and not yet paid by the Company, and any accrued vacation pay not yet paid by the Company; and (ii) for the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those -11- which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated, including health insurance and life insurance, in accordance with the most favorable plans, practices, programs or policies of the Company and its subsidiaries during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key management associates and their families and for purposes of eligibility for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period. 7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices, provided by the Company or any of its subsidiaries and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any stock option or other agreements with the Company or any of its subsidiaries. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company or any of its subsidiaries at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program. 8. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set- off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the month of any payment pursuant to Section 9 of this Agreement), plus in each case interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code. 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any -12- payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company of the date of vesting or payment or rate of payment under any plan, program or arrangement of the Company (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by Deloitte & Touche LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment which would be subject to the Excise Tax, or such earlier time as is requested by the Company. The initial Gross-Up Payment, if any, as determined pursuant to this Section 9(b), shall be paid to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with an opinion that he has substantial authority not to report any Excise Tax on his federal income tax return. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross- Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive -13- knows of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is -14- limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its subsidiaries, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its subsidiaries and which shall not be or become public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. TERMINATION OF SEVERANCE AGREEMENT. The Executive and the Company are Parties to a Severance Agreement (the "Severance Agreement"). Effective as of the date of execution and delivery of this Agreement, the Severance Agreement shall be terminated and of no further force and effect. 12. SUCCESSORS. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of -15- descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. 13. INDEMNIFICATION AND INSURANCE. The Executive shall be indemnified and held harmless by the Company during the term of this Agreement and following any termination of this Agreement for any reason whatsoever in the same manner as would any other key management associate of the Company with respect to acts or omissions occurring prior to (a) the termination of this Agreement or (b) the termination of employment of the Executive. In addition, during the term of this Agreement and for a period of five years following the termination of this Agreement for any reason whatsoever, the Executive shall be covered by a Company held Directors and Officers liability insurance policy covering acts or omissions occurring prior to (a) the termination of this Agreement or (b) the termination of employment of the Executive. Provided, in no event will the obligation of the Company to indemnify the Executive or provide Directors and Officers insurance to the Executive under this Section 13 be less than the obligation and insurance coverage which the Company had to the Executive immediately prior to the occurrence of a Change of Control. 14. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Oklahoma, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: -16- IF TO THE EXECUTIVE: At his last known address evidenced on the Company's payroll records IF TO THE COMPANY: Fleming Companies, Inc. 6301 Waterford Boulevard P. O. Box 26647 Oklahoma City, Oklahoma 73126-0647 Attention: Mr. Robert E. Stauth, Chairman, President and Chief Executive Officer WITH A COPY TO: David R. Almond, Esq., Senior Vice President and General Counsel Fleming Companies, Inc. 6301 Waterford Boulevard P. O. Box 26647 Oklahoma City, Oklahoma 73126-0647 WITH A COPY TO: McAfee & Taft A Professional Corporation 10th Floor, Two Leadership Square Oklahoma City, Oklahoma 73102 Attention: John M. Mee, Esq. or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (f) This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. (g) The Executive and the Company acknowledge that the employment of the Executive by the Company is "at will," and, prior to the Effective Date, may be terminated by either the Executive or the Company at any time. Upon a termination of the Executive's employment or upon the Executive's ceasing to be an -17- officer of the Company, in each case, prior to the Effective Date, there shall be no further rights under this Agreement. 15. NO TRUST. No action under this Agreement by the Company or its Board of Directors shall be construed as creating a trust, escrow or other secured or segregated fund, in favor of the Executive or his beneficiary. The status of the Executive and his beneficiary with respect to any liabilities assumed by the Company hereunder shall be solely those of unsecured creditors of the Company. Any asset acquired or held by the Company in connection with liabilities assumed by it hereunder, shall not be deemed to be held under any trust, escrow or other secured or segregated fund for the benefit of the Executive or his beneficiary or to be security for the performance of the obligations of the Company, but shall be, and remain a general, unpledged, unrestricted asset of the Company at all times subject to the claims of general creditors of the Company. 16. NO ASSIGNABILITY. Neither the Executive nor his beneficiary, nor any other person shall acquire any right to or interest in any payments payable under this Agreement, otherwise than by actual payment in accordance with the provisions of this Agreement, or have any power to transfer, assign, anticipate, pledge, mortgage or otherwise encumber, alienate or transfer any rights hereunder in advance of any of the payments to be made pursuant to this Agreement or any portion thereof which is expressly declared to be nonassignable and nontransferable. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefit. IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ---------------------------------------- 2 "EXECUTIVE" -18- FLEMING COMPANIES, INC., an Oklahoma corporation By --------------------------------------- Robert E. Stauth, Chairman, President and Chief Executive Officer "COMPANY" -19- EX-11 11 COMP TABLE EXHIBIT 11 FLEMING COMPANIES, INC. EARNINGS PER SHARE COMPUTATION (In thousands, except per share amounts)
YEAR ENDED -------------------------- DECEMBER 31, DECEMBER 25, 1994 1993 ------------ ------------ PRIMARY EARNINGS PER SHARE Reconciliation of net earnings from consolidated statements of earnings to amount used in primary earnings per share computation: Earnings before extraordinary loss applicable to common shares $56,169 $37,480 ======= ======= Weighted average shares outstanding used to compute primary earnings per share 37,254 36,801 Add share equivalents- shares issuable under stock option and stock purchase plans 160 26 ------- ------- Weighted average shares outstanding, as adjusted 37,414 36,827 ======= ======= Primary earnings per share before extraordinary loss $1.51(a) $1.02(a) ===== ===== (a) Agrees to the related amounts shown in the consolidated statements of earnings.
EXHIBIT 11 (Continued) FLEMING COMPANIES, INC. EARNINGS PER SHARE COMPUTATION (In thousands, except per share amounts)
YEAR ENDED -------------------------- DECEMBER 31, DECEMBER 25, 1994 1993 ------------ ------------ (PRIMARY EARNINGS PER SHARE, cont'd) Extraordinary loss $ 2,308 ======= Weighted average shares outstanding, as adjusted 36,827 ======= Loss per share related to extraordinary item $.06(a) ==== Earnings applicable to common shares $56,169 $35,172 ======= ======= Weighted average shares outstanding, as adjusted 37,414 36,827 ======= ======= Primary earnings per share $1.51(a) $.96(a) ===== ==== (a) Agrees to the related amounts shown in the consolidated statements of earnings.
EX-12 12 RATIO TABLE EXHIBIT 12 FLEMING COMPANIES, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FISCAL YEAR ENDED THE LAST SATURDAY IN DECEMBER ------------------------------------------------ 1990 1991 1992 1993 1994 -------- -------- -------- -------- -------- (IN THOUSANDS OF DOLLARS) Earnings: Pretax income $164,501 $104,329 $194,941 $ 72,078 $112,337 Fixed charges, net 117,877 117,865 105,726 102,303 148,454 -------- -------- -------- -------- -------- Total earnings $282,378 $222,194 $300,667 $174,381 $260,791 ======== ======== ======== ======== ======== Fixed charges: Interest expense $ 93,643 $ 93,353 $ 81,102 $ 78,029 $120,408 Portion of rental charges deemed to be interest 22,836 22,907 23,027 22,969 27,746 Capitalized interest and debt issuance cost amortization 1,250 1,464 1,287 1,005 364 -------- -------- -------- -------- -------- Total fixed charges $117,729 $117,724 $105,416 $102,003 $148,518 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges 2.40 1.89 2.85 1.71 1.76 ==== ==== ==== ==== ====
"Earnings" consist of income from continuing operations before income taxes and fixed charges excluding capitalized interest. Capitalized interest amortized during the respective periods is added back to earnings. "Fixed charges, net" consist of interest expense, an estimated amount of rental expense which is deemed to be representative of the interest factor and amortization of capitalized interest and debt issuance cost. The pro forma ratio of earnings to fixed charges is omitted as it is not applicable. EX-21 13 CO. SUBSID. LIST EXHIBIT 21 FLEMING COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT The following table sets forth Fleming's active wholly owned subsidiaries:
JURISDICTION OF NAME ORGANIZATION ---- --------------- Baker's Supermarkets, Inc. Nebraska Fleming Holdings, Inc. (1) Delaware Fleming Supermarkets, Inc. Wisconsin Fleming International, Ltd. Oklahoma Fleming Transportation Service, Inc. Oklahoma (1) Includes: (a) Scrivner, Inc., which has 12 wholly owned subsidiaries; (b) Scrivner-Food Holdings, Inc. which is 50% owned by Fleming Holdings, Inc. and 50% owned by Scrivner, Inc.; and Gateway Foods, Inc., which has 15 subsidiaries and is wholly owned by Scrivner-Food Holdings, Inc.
Not included above are 7 retail equity store corporations in which Fleming owns more than 50% of the voting securities as described under "Capital Invested in Retailers" in Item 1 hereto. In addition, the company has other subsidiaries that are not reflected herein. In the aggregate, these are not significant. EX-23 14 AUDITORS' CONSENT EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in: (i) Registration Statement No. 2-98602 (1985 Stock Option Plan) on Form S-8; (ii) Registration Statement No. 33-18867 (Godfrey Company 1981 Stock Option Plan and 1984 Nonqualified Stock Option Plan) on Form S-8; (iii) Registration Statement No. 33-36586 (1990 Fleming Stock Option Plan) on Form S-8; (iv) Registration Statement No. 33-56241 (Dividend Reinvestment and Stock Purchase Plan) on Form S-3; (v) Registration Statement No. 33-61860 ($350,550,000 Debt Securities, Series C) on Form S-3; (vi) Registration Statement No. 33-55369 ($500,000,000 Senior Notes) on Form S-3 of our report dated February 23, 1995, appearing in this Annual Report on Form 10-K of Fleming Companies, Inc. for the year ended December 31, 1994. Deloitte & Touche LLP Oklahoma City, Oklahoma March 27, 1995 EX-24 15 POA EXHIBIT 24 POWER OF ATTORNEY We, the undersigned officers and directors of Fleming Companies, Inc. (hereinafter the "Company"), hereby severally constitute Robert E. Stauth, Harry L. Winn, Jr. and David R. Almond, and each of them severally, our true and lawful attorneys with full power to them and each of them to sign for us, and in our names as officers or directors, or both, of the Company, the Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and any and all amendments thereto, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and to perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. Dated this 2nd day of March, 1995. SIGNATURE TITLE --------- ----- \s\ ROBERT E. STAUTH Chairman, President and Chief - ----------------------------- Executive Officer (principal Robert E. Stauth executive officer) \s\ HARRY L. WINN, JR. Executive Vice President and Chief - ----------------------------- Financial Officer (principal Harry L. Winn, Jr. financial officer) \s\ KEVIN J. TWOMEY Vice President - Controller - ----------------------------- (principal accounting officer) Kevin J. Twomey \s\ ARCHIE R. DYKES Director - ----------------------------- Archie R. Dykes \s\ CAROL B. HALLETT Director - ----------------------------- Carol B. Hallett \s\ JAMES G. HARLOW, JR. Director - ----------------------------- James G. Harlow, Jr. \s\ LAWRENCE M. JONES Director - ----------------------------- Lawrence M. Jones \s\ EDWARD C. JOULLIAN III Director - ----------------------------- Edward C. Joullian III \s\ HOWARD H. LEACH Director - ----------------------------- Howard H. Leach \s\ JOHN A. MCMILLAN Director - ----------------------------- John A. McMillan \s\ GUY A. OSBORN Director - ----------------------------- Guy A. Osborn \s\ E. DEAN WERRIES Director - ----------------------------- E. Dean Werries EX-27 16 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Form 10-K for the year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-31-1994 DEC-26-1993 DEC-31-1994 28,352 0 404,390 39,506 1,301,980 1,820,081 1,455,954 467,830 4,608,329 1,323,631 1,994,793 93,705 0 0 984,850 4,608,329 15,753,487 15,753,487 14,606,963 15,459,524 0 61,218 120,408 112,337 56,168 56,169 0 0 0 56,169 1.51 1.51
EX-99 17 UNDERTAKING EXHIBIT 99 FORM S-8 UNDERTAKING The following is incorporated by reference in Item 21 of Part II of the registrant's registration statements on Form S-8: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has 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 registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. -----END PRIVACY-ENHANCED MESSAGE-----