-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VZbKk2XUXD6P9B/VoLfAGBB/Bd6KnQWf1tpmg1E1rS8IcoQKmC1uGx24gprrY5v8 2aqfJtoVNukG4jcM/GjJ/Q== 0000950149-01-500628.txt : 20010507 0000950149-01-500628.hdr.sgml : 20010507 ACCESSION NUMBER: 0000950149-01-500628 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20010503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEMING COMPANIES INC /OK/ CENTRAL INDEX KEY: 0000352949 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & GENERAL LINE [5141] IRS NUMBER: 480222760 STATE OF INCORPORATION: OK FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-60184 FILM NUMBER: 1621846 BUSINESS ADDRESS: STREET 1: 1945 LAKEPOINTE DRIVE CITY: LEWISVILLE STATE: TX ZIP: 73126 BUSINESS PHONE: 4058407200 MAIL ADDRESS: STREET 1: 1945 LAKEPOINT DRIVE CITY: LEWISVILLE STATE: TX ZIP: 75057 S-4 1 f71028s-4.txt FLEMING COMPANIES, INC. FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ FLEMING COMPANIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OKLAHOMA 5141 48-0222760 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
1945 LAKEPOINTE DRIVE LEWISVILLE, TEXAS 75057 (972) 906-8000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) FOR CO-REGISTRANTS, SEE "TABLE OF CO-REGISTRANTS" ON FOLLOWING PAGE. ------------------------ CARLOS M. HERNANDEZ SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY FLEMING COMPANIES, INC. 1945 LAKEPOINTE DRIVE LEWISVILLE, TEXAS 75057 (972) 906-8000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: JOHN M. NEWELL LATHAM & WATKINS 505 MONTGOMERY STREET, SUITE 1900 SAN FRANCISCO, CALIFORNIA 94111 (415) 391-0600 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this registration statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration number for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier, effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------------------------- 10 1/8% Senior Notes due 2008........... $355,000,000 100% $355,000,000 $88,750 Guarantees of Senior Notes (2).......... (2) (2) (2) (2) - ---------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f). (2) No separate consideration will be received with respect to these guarantees and, therefore, no registration fee is attributable to them. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF CO-REGISTRANTS
STATE OF I.R.S. EMPLOYER JURISDICTION OF IDENTIFICATION PSIC CODE NAME ORGANIZATION NUMBER NUMBER ---- --------------- --------------- --------- ABCO Food Group, Inc. ............................... Nevada 88-0440077 5411 ABCO Markets, Inc. .................................. Arizona 86-0491500 * ABCO Realty Corp. ................................... Arizona 86-0491499 * AG, L.L.C. .......................................... Oklahoma ** ** American Logistics Group, Inc. ...................... Delaware 13-2656567 5141 Baker's Food Group, Inc. ............................ Nevada 88-0440078 5411 Dunigan Fuels, Inc. ................................. Texas 52-2206478 5172 FAVAR CONCEPTS, LTD.................................. Delaware 73-1570430 5411 Fleming Food Management Co., L.L.C. ................. Oklahoma 73-1577381 5141 Fleming Foods of Texas, L.P. ........................ Oklahoma 73-1577380 5141 Fleming International Ltd. .......................... Oklahoma 73-1414701 5141 Fleming Supermarkets of Florida, Inc. ............... Florida 65-0418543 5411 Fleming Transportation Service, Inc. ................ Oklahoma 73-1126039 5141 Fleming Wholesale, Inc. ............................. Nevada 93-1175982 5141 FuelServ, Inc. ...................................... Delaware 75-2894483 5172 Gateway Insurance Agency, Inc. ...................... Wisconsin 39-1346803 5141 LAS, Inc. ........................................... Oklahoma 73-1410261 5411 Piggly Wiggly Company................................ Oklahoma 73-1477999 6794 Progressive Realty, Inc. ............................ Oklahoma 73-1485750 5141 Rainbow Food Group, Inc. ............................ Nevada 88-0440079 5411 Retail Investments, Inc. ............................ Nevada 86-0900985 5411 Retail Supermarkets, Inc. ........................... Texas 74-0658440 5411 RFS Marketing Services, Inc. ........................ Oklahoma 73-1489627 5141 Richmar Foods, Inc. ................................. California 68-0095094 5411 Scrivner Transportation, Inc. ....................... Oklahoma 73-1288028 *
- ------------------------- * Inactive entity. ** No I.R.S. Employer Identification Number or PSICC Number -- subsidiary created solely for liquor license. 3 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED MAY 3, 2001 PRELIMINARY PROSPECTUS FLEMING COMPANIES, INC. OFFER TO EXCHANGE $355,000,000 AGGREGATE PRINCIPAL AMOUNT OF ITS 10 1/8% SENIOR NOTES DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL OF ITS OUTSTANDING 10 1/8% SENIOR NOTES DUE 2008 MATERIAL TERMS OF THE EXCHANGE OFFER - - The exchange offer expires at 5:00 p.m., New York City time, on , 2001, unless extended. - - We will exchange all outstanding notes that are validly tendered and not validly withdrawn for an equal principal amount of a new series of notes which are registered under the Securities Act. - - The exchange offer is not subject to any conditions other than that it not violate applicable law or any applicable interpretation of the staff of the SEC. - - You may withdraw tenders of outstanding notes at any time before the exchange offer expires. - - The exchange of notes will not be a taxable event for U.S. federal income tax purposes. - - We will not receive any proceeds from the exchange offer. - - The terms of the new series of notes are substantially identical to the outstanding notes, except for transfer restrictions and registration rights relating to the outstanding notes. - - You may tender outstanding notes only in denominations of $1,000 and multiples of $1,000. - - Our affiliates may not participate in the exchange offer. PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 13 OF THIS PROSPECTUS FOR A DESCRIPTION OF THE RISKS YOU SHOULD CONSIDER WHEN EVALUATING THIS INVESTMENT. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. We are not making this exchange offer in any state where it is not permitted. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OF THE NOTES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is , 2001. 4 We have not authorized any dealer, salesperson or other person to give any information or to make any representations to you other than the information contained in this prospectus. You must not rely on any information or representations not contained in this prospectus as if we had authorized it. This prospectus does not offer to sell or solicit an offer to buy any securities other than the registered notes to which it relates, nor does it offer to buy any of these notes in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. The information contained in this prospectus is current only as of the date on the cover page of this prospectus, and may change after that date. We do not imply that there has been no change in the information contained in this prospectus or in our affairs since that date by delivering this prospectus. THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT US THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS. THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU UPON WRITTEN OR ORAL REQUEST. IF YOU WOULD LIKE A COPY OF ANY OF THIS INFORMATION, PLEASE SUBMIT YOUR REQUEST TO 1945 LAKEPOINTE DRIVE, BOX 299013, LEWISVILLE, TEXAS 75029, ATTENTION: LEGAL DEPARTMENT, OR CALL (972) 906-8000 AND ASK TO SPEAK TO SOMEONE IN OUR LEGAL DEPARTMENT. IN ADDITION, TO OBTAIN TIMELY DELIVERY OF ANY INFORMATION YOU REQUEST, YOU MUST SUBMIT YOUR REQUEST NO LATER THAN , 2001, WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE THE EXCHANGE OFFER EXPIRES. ------------------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary.......................................... 1 Risk Factors................................................ 13 The Exchange Offer.......................................... 20 Use of Proceeds............................................. 30 Capitalization.............................................. 30 Selected Consolidated Financial Data........................ 31 Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 33 Business.................................................... 42 Management.................................................. 56 Principal and Management Shareholders....................... 59 Description of Other Indebtedness........................... 62 Description of Notes........................................ 63 Book-Entry; Delivery and Form............................... 95 Plan of Distribution........................................ 99 Material United States Federal Income Tax Considerations.... 99 Legal Matters............................................... 100 Independent Auditors........................................ 100 Available Information....................................... 100 Incorporation by Reference.................................. 101 Index to Consolidated Financial Statements.................. F-1
i 5 INDUSTRY DATA In this prospectus, we rely on and refer to information regarding market data obtained from internal surveys, market research, publicly available information and industry publications. Although we believe the information is reliable, we cannot guarantee the accuracy or completeness of the information and have not independently verified it. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS All statements other than statements of historical facts included in this prospectus, including, without limitation, statements in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this prospectus regarding our future financial position, business strategy and our management's plans and objectives for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or the negative thereof or variations thereon or similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these expectations may not prove to be correct. Important factors that could cause actual results to differ materially from our expectations are disclosed under the section "Risk Factors" and elsewhere in this prospectus, including, without limitation, in conjunction with the forward-looking statements included in this prospectus. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. ii 6 PROSPECTUS SUMMARY In this prospectus, the words "Fleming," "the Company," "ours," "us" and "we" refer to Fleming Companies, Inc., the issuer of the notes, and its subsidiaries. We will refer to the offering of the private notes as the "private offering." Unless indicated otherwise, the term "notes" refers to both the private notes and the exchange notes. For ease of reference, we will refer to the private offering, the concurrent private offering of our $150 million 5.25% convertible senior subordinated notes due 2009 and the $50 million investment in our common stock by an affiliate of The Yucaipa Companies, collectively, as the "Transactions." The following summary contains basic information about us and this offering. It likely does not contain all the information that is important to you. For a more complete understanding of this offering, we encourage you to read this entire document and the documents we have referred you to. THE EXCHANGE OFFER The Exchange Offer............ We are offering to exchange our exchange notes for our outstanding private notes that are properly tendered and accepted. You may tender outstanding notes only in denominations of $1,000 and multiples of $1,000. We will issue the exchange notes on or promptly after the exchange offer expires. As of the date of this prospectus, $355,000,000 principal amount of private notes is outstanding. Expiration Date............... The exchange offer will expire at 5:00 p.m., New York City time, on , 2001, unless extended, in which case the expiration date will mean the latest date and time to which we extend the exchange offer. Conditions to the Exchange Offer......................... The exchange offer is not subject to any condition other than that it not violate applicable law or any applicable interpretation of the staff of the SEC. The exchange offer is not conditioned upon any minimum principal amount of private notes being tendered for exchange. Procedures for Tendering Private Notes................. If you wish to tender your private notes for exchange notes pursuant to the exchange offer you must transmit to Bankers Trust Company, as exchange agent, on or before the expiration date, either: - a computer generated message transmitted through The Depository Trust Company's Automated Tender Offer Program system and received by the exchange agent and forming a part of a confirmation of book-entry transfer in which you acknowledge and agree to be bound by the terms of the letter of transmittal; or - a properly completed and duly executed letter of transmittal, which accompanies this prospectus, or a facsimile of the letter of transmittal, together with your private notes and any other required documentation, to the exchange agent at its address listed in this prospectus and on the front cover of the letter of transmittal. If you cannot satisfy either of these procedures on a timely basis, then you should comply with the guaranteed delivery procedures 1 7 described below. By executing the letter of transmittal, you will make the representations to us described under "The Exchange Offer -- Procedures for Tendering." Special Procedures for Beneficial Owners............. If you are a beneficial owner whose private notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your private notes in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you wish to tender on your own behalf, you must either (1) make appropriate arrangements to register ownership of the private notes in your name or (2) obtain a properly completed bond power from the registered holder, before completing and executing the letter of transmittal and delivering your private notes. Guaranteed Delivery Procedures.................... If you wish to tender your private notes and time will not permit the documents required by the letter of transmittal to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, you must tender your private notes according to the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer -- Guaranteed Delivery Procedures." Acceptance of Private Notes and Delivery of Exchange Notes....................... Subject to the satisfaction or waiver of the conditions to the exchange offer, we will accept for exchange any and all private notes which are validly tendered in the exchange offer and not withdrawn before 5:00 p.m., New York City time, on the expiration date. Withdrawal Rights............. You may withdraw the tender of your private notes at any time before 5:00 p.m., New York City time, on the expiration date, by complying with the procedures for withdrawal described in this prospectus under the heading "The Exchange Offer -- Withdrawal of Tenders." Material United States Federal Income Tax Considerations..... The exchange of notes will not be a taxable event for United States federal income tax purposes. For a discussion of the material federal income tax consequences relating to the exchange of notes, see "Material United States Federal Income Tax Considerations." Exchange Agent................ Bankers Trust Company, the trustee under the indenture governing the private notes, is serving as the exchange agent. Consequences of Failure to Exchange Notes................ If you do not exchange your private notes for exchange notes, you will continue to be subject to the restrictions on transfer provided in the private notes and in the indenture governing the private notes. In general, the private notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the 2 8 Securities Act and applicable state securities laws. We do not currently plan to register the private notes under the Securities Act. Registration Rights Agreement..................... You are entitled to exchange your private notes for exchange notes with substantially identical terms. The exchange offer satisfies this right. After the exchange offer is completed, you will no longer be entitled to any exchange or registration rights with respect to your private notes. We explain the exchange offer in greater detail beginning on page 20. 3 9 THE EXCHANGE NOTES The form and terms of the exchange notes are the same as the form and terms of the private notes, except that the exchange notes will be registered under the Securities Act and, therefore, the exchange notes will not be subject to the transfer restrictions, registration rights and provisions providing for an increase in the interest rate applicable to the private notes. The exchange notes will evidence the same debt as the private notes and both the private notes and the exchange notes, which we will collectively refer to as the "notes," are governed by the same indenture. Securities Offered............ $355,000,000 principal amount of 10 1/8% senior subordinated notes due 2008. Issuer........................ Fleming Companies, Inc. Maturity Date................. April 1, 2008. Interest...................... The exchange notes will bear interest at the rate of 10 1/8% per year (calculated using a 360-day year), payable every six months on April 1 and October 1, beginning October 1, 2001. Ranking....................... The notes are our unsecured senior obligations and rank senior to all of our subordinated debt and pari passu with all of our other senior debt except to the extent of collateral. The guarantees of the notes by our subsidiaries are unsecured senior obligations of such subsidiaries and rank senior to all subordinated debt and pari passu with all other senior debt of such subsidiaries except to the extent of collateral. As of December 30, 2000, pro forma for the Transactions, we estimate that we and our subsidiaries would have had $989 million of senior debt (including capital leases), of which $622 million would have been secured, excluding approximately $406 million that we would have had available to borrow under our credit facility. Guarantees.................... Our wholly-owned domestic subsidiaries as of March 15, 2001 are unconditionally guaranteeing the notes. If we create or acquire a new wholly-owned subsidiary or if any subsidiary guarantees certain other debt, it will guarantee the notes unless we designate the subsidiary as an "unrestricted subsidiary" under the indenture. Optional Redemption........... On and after April 1, 2005, we may redeem some or all of the notes at the redemption prices listed in the "Description of Notes" section under the heading "Optional Redemption," plus accrued interest. Optional Redemption After Equity Offerings.............. At any time (which may be more than once) on or prior to April 1, 2004, we can choose to redeem up to 35% of the original principal amount of the notes with money that we raise in one or more equity offerings, as long as: - we pay 110.125% of the face amount of the notes, plus interest; - we redeem the notes within 90 days of completing the equity offering; and 4 10 - at least 65% of the aggregate principal amount of the notes issued remains outstanding afterwards. Change of Control Offer....... If a change of control of our company occurs, we must give holders of the notes the opportunity to sell to us their notes at 101% of their face amount, plus accrued interest. We might not be able to pay you the required price for notes you present to us at the time of a change of control, because: - we might not have enough funds at that time; - the terms of our other senior debt may prevent us from paying; or - our bylaws may prevent us from paying. Asset Sale Proceeds........... If we or our subsidiaries engage in asset sales, we generally must either invest the net cash proceeds from such sales in our business within a period of time, prepay the debt under our credit facility or make an offer to purchase a principal amount of the notes equal to the excess net cash proceeds. The purchase price of the notes will be 100% of their principal amount, plus accrued interest. Certain Indenture Provisions.................... The indenture governing the notes contains covenants limiting our (and most or all of our subsidiaries') ability to: - incur additional debt; - pay dividends or distributions on our capital stock or repurchase our capital stock; - issue stock of subsidiaries; - make certain investments; - create liens on our assets to secure debt; - enter into transactions with affiliates; - merge or consolidate with another company; or - transfer and sell assets. These covenants are subject to a number of important limitations and exceptions. Form of Exchange Notes........ The exchange notes will be represented by one or more permanent global certificates, in fully registered form, deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company, as depositary. You will not receive exchange notes in certificated form unless one of the events described in the section entitled "Book-Entry; Delivery and Form" occurs. Instead, beneficial interests in the exchange notes will be shown on, and transfers of these notes will be effected only through, records maintained in book-entry form by The Depository Trust Company and its participants. Use of Proceeds............... We will not receive any cash proceeds in the exchange offer. 5 11 Risk Factors.................. Investing in the notes involves substantial risks. See the section entitled "Risk Factors" for a description of certain of the risks you should consider before investing in the notes. We explain the exchange notes in greater detail beginning on page 63. 6 12 THE COMPANY INTRODUCTION Fleming is an industry leader in the distribution of consumable goods, and also has a growing presence in operating "price impact" supermarkets. Through our distribution group, we distribute products to customers that operate approximately 3,000 supermarkets, 3,000 convenience stores and nearly 1,000 supercenters, discount stores, limited assortment stores, drug stores, specialty stores and other stores across the U.S. We expect to substantially increase our distribution volume in connection with, among other things, our recently announced ten-year, $4.5 billion per year strategic alliance with our largest customer, Kmart Corporation. In addition, our retail group currently operates 103 supermarkets. In the fiscal year ended December 30, 2000, we generated total net sales of $14.4 billion. Our distribution group net sales were $11.2 billion for 2000, a 5.8% increase over the prior year, and represented approximately 77% of total net sales in 2000. To supply our customers, we have a network of 32 distribution centers that have a total of approximately 19 million square feet of warehouse space. To support our new business from Kmart, we expect to add up to four new distribution centers over the next several months. Once that infrastructure is in place, we believe that we will be the only distributor of consumable goods serving customers in all 50 states. In addition to product storage, handling and distribution functions, we also provide our customers with an offering of advertising, store development, accounting, pricing and retail technology services. Our retail group net sales were $3.3 billion for 2000, which represented approximately 23% of total net sales. Of that amount, $1.9 billion was attributable to continuing chains, which represents a 4.8% increase over the prior year. As of April 23, 2001, our continuing chains include 38 price impact supermarkets under the Food 4 Less banner and ten additional supermarkets which we intend to convert to the price impact format. Price impact supermarkets offer deep-discount, everyday low prices in a warehouse-style format. These stores typically cost less to build, maintain and operate than conventional supermarkets. We also operate 44 supermarkets that are adopting certain elements of the price impact format under the Rainbow Foods banner. In addition, we operate 11 limited assortment stores under the Yes!Less banner. Limited assortment stores offer a narrow selection of low-price, private label food and other consumable goods, as well as general merchandise. In recent years, consumers have been shifting their purchases of food and other consumable goods away from conventional full-service grocery stores towards other retail channels, such as price impact supermarkets, discount stores, supercenters, convenience stores, drug stores and ethnic food stores. Since 1998, we have repositioned our distribution group to become a highly-efficient supplier to these retail channels, and as a result, our distribution group has experienced renewed sales growth. In addition, we believe price-sensitive consumers are underserved in the retail grocery market, so we have repositioned our retail group to expand our presence in the price impact format. REPOSITIONING OF FLEMING In late 1998, Mark Hansen joined Fleming as our Chairman and Chief Executive Officer. Together with other new members of senior management, he established the following strategic initiatives in order to reposition us for growth: - lower the cost of goods sold and the cost of our distribution services in order to increase sales to existing customers and attract new customers; - diversify our customer base by appealing to retailers beyond our traditional conventional supermarket customers; and - reposition our retail group by selling or closing most of our conventional format supermarkets and opening additional price impact supermarkets. 7 13 In the course of implementing our strategic initiatives, since 1998, we have, among other accomplishments: - closed or consolidated 12 of our distribution centers, which resulted in: -- increased average sales per full-line distribution center by more than 40% from $390 million in 1998 to $550 million in 2000, and -- increased average sales per full-line distribution center employee by more than 12% from 1998 to 2000; - centralized the majority of our purchasing operations in our customer support center near Dallas, Texas; - centralized our accounting, human resources, information technology and other support services in our shared services center in Oklahoma City, Oklahoma; - sold or closed 207 conventional supermarkets, with 31 more to be sold or closed; - opened 22 additional price impact supermarkets; and - instituted a "culture of thrift" among our employees, in part through our Low Cost Pursuit Program. We believe these initiatives have lowered our cost structure, improved the economics we can offer our traditional retail customers and strengthened our appeal to new channel retailers. We believe these improvements have been the key to our ability to increase distribution group sales for the last five consecutive quarters (year-over-year comparisons). In 2000, we added approximately $1.2 billion in gross annualized distribution group sales from both new channel retailers and our traditional supermarket customers. COMPETITIVE STRENGTHS Low-Cost, High-Volume National Distribution System: We have consolidated our smaller distribution centers into high-volume distribution centers. Our distribution centers produce average annual sales that are among the highest in the consumable goods distribution industry. Our procurement and logistics capabilities, combined with the scale of our distribution centers, have enhanced our ability to provide customers with lower-cost merchandise and services that improve customer acquisition and retention. Our larger, super-regional distribution centers are able to conduct profitable operations at an extended range, thereby increasing our potential market reach. Efficient Centralized Purchasing: Category management decisions and vendor negotiations for the majority of our merchandise procurement are conducted in one location. Our customer support center is one of the largest buyer locations of consumable goods in the U.S. Centralized purchasing generates economies of scale because it enables us in one location to purchase goods more efficiently by eliminating redundancy involved in purchasing through multiple locations, which we believe increases our leverage with vendors. We believe that our centralized purchasing capabilities are valuable to national retailers such as Kmart as well as the smaller, independent retailers that make up our traditional customer base because we offer greater convenience and lower cost. Diverse Distribution Customer Base: We distribute to approximately 2,500 companies that operate almost 7,000 retail store locations under a wide variety of formats across the U.S. Other than Kmart, no customer accounted for more than 2% of our fiscal 2000 net sales. Successful Price Impact Retail Format: Our price impact supermarkets offer name-brand and private label consumable goods at significantly lower prices than conventional supermarkets. We keep prices low by leveraging our existing distribution and procurement capabilities and maintaining a lower cost structure associated with operating these stores. We believe this format is profitable because we offer a reduced number of product selections, focus on high-turnover products and product categories, employ flow-through 8 14 distribution methods which reduce product storage and handling expense, and minimize store operating costs through a warehouse-style operation. BUSINESS STRATEGY Our business strategy is to use our competitive strengths to achieve sales and earnings growth in both our distribution group and retail group. As principal elements of our strategy, we intend to: Grow Sales to New Channel Retailers: We are rapidly moving beyond our historic market position and have targeted three key growth sectors. First, we are focusing on broad assortment/destination retailers, including supercenters and discount stores, and have demonstrated significant penetration in this market as evidenced by our distribution arrangements with Kmart and Target, Inc. Second, we are concentrating on precision assortment/neighborhood retailers such as convenience stores, drug stores and ethnic food stores. Our recent efforts in these markets include distribution agreements with significant customers such as Clark Retail Enterprises. Finally, we intend to focus on precision assortment/destination retailers typified by large-store formats such as cash-and-carries and price impact stores. Grow Sales to Traditional Format Customers: Despite being the second largest distributor in the $110 billion wholesale grocery industry, we account for approximately 10% of this traditional core market, representing substantial room for additional growth. Our repositioned distribution group has already enabled us to increase sales to existing and new customers, and we expect to be able to continue this trend. We routinely conduct detailed market studies to identify potential new customers in areas contiguous to existing customers, as we have capacity in our high-volume distribution centers to serve additional local independent stores or chains. Many potential customers are currently served by local or regional wholesalers that do not have the efficiencies associated with our procurement scale and do not provide the full scope of retail services that we provide. Expand Price Impact Format: We believe we have a substantial opportunity to grow our retail group's price impact supermarket operations. Because price impact stores cost less to build, maintain and operate than conventional supermarkets, we expect to be able to grow our price impact supermarket operations while incurring fewer capital expenditures than operators of conventional retail stores. As of April 23, 2001, we own and operate 38 price impact supermarkets, and we intend to add up to 17 price impact supermarkets in 2001 through a combination of construction of new stores, conversion of existing stores and acquisitions. Leverage Efficiencies Created by Our Kmart Distribution Agreement: We believe our new distribution agreement with Kmart and the resulting substantial increase in our distribution volume will provide us with increased economic and purchasing leverage that will benefit all of our existing and potential new customers. We have established a "best practices" team with Kmart based in Troy, Michigan that focuses on reducing costs and achieving greater efficiencies in our product supply chain. In addition, we believe that the increased volume of candy and tobacco that we will distribute as a result of the Kmart distribution agreement will enable us to compete more effectively for convenience store distribution business. Continue to Improve Working Capital Management and Reduce Costs: We intend to improve our working capital management primarily by improving inventory turns. To do this, we will continue to improve vendor inventory management practices, further develop our central procurement operations, improve ad forecasting with our customers, effectively manage alternative channels of product delivery to retail locations and invest in systems enhancements. In addition, to strengthen our position as a low-cost supplier to our customers and increase our profitability, we have instituted a "culture of thrift" among our employees and developed initiatives to reduce our expenses through our Low Cost Pursuit Program. 9 15 RECENT DEVELOPMENTS New Kmart Strategic Alliance On February 7, 2001, we announced a ten-year strategic alliance under which we will supply to Kmart substantially all of the food and consumable products in all current and future Kmart and Kmart supercenter stores in the U.S. and the Caribbean. We expect annual sales to Kmart to increase from approximately $1.4 billion in 2000 to approximately $2.6 billion in 2001 and approximately $4.5 billion in 2002. This new supply arrangement includes grocery, frozen, dairy, packaged meat and seafood, produce, bakery/deli, fresh meat, cigarettes, tobacco and candy. This strategic alliance may be further expanded to include an agreement on health and beauty products and related categories. It is planned that certain aspects of our price impact retail format could be incorporated into Kmart's merchandising programs, which could extend our combined procurement leverage. In addition, Kmart will offer us access to its strengths in general merchandise and seasonal goods. Kmart will adopt our "BestYet" private label program and pay fees to us based on brand management. Yucaipa Investment On March 22, 2001, an affiliate of The Yucaipa Companies, an investment group controlled by Ron Burkle, completed a $50 million investment in our common stock. Through this investment, Yucaipa acquired approximately 3.8 million newly issued shares, representing approximately 8.7% of our outstanding common stock. Yucaipa has substantial experience in the retailing and distribution sectors, including past investments in such food retailers as Food 4 Less Supermarkets, Inc., Ralph's Grocery Company, Dominick's Finer Foods and Fred Meyer, Inc. Yucaipa also acquired a 12-month option to invest an additional $50 million in our common stock at the then-current average market price. 10 16 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) The table below includes summary historical consolidated financial information for our company. You should read the information set forth below together with the other financial information contained in this prospectus.
FISCAL YEAR ENDED(1) ------------------------------------------ DECEMBER 26, DECEMBER 25, DECEMBER 30, 1998(2) 1999(3) 2000(4) ------------ ------------ ------------ INCOME STATEMENT DATA: Net sales(5).............................................. $14,678 $14,272 $14,444 Costs and expenses: Cost of sales(5)........................................ 13,228 12,835 13,097 Selling and administrative.............................. 1,251 1,262 1,185 Interest expense........................................ 161 165 175 Interest income......................................... (37) (40) (33) Equity investment results............................... 12 10 8 Litigation charges...................................... 8 -- -- Impairment/restructuring charge......................... 653 103 213 ------- ------- ------- Total costs and expenses............................. 15,276 14,335 14,645 ------- ------- ------- Earnings (loss) before taxes.............................. (598) (63) (201) Taxes on income (loss).................................... (87) (18) (79) ------- ------- ------- Earnings (loss) before extraordinary charge............... (511) (45) (122) Extraordinary charge from early retirement of debt (net of taxes).................................................. -- -- -- ------- ------- ------- Net earnings (loss).................................. $ (511) $ (45) $ (122) ======= ======= ======= Diluted earnings (loss) per share......................... $(13.48) $ (1.17) $ (3.15) BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents............................... $ 6 $ 7 $ 30 Total assets............................................ 3,491 3,573 3,403 Total debt (including current maturities and capital leases).............................................. 1,566 1,694 1,669 Shareholders' equity.................................... 570 561 427 OTHER FINANCIAL DATA: EBITDA(6)............................................... $ (237) $ 281 $ 154 Depreciation and amortization(7)........................ 180 158 169 Capital expenditures.................................... 200 166 151
- ------------------------- (1) Fiscal 2000 is a 53 week year; all other years are 52 weeks. (2) The results in 1998 reflect an impairment/restructuring charge with related costs totaling $668 million ($543 million after-tax) related to the strategic plan. (3) The results in 1999 reflect an impairment/restructuring charge with related costs totaling $137 million ($92 million after-tax) related to our strategic plan. Such period also reflects one-time items ($31 million charge to close ten conventional retail stores, income of $22 million from extinguishing a portion of the self-insured workers' compensation liability, interest income of $9 million related to refunds in federal income taxes from prior years, and $6 million in gains from the sale of distribution facilities) netting to $6 million of income ($3 million after-tax). (4) The results in 2000 reflect an impairment/restructuring charge with related costs totaling $309 million ($183 million after-tax) relating to our strategic plan. Such period also reflects one-time items ($10 million charge related primarily to asset impairment on retail stores, income of $2 million relating to litigation settlements, and $9 million in gains from the sale of distribution facilities) netting to less than $1 million of income ($1 million loss after-tax). 11 17 (5) During the fourth quarter of 2000 we adopted EITF 99-19 and restated sales and cost of sales for all prior periods. The adoption had no effect on gross margins or earnings. (6) EBITDA is earnings before extraordinary items, interest expense, income taxes, depreciation and amortization, equity investment results and LIFO provision. EBITDA should not be considered as an alternative measure of our net income, operating performance, cash flow or liquidity. We provide it as additional information related to our ability to service debt; however, conditions may require conservation of funds for other uses. Although we believe EBITDA enhances your understanding of our financial condition, this measure, when viewed individually, is not necessarily a better indicator of any trend as compared to conventionally computed measures (e.g., net sales, net earnings, net cash flows, etc.). Amounts presented may not be comparable to similar measures disclosed by other companies. (7) Depreciation and amortization expense includes goodwill amortization and excludes amortization of debt cost which is reflected in interest expense. 12 18 RISK FACTORS You should read and carefully consider the risks described below, together with the other information contained in or incorporated by reference into this prospectus, before making a decision to tender your private notes in the exchange offer. The risk factors set forth below, other than the first risk factor set forth below, are generally applicable to the private notes as well as the exchange notes. If any of the following risks actually occur, our business, financial condition, operating results and prospects could be materially adversely affected, which in turn could adversely affect our ability to repay the notes. IF YOU DO NOT EXCHANGE YOUR NOTES PURSUANT TO THIS EXCHANGE, YOU MAY NEVER BE ABLE TO SELL YOUR NOTES. It may be difficult for you to sell notes that are not exchanged in the exchange offer. Those notes may not be offered or sold unless they are registered or they are exempt from the registration requirements under the Securities Act and applicable state securities laws. The restrictions on transfer of your private notes arise because we issued the private notes pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws. We do not intend to register the private notes under the Securities Act. If you do not tender your private notes or if we do not accept some of your private notes, those notes will continue to be subject to the transfer and exchange restrictions in: - the indenture; - the legend on the private notes; and - the offering memorandum relating to the private notes. Moreover, to the extent private notes are tendered and accepted in the exchange offer, the trading market, if any, for the private notes would be adversely affected. WE HAVE A SUBSTANTIAL AMOUNT OF DEBT AND DEBT SERVICE OBLIGATIONS, WHICH COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES. We have a substantial amount of debt outstanding. The following chart shows certain important credit statistics as of December 30, 2000, as adjusted for the Transactions.
AT DECEMBER 30, 2000, AS ADJUSTED --------------------- Total debt (including capital leases)............. $1,639 million Shareholders' equity.............................. $ 475 million Debt to equity ratio.............................. 3.5x
For the fiscal year ended December 30, 2000, earnings were insufficient to cover fixed charges by $202 million. Our substantial amount of debt could have important consequences to you. For example, it could: - make it more difficult for us to satisfy our obligations with respect to the notes; - require us to dedicate a substantial portion of our cash flow to payments on our debt; - increase our vulnerability to general adverse economic and industry conditions; - limit our ability to fund future working capital, capital expenditures and other general corporate requirements; - limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and - limit, along with the financial and other restrictive covenants in our debt, among other things, our ability to borrow additional funds. If we fail to comply with those covenants, it could result in an 13 19 event of default which, if not cured or waived, could have a material adverse effect on our financial condition. We and our subsidiaries may be able to incur substantial additional debt in the future, including secured debt. The terms of the indenture do not fully prohibit us or our subsidiaries from doing so. As of December 30, 2000 and after giving effect to the Transactions, our credit facility would have permitted additional borrowings of up to $406 million and all of those borrowings would be effectively senior to the notes to the extent of any collateral securing those borrowings. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now face could intensify. Our ability to make payments on and to refinance our debt, including the notes, will depend on our financial and operating performance, which may fluctuate significantly from quarter to quarter and is subject to prevailing economic conditions and to financial, business and other factors beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our credit facility in an amount sufficient to enable us to pay our debt, including the notes, or to fund our other liquidity needs. We may need to refinance all or a portion of our debt, including the notes, on or before maturity. We cannot assure you that we will be able to refinance any of our debt, including our credit facility and the notes, on commercially reasonable terms or at all. WE NOW DEPEND ON KMART FOR A SUBSTANTIAL PORTION OF OUR BUSINESS. IF WE ARE UNABLE TO REALIZE ANTICIPATED COST SAVINGS RESULTING FROM THE ADDITIONAL VOLUME REPRESENTED BY OUR AGREEMENT, IT COULD HARM OUR FINANCIAL CONDITION, WHICH COULD JEOPARDIZE OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER THE NOTES. Kmart is our largest customer, accounting for 9.8% of our net sales in 2000. On February 7, 2001, we announced a ten-year agreement with Kmart Corporation, pursuant to which we agreed to supply substantially all of the food and consumable products in all current and future Kmart and Kmart supercenter stores in the U.S. and the Caribbean. As a result of this agreement, we currently anticipate that Kmart will account for a significantly greater percentage of our net sales in 2001. Accordingly, we now depend on Kmart for a substantial portion of our business. We will be required to commit substantial capital expenditures and management resources in order to perform our obligations under the Kmart agreement. If we or Kmart are unable to successfully fulfill our respective obligations under the agreement, it will harm our financial condition, which could jeopardize our ability to fulfill our obligations under the notes. More specifically, the bulk of the benefits that we anticipate receiving from the Kmart agreement depend on Kmart's achievement of certain sales projections. If Kmart fails to meet these sales projections, the benefits that we will receive as a result of the agreement will decrease. Kmart can also elect to terminate the agreement if we materially breach our obligations under the agreement, if we experience certain types of changes of control or if the volume of Kmart's purchases under the agreement declines by certain amounts. Finally, if we are unable to capture anticipated cost savings resulting from our increased purchasing power due to the Kmart agreement, it could adversely affect our results of operations and financial condition. THE INDENTURE, OUR CREDIT FACILITY AND OUR OTHER EXISTING INDEBTEDNESS CONTAIN PROVISIONS THAT COULD MATERIALLY RESTRICT OUR BUSINESS. The indenture, our credit facility and our other existing indebtedness contain a number of significant covenants that, among other things, restrict our ability to: - dispose of assets; - incur additional debt; - guarantee third-party obligations; - repay other debt or amend other debt instruments; 14 20 - create liens on assets; - enter into capital leases; - make investments, loans or advances; - make acquisitions or engage in mergers or consolidations; - make capital expenditures; and - engage in certain transactions with our subsidiaries and affiliates. In addition, under our credit facility, we are required to meet a number of financial ratios and tests. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of these covenants or restrictions, it could result in an event of default under our credit facility, the indenture or the documents governing our other existing indebtedness, which would permit our lenders to declare all amounts borrowed thereunder to be due and payable, together with accrued and unpaid interest, and our senior lenders could terminate their commitments to make further extensions of credit under our credit facility. If we were unable to repay debt to our secured lenders, they could proceed against the collateral securing the debt. NOT ALL OF OUR SUBSIDIARIES ARE GUARANTEEING THE NOTES, AND YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE OR REORGANIZE. Not all of our subsidiaries are guaranteeing the notes. In the event any of our non-guarantor subsidiaries becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, holders of their indebtedness and their trade creditors will generally be entitled to payment on their claims from the assets of those subsidiaries before any of those assets are made available to us. Consequently, your claims in respect of the notes will be effectively subordinated to all of the liabilities of our non-guarantor subsidiaries. IF THE CUSTOMERS TO WHOM WE LEND MONEY OR FOR WHOM WE GUARANTEE STORE LEASE OBLIGATIONS FAIL TO REPAY US, IT COULD HARM OUR FINANCIAL CONDITION. We provide subleases, extend loans to and make investments in many of our retail store customers, often in conjunction with the establishment of long-term supply contracts. Our loans to our customers are generally not investment grade and, along with our equity investments in our customers, are highly illiquid. We also make investments in our customers through direct financing leases, lease guarantees, operating leases, credit extensions for inventory purchases and the recourse portion of notes sold evidencing such loans. We also invest in real estate to assure market access or to secure supply points. Although we have strict credit policies and apply cost/benefit analyses to these investment decisions, we face the risk that credit losses from existing or future investments or commitments could adversely affect our financial condition. VARIOUS CHANGES IN THE DISTRIBUTION AND RETAIL MARKETS IN WHICH WE OPERATE HAVE LED AND MAY CONTINUE TO LEAD TO REDUCED SALES AND MARGINS AND LOWER PROFITABILITY FOR OUR CUSTOMERS AND, CONSEQUENTLY, FOR US. The distribution and retail markets in which we operate are undergoing accelerated change as distributors and retailers seek to lower costs and provide additional services in an increasingly competitive environment. An example of this is the growing trend of large self-distributing chains consolidating to reduce costs and gain efficiencies. Eating away from home and alternative format food stores, such as warehouse stores and supercenters, have taken market share from traditional supermarket operators, including independent grocers, many of whom are our customers. Vendors, seeking to ensure that more of their promotional fees and allowances are used by retailers to increase sales volume, increasingly direct promotional dollars to large self-distributing chains. We believe that these changes have led to reduced sales, reduced margins and lower profitability among many of our customers and, consequently, for us. If 15 21 the strategies we have developed in response to these changing market conditions are not successful, it could harm our financial condition and business prospects. CONSUMABLE GOODS DISTRIBUTION IS A LOW-MARGIN BUSINESS AND IS SENSITIVE TO ECONOMIC CONDITIONS. We derive most of our revenues from the consumable goods distribution industry. This industry is characterized by a high volume of sales with relatively low profit margins. A significant portion of our sales are at prices that are based on product cost plus a percentage markup. Consequently, our results of operations may be negatively impacted when the prices of consumable goods go down, even though our percentage markup may remain constant. The consumable goods industry is also sensitive to national and regional economic conditions, and the demand for our consumable goods has been adversely affected from time to time by economic downturns. Additionally, our distribution business is sensitive to increases in fuel and other transportation-related costs. WE FACE INTENSE COMPETITION IN BOTH OUR DISTRIBUTION AND RETAIL MARKETS, AND IF WE ARE UNABLE TO COMPETE EFFECTIVELY IN THESE MARKETS, IT COULD HARM OUR BUSINESS. Our distribution group operates in a highly competitive market. We face competition from local, regional and national food distributors on the basis of price, quality and assortment, schedules and reliability of deliveries and the range and quality of services provided. We also compete with retail supermarket chains that self-distribute, purchasing directly from vendors and distributing products to their supermarkets for sale to the consumer. Consolidation of self-distributing chains may produce even stronger competition for our distribution group. Our retail group competes with other food outlets on the basis of price, quality and assortment, store location and format, sales promotions, advertising, availability of parking, hours of operation and store appeal. Traditional mass merchandisers have gained a growing foothold in food marketing and distribution with alternative store formats, such as warehouse stores and supercenters, which depend on concentrated buying power and low-cost distribution technology. We expect that stores with alternative formats will continue to increase their market share in the future. Retail consolidations not only produce stronger competition for our retail group, but may also result in declining sales in our distribution group if our existing customers are acquired by self-distributing chains. Some of our competitors have greater financial and other resources than we do. In addition, consolidation in the industry, heightened competition among our vendors, new entrants and trends toward vertical integration could create additional competitive pressures that reduce our margins and adversely affect our business. If we fail to successfully respond to these competitive pressures or to implement our strategies effectively, it could have a material adverse effect on our financial condition and prospects. BECAUSE WE OWN AND OPERATE REAL ESTATE, WE FACE THE RISK OF BEING HELD LIABLE FOR ENVIRONMENTAL DAMAGES THAT MAY OCCUR ON OUR PROPERTIES. Our facilities and operations are subject to various laws, regulations and judicial and administrative orders concerning protection of the environment and human health, including provisions regarding the transportation, storage, distribution, disposal or discharge of certain materials. In conformity with these provisions, we have a comprehensive program for testing, removal, replacement or repair of our underground fuel storage tanks and for site remediation where necessary. Although we have established reserves that we believe will be sufficient to satisfy the anticipated costs of all known remediation requirements, we cannot assure you that these reserves will be sufficient. We and others have been designated by the U.S. Environmental Protection Agency and by similar state agencies as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, or similar state laws, as applicable, with respect to EPA-designated Superfund sites. While liability under CERCLA for remediation at these sites is generally joint and several with other responsible parties, we believe that, to the extent we are ultimately determined to be liable for the expense of remediation at any site, such liability will not result in a material adverse 16 22 effect on our consolidated financial position or results of operations. We are committed to maintaining the environment and protecting natural resources and human health and to achieving full compliance with all applicable laws, regulations and orders. WE ARE CURRENTLY SUBJECT TO A NUMBER OF MATERIAL LITIGATION PROCEEDINGS. IF ANY OF THESE PROCEEDINGS IS RESOLVED AGAINST US, IT COULD HARM OUR FINANCIAL CONDITION AND BUSINESS PROSPECTS. We are currently subject to a number of material litigation proceedings, the costs and other effects of which are impossible to predict with any certainty. An unfavorable outcome in any one of these cases could have a material adverse effect on our financial condition and prospects. From time to time, we are also party to or threatened with litigation in which claims against us are made, or are threatened to be made, by present and former customers, sometimes in situations involving financially troubled or failed customers. We are a party to various other litigation and contingent loss situations arising in the ordinary course of our business including: - disputes with customers and former customers; - disputes with owners and former owners of financially troubled or failed customers; - disputes with employees and former employees regarding labor conditions, wages, workers' compensation matters and alleged discriminatory practices; - disputes with insurance carriers; - tax assessments; and - other matters, some of which are for substantial amounts. The current environment for litigation involving food distributors may increase the risk of litigation being commenced against us. We would incur the costs of defending any such litigation whether or not any claim had merit. For more information regarding the legal proceedings to which we are currently subject, see the section "Business" under the subheading "Legal Proceedings." BECAUSE WE SELL FOOD AND OTHER PRODUCTS, WE ARE SUBJECT TO PRODUCT LIABILITY CLAIMS. Like any other seller of food and other products, we face the risk of exposure to product liability claims in the event that people who purchase products we sell become injured or experience illness as a result. We believe that we have sufficient primary and excess umbrella liability insurance to protect us against any product liability claims that may arise. However, this insurance may not continue to be available at a reasonable cost, or, even if it is available, it may not be adequate to cover our liabilities. We generally seek contractual indemnification and insurance coverage from parties supplying our products, but this indemnification or insurance coverage is limited, as a practical matter, to the creditworthiness of the indemnifying party and the policy limits of any insurance provided by suppliers. If we do not have adequate insurance or contractual indemnification to cover our liabilities, product liability claims relating to defective food and other products could materially reduce our earnings. WE CANNOT ASSURE YOU THAT WE WILL BE SUCCESSFUL IN INTEGRATING NEWLY ACQUIRED STORES AND DISTRIBUTION CENTERS. IF WE DO NOT ACHIEVE THE BENEFITS WE EXPECT FROM ANY OF THESE ACQUISITIONS, IT COULD HARM OUR BUSINESS AND FINANCIAL CONDITION. Part of our growth strategy for our retail group involves selective strategic acquisitions of stores operated by others. In addition, our distribution group intends to seek strategic acquisitions of other distribution centers on a limited basis. Achieving the benefits of these acquisitions will depend in part on our ability to integrate those businesses with our business in an efficient manner. We cannot assure you that this will happen or that it will happen in an efficient manner. Our consolidation of operations following these acquisitions may require substantial attention from our management. The diversion of management attention and any difficulties encountered in the transition and integration process could have 17 23 a material adverse effect on our ability to achieve expected net sales, operating expenses and operating results for the acquired business. We cannot assure you that we will realize any of the anticipated benefits of any acquisition, and if we fail to realize these anticipated benefits, our operating performance could suffer. WE OPERATE IN A COMPETITIVE LABOR MARKET, AND THE MAJORITY OF OUR EMPLOYEES ARE COVERED BY COLLECTIVE BARGAINING AGREEMENTS. Our continued success will depend on our ability to attract and retain qualified personnel in both our distribution and retail groups. We compete with other businesses in our markets with respect to attracting and retaining qualified employees. The labor market is currently tight and we expect the tight labor market to continue. A shortage of qualified employees would require us to enhance our wage and benefits packages in order to compete effectively in the hiring and retention of qualified employees or to hire more expensive temporary employees. In addition, about half of our employees are covered by collective bargaining agreements, most of which expire at various times over the course of the next five years. We cannot assure you that we will be able to renew our collective bargaining agreements, that our labor costs will not increase, that we will be able to recover any increases through increased prices charged to customers or that we will not suffer business interruptions as a result of strikes or other work stoppages. If we fail to attract and retain qualified employees, to control our labor costs, or to recover any increased labor costs through increased prices charged to our customers, it could harm our business. UNDER CERTAIN CIRCUMSTANCES, FEDERAL AND STATE LAWS MAY ALLOW COURTS TO VOID THE NOTES AND THE GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS THEY RECEIVE FROM US. Under the federal Bankruptcy Code and comparable provisions of state fraudulent transfer laws, a court could void the notes and guarantees or subordinate claims in respect of the notes and guarantees to all of our other debts if, among other things, we or any of the guarantors, at the time we incurred the indebtedness evidenced by the notes or guarantees: - received less than reasonably equivalent value or fair consideration for the incurrence of such notes or guarantees; and - were insolvent or rendered insolvent by reason of the incurrence; or - were engaged in a business or transaction for which our remaining assets constituted unreasonably small capital; or - intended to incur, or believed that we would incur, debts beyond our ability to pay such debts as they became due. In addition, a court could void any payment by us or a guarantor or require a noteholder to return the payment to us or a guarantor, or to a fund for the benefit of our creditors. The measures of insolvency for purposes of these fraudulent transfer laws vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, we or a guarantor would be considered insolvent if: - the sum of our debts, including contingent liabilities, were greater than the fair saleable value of all of our assets; or - the present fair saleable value of our assets was less than the amount that would be required to pay our probable liability on our existing debts, including contingent liabilities, as they become absolute and mature; or - we could not pay our debts as they become due. On the basis of our historical financial information, recent operating history and other factors, we believe that after giving effect to the issuance of the notes and the guarantees, neither we nor any of the guarantors will be insolvent, have unreasonably small capital for the respective businesses in which we are 18 24 engaged or have incurred debts beyond our respective abilities to pay debts as they mature. However, we cannot assure you that a court making these determinations would agree with our conclusions in this regard. WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE. IN ADDITION, OUR BYLAWS MAY NOT PERMIT US TO MAKE THE CHANGE OF CONTROL PAYMENT EVEN IF WE DO HAVE THE FUNDS. Upon the occurrence of a change of control of Fleming, we will be required to offer to repurchase all outstanding notes and other outstanding debt. If a change of control were to occur, we cannot assure you that we would have sufficient funds to pay the repurchase price for all the notes tendered by the holders. Our existing credit agreement and indentures contain, and any future other agreements relating to other indebtedness to which we become a party may contain, restrictions or prohibitions on our ability to repurchase notes or may provide that an occurrence of a change of control constitutes an event of default under, or otherwise requires payment of amounts borrowed under those agreements. If a change of control occurs at a time when we are prohibited from repurchasing the notes, we could seek the consent of our then existing lenders and note holders to the repurchase of the notes or could attempt to refinance the borrowings that contain the prohibition. If we do not obtain such a consent or repay the borrowings, we would remain prohibited from repurchasing the notes. In that case, our failure to repurchase tendered notes would constitute an event of default under the indenture and may constitute a default under the terms of other indebtedness that we may enter into from time to time. In addition, our bylaws contain a provision that prohibits us from adopting a shareholder rights plan or any other form of "poison pill" without the prior approval of holders of at least a majority of the shares of our outstanding capital stock. It is unclear whether this provision of our bylaws would prohibit us from repurchasing the notes in the event of a change of control. If a court concluded that the change of control provisions of the indenture were inconsistent with or prohibited by our bylaws, we may not be able to repurchase the notes. For more details, see the section "Description of Notes" under the heading "Repurchase of Notes at the Option of Holders Upon a Change of Control." YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE EXCHANGE NOTES. Before this exchange offer, there was no established trading market for the exchange notes. We have been informed by the initial purchasers of the private notes that they intend to make a market in the exchange notes. However, they may cease their market-making at any time. In addition, the liquidity of the trading market in the exchange notes, and the market price quoted for the exchange notes, may be adversely affected by changes in the overall market for high yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, you cannot be sure that an active trading market will develop for these notes. VOLATILE TRADING PRICES MAY REQUIRE YOU TO HOLD THE NOTES FOR AN INDEFINITE PERIOD OF TIME. If a market develops for the notes, the notes might trade at prices higher or lower than their initial offering price. The trading price would depend on many factors, such as prevailing interest rates, the market for similar securities, general economic conditions and our financial condition, performance and prospects. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial fluctuation in the prices of these securities. The market for the notes may be subject to such disruptions, which could have an adverse effect on the price of the notes. You should be aware that you may be required to bear the financial risk of an investment in the notes for an indefinite period of time. 19 25 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER We issued the private notes on March 15, 2001 to Deutsche Banc Alex. Brown Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc., Chase Securities Inc. and UBS Warburg LLC, the initial purchasers, pursuant to a purchase agreement. The initial purchasers subsequently sold the private notes to "qualified institutional buyers," as defined in Rule 144A under the Securities Act, in reliance on Rule 144A, and outside the United States under Regulation S of the Securities Act. As a condition to the sale of the private notes, we entered into a registration rights agreement with the initial purchasers on March 15, 2001. Pursuant to the registration rights agreement, we agreed that we would: (1) file a registration statement with the SEC with respect to the exchange notes on or before June 13, 2001; (2) use all reasonable efforts to cause the registration statement to be declared effective by the SEC on or before September 11, 2001; (3) use all reasonable efforts to keep the registration statement effective until the closing of the exchange offer; (4) use all reasonable efforts to keep the exchange offer open for not less than 30 days (or longer if required by applicable law) after the date that notice of the exchange offer is mailed to holders of the notes; and (5) use our best efforts to consummate the exchange offer on or before October 26, 2001. Upon the effectiveness of the registration statement, we will offer the exchange notes in exchange for the private notes. We filed a copy of the registration rights agreement as an exhibit to the registration statement. RESALE OF THE EXCHANGE NOTES Based upon an interpretation by the staff of the SEC contained in no-action letters issued to third parties, we believe that you may exchange private notes for exchange notes in the ordinary course of business. For further information on the SEC's position, see Exxon Capital Holdings Corporation, available May 13, 1988, Morgan Stanley & Co. Incorporated, available June 5, 1991 and Shearman & Sterling, available July 2, 1993, and other interpretive letters to similar effect. You will be allowed to resell exchange notes to the public without further registration under the Securities Act and without delivering to purchasers of the exchange notes a prospectus that satisfies the requirements of Section 10 of the Securities Act so long as you do not participate, do not intend to participate, and have no arrangement with any person to participate, in a distribution of the exchange notes. However, the foregoing does not apply to you if you are: - a broker-dealer who purchased the exchange notes directly from us to resell pursuant to Rule 144A or any other available exemption under the Securities Act; or - you are an "affiliate" of Fleming within the meaning of Rule 405 under the Securities Act. In addition, if: - you are a broker-dealer; or - you acquire exchange notes in the exchange offer for the purpose of distributing or participating in the distribution of the exchange notes, you cannot rely on the position of the staff of the SEC contained in the no-action letters mentioned above and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. 20 26 Each broker-dealer that receives exchange notes for its own account in exchange for private notes, which the broker-dealer acquired as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. A broker-dealer may use this prospectus, as it may be amended or supplemented from time to time, in connection with resales of exchange notes received in exchange for private notes which the broker-dealer acquired as a result of market-making or other trading activities. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions described in this prospectus and in the letter of transmittal, we will accept any and all private notes validly tendered and not withdrawn before the expiration date. We will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding private notes surrendered pursuant to the exchange offer. You may tender private notes only in integral multiples of $1,000. The form and terms of the exchange notes are the same as the form and terms of the private notes except that: - we will register the exchange notes under the Securities Act and, therefore, the exchange notes will not bear legends restricting their transfer; and - holders of the exchange notes will not be entitled to any of the rights of holders of private notes under the registration rights agreement, which rights will terminate upon the completion of the exchange offer. The exchange notes will evidence the same debt as the private notes and will be issued under the same indenture, so the exchange notes and the private notes will be treated as a single class of debt securities under the indenture. As of the date of this prospectus, $355,000,000 in aggregate principal amount of the private notes are outstanding and registered in the name of Cede & Co., as nominee for The Depository Trust Company. Only registered holders of the private notes, or their legal representative or attorney-in-fact, as reflected on the records of the trustee under the indenture, may participate in the exchange offer. We will not set a fixed record date for determining registered holders of the private notes entitled to participate in the exchange offer. You do not have any appraisal or dissenters' rights under the indenture in connection with the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement and the applicable requirements of the Securities Act, the Exchange Act and the rules and regulations of the SEC. We will be deemed to have accepted validly tendered private notes when, as and if we had given oral or written notice of acceptance to the exchange agent. The exchange agent will act as your agent for the purposes of receiving the exchange notes from us. If you tender private notes in the exchange offer you will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of private notes pursuant to the exchange offer. We will pay all charges and expenses, other than the applicable taxes described below, in connection with the exchange offer. EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term expiration date will mean 5:00 p.m., New York City time on , 2001, unless we, in our sole discretion, extend the exchange offer, in which case the term expiration date will mean the latest date and time to which we extend the exchange offer. 21 27 To extend the exchange offer, we will: - notify the exchange agent of any extension orally or in writing; and - mail to each registered holder an announcement that will include disclosure of the approximate number of private notes deposited to date, each before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We reserve the right, in our reasonable discretion: - to delay accepting any private notes: - to extend the exchange offer; or - if any conditions listed below under "-- Conditions" are not satisfied, to terminate the exchange offer by giving oral or written notice of the delay, extension or termination to the exchange agent. We will follow any delay in acceptance, extension or termination as promptly as practicable by oral or written notice to the registered holders. If we amend the exchange offer in a manner we determine constitutes a material change, we will promptly disclose the amendment in a prospectus supplement that we will distribute to the registered holders. We will also extend the exchange offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure, if the exchange offer would otherwise expire during the five to ten business day period. INTEREST ON THE EXCHANGE NOTES The exchange notes will bear interest at the same rate and on the same terms as the private notes. Consequently, the exchange notes will bear interest at a rate equal to 10 1/8% per annum (calculated using a 360-day year). Interest will be payable semi-annually on each April 1 and October 1, commencing October 1, 2001. You will receive interest on October 1, 2001 from the date of initial issuance of the exchange notes, plus an amount equal to the accrued interest on the private notes from the date of delivery to the date of exchange. We will deem the right to receive any interest accrued on the private notes waived by you if we accept your private notes for exchange. PROCEDURES FOR TENDERING You may tender private notes in the exchange offer only if you are a registered holder of private notes. To tender in the exchange offer, you must: - complete, sign and date the letter of transmittal or a facsimile of the letter of transmittal; - have the signatures guaranteed if required by the letter of transmittal; and - mail or otherwise deliver the letter of transmittal or the facsimile to the exchange agent at the address listed below under "-- Exchange Agent" for receipt before the expiration date. In addition, either: - the exchange agent must receive certificates for the private notes along with the letter of transmittal into its account at the depositary pursuant to the procedure for book-entry transfer described below before the expiration date; 22 28 - the exchange agent must receive a timely confirmation of a book-entry transfer of the private notes, if the procedure is available, into its account at the depositary pursuant to the procedure for book-entry transfer described below before the expiration date; or - you must comply with the guaranteed delivery procedures described below. Your tender, if not withdrawn before the expiration date, will constitute an agreement between you and us in accordance with the terms and subject to the conditions described in this prospectus and in the letter of transmittal. The method of delivery of private notes and the letter of transmittal and all other required documents to the exchange agent is at your election and risk. We recommend that instead of delivery by mail, you use an overnight or hand delivery service, properly insured. In all cases, you should allow sufficient time to assure delivery to the exchange agent before the expiration date. You should not send letters of transmittal or private notes to us. You may request your respective brokers, dealers, commercial banks, trust companies or nominees to effect the transactions described above for you. If you are a beneficial owner of private notes whose private notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your notes, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you wish to tender on your own behalf, before completing and executing the letter of transmittal and delivering the private notes you must either: - make appropriate arrangements to register ownership of the private notes in your name; or - obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Unless the private notes are tendered: (1) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on the letter of transmittal; or (2) for the account of: - a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc.; - a commercial bank or trust company having an office or correspondent in the United States; or - an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act that is a member of one of the recognized signature guarantee programs identified in the letter of transmittal, an eligible guarantor institution must guarantee the signatures on a letter of transmittal or a notice of withdrawal described below under "-- Withdrawal of Tenders." If the letter of transmittal is signed by a person other than the registered holder, the private notes must be endorsed or accompanied by a properly completed bond power, signed by the registered holder as the registered holder's name appears on the private notes. If the letter of transmittal or any private notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, they should so indicate when signing, and unless waived by us, they must submit evidence satisfactory to us of their authority to so act with the letter of transmittal. The exchange agent and the depositary have confirmed that any financial institution that is a participant in the depositary's system may utilize the depositary's Automated Tender Offer Program to tender notes. 23 29 We will determine in our sole discretion all questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal of tendered private notes, which determination will be final and binding. We reserve the absolute right to reject any and all private notes not properly tendered or any private notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular private notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, you must cure any defects or irregularities in connection with tenders of private notes within the time we determine. Although we intend to notify you of defects or irregularities with respect to tenders of private notes, neither we, the exchange agent nor any other person will incur any liability for failure to give you that notification. Unless waived, we will not deem tenders of private notes to have been made until you cure the defects or irregularities. While we have no present plan to acquire any private notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any private notes that are not tendered in the exchange offer, we reserve the right in our sole discretion to purchase or make offers for any private notes that remain outstanding after the expiration date. We also reserve the right to terminate the exchange offer, as described below under "-- Conditions," and, to the extent permitted by applicable law, purchase private notes in the open market, in privately negotiated transactions or otherwise. The terms of any of those purchases or offers could differ from the terms of the exchange offer. If you wish to tender private notes in exchange for exchange notes in the exchange offer, we will require you to represent that: - you are not an affiliate of ours; - you will acquire any exchange notes in the ordinary course of your business; and - at the time of completion of the exchange offer, you have no arrangement with any person to participate in the distribution of the exchange notes. In addition, in connection with the resale of exchange notes, any participating broker-dealer who acquired the private notes for its own account as a result of market-making or other trading activities must deliver a prospectus meeting the requirements of the Securities Act. The SEC has taken the position that participating broker-dealers may fulfill their prospectus delivery requirements with respect to the exchange notes, other than a resale of an unsold allotment from the original sale of the notes, with this prospectus. RETURN OF NOTES If we do not accept any tendered private notes for any reason described in the terms and conditions of the exchange offer or if you withdraw or submit private notes for a greater principal amount than you desire to exchange, we will return the unaccepted, withdrawn or non-exchanged notes without expense to you as promptly as practicable. In the case of private notes tendered by book-entry transfer into the exchange agent's account at the depositary pursuant to the book-entry transfer procedures described below, we will credit the private notes to an account maintained with the depositary as promptly as practicable. BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account with respect to the private notes at the depositary for purposes of the exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in the depositary's systems may make book-entry delivery of private notes by causing the depositary to transfer the private notes into the exchange agent's account at the depositary in accordance with the depositary's procedures for transfer. However, although delivery of private notes may be effected through book-entry transfer at the depositary, you must transmit and the exchange agent must receive, the letter of transmittal or a facsimile of the letter of transmittal, with any required signature guarantees and any other required documents, at the address below under "-- Exchange Agent" on or before the expiration date or pursuant to the guaranteed delivery procedures described below. 24 30 GUARANTEED DELIVERY PROCEDURES If you wish to tender your private notes and (1) the notes are not immediately available or (2) you cannot deliver the private notes, the letter of transmittal or any other required documents to the exchange agent before the expiration date, you may effect a tender if: (a) the tender is made through an eligible guarantor institution; (b) before the expiration date, the exchange agent receives from the eligible guarantor institution a properly completed and duly executed notice of guaranteed delivery, substantially in the form provided by us, that: - states your name and address, the certificate number(s) of the private notes and the principal amount of private notes tendered, - states that the tender is being made by that notice of guaranteed delivery, and - guarantees that, within three New York Stock Exchange trading days after the expiration date, the eligible guarantor institution will deposit with the exchange agent the letter of transmittal, together with the certificate(s) representing the private notes in proper form for transfer or a confirmation of a book-entry transfer, as the case may be, and any other documents required by the letter of transmittal; and (c) within five New York Stock Exchange trading days after the expiration date, the exchange agent receives a properly executed letter of transmittal, as well as the certificate(s) representing all tendered private notes in proper form for transfer and all other documents required by the letter of transmittal. Upon request, the exchange agent will send to you a notice of guaranteed delivery if you wish to tender your notes according to the guaranteed delivery procedures described above. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, you may withdraw tenders of private notes at any time before 5:00 p.m. on the expiration date. To withdraw a tender of private notes in the exchange offer, the exchange agent must receive a written or facsimile transmission notice of withdrawal at its address listed in this prospectus before the expiration date. Any notice of withdrawal must: - specify the name of the person who deposited the private notes to be withdrawn; - identify the private notes to be withdrawn, including the certificate number(s) and principal amount of the private notes; and - be signed in the same manner as the original signature on the letter of transmittal by which the private notes were tendered, including any required signature guarantees. We will determine in our sole discretion all questions as to the validity, form and eligibility of the notices, and our determination will be final and binding on all parties. We will not deem any properly withdrawn private notes to have been validly tendered for purposes of the exchange offer, and we will not issue exchange notes with respect to those private notes, unless you validly retender the withdrawn private notes. You may retender properly withdrawn private notes by following one of the procedures described above under "-- Procedures for Tendering" at any time before the expiration date. CONDITIONS Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or exchange the exchange notes for, any private notes, and may terminate the exchange offer as provided 25 31 in this prospectus before the acceptance of the private notes, if, in our reasonable judgment, the exchange offer violates applicable law, rules or regulations or an applicable interpretation of the staff of the SEC. If we determine in our reasonable discretion that any of these conditions are not satisfied, we may: - refuse to accept any private notes and return all tendered private notes to you; - extend the exchange offer and retain all private notes tendered before the exchange offer expires, subject, however, to your rights to withdraw the private notes; or - waive the unsatisfied conditions with respect to the exchange offer and accept all properly tendered private notes that have not been withdrawn. If the waiver constitutes a material change to the exchange offer, we will promptly disclose the waiver by means of a prospectus supplement that we will distribute to the registered holders of the private notes, and we will extend the exchange offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the exchange offer would otherwise expire during the five to ten business day period. TERMINATION OF RIGHTS All of your rights under the registration rights agreement will terminate upon consummation of the exchange offer except with respect to our continuing obligations: - to indemnify you and parties related to you against liabilities, including liabilities under the Securities Act; and - to provide, upon your request, the information required by Rule 144A(d)(4) under the Securities Act to permit resales of the notes pursuant to Rule 144A. SHELF REGISTRATION If (1) applicable law or SEC policy does not permit us to consummate the exchange offer, (2) we do not consummate the exchange offer on or before October 26, 2001 or (3) you notify us before the 60th day following the completion of the exchange offer that: - you are prohibited by law or SEC policy from participating in the exchange offer; - you may not resell the exchange notes acquired by you in the exchange offer to the public without delivering a prospectus, and the prospectus contained in the registration statement is not appropriate or available for resales by you; or - you are a broker-dealer and hold notes acquired directly from us, we will file with the SEC a shelf registration statement to register for public resale the registrable notes held by you if you provide us with the necessary information for inclusion in the shelf registration statement. For the purposes of the registration rights agreement, "registrable notes" means each private note until the earliest date on which: - a registration statement covering the private note has been declared effective by the SEC and the note has been disposed of in accordance with such effective registration statement; - the private note has been exchanged pursuant to the exchange offer for an exchange note or exchange notes that may be resold without restriction under state and federal securities laws; - such private note ceases to be outstanding; or - the private note may be resold without restriction pursuant to Rule 144 under the Securities Act. 26 32 ADDITIONAL INTEREST If: (1)(A) we do not file the registration statement with the SEC on or before June 13, 2001, or (B) we are obligated to file a shelf registration statement and we fail to file the shelf registration statement with the SEC on or before the 90th day after the obligation to file a shelf registration statement arises, then, commencing on the day after either required filing date, we agree to pay additional interest on the principal amount of the notes at a rate of 0.50% per annum for the first 90 days immediately following the required filing date, with the additional interest increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (2)(A) the SEC does not declare the registration statement effective on or before September 11, 2001, or (B) we are obligated to file a shelf registration statement and the SEC does not declare the shelf registration statement effective on or before the 180th day after the obligation to file a shelf registration statement arises, then, commencing on the day after either required effective date, we agree to pay additional interest on the principal amount of the notes at a rate of 0.50% per annum for the first 90 days immediately following the required effective date, with the additional interest increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (3)(A) we do not complete the exchange offer on or before the 45th day after the SEC declares the registration statement effective, or (B) if applicable, a shelf registration statement has been declared effective but thereafter ceases to be effective at any time prior to March 15, 2003 (unless all of the notes have already been disposed of or all of the notes are eligible to be sold pursuant to Rule 144(k)), then we agree to pay additional interest on the principal amount of the notes at a rate of 0.50% per annum for the first 90 days commencing on (x) the 46th day after the effective date, in the case of (A) above, or (y) the day the shelf registration statement ceases to be effective, in the case of (B) above, with the additional interest rate increasing by an additional 0.50% per year at the beginning of each subsequent 90-day period; provided, however, that the additional interest rate on the notes may not accrue under more than one of the foregoing clauses (1) through (3) at any one time and at no time will the aggregate amount of additional interest accruing exceed in the aggregate 1.00% per annum; provided, further, however, that when (i) we file the registration statement or the shelf registration statement (in the case of clause (1) above), (ii) the SEC declares the registration statement or the shelf registration statement effective (in the case of clause (2) above), or (iii) we complete the exchange offer (in the case of clause (3)(A) above), or upon the effectiveness of the shelf registration statement which had ceased to remain effective (in the case of clause (3)(B) above), additional interest on the notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. We agree to pay any amount of additional interest due pursuant to clause (1), (2) or (3) above in cash on the same original interest payment dates as the notes. 27 33 EXCHANGE AGENT We have appointed Bankers Trust Company as exchange agent for the exchange offer. You should direct questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for a notice of guaranteed delivery to the exchange agent addressed as follows: By Registered or Certified Mail: By Hand Delivery: Bankers Trust Company Bankers Trust Company Corporate Trust and Agency Services Corporate Trust and Agency Services Four Albany Street, 4th Floor Four Albany Street, 4th Floor New York, New York 10006 New York, New York 10006 Attention: Matthew Sherman Attention: Matthew Sherman By Overnight Delivery: By Facsimile: Bankers Trust Company (212) 250-6727 Corporate Trust and Agency Services Attn: Matthew Sherman Four Albany Street, 4th Floor Confirm by Telephone: (212) 250-6992 New York, New York 10006 Attention: Matthew Sherman
Delivery to an address other than the one stated above or transmission via a facsimile number other than the one stated above will not constitute a valid delivery. FEES AND EXPENSES We will bear the expenses of soliciting tenders. We are making the principal solicitation by mail; however, our officers and regular employees may make additional solicitations by facsimile, telephone or in person. We have not retained any dealer manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses. We will pay the cash expenses incurred in connection with the exchange offer which we estimate to be approximately $250,000. These expenses include registration fees, fees and expenses of the exchange agent and the trustee, accounting and legal fees and printing costs, among others. We will pay all transfer taxes, if any, applicable to the exchange of notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of the private notes pursuant to the exchange offer, then you must pay the amount of the transfer taxes. If you do not submit satisfactory evidence of payment of the taxes or exemption from payment with the letter of transmittal, we will bill the amount of the transfer taxes directly to you. CONSEQUENCE OF FAILURES TO EXCHANGE Participation in the exchange offer is voluntary. We urge you to consult your financial and tax advisors in making your decisions on what action to take. Private notes that are not exchanged for exchange notes pursuant to the exchange offer will remain restricted securities. Accordingly, those private notes may be resold only: - to a person whom the seller reasonably believes is a qualified institutional buyer in a transaction meeting the requirements of Rule 144A; - in a transaction meeting the requirements of Rule 144 under the Securities Act; - outside the United States to a foreign person in a transaction meeting the requirements of Rule 903 or 904 of Regulation S under the Securities Act; 28 34 - in accordance with another exemption from the registration requirements of the Securities Act and based upon an opinion of counsel if we so request; - to us; or - pursuant to an effective registration statement. In each case, the private notes may be resold only in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction. 29 35 USE OF PROCEEDS The exchange offer satisfies an obligation under the registration rights agreement. We will not receive any cash proceeds from the exchange offer. CAPITALIZATION The following table sets forth our cash and cash equivalents, our current maturities of long-term debt and capital leases and our consolidated capitalization at December 30, 2000 and as adjusted to give effect to the Transactions.
AT DECEMBER 30, 2000 ------------------------- ACTUAL AS ADJUSTED ---------- ----------- (DOLLARS IN THOUSANDS) Cash and cash equivalents(1)........................ $ 30,380 $ 25,680 ========== ========== Current maturities of long-term debt and capital leases............................................ $ 59,837 $ 59,837 ---------- ---------- Long-term debt: Revolving Credit Facility(2)...................... 300,000 68,998 Term Loan Facility................................ 118,637 118,637 10 1/8% Senior Notes due 2008, net of discount.... -- 350,602 10.625% Senior Notes due 2001..................... 300,000 -- Long-term obligations under capital leases........ 377,239 377,239 10.5% Senior Subordinated Notes due 2004.......... 250,000 250,000 10.625% Senior Subordinated Notes due 2007........ 250,000 250,000 5.25% Convertible Senior Subordinated Notes due 2009........................................... -- 150,000 Medium-Term Notes and other long-term debt........ 13,763 13,763 ---------- ---------- Total long-term debt........................... 1,609,639 1,579,239 ---------- ---------- Total shareholders' equity..................... 427,192 474,857 ---------- ---------- Total capitalization (including current maturities).................................. $2,096,668 $2,113,933 ========== ==========
- ------------------------- (1) Cash and cash equivalents are defined as cash and investments with original maturities of 90 days or less which are readily convertible into cash. The as adjusted amount reflects the payment of fees and expenses related to the proposed Yucaipa investment and other financing expenses. (2) The Revolving Credit Facility provides for a total commitment of $600 million. As of December 30, 2000, the Company had $43 million of outstanding letters of credit under the Revolving Credit Facility. 30 36 SELECTED CONSOLIDATED FINANCIAL DATA (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) The information presented below for, and as of the end of, each of the fiscal years in the five-year period ended December 30, 2000 is derived from our audited consolidated financial statements. The following information should be read in conjunction with the section "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements included elsewhere in this prospectus.
FISCAL YEAR ENDED(1) ------------------------------------------------------------------------ DECEMBER 28, DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 30, 1996(2) 1997(3) 1998(4) 1999(5) 2000(6) ------------ ------------ ------------ ------------ ------------ INCOME STATEMENT DATA: Net sales(7)....................... $16,051 $14,966 $14,678 $14,272 $14,444 Costs and expenses: Cost of sales(7)................... 14,594 13,558 13,228 12,835 13,097 Selling and administrative......... 1,250 1,172 1,251 1,262 1,185 Interest expense................... 163 163 161 165 175 Interest income.................... (49) (47) (37) (40) (33) Equity investment results.......... 18 17 12 10 8 Litigation charges................. 20 21 8 -- -- Impairment/restructuring charge.... -- -- 653 103 213 ------- ------- ------- ------- ------- Total costs and expenses......... 15,996 14,884 15,276 14,335 14,645 ------- ------- ------- ------- ------- Earnings (loss) before taxes....... 55 82 (598) (63) (201) Taxes on income (loss)............. 28 44 (87) (18) (79) ------- ------- ------- ------- ------- Earnings (loss) before extraordinary charge............. 27 38 (511) (45) (122) Extraordinary charge from early retirement of debt (net of taxes)........................... -- (13) -- -- -- ------- ------- ------- ------- ------- Net earnings (loss)................ $ 27 $ 25 $ (511) $ (45) $ (122) ======= ======= ======= ======= ======= Diluted earnings (loss) per share............................ $ 0.71 $ 0.67 $(13.48) $ (1.17) $ (3.15) BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents.......... $ 64 $ 30 $ 6 $ 7 $ 30 Total assets....................... 4,055 3,924 3,491 3,573 3,403 Total debt (including current maturities and capital leases)... 1,598 1,563 1,566 1,694 1,669 Shareholders' equity............... 1,076 1,090 570 561 427 OTHER FINANCIAL DATA: Cash flows from operating activities....................... $ 327 $ 113 $ 141 $ 118 $ 127 Cash flows from investing activities....................... (45) (54) (163) (213) (48) Cash flows from financing activities....................... (223) (92) (2) 96 (55) EBITDA(8).......................... 417 441 (237) 281 154 Depreciation and amortization(9)... 175 173 180 158 169 Capital expenditures............... 129 129 200 166 151 Ratio of earnings to fixed charges(10)...................... 1.27x 1.41x -- -- --
- ------------------------- (1) Fiscal 2000 is a 53 week year; all other years are 52 weeks. (2) Results in 1996 include a charge of $20 million ($10 million after-tax) related to the settlement of two related lawsuits against us. (3) The results in 1997 reflect a charge of $19 million ($9 million after-tax) related to the settlement of a lawsuit against us. Such period also reflects an extraordinary charge of $22 million ($13 million after-tax) related to a recapitalization. 31 37 (4) The results in 1998 reflect an impairment/restructuring charge with related costs totaling $668 million ($543 million after-tax) related to the strategic plan. (5) The results in 1999 reflect an impairment/restructuring charge with related costs totaling $137 million ($92 million after-tax) related to our strategic plan. Such period also reflects one-time items ($31 million charge to close 10 conventional retail stores, income of $22 million from extinguishing a portion of the self-insured workers' compensation liability, interest income of $9 million related to refunds in federal income taxes from prior years, and $6 million in gains from the sale of distribution facilities) netting to $6 million of income ($3 million after-tax). (6) The results in 2000 reflect an impairment/restructuring charge with related costs totaling $309 million ($183 million after-tax) relating to our strategic plan. Such period also reflects one-time items ($10 million charge related primarily to asset impairment on retail stores, income of $2 million relating to litigation settlements, and $9 million in gains from the sale of distribution facilities) netting to less than $1 million of income ($1 million loss after-tax). (7) During the fourth quarter of 2000 we adopted EITF 99-19 and restated sales and cost of sales for all prior periods. The adoption had no effect on gross margins or earnings. (8) EBITDA is earnings before extraordinary items, interest expense, income taxes, depreciation and amortization, equity investment results and LIFO provision. EBITDA should not be considered as an alternative measure of our net income, operating performance, cash flow or liquidity. We provide it as additional information related to our ability to service debt; however, conditions may require conservation of funds for other uses. Although we believe EBITDA enhances your understanding of our financial condition, this measure, when viewed individually, is not necessarily a better indicator of any trend as compared to conventionally computed measures (e.g., net sales, net earnings, net cash flows, etc.). Amounts presented may not be comparable to similar measures disclosed by other companies. (9) Depreciation and amortization expense includes goodwill amortization and excludes amortization of debt cost which is reflected in interest expense. (10) For purposes of computing this ratio, earnings consist of earnings before income taxes and fixed charges. Fixed charges consist primarily of interest expense, including amortization of deferred debt issuance costs and one-third of rental expense (the portion considered representative of the interest factor). Earnings were insufficient to cover fixed charges by $598 million, $62 million and $202 million for the fiscal years ended December 26, 1998, December 25, 1999 and December 30, 2000, respectively. 32 38 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW In early 1998, our board of directors and senior management began an extensive strategic planning process that evaluated all aspects of our business. With the help of a consulting firm, the evaluation and planning process was completed in late 1998. In December 1998, the strategic plan was approved and implementation efforts began. In the course of implementing our strategic initiatives, since 1998 we have, among other accomplishments: - closed or consolidated 12 of our distribution centers, which resulted in: -- increased average sales per full-line distribution center by more than 40% from $390 million in 1998 to $550 million in 2000, and -- increased average sales per full-line distribution center employee by more than 12% from 1998 to 2000; - centralized the majority of our purchasing operations in our customer support center near Dallas, Texas; - centralized our accounting, human resources, information technology and other support services in our shared services center in Oklahoma City, Oklahoma; - sold or closed 207 conventional supermarkets, with 31 more to be sold or closed; - opened 22 additional price impact supermarkets; and - instituted a "culture of thrift" among our employees, in part through our Low Cost Pursuit Program. The pre-tax charge of the strategic plan recorded through 2000 was $1,114 million ($309 million in 2000, $137 million in 1999, and $668 million recorded in 1998). After tax, the expense was $183 million for 2000, $92 million for 1999 and $543 million for 1998. We currently estimate pre-tax strategic plan charges for 2001 and 2002 at $20 million ($15 million cash and $5 million non-cash) and $4 million (all cash), respectively. These charges represent future severance related expenses, anticipated inventory markdowns and other exit costs related to the divestiture of our conventional retail stores. 33 39 RESULTS OF OPERATIONS Set forth in the following table is information regarding our net sales and certain components of earnings expressed as a percent of sales which are referred to in the accompanying discussion:
1998 1999 2000 ------ ------ ------ Net sales................................................ 100.00% 100.00% 100.00% Gross margin............................................. 9.88 10.07 9.33 Less: Selling and administrative............................. 8.52 8.84 8.21 Interest expense....................................... 1.10 1.16 1.21 Interest income........................................ (.25) (.28) (.23) Equity investment results.............................. .08 .07 .06 Litigation charges..................................... .05 -- -- Impairment/restructuring charge........................ 4.45 .72 1.47 ------ ------ ------ Total expenses...................................... 13.95 10.51 10.72 ------ ------ ------ Loss before taxes........................................ (4.07) (.44) (1.39) Taxes on loss............................................ (.59) (.13) (.54) ------ ------ ------ Net loss................................................. (3.48)% (.31)% (.85)% ====== ====== ======
Years Ended December 30, 2000 and December 25, 1999 Net Sales Our net sales for 2000 increased by 1% to $14.44 billion from $14.27 billion for 1999. 2000 was a 53-week year; 1999 was a 52-week year. Net sales for the distribution segment were $11.2 billion in 2000 compared to $10.6 billion in 1999, an increase of 5.8%. The sales increase was primarily due to new business added from independent retailers, convenience stores, e-tailers, and supercenter customers, including such customers as Clark Retail Enterprises, Inc and additional Super Target stores. This increase was partially offset by a loss of previously announced sales from Randall's (in 1999) and United (in 2000). Sales have also been impacted by the planned closing and consolidation of certain distribution operating units. In 1999, sales to Randall's and United accounted for less than 4% of our total sales. The distribution segment had strategic plan charges and one-time items (e.g., gain on sale of facilities) that affected sales for both years with no significant effect on total distribution sales. Recently, we announced a 10-year agreement to become the sole supplier of food and consumable products to Kmart Corporation's more that 2,100 stores and supercenters. We expect annual sales to Kmart to increase from approximately $1.4 billion in 2000 to approximately $2.6 billion in 2001 and approximately $4.5 billion in 2002. Retail segment sales were $3.3 billion in 2000 compared to $3.7 billion in 1999. The decrease in sales was due primarily to the divestiture of under-performing and non-strategic stores. Decreases in same-store sales also contributed to the sales decline. The decrease was offset partially by sales from new stores opened during 1999 and 2000. As additional conventional retail stores are sold or closed, sales will continue to decrease in the retail segment. Food price inflation for our product mix was not significant in 2000 or 1999. Gross Margin Gross margin for 2000 decreased to $1.35 billion from $1.44 billion for 1999, and decreased as a percentage of net sales to 9.33% in 2000 from 10.07% for 1999. After excluding the strategic plan charges and one-time items, gross margin dollars in 2000 decreased to $1.40 billion from $1.45 billion for 1999 and gross margin as a percentage of net sales decreased to 9.68% in 2000 from 10.16% in 1999. The decrease in dollars was due partly to the sales decrease in the retail segment, but was offset by positive results from 34 40 leveraging our buying power and cutting costs. The decrease in percentage of net sales was due to a change in mix between the distribution and retail segments. The sales of the distribution segment represented a larger portion of total company sales in 2000 compared to 1999 and the distribution segment has lower margins as a percentage of sales versus the retail segment. For the distribution segment, gross margin as a percentage of gross distribution sales was down in 2000 compared to 1999. This was due to competitive pricing actions and increased transportation costs which were partially offset by the benefits of asset rationalization and the centralization of procurement. For the retail segment, gross margin as a percentage of net retail sales improved for 2000 compared to 1999 due to the divesting or closing of under-performing stores. The strategic plan charges and one-time items increased in 2000 compared to the same periods in 1999. The increased charges were primarily due to inventory markdowns for clearance for closed operations, additional depreciation and amortization of assets to be disposed of but not yet held for sale, and periodic costs recorded as incurred such as recruiting and training. Selling and Administrative Expenses Selling and administrative expenses for 2000 decreased by 6% to $1.19 billion from $1.26 billion for 1999, and decreased as a percentage of net sales to 8.21% for 2000 from 8.84% for 1999. Excluding the strategic plan charges and one-time items, selling and administrative expenses for 2000 decreased by 8% to $1.14 billion from $1.24 billion for 1999. The decreases were due to asset rationalization, our low cost pursuit program, and centralizing administrative functions, but also due to a reduction in the volume of the retail segment. The sales of the distribution segment represented a larger portion of total company sales in 2000 compared to 1999 and the distribution segment has lower selling and administrative expenses as a percentage of sales versus the retail segment. The strategic plan charges and one-time items were significantly higher in 2000 compared to 1999. The strategic charges were primarily made up of moving and training costs incurred in connection with the consolidation of the accounting and human resource functions. The one-time items in both years included costs relating to the closing of certain retail stores. An additional one-time item in 2000 was income from net litigation settlements. An additional one-time item recorded in 1999 was income from extinguishing a portion of our self-insured workers' compensation liability. For the distribution segment on an adjusted basis, selling and administrative expenses as a percentage of net sales improved for 2000 compared to 1999 due to asset rationalization and the centralization of administrative functions. For the retail segment on an adjusted basis selling and administrative expenses as a percentage of retail sales improved for 2000 compared to 1999 due to the divestiture or closing of under-performing stores, the centralization of administrative functions, and operating cost reductions. This was offset by costs associated with closing certain retail stores. We have extended credit to certain customers through various methods. These methods include customary and extended credit terms for inventory purchases and equity investments in and secured and unsecured loans to certain customers. Secured loans generally have terms up to 10 years. Credit loss expense is included in selling and administrative expenses and for 2000 increased to $29 million from $25 million for 1999. Operating Earnings Operating earnings for 2000 decreased to $162 million from $176 million in 1999. Excluding the strategic plan charges and one-time items, operating earnings increased by 22% to $257 million from $212 million in 1999. We measure operating earnings for segment reporting as sales less cost of sales less selling and administrative expenses. Operating earnings for the distribution segment increased to $297 million in 2000 from $290 million for 1999. Excluding the costs relating to the strategic plan and one-time items, operating earnings increased by approximately $44 million, or 14%, to $346 million in 2000 from $302 million for the same 35 41 period of 1999. Operating earnings improved primarily due to the benefits of consolidating distribution operating units, reducing costs, centralizing certain procurement and administrative functions in support services and improving sales. The strategic plan charges were primarily due to inventory markdowns for clearance for closed operations, moving and training costs associated with the consolidation of the accounting and human resource functions, and additional depreciation and amortization on assets to be disposed of but not yet held for sale. The one-time items were gains on sales of facilities in both years. Operating earnings for the retail segment increased by approximately $64 million to an income of $62 million in 2000 from a loss of $2 million for 1999. Excluding the costs relating to the strategic plan and one-time items, operating earnings increased by $47 million to $89 million from $42 million for the same period of 1999. The increase was due to divesting or closing under-performing chains and centralizing certain administrative functions in support services. The strategic charges were primarily made up of inventory markdowns for clearance for closed operations and moving costs in both years. The one-time items in both years included costs relating to the closing of certain retail stores. Support services increased in 2000 to $197 million compared to $113 million for 1999. Excluding the costs relating to the strategic plan and one-time items, support services increased in 2000 to $177 million compared to $133 million for 1999. The increase was due primarily to centralizing certain procurement and administrative functions from the distribution and retail segments. Strategic plan charges were higher in 2000 due to moving and training expenses associated with the centralization of the procurement and administrative functions. One-time items included income from net litigation settlements in 2000 and income from extinguishing a portion of our self-insured workers' compensation liability in 1999. Interest Expense Interest expense of $175 million in 2000 was $9 million higher than 1999 due primarily to higher average debt balances for revolver loans and capitalized lease obligations, and higher average interest rates for revolver and term loans. For 2000, interest rate hedge agreements contributed $0.9 million of net interest expense compared to $4.8 million in 1999. The decrease occurred because the hedge agreements matured by mid-year 2000 and were not renewed or replaced. These derivative agreements consisted of simple "floating-to-fixed rate" interest rate swaps. In these transactions, we paid to the hedge counterparty a cash flow stream equal to a designated fixed interest rate times a notional principal amount as a proxy for a portion of our debt which carries variable interest rates. In exchange, the hedge counterparty paid us a cash flow stream equal to a variable or floating interest rate times the same notional principal amount. These kind of interest rate swap transactions are designed to provide a hedge against variable interest rates. Interest Income Interest income of $33 million for 2000 was $8 million lower than 1999 due to a one-time item in 1999 related to interest on refunds of federal income taxes from prior years. This was partially offset by lower average balances for our investment in direct financing leases with customers. Equity Investment Results Our portion of net operating losses from equity investments for 2000 decreased by $2 million to $8 million from $10 million for 1999. The reduction in losses is due to improved results of operations in certain of the underlying equity investments. Impairment/Restructuring Charge The pre-tax charge for our strategic plan totaled $309 million for 2000 and $137 million for 1999. Of these totals, $213 million and $103 million were reflected in the Impairment/restructuring charge line with the balance of the charges reflected in other financial statement lines. 36 42 Taxes on Income The effective tax rates used for 2000 and 1999 were 39.2% and 28.5%, respectively, both representing a tax benefit. These are blended rates taking into account operations activity, strategic plan activity, write-offs of non-deductible goodwill and the timing of these transactions during the year. Certain Accounting Matters The Financial Accounting Standards Board issued SFAS No. 133 -- Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and became effective on January 1, 2001. We revised our written policies regarding financial derivatives, as needed, prior to the effective date. There was no significant impact on our financial statements upon adopting the new standard. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 -- Revenue Recognition. SAB No. 101 provides guidance on recognition, presentation and disclosure of revenue in financial statements. In July 2000, the Financial Accounting Standards Board Emerging Issues Task Force issued EITF 99-19 -- Reporting Revenue Gross as a Principal versus Net as an Agent. EITF 99-19 provides further guidance on reflecting revenue gross or net. We adopted SAB No. 101 and EITF 99-19 in the fourth quarter of 2000. The implementation had an impact on the classification of previously reported net sales and cost of goods sold (ranging annually from $350 million to $400 million), but had no impact on earnings. Net sales and cost of goods sold have been restated for all prior periods presented. The Financial Accounting Standards Board has recently issued an exposure draft for Business Combinations and Intangible Assets. One of the provisions of this exposure draft is to require use of a non-amortization approach to account for purchased goodwill. Under that approach, goodwill would not be amortized to earnings over a period of time. Instead, it would be reviewed for impairment and expensed against earnings only in the periods in which the recorded value of goodwill is more that its implied fair value. Goodwill amortization increased the basic and diluted net loss per share by $0.47 and $0.54 in 2000 and 1999, respectively. This exposure draft is not final and may change before any new accounting standard is adopted. Other Costs relating to the strategic plan have negatively affected earnings for some time, but are expected to drastically decrease in the near future. We currently estimate pre-tax strategic plan charges for 2001 and 2002 at $20 million ($15 million cash and $5 million non-cash) and $4 million (all cash), respectively. These charges represent future severance related expenses, anticipated inventory markdowns and other exit costs related to the divestiture of our conventional retail stores. Years Ended December 25, 1999 and December 26, 1998 Net Sales Our net sales for 1999 decreased by 3% to $14.27 billion from $14.68 billion for 1998. Net sales for the distribution segment were $10.6 billion in 1999 compared to $11.1 billion in 1998. The sales decrease was primarily due to the previously announced loss of sales to Furr's (in 1998) and Randall's (in 1999) and the disposition of the Portland division (in 1999). These sales losses were partially offset by the increase in sales to Kmart Corporation. Sales during 1999 were also impacted by the planned closing and consolidation of certain distribution operating units. These sales losses plus the loss of sales to United in 2000 were partially offset by the increase in sales to Kmart Corporation. In 1999 and 1998, sales to Furr's, Randall's and United accounted for approximately 4% and 8%, respectively, of our total sales. 37 43 Retail segment sales were $3.7 billion in 1999 compared to $3.6 billion in 1998. The increase in sales was due primarily to new stores added in 1999. This was offset partially by a decrease in same-store sales and the closing of non-performing stores. We measure inflation using data derived from the average cost of a ton of product we sell. For 1999, food price inflation was 1.0%, compared to 2.1% in 1998. Gross Margin Gross margin for 1999 decreased by 1% to $1.44 billion from $1.45 billion for 1998, and increased as a percentage of net sales to 10.07% from 9.88% for 1998. After excluding the strategic plan charges and one-time items, gross margin dollars still decreased compared to the same period in 1998 and gross margin as a percentage of net sales still increased compared to the same period in 1998. The decrease in dollars was due primarily to the overall sales decrease, but was partly offset by positive results from leveraging our buying power and cutting costs. The increase in percentage of net sales was due to the impact of the growing retail segment compared to the distribution segment. The retail segment has the higher margins of the two segments. This increase was partly offset by lower margins in the retail segment due to competitive pricing at company-owned new stores. Selling and Administrative Expenses Selling and administrative expenses for 1999 increased by 1% to $1.26 billion from $1.25 billion for 1998, and increased as a percentage of net sales to 8.84% for 1999 from 8.52% for 1998. The increase in both dollars and percentage of net sales was primarily due to one-time items recorded in 1999: a charge to close conventional retail stores which was partially offset by income from extinguishing a portion of our self-insured workers' compensation liability at a discount. The increase in percentage to net sales was also partly due to the impact of the growing retail segment compared to the distribution segment -- the retail segment has higher operating expenses as a percent to sales compared to the distribution segment. We have extended a significant amount of credit to certain customers through various methods. These methods include customary and extended credit terms for inventory purchases and equity investments in and secured and unsecured loans to certain customers. Secured loans generally have terms up to 10 years. Credit loss expense is included in selling and administrative expenses and for 1999 increased to $25 million from $23 million for 1998. Operating Earnings Operating earnings for 1999 decreased to $176 million from $199 million in 1998. Excluding the strategic plan charges and one-time items, operating earnings decreased to $212 million from $214 million in 1998. Operating earnings for the distribution segment increased by 12% to $290 million from $259 million for 1998, and increased as a percentage of distribution net sales to 2.75% for 1999 from 2.34% for 1998. Excluding the costs relating to the strategic plan and one-time items, operating earnings still increased by $29 million to $302 million from $273 million for the same period of 1998. Operating earnings improved primarily due to the benefits of the consolidation of distribution operating units and cost reduction. Operating earnings for the retail segment decreased by $64 million to a loss of $2 million from earnings of $62 million for 1998. Excluding the costs relating to the strategic plan and one-time items (primarily a charge to close conventional retail stores), operating earnings still decreased by $20 million to $42 million from $62 million for the same period of 1998. The decrease was due to the impact of new store start-up expenses plus expenses related to the divestiture and closing of stores. Operating earnings for the retail segment were also adversely affected by a 1.9% decrease in same-store sales. Support services decreased in 1999 to $112 million compared to $122 million for 1998. Excluding the costs relating to the strategic plan and one-time items (primarily income from extinguishing a portion of our self-insured workers' compensation liability at a discount), support services increased in 1999 to 38 44 $132 million compared to $121 million for 1998. The increase was due primarily to an increase in lease termination and real estate disposition expenses and higher incentive compensation. Interest Expense Interest expense in 1999 was $4 million higher than 1998 due primarily to 1998's low interest expense as a consequence of a favorable settlement of tax assessments. The higher 1999 expense was also due to higher average debt balances. Our derivative agreements consisted of simple "floating-to-fixed rate" interest rate swaps. For 1999, interest rate hedge agreements contributed $4.8 million of net interest expense compared to $4.3 million in 1998, or $0.5 million higher. This was due to slightly higher average net interest rates underlying the hedge agreements. Interest Income Interest income for 1999 was $4 million higher than 1998 due to a one-time item related to interest on refunds of federal income taxes from prior years. This was partially offset by lower average balances for our investment in direct financing leases. Equity Investment Results Our portion of net operating losses from equity investments for 1999 decreased by approximately $2 million to $10 million from $12 million for 1998. The reduction in losses is due to improved results of operations in certain of the underlying equity investments. Litigation Charges In October 1997, we began paying Furr's $800,000 per month as part of a settlement agreement which ceased in October 1998. Payments to Furr's totaled $7.8 million in 1998. Impairment/Restructuring Charge The pre-tax charge for our strategic plan totaled $137 million for 1999 and $668 million for 1998. Of these totals, $103 million and $653 million were reflected in the Impairment/restructuring charge line with the balance of the charges reflected in other financial statement lines. Taxes on Income The effective tax rates used for 1999 and 1998 were 28.5% and 14.6%, respectively, both representing a tax benefit. These are blended rates taking into account operations activity, strategic plan activity, write-offs of non-deductible goodwill and the timing of these transactions during the year. LIQUIDITY AND CAPITAL RESOURCES In the fiscal year ended December 30, 2000, our principal sources of cash were cash flows from operating activities, the sale of certain assets and investments, and borrowings under our credit facility. During this period sources of long-term capital, excluding shareholders' equity, were credit facility lenders and lessors. On December 30, 2000, we had $30 million of cash and cash equivalents, $257 million available under the revolving portion of our credit facility and $391 million of net working capital (current assets minus current liabilities). Net cash provided by operating activities Operating activities generated $127 million of net cash flows for the year ended December 30, 2000, compared to $118 million for the same period in 1999. Included in 2000 net operating cash flows were $312 million in gross cash flows from operations, which were reduced by a $67 million increase primarily 39 45 in working capital and $118 million in payments for strategic plan-related cash expenditures. For fiscal 2001, incremental net working capital required to support the expected new business with Kmart is expected to be up to $150 million. Cash expenditures required to implement and help complete the strategic plan were $118 million in 2000 (on a pre-tax basis). We estimate expenditures to complete the strategic plan initiatives will be about $56 million in fiscal 2001 and $27 million in fiscal 2002. Management believes working capital reductions, proceeds from the sale of assets, and increased after-tax earnings related to the successful implementation of the strategic plan are expected to provide adequate cash flows to cover the remaining expenditures. Net cash used in investing activities Net cash used in investing activities totaled $48 million in fiscal 2000 compared to $213 million for 1999. Included in 2000 net investment expenditures were $151 million for capital expenditures and $7 million for acquisitions of retail stores. Offsetting these expenditures in part were sales of assets and investments totaling $100 million. Cash spent to make loans and equity investments in our customers was financed essentially by collections on customer loans made in the past. For fiscal 2001, capital expenditures are expected to be approximately $225 million to maintain our distribution system, grow our price impact retail operations, expand our distribution operations to supply the expected incremental Kmart business, and further upgrade our information technology systems. We plan to increase our investment in price impact retail operations by making investments in our existing stores and by adding new stores through store construction or acquisitions. In addition, distribution operations may be acquired to increase our ability to supply convenience stores and other customers. Acquisitions of supermarket groups or chains or distribution operations will be made only on a selective basis. The focus of retail investment has shifted toward our price impact format retail stores. On April 25, 2000, we announced the evaluation of strategic alternatives for the remaining conventional retail chains we own. This evaluation covered our ABCO, Baker's, Rainbow and Sentry supermarkets. We sold 11 of our ABCO Desert Market stores to Safeway in late February, 2001, and we sold our 16 Baker's stores to Kroger in late March, 2001. We plan to convert 10 of our Sentry supermarkets to a price impact format. We plan to sell or close the remaining 47 conventional retail supermarkets we own. We expect to retain a substantial level of the distribution supply business to a large portion of these stores, and to receive a total of $200 million for the sale of all conventional supermarkets we sell this year ($175 million in cash and a $25 million reduction in capitalized lease obligations). We will use the net cash proceeds from the sale of these stores to reduce debt or to help finance business investment. Net cash provided by (used in) financing activities For fiscal 2000, net cash used in financing activities was $55 million compared to 1999 when our financing activities resulted in a $96 million net source of cash. Included in 2000 net cash used in financing activities was a net decrease in long-term debt of $35 million since the end of 1999. In addition, capital lease obligations increased by $10 million even though $21 million in payments were made to the lessors. This means $31 million in total capital was provided by lessors. At the end of fiscal 2000, borrowings under the revolving portion of our credit facility totaled $300 million, $154 million in term loans, and $43 million of letters of credit had been issued. On February 7, 2001, we announced: (a) the new long-term, exclusive strategic alliance and supply agreement with Kmart, which we expect will require up to $150 million in net working capital requirements, and (b) an agreement with an affiliate of Yucaipa to sell $50 million of newly issued common stock. The Yucaipa investment closed on March 22, 2001. On March 15, 2001, we sold $355 million of new 10 1/8% senior notes due 2008. Most of the net proceeds were used to redeem $300 million principal amount of our 10 5/8% senior notes, including an amount to cover accrued interest and the redemption premium, on April 16, 2001. The balance of the net 40 46 proceeds was used to pay down our revolver loans. At the time the redemption is final, an extraordinary after-tax charge of approximately $3 million will be recorded. On March 15, 2001, we also sold $150 million of new 5.25% convertible senior subordinated notes due 2009 with a conversion price of $30.27 per share. The net proceeds were used to pay down our revolver loans. For fiscal 2001, our principal sources of liquidity and capital are expected to be cash flows from operating activities, asset sale cash proceeds of approximately $175 million, net cash proceeds from the sale of $355 million of 10 1/8% senior notes due 2008, $150 million of 5.25% convertible senior subordinated notes due 2009, and the $50 million of common stock to Yucaipa, and our ability to borrow under the revolving portion of our credit facility. In addition, lease financing may be employed for new retail stores, distribution facilities and certain equipment. We currently expect total debt at fiscal year-end 2001 could be up to $85 million higher than the fiscal 2000 year-end balance of $1.669 billion. Management believes the sources mentioned will be adequate to meet working capital needs, capital expenditures, expenditures for acquisitions (if any), strategic plan completion costs and other capital needs for the remainder of fiscal 2001. Contingencies From time to time we face litigation or other contingent loss situations resulting from owning and operating our assets, conducting our business or complying (or allegedly failing to comply) with federal, state and local laws, rules and regulations which may subject us to material contingent liabilities. In accordance with applicable accounting standards, we record as a liability amounts reflecting such exposure when a material loss is deemed by management to be both "probable" and either "quantifiable" or "reasonably estimable." Furthermore, we disclose material loss contingencies in the notes to our financial statements when the likelihood of a material loss has been determined to be greater than "remote" but less than "probable." Such contingent matters are discussed in the notes to consolidated financial statements included herein. An adverse outcome experienced in one or more of such matters, or an increase in the likelihood of such an outcome, could have a material adverse effect on our financial condition or prospects. 41 47 BUSINESS INTRODUCTION Fleming is an industry leader in the distribution of consumable goods, and also has a growing presence in operating "price impact" supermarkets. Through our distribution group, we distribute products to customers that operate approximately 3,000 supermarkets, 3,000 convenience stores and nearly 1,000 supercenters, discount stores, limited assortment stores, drug stores, specialty stores and other stores across the U.S. We expect to substantially increase our distribution volume in connection with, among other things, our recently announced ten-year, $4.5 billion per year strategic alliance with our largest customer, Kmart Corporation. In addition, our retail group currently operates 103 supermarkets. In the fiscal year ended December 30, 2000, we generated total net sales of $14.4 billion. Our distribution group net sales were $11.2 billion for 2000, a 5.8% increase over the prior year, and represented approximately 77% of total net sales in 2000. To supply our customers, we have a network of 32 distribution centers that have a total of approximately 19 million square feet of warehouse space. To support our new business from Kmart, we expect to add up to four new distribution centers over the next several months. Once that infrastructure is in place, we believe that we will be the only distributor of consumable goods serving customers in all 50 states. In addition to product storage, handling and distribution functions, we also provide our customers with an offering of advertising, store development, accounting, pricing and retail technology services. Our retail group net sales were $3.3 billion for 2000, which represented approximately 23% of total net sales. Of that amount, $1.9 billion was attributable to continuing chains, which represents a 4.8% increase over the prior year. As of April 23, 2001, our continuing chains include 38 price impact supermarkets under the Food 4 Less banner and ten additional supermarkets which we intend to convert to the price impact format. Price impact supermarkets offer deep-discount, everyday low prices in a warehouse-style format. These stores typically cost less to build, maintain and operate than conventional supermarkets. We also operate 44 supermarkets that are adopting certain elements of the price impact format under the Rainbow Foods banner. In addition, we also operate 11 limited assortment stores under the Yes!Less banner. Limited assortment stores offer a narrow selection of low-price, private label food and other consumable goods, as well as general merchandise. In recent years, consumers have been shifting their purchases of food and other consumable goods away from conventional full-service grocery stores towards other retail channels, such as price impact supermarkets, discount stores, supercenters, convenience stores, drug stores and ethnic food stores. Since 1998, we have repositioned our distribution group to become a highly-efficient supplier to these retail channels, and as a result, our distribution group has experienced renewed sales growth. In addition, we believe price-sensitive consumers are underserved in the retail grocery market, so we have repositioned our retail group to expand our presence in the price impact format. REPOSITIONING OF FLEMING In late 1998, Mark Hansen joined Fleming as our Chairman and Chief Executive Officer. Together with other new members of senior management, he established the following strategic initiatives in order to reposition us for growth: - lower the cost of goods sold and the cost of our distribution services in order to increase sales to existing customers and attract new customers; - diversify our customer base by appealing to retailers beyond our traditional conventional supermarket customers; and - reposition our retail group by selling or closing most of our conventional format supermarkets and opening additional price impact supermarkets. 42 48 In the course of implementing our strategic initiatives, since 1998, we have, among other accomplishments: - closed or consolidated 12 of our distribution centers, which resulted in: -- increased average sales per full-line distribution center by more than 40% from $390 million in 1998 to $550 million in 2000, and -- increased average sales per full-line distribution group employee by more than 12% from 1998 to 2000; - centralized the majority of our purchasing operations in our customer support center near Dallas, Texas; - centralized our accounting, human resources, information technology and other support services in our shared services center in Oklahoma City, Oklahoma; - sold or closed 207 conventional supermarkets, with 31 more to be sold or closed; - opened 22 additional price impact supermarkets; and - instituted a "culture of thrift" among our employees, in part through our Low Cost Pursuit Program. We believe these initiatives have lowered our cost structure, improved the economics we can offer our traditional retail customers and strengthened our appeal to new channel retailers. We believe these improvements have been the key to our ability to increase distribution group sales for the last five consecutive quarters (year-over-year comparisons). In 2000, we added approximately $1.2 billion in gross annualized distribution group sales from both new channel retailers and our traditional supermarket customers. COMPETITIVE STRENGTHS Low-Cost, High-Volume National Distribution System: We have consolidated our smaller distribution centers into high-volume distribution centers. Our distribution centers produce average annual sales that are among the highest in the consumable goods distribution industry. Our procurement and logistics capabilities, combined with the scale of our distribution centers, have enhanced our ability to provide customers with lower-cost merchandise and services that improve customer acquisition and retention. Our larger, super-regional distribution centers are able to conduct profitable operations at an extended range, thereby increasing our potential market reach. Efficient Centralized Purchasing: Category management decisions and vendor negotiations for the majority of our merchandise procurement are conducted in one location. Our customer support center is one of the largest buyer locations of consumable goods in the U.S. Centralized purchasing generates economies of scale because it enables us in one location to purchase goods more efficiently by eliminating redundancy involved in purchasing through multiple locations, which we believe increases our leverage with vendors. We believe that our centralized purchasing capabilities are valuable to national retailers such as Kmart as well as the smaller, independent retailers that make up our traditional customer base because we offer greater convenience and lower cost. Diverse Distribution Customer Base: We distribute to approximately 2,500 companies that operate almost 7,000 retail store locations under a wide variety of formats across the U.S. Other than Kmart, no customer accounted for more than 2% of our fiscal 2000 net sales. Successful Price Impact Retail Format: Our price impact supermarkets offer name-brand and private label consumable goods at significantly lower prices than conventional format supermarkets. We keep prices low by leveraging our existing distribution and procurement capabilities and maintaining a lower cost structure associated with operating these stores. We believe this format is profitable because we offer a reduced number of product selections, focus on high-turnover products and product categories, employ 43 49 flow-through distribution methods which reduce product storage and handling expense, and minimize store operating costs through a warehouse-style operation. BUSINESS STRATEGY Our business strategy is to use our competitive strengths to achieve sales and earnings growth in both our distribution group and retail group. As principal elements of our strategy, we intend to: Grow Sales to New Channel Retailers: We are rapidly moving beyond our historic market position and have targeted three key growth sectors. First, we are focusing on broad assortment/destination retailers, including supercenters and discount stores, and have demonstrated significant penetration in this market as evidenced by our distribution arrangements with Kmart and Target, Inc. Second, we are concentrating on precision assortment/neighborhood retailers such as convenience stores, drug stores and ethnic food stores. Our recent efforts in these markets include distribution agreements with significant customers such as Clark Retail Enterprises. Finally, we intend to focus on precision assortment/destination retailers typified by large-store formats such as cash-and-carries and price impact stores. Grow Sales to Traditional Format Customers: Despite being the second largest distributor in the $110 billion wholesale grocery industry, we account for approximately 10% of this traditional core market, representing substantial room for additional growth. Our repositioned distribution group has already enabled us to increase sales to existing and new customers, and we expect to be able to continue this trend. We routinely conduct detailed market studies to identify potential new customers in areas contiguous to existing customers, as we have capacity in our high-volume distribution centers to serve additional local independent stores or chains. Many potential customers are currently served by local or regional wholesalers that do not have the efficiencies associated with our procurement scale and do not provide the full scope of retail services that we provide. Expand Price Impact Format: We believe we have a substantial opportunity to grow our retail group's price impact supermarket operations. Because price impact stores cost less to build, maintain and operate than conventional supermarkets, we expect to be able to grow our price impact supermarket operations while incurring fewer capital expenditures than operators of conventional retail stores. As of April 23, 2001, we own and operate 38 price impact supermarkets, and we intend to add up to 17 price impact supermarkets in 2001 through a combination of construction of new stores, conversion of existing stores and acquisitions. Leverage Efficiencies Created by Our Kmart Distribution Agreement: We believe our new distribution agreement with Kmart and the resulting substantial increase in our distribution volume will provide us with increased economic and purchasing leverage that will benefit all of our existing and potential new customers. We have established a "best practices" team with Kmart based in Troy, Michigan that focuses on reducing costs and achieving greater efficiencies in our product supply chain. In addition, we believe that the increased volume of candy and tobacco that we will distribute as a result of the Kmart distribution agreement will enable us to compete more effectively for convenience store distribution business. Continue to Improve Working Capital Management and Reduce Costs: We intend to improve our working capital management primarily by improving inventory turns. To do this, we will continue to improve vendor inventory management practices, further develop our central procurement operations, improve ad forecasting with our customers, effectively manage alternative channels of product delivery to retail locations and invest in systems enhancements. In addition, to strengthen our position as a low-cost supplier to our customers and increase our profitability, we have instituted a "culture of thrift" among our employees and developed initiatives to reduce our expenses through our Low Cost Pursuit Program. 44 50 RECENT DEVELOPMENTS New Kmart Strategic Alliance On February 7, 2001, we announced a ten-year strategic alliance under which we will supply to Kmart substantially all of the food and consumable products in all current and future Kmart and Kmart supercenter stores in the U.S. and the Caribbean. We expect annual sales to Kmart to increase from approximately $1.4 billion in 2000 to approximately $2.6 billion in 2001 and approximately $4.5 billion in 2002. This new supply arrangement includes grocery, frozen, dairy, packaged meat and seafood, produce, bakery/deli, fresh meat, cigarettes, tobacco and candy. This strategic alliance may be further expanded to include an agreement on health and beauty products and related categories. It is planned that certain aspects of our price impact retail format could be incorporated into Kmart's merchandising programs, which could extend our combined procurement leverage. In addition, Kmart will offer us access to its strengths in general merchandise and seasonal goods. Kmart will adopt our "BestYet" private label program and pay fees to us based on brand management. Yucaipa Investment On March 22, 2001, an affiliate of The Yucaipa Companies, an investment group controlled by Ron Burkle, completed a $50 million investment in our common stock. Through this investment, Yucaipa acquired approximately 3.8 million newly issued shares, representing approximately 8.7% of our outstanding common stock. Yucaipa has substantial experience in the retailing and distribution sectors, including past investments in such food retailers as Food 4 Less Supermarkets, Inc., Ralph's Grocery Company, Dominick's Finer Foods and Fred Meyer, Inc. Yucaipa also acquired a 12-month option to invest an additional $50 million in our common stock at the then-current average market price. OUR DISTRIBUTION GROUP Our distribution group sells food and non-food products to supermarkets, convenience stores, supercenters, discount stores, limited assortment stores, drug stores, specialty stores and other stores across the U.S. We also offer a variety of retail support services to independently-owned and company-owned retail stores. Net sales for our distribution segment were $11.2 billion for fiscal 2000, excluding sales to our own retail stores. Sales to our own retail stores totaled $1.8 billion during fiscal 2000. In the course of implementing our strategic plan, since 1998 we have closed or consolidated 12 of our distribution centers, which has increased volumes at our remaining 32 distribution centers. As a result, we now have four distribution divisions with net sales for 2001 expected to be over $1 billion each. We have a total of 26 distribution divisions, some of which encompass multiple distribution centers that have common management. Customers Served. During 2000, our distribution group served a wide variety of retail operations located in 41 states. The group serves customers operating as conventional supermarkets (averaging approximately 23,000 total square feet), superstores (supermarkets of 30,000 square feet or more), supercenters (a combination of discount store and supermarket encompassing 110,000 square feet or more), warehouse stores ("no-frills" operations of various large sizes), combination stores (which have a high percentage of non-food offerings) and convenience stores (generally under 4,000 square feet and offering only a limited assortment of products). Our top ten customers accounted for approximately 17% of our total net sales during 2000. Kmart Corporation, our largest customer, represented approximately 10% of our total net sales in 2000, which we project will increase to a significantly greater percentage of our total net sales in 2001. No other single customer represented more than 2% of our fiscal 2000 net sales. Pricing. The distribution group uses market research and cost analyses as a basis for pricing its products and services. In all operating units, retail services are individually and competitively priced. We have three basic marketing programs for our distribution business: FlexMate, FlexPro and FlexStar. 45 51 The FlexMate marketing program prices product to customers at a quoted sell price, a selling price established by us that may include a mark-up. The FlexMate marketing program is available as an option in all operating units for grocery, frozen and dairy products. In all operating units, a quoted sell price method is used for meat, produce, bakery goods, delicatessen products, tobacco supplies, general merchandise and health and beauty care products. A distribution fee is usually added to the quoted sell price based upon the product category. Under some marketing programs, freight charges are also added to offset in whole or in part our cost of delivery services provided. Any cash discounts, certain allowances, and service income earned from vendors may be retained by the distribution group. This has generally been referred to as the "traditional pricing" method. Under FlexPro, grocery, frozen and dairy products are priced at their net acquisition value which is generally comparable to the net cash price paid by the distribution group. Vendor allowances and service income are passed through to the customer. Service charges are established using the principles of activity-based pricing modified by marketing considerations. Activity-based pricing attempts to identify our cost of providing certain services in connection with the sale of products such as transportation, storage and handling. Based on these identified costs, and with a view to market responses, we establish charges for these activities designed to recover our cost and provide us with a reasonable profit. These charges are then added to the net product price. We also charge a fee for administrative services provided to arrange and manage certain allowances and service income offered by vendors and earned by the distribution group and its customers. FlexStar uses the same product pricing as FlexPro, but generally uses a less complex presentation for distribution service charges. FlexStar averages the charges across items and orders and provides the customer a more consistent percentage base charge by department. Kmart product pricing for grocery, frozen, dairy, produce, package meat, bakery and deli products will follow the FlexPro/FlexStar pricing methodology, priced at their net acquisition value, with vendor allowances passed through. Random weight meat and deli products will be priced at our last received cost. Certain other items will be priced at net acquisition value plus a negotiated fee. In addition, Kmart will pay us a logistics fee equal to a percentage of purchases based on volume, and a negotiated fixed annual procurement fee. Fleming Brands. Fleming Brands are Fleming-owned brands that we offer exclusively to our customers. Fleming Brands, which include BestYet, Nature's Finest, SuperTru, Marquee, Rainbow and Exceptional Value, are positioned to compete with national brand products and value brand products. As part of our recent Kmart strategic alliance, Kmart has agreed to adopt our BestYet private label program in its Kmart and Kmart supercenter stores. Controlled labels are offered only in stores operating under specific banners (which may or may not be controlled by us). Controlled labels are products to which we have exclusive distribution rights to a particular customer or in a specific region. We offer two controlled labels, IGA and Piggly Wiggly brands, which are national quality brands. Procurement. We have centralized the majority of our merchandise procurement. This makes more efficient use of our procurement staff, improves buying efficiency and reduces the cost of goods. Our customer support center near Dallas is one of the largest buyer locations of consumable goods in the U.S. We believe that our centralized purchasing capabilities are valuable to national retailers such as Kmart as well as the smaller, independent retailers that make up our traditional customer base. Retail Services. Retail services are marketed, priced and delivered separately from other distribution operations. Our retail services marketing and sales personnel look for opportunities to cross-sell additional retail services as well as other distribution group products to their customers. Through our recently established retail account executive, or RAE, programs, we offer consulting, strategic planning, administrative and information technology services to customers to assist them in improving store performance. Incentive compensation for our RAEs is based on the performance of the customers they serve. 46 52 Facilities and Transportation. As of April 23, 2001 our distribution group operates 22 full-line distribution centers which are responsible for the distribution of national brands and Fleming Brands, including groceries, meat, dairy and delicatessen products, frozen foods, produce, bakery goods and a variety of related food and non-food items. Six general merchandise and specialty food operating units distribute health and beauty care items and other items of general merchandise and specialty foods. Four warehouse facilities serve convenience stores. All facilities are equipped with modern material handling equipment for receiving, storing and shipping large quantities of merchandise. Our distribution centers comprise approximately 19 million square feet of warehouse space. Additionally, the distribution group rents, on a short-term basis, approximately 432,000 square feet of off-site temporary storage space. To support our new business from Kmart, we expect to add up to four new distribution centers over the next few months. Transportation arrangements and operations vary by distribution center and may vary by customer. Some customers prefer to handle product delivery themselves, others prefer us to deliver products, and still others ask us to coordinate delivery with a third party. Accordingly, many of our distribution centers maintain a truck fleet to deliver products to customers, and several of our distribution centers also engage dedicated contract carriers to deliver products. We increase the utilization of our truck fleet by back-hauling products from suppliers and others, thereby reducing the number of empty miles traveled. To further increase our fleet utilization, we have made our truck fleet available to other firms on a for-hire carriage basis. Capital Invested in Customers. As part of our services to retailers, we provide capital to certain customers by extending credit for inventory purchases, by becoming primarily or secondarily liable for store leases, by leasing equipment to retailers, by making secured loans and by making equity investments in customers: - Extension of Credit for Inventory Purchases. Customary trade credit terms are usually the day following statement date for customers on FlexPro or FlexStar and up to seven days for other marketing plan customers. - Store and Equipment Leases. We lease stores for sublease to certain customers. At year-end 2000, we were the primary lessee of approximately 600 retail store locations subleased to and operated by customers. We also lease a substantial amount of equipment to retailers. - Secured Loans and Lease Guarantees. We make loans to customers primarily for store expansions or improvements. These loans are typically secured by inventory and store fixtures, bear interest at rates above the prime rate, and are for terms of up to ten years. Loans are approved by our business development committee following written approval standards. We believe our loans to customers are illiquid and would not be investment grade if rated. From time to time, we also guarantee the lease obligations of certain of our customers. In making credit and investment decisions, we consider many factors, including estimated return on capital, assumed risks and benefits (including our ability to secure long-term supply contracts with these customers). At year-end 2000, we had loans outstanding to customers totaling $110 million. We also have investments in customers through direct financing leases of real property and equipment, lease guarantees, operating leases or credit extensions for inventory purchases. The present values of our obligations under such direct financing leases and lease guarantees were $182 million and $14 million, respectively, at year-end 2000. Our credit loss expense from receivables as well as from investments in customers was $29 million in 2000 which is comparable to prior years. Franchising. We also license or grant franchises to retailers to use certain registered trade names such as Piggly Wiggly, Food 4 Less (a registered servicemark and trademark that we are authorized to use pursuant to a restricted license granted by Ralph's Grocery Company, a subsidiary of Kroger Co.), Sentry, Super 1 Foods, Festival Foods, Jubilee Foods, Jamboree Foods, MEGAMARKET, Shop 'N Kart, 47 53 American Family, Big Star, Big T, Buy for Less, County Pride Markets, Red Fox, Shop N Bag, Super Duper, Super Foods, Super Thrift, Thriftway and Value King. We encourage independents and small chains to join one of the Fleming Banner Groups to receive many of the same marketing and procurement efficiencies available to larger chains. The Fleming Banner Groups are retail stores operating under one of a number of banners representing either a conventional or price impact retail format. Cost-Reduction Initiatives. To strengthen our position as a low-cost supplier to our retail customers and increase our profitability, we instituted a "culture of thrift" among our employees and developed initiatives to reduce our expenses through our Low Cost Pursuit Program. This program focuses on five areas: merchandising and procurement, logistics and distribution, shared services and finance, retail operations, and customer relations. In the merchandising and procurement functions, we have lowered cost of goods and administrative costs by centralizing most of our procurement functions, which were conducted in individual distribution centers, into one national procurement center near Dallas, which is now one of the largest procurement locations in the U.S. The logistics and distribution functions have removed costs associated with back-haul, in-bound transportation and other logistics functions. In addition, we established a new shared services center in Oklahoma City where we have centralized the management of our accounting, human resources, information technology and other support services. Retail operations have implemented best demonstrated practices to reduce labor costs and reduce store operating costs, and certain administrative functions have also been centralized for retail operations. Finally, customer relations has established a single point of contact for each customer to eliminate many paper-based processes and improve customer communications. OUR RETAIL GROUP As of April 23, 2001, our retail group operates 103 supermarkets under a variety of formats. Our continuing chains include 38 price impact supermarkets under the Food 4 Less banner, and ten additional supermarkets which we intend to convert to the price impact format in 2001 and 2002. We also operate 44 supermarkets that are adopting certain elements of the price impact format under the Rainbow Foods banner. Price impact supermarkets offer deep-discount, everyday low prices in a warehouse-style format. In addition, we operate 11 limited assortment stores under the Yes!Less banner, five of which we opened in 2001. Our limited assortment stores offer a narrow selection of low-price, private label food and other consumable goods, as well as general merchandise. Price Impact Supermarkets. Our retail group owns and operates 38 Food 4 Less price impact supermarkets, of which 26 are located in Northern California, seven in the Salt Lake City, Utah area, four in the Phoenix, Arizona area and one in Wisconsin. Of these 38 stores, 22 have opened since the beginning of 1999. These stores offer deep-discount, everyday low prices well below those offered by conventional supermarkets and carry prices for grocery products which are also generally lower than supercenters. Our price impact supermarkets are also known for their quality meat and produce offerings. These supermarkets average 55,000 square feet in size, generate average weekly sales of more than $450,000. Our price impact supermarkets serve price-sensitive middle-income consumers who may have larger-than-average families. These stores have a wider trade area than conventional supermarkets yet are generally more convenient to shop than supercenters. Our price impact supermarkets offer name-brand food and consumable goods at significantly lower prices than conventional format retail store operators because of the many low-cost features of our stores. These features include: offering a reduced number of product selections, focusing on popular, name-brand products and product categories; employing flow-through distribution methods which reduce product storage and handling expense; and minimizing store operating costs by presenting a warehouse-style operation. 48 54 These stores do not cost as much as conventional stores to construct and maintain, as price impact stores typically feature cement floors, cinder block walls, exposed ceiling and walk-in freezers and coolers which combine the typically separate storage and display areas. In addition, price impact stores produce lower operating expenses, primarily as a result of less labor content due to pallet or case-loading display racks, fewer product categories offered due to focusing on the more popular items, self bagging, and elimination of on-site service departments such as a bakery or butcher shop. We believe price-sensitive consumers are underserved on a nationwide basis. Because price impact stores cost less to build and maintain than conventional supermarkets, we expect to be able to grow our price impact supermarket operations while incurring fewer capital expenditures. We believe the success of our price impact stores is based on an underserved trade area and does not require significant market share. Consequently, we believe the typical advertising and marketing expenditure requirements do not apply. In 2001, we intend to convert seven of our conventional format supermarkets located in the greater Milwaukee, Wisconsin area to the price impact format, and an additional three in early 2002. We also plan to open an additional ten price impact stores in 2001 through new store construction and acquisitions. New price impact stores that our retail group opens may be opened under trade names other than Food 4 Less. Conventional Supermarkets with Price Impact Elements. We also operate 44 Rainbow Foods supermarkets, with 42 stores in Minnesota and two in Wisconsin. Our Rainbow Foods stores are conventional supermarkets which we are beginning the process of retrofitting with an increasing degree of price impact elements. As part of this repositioning process, labor-intensive service departments will be reduced or eliminated, and some of the merchandising strategies of our price impact format will be implemented. Purchasing decisions will be coordinated with our price impact stores, which should also help to increase operating margins. We expect that the repositioning of the Rainbow Foods chain will be complete by the end of 2002. Limited Assortment Stores. In 2000, we began to develop our limited assortment retail concept operating under the Yes!Less trade name, operating stores averaging 12,000 to 15,000 square feet of selling space. Our Yes!Less concept is designed to appeal to a needs-based consumer, primarily with low price private label food and other consumables and an attractive selection of general merchandise products at opening price points. With five stores opened in 2001, there are currently 11 Yes!Less retail stores open, ten in Texas and one in Louisiana. We are currently evaluating the concept with a view toward appropriate expansion. Divestiture of Conventional Format Supermarkets. In addition to the 103 supermarkets described above, we also own and operate 31 conventional format supermarkets. As part of our strategic repositioning, we decided to sell or close these 31 conventional format supermarkets in order to focus resources on growing our price impact stores and improving financial results. Since 1998, we have divested 207 conventional supermarkets and we are in the process of selling or closing the remaining 31 stores. These conventional format supermarkets are operating primarily under the ABCO Desert Market trade name, and are in various stages of divestiture. In 2001, we have sold or closed 66 stores, including the sale of the assets of 11 ABCO Desert Market stores located in Arizona to Safeway, Inc. and the assets of a 16-store chain of Baker's Supermarkets located in the Omaha, Nebraska area to Kroger Co. Of the remaining 31 stores to be divested, we are in various stages of discussions with numerous parties with respect to the sale of the majority of these stores, and we currently expect that all of these stores will either be sold or closed by the end of 2001. We expect to retain a substantial level of the distribution business for the majority of stores that are sold. PRODUCTS We supply a full line of national brands and Fleming Brands, including groceries, meat, dairy and delicatessen products, frozen foods, produce, bakery goods and a variety of general merchandise, health and beauty care and other related items. During 2000, the average number of stock keeping units, or 49 55 SKUs, carried in full-line distribution centers was approximately 15,000. General merchandise and specialty food operating units carried an average of approximately 17,500 SKUs. Product sales account for over 97% of our consolidated sales. During 2000, our product mix as a percentage of product sales was approximately 54% groceries, 39% perishables and 7% general merchandise. SUPPLIERS We purchase our products from numerous vendors and growers. As a large customer, we are able to secure favorable terms and volume discounts on many of our purchases, leading to lower unit costs. We purchase products from a diverse group of suppliers and believe we have adequate sources of supply for substantially all of our products. COMPETITION The distribution segment operates in a competitive market. Our primary competitors are regional and local food distributors, national chains which perform their own distribution and national food distributors. The principal factors on which we compete include price, quality and assortment of product lines, schedules and reliability of delivery and the range and quality of customer services. The primary competitors of our retail segment supermarkets and distribution segment customers are national, regional and local grocery chains, as well as supercenters, independent supermarkets, convenience stores, drug stores, restaurants and fast food outlets. Principal competitive factors include price, quality and assortment, store location and format, sales promotions, advertising, availability of parking, hours of operation and store appeal. INTELLECTUAL PROPERTY We or our subsidiaries have many trade names registered at either the federal or state level or a combination of both, such as Piggly Wiggly, Super 1 Foods, Festival Foods, Jubilee Foods, Jamboree Foods, MEGAMARKET, Shop 'N Kart, ABCO Desert Market, American Family, Big Star, Big T, Buy for Less, County Pride Markets, Rainbow Foods, Red Fox, Sentry, Shop N Bag, Super Duper, Super Foods, Super Thrift, Thriftway and Value King. We have applied for trademark registration for the name Fresh 4 Less. We license the Food 4 Less service mark and trade name from Ralph's Grocery Company, a subsidiary of Kroger Co., and have the exclusive right to use and sublicense the name in certain areas of California. We also have the exclusive license to use and sublicense the name in all other states, excluding certain areas of Southern California and certain areas in various other states previously licensed to others by Ralph's or its predecessors. Additionally, should the rights to such a previously licensed area terminate, we would automatically obtain the exclusive license for that area. The Food 4 Less license agreement generally provides for protected trade area status for five years after the date that we, our franchisees or Ralph's commit to entering a new market area under the Food 4 Less banner. However, we are not prohibited by the licensing agreement from opening stores under a different trade name in any of these areas. EMPLOYEES At December 30, 2000, we had 29,567 full-time and part-time employees, with 9,667 employed by the distribution group, 17,829 by the retail group and 2,071 employed in shared services, customer support and other functions. Approximately half of our employees 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; the Retail, Wholesale and Department Store Union; and the International Union of Operating Engineers. Most of 50 56 these agreements expire at various times throughout the next five years. We consider our employee relations in general to be satisfactory. PROPERTIES The following table sets forth facilities information with respect to our distribution group.
APPROXIMATE LOCATION SQUARE FEET OWNED OR LEASED -------- -------------- --------------- (IN THOUSANDS) FULL-LINE FOOD DISTRIBUTION CENTERS: Ewa Beach, HI.......................................... 361 Leased Fresno, CA............................................. 828 Owned/Leased Garland, TX............................................ 1,190 Owned Geneva, AL............................................. 643 Leased Kansas City, KS........................................ 1,136 Leased La Crosse, WI.......................................... 907 Owned Lafayette, LA.......................................... 437 Owned Lincoln, NE............................................ 515 Leased Lubbock, TX............................................ 763 Owned/Leased Massillon, OH.......................................... 874 Owned Memphis, TN............................................ 1,071 Owned/Leased Miami, FL.............................................. 764 Owned Milwaukee, WI.......................................... 600 Owned Minneapolis, MN........................................ 480 Owned Nashville, TN.......................................... 941 Leased North East, MD......................................... 591 Owned/Leased Oklahoma City, OK...................................... 529 Leased Phoenix, AZ............................................ 1,642 Owned/Leased Sacramento, CA......................................... 787 Owned/Leased Salt Lake City, UT..................................... 555 Owned/Leased Superior, WI........................................... 371 Owned Warsaw, NC............................................. 672 Owned/Leased ------ Total................................................ 16,657 GENERAL MERCHANDISE DISTRIBUTION CENTERS: Dallas, TX............................................. 262 Owned/Leased King of Prussia, PA.................................... 377 Leased La Crosse, WI.......................................... 163 Owned Memphis, TN............................................ 495 Owned/Leased Sacramento, CA......................................... 438 Leased Topeka, KS............................................. 223 Leased ------ Total................................................ 1,958 CONVENIENCE STORES: Altoona, PA............................................ 172 Owned Marshfield, WI......................................... 157 Owned Plymouth, MN........................................... 239 Leased Romeoville, IL......................................... 124 Leased ------ Total................................................ 692 OUTSIDE STORAGE: Outside storage facilities -- Typically rented on a short-term basis..................................... 432 ------ Total for Distribution............................... 19,739 ======
51 57 To support our new business from Kmart, recently we leased a warehouse facility in Fort Wayne, Indiana. Pursuant to our repositioning strategy, we have five closed facilities in various states and we are actively marketing them. Our retail group operates 103 supermarkets in a variety of formats in California, Utah, Arizona, Wisconsin, Minnesota, Texas and Louisiana. Our continuing chains include 38 price impact supermarkets, ten supermarkets to be converted to the price impact format, 11 limited assortment stores and 44 conventional supermarkets which are adopting certain elements of the price impact format. In addition, we are in the process of selling or closing an additional 31 conventional supermarkets that our retail segment owns and operates in Arizona and Illinois. For more information, see the subsection "Our Retail Group." Our shared service center office is located in Oklahoma City, Oklahoma. The shared service center occupies leased office space totaling approximately 232,000 square feet. Our customer support center near Dallas, Texas occupies leased office space totaling approximately 136,000 square feet. We own and lease other significant assets, such as inventories, fixtures and equipment and capital leases. LEGAL PROCEEDINGS The following describes various pending legal proceedings to which we are subject: Class Action Suits. In 1996, we and certain of our present and former officers and directors were named as defendants in nine purported class action suits filed by certain stockholders and one purported class action suit filed by two noteholders. All cases were filed in the United States District Court for the Western District of Oklahoma. In 1997, the court consolidated the stockholder cases; the noteholder case was also consolidated, but only for pre-trial purposes. The plaintiffs in the consolidated cases sought undetermined but significant damages, and asserted liability for our alleged "deceptive business practices," and our alleged failure to properly account for and disclose the contingent liability created by the David's Supermarkets case, a lawsuit we settled in April 1997 in which David's sued us for allegedly overcharging for products. The plaintiffs claimed that these alleged practices led to the David's case and to other material contingent liabilities, caused us to change our manner of doing business at great cost and loss of profit and materially inflated the trading price of our common stock. During 1998 the complaint in the noteholder case was dismissed, and during 1999 the complaint in the consolidated stockholder case was also dismissed, each without prejudice. The court gave the plaintiffs the opportunity to restate their claims in each case, and they did so in amended complaints. We again filed motions to dismiss all claims in both cases. On February 4, 2000, the court dismissed the amended complaint in the stockholder case with prejudice. The stockholder plaintiffs filed a notice of appeal on March 3, 2000. Briefing is complete in the Court of Appeals for the Tenth Circuit, and the case is set for oral argument on May 15, 2001. On August 1, 2000, the court dismissed the claims in the noteholder complaint alleging violations of the Securities Exchange Act of 1934, but the court determined that the noteholder plaintiffs have stated a claim under Section 11 of the Securities Act of 1933. On September 15, 2000, defendants filed a motion to allow an immediate appeal of the court's denial of their motion to dismiss plaintiffs' claim under Section 11. That motion was denied on January 8, 2001. The case was set for a status and scheduling conference on January 30, 2001. The court has entered an order setting this case for trial in October 2001. On April 30, 2001, a Memorandum of Understanding was signed which provides, among other things, for the parties in the noteholder case to proceed to agree on a Settlement Agreement which will include a payment by defendants and our insurer of $2.5 million in full satisfaction of the claim. The settlement will require court and class approval. In 1997, we won a declaratory judgment against certain of our insurance carriers regarding policies issued to us for the benefit of our officers and directors. On motion for summary judgment, the court ruled 52 58 that our exposure, if any, under the class action suits is covered by D&O policies written by the insurance carriers, aggregating $60 million in coverage, and that the "larger settlement rule" will apply to the case. According to the trial court, under the larger settlement rule, a D&O insurer is liable for the entire amount of coverage available under a policy even if there is some overlap in the liability created by the insured individuals and the uninsured corporation. If a corporation's liability is increased by uninsured parties beyond that of the insured individuals, then that portion of the liability is the sole obligation of the corporation. The court also held that allocation is not available to the insurance carriers as an affirmative defense. The insurance carriers appealed. In 1999, the appellate court affirmed the decision that the class actions were covered by D&O policies aggregating $60 million in coverage but reversed the trial court's decision as to allocation as being premature. We intend to vigorously defend against the claims in these class action suits and pursue the issue of insurance discussed above, but we cannot predict the outcome of the cases. An unfavorable outcome could have a material adverse effect on our financial condition and prospects. Don's United Super (and related cases). We and two of our retired executives have been named in a suit filed in 1998 in the United States District Court for the Western District of Missouri by several current and former customers of the company (Don's United Super, et al. v. Fleming, et al.). The 19 plaintiffs operate retail grocery stores in the St. Joseph and Kansas City metropolitan areas. The plaintiffs in this suit allege product overcharges, breach of contract, breach of fiduciary duty, misrepresentation, fraud and RICO violations, and they are seeking actual, punitive and treble damages, as well as a declaration that certain contracts are voidable at the option of the plaintiffs. During the fourth quarter of 1999, plaintiffs produced reports of their expert witnesses calculating alleged actual damages of approximately $112 million. During the first quarter of 2000, plaintiffs revised a portion of these damage calculations, and although it is not clear what the precise damage claim will be, it appears that plaintiffs will claim approximately $120 million, exclusive of any punitive or treble damages. On May 2, 2000, the court granted partial summary judgment to the defendants, holding that plaintiffs' breach of contract claims that relate to events that occurred more than four years before the filing of the litigation are barred by limitations, and that plaintiffs' fraud claims based upon fraudulent inducement that occurred more than 15 years before the filing of the lawsuit likewise are barred. It is unclear what impact, if any, these rulings may have on the damage calculations of the plaintiffs' expert witnesses. The court has set August 13, 2001 as the date on which trial of the Don's case will commence. In October 1998, we and the same two retired executives were named in a suit filed by another group of retailers in the same court as the Don's case (Coddington Enterprises, Inc., et al. v. Fleming, et al.). Currently, 16 plaintiffs are asserting claims in the Coddington case, all but one of which have arbitration agreements with us. The plaintiffs assert claims virtually identical to those set forth in the Don's case, and although plaintiffs have not yet quantified the damages in their pleadings, it is anticipated that they will claim actual damages approximating the damages claimed in the Don's case. In July 1999, the court ordered two of the plaintiffs in the Coddington case to arbitration, and otherwise denied arbitration as to the remaining plaintiffs. We have appealed the court's denial of arbitration to the United States Court of Appeals for the Eighth Circuit. The two plaintiffs that were ordered to arbitration have filed motions asking the court to reconsider the arbitration ruling. Two other cases had been filed before the Don's case in the same court (R&D Foods, Inc., et al. v. Fleming, et al.; and Robandee United Super, Inc., et al. v. Fleming, et al.) by 10 customers, some of whom are also plaintiffs in the Don's case. The earlier two cases, which principally seek an accounting of our expenditure of certain joint advertising funds, have been consolidated. All proceedings in these cases have been stayed pending the arbitration of the claims of those plaintiffs who have arbitration agreements with us. 53 59 In March 2000, we and one former executive were named in a suit filed in the United States District Court for the Western District of Missouri by current and former customers that operated five retail grocery stores in and around Kansas City, Missouri, and four retail grocery stores in and around Phoenix, Arizona (J&A Foods, Inc., et al. v. Dean Werries and Fleming Companies, Inc.). The plaintiffs have alleged product overcharges, fraudulent misrepresentation, fraudulent nondisclosure and concealment, breach of contract, breach of duty of good faith and fair dealing and RICO violations, and they are seeking actual, punitive and treble damages, as well as other relief. The damages have not been quantified by the plaintiffs; however, we anticipate that substantial damages will be claimed. On August 8, 2000, the Judicial Panel on Multidistrict Litigation granted our motion and ordered the related Missouri cases (Don's United Super, Coddington Enterprises, Inc. and J&A Foods, Inc.) and the Storehouse Markets case (described below) transferred to the United States District Court for the Western District of Missouri for coordinated or consolidated pre-trial proceedings. On March 2, 2001, the court ordered the parties in the related Missouri cases, the Storehouse Markets case and the Welsh case to mediate their claims within 45 days of the order. On April 9 - 11, 2001, the parties to the related Missouri cases participated in a mediation process held in Kansas City, Missouri pursuant to the court's order. Although the precise details of the mediation are subject to a confidentiality agreement among the parties and may not be disclosed, the mediation confirmed our expectation that the plaintiffs in all cases will claim substantial damages. In addition, based on discussions with plaintiffs' counsel during the mediation, it appears unlikely that these cases will be resolved before trial. We intend to vigorously defend against the claims in these related cases, but we are currently unable to predict the outcome of the cases. An unfavorable outcome could have a material adverse effect on our financial condition and prospects. Storehouse Markets. In 1998, we and one of our former division officers were named in a suit filed in the United States District Court for the District of Utah by several current and former customers of the company (Storehouse Markets, Inc., et al. v. Fleming Companies, Inc., et al.). The plaintiffs have alleged product overcharges, fraudulent misrepresentation, fraudulent nondisclosure and concealment, breach of contract, breach of duty of good faith and fair dealing and RICO violations, and they are seeking actual, punitive and treble damages. Damages have not been quantified by the plaintiffs; however, we anticipate that substantial damages will be claimed. The plaintiffs have made these claims on behalf of a class that would purportedly include current and former customers of our Salt Lake City division covering a four-state region. On June 12, 2000, the court entered an order certifying the case as a class action. On July 11, 2000, the United States Court of Appeals for the Tenth Circuit granted our request for a discretionary appeal of the class certification order, and we are pursuing that appeal on an expedited basis. On August 8, 2000, the Judicial Panel on Multidistrict Litigation granted our motion and ordered the Storehouse Markets case and the related Missouri cases (described above) transferred to the United States District Court for the Western District of Missouri for coordinated or consolidated pre-trial proceedings. On March 2, 2001, the court ordered the parties in the related Missouri cases, the Storehouse Markets case and the Welsh case to mediate their claims within 45 days of the order. On April 9 - 11, 2001, the parties to the Storehouse case participated in mediation process held in Kansas City, Missouri pursuant to the court's order. Although the precise details of the mediation are subject to a confidentiality agreement among the parties and may not be disclosed, the mediation confirmed our expectation that the plaintiffs in Storehouse will claim substantial damages. We intend to vigorously defend against these claims but we cannot predict the outcome of the case. An unfavorable outcome could have a material adverse effect on our financial condition and prospects. 54 60 Welsh. In April 2000, the operators of two grocery stores in Van Horn and Marfa, Texas filed an amended complaint in the United States District Court for the Western District of Texas, Pecos Division (Welsh v. Fleming Foods of Texas, L.P.). The amended complaint alleges product overcharges, breach of contract, fraud, conversion, breach of fiduciary duty, negligent misrepresentation and breach of the Texas Deceptive Trade Practices Act. The amended complaint seeks unspecified actual damages, punitive damages, attorneys' fees and pre-judgment and post-judgment interest. Pursuant to the order of the Judicial Panel on Multidistrict Litigation, the Welsh case has been transferred to the Western District of Missouri for pre-trial proceedings. No trial date has been set in this case. On March 2, 2001, the court ordered the parties in the related Missouri cases, the Storehouse Markets case and the Welsh case to mediate their claims within 45 days of the order. The parties in the Welsh case have not yet mediated their claims. Other. Our facilities and operations are subject to various laws, regulations and judicial and administrative orders concerning protection of the environment and human health, including provisions regarding the transportation, storage, distribution, disposal or discharge of certain materials. In conformity with these provisions, we have a comprehensive program for testing, removal, replacement or repair of our underground fuel storage tanks and for site remediation where necessary. We have established reserves that we believe will be sufficient to satisfy the anticipated costs of all known remediation requirements. We and others have been designated by the U.S. Environmental Protection Agency and by similar state agencies as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, or similar state laws, as applicable, with respect to EPA-designated Superfund sites. While liability under CERCLA for remediation at these sites is generally joint and several with other responsible parties, we believe that, to the extent we are ultimately determined to be liable for the expense of remediation at any site, such liability will not result in a material adverse effect on our consolidated financial position or results of operations. We are committed to maintaining the environment and protecting natural resources and human health and to achieving full compliance with all applicable laws, regulations and orders. We are a party to or threatened with various other litigation and contingent loss situations arising in the ordinary course of our business including: disputes with customers and former customers; disputes with owners and former owners of financially troubled or failed customers; disputes with landlords and former landlords; disputes with employees and former employees regarding labor conditions, wages, workers' compensation matters and alleged discriminatory practices; disputes with insurance carriers; tax assessments and other matters, some of which are for substantial amounts. Except as noted in this prospectus, we do not believe that any such claim will have a material adverse effect on us. 55 61 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS Our Executive Officers and Directors are as follows:
NAME AGE PRESENT POSITION ---- --- ---------------- Executive Officers: Mark S. Hansen................... 46 Chairman and Chief Executive Officer Thomas G. Dahlen................. 47 Executive Vice President and President, Retail and Corporate Marketing E. Stephen Davis................. 60 Executive Vice President and President, Wholesale Dennis C. Lucas.................. 53 Executive Vice President and President, Retail William H. Marquard.............. 41 Executive Vice President, Business Development and Chief Knowledge Officer Scott M. Northcutt............... 39 Executive Vice President, Human Resources Neal J. Rider.................... 39 Executive Vice President and Chief Financial Officer Ronald C. Anderson............... 58 Senior Vice President, Central Operations John F. Baldi.................... 49 Senior Vice President, Convenience Store and E-Commerce Fulfillment Mark K. Batenic.................. 52 Senior Vice President, Northern Operations Michael J. Carey................. 54 Senior Vice President, Western Operations Charles L. Hall.................. 50 Senior Vice President, Real Estate and Store Development Carlos M. Hernandez.............. 46 Senior Vice President, General Counsel and Secretary Leonard Kaye..................... 62 Senior Vice President, Eastern Operations Directors: Mark S. Hansen................... 46 Chairman and Chief Executive Officer Herbert M. Baum.................. 64 Director Archie R. Dykes.................. 70 Director Carol B. Hallett................. 63 Director Robert S. Hamada................. 63 Director Edward C. Joullian III........... 71 Director Guy A. Osborn.................... 65 Director Alice M. Peterson................ 48 Director
Mark S. Hansen joined us as Chairman and Chief Executive Officer in November 1998. Prior to joining us, Mr. Hansen served as President and Chief Executive Officer of SAM'S Club, a division of Wal-Mart Stores, Inc., from 1997 through 1998. Prior to joining Wal-Mart, Mr. Hansen served in multiple capacities at PETsMart Inc., a retailer of pet food, pet supplies and related products, including as President and Chief Executive Officer from 1989 to 1997. Prior to 1989, Mr. Hansen served in various management capacities in the supermarket industry. He serves as an executive advisory board member of Swander Pace Capital and is a director of Applebee's Restaurants. Thomas G. Dahlen joined us as our Executive Vice President and President, Retail and Corporate Marketing in April 2001. From 1999 until joining us, Mr. Dahlen served as President and Chief Executive Officer of Furrs Supermarkets, Inc. From 1994 until 1999, Mr. Dahlen served in multiple capacities at Ralph's Supermarkets Division of the Yucaipa Companies, including Executive Vice President from 1998 to 1999, and Senior Vice President, Sales and Marketing from 1994 to 1998. E. Stephen Davis joined us in 1960 and has served as our Executive Vice President and President, Wholesale since February 2000. Prior to that, Mr. Davis has served us in various positions, including Executive Vice President, Food Distribution from 1998 to February 2000, Executive Vice President, Operations from 1997 to 1998, Executive Vice President, Food Operations from 1996 to 1997 and Executive Vice President, Distribution from 1995 to 1996. 56 62 Dennis C. Lucas joined us as Executive Vice President and President, Retail in July 1999. From 1992 until joining us, Mr. Lucas served in multiple capacities at Albertson's, including Regional President from 1998 to July 1999, Senior Vice President and Regional Manager from 1996 to 1998, and various Vice President positions from 1992 to 1996. William H. Marquard joined us as Executive Vice President, Business Development and Chief Knowledge Officer in June 1999. From 1991 until joining us, Mr. Marquard was a partner in the consulting practice of Ernst & Young. Scott M. Northcutt joined us as Senior Vice President, Human Resources in January 1999 and he became Executive Vice President, Human Resources in February 2000. From 1997 until joining us, Mr. Northcutt was Vice President-People Group at SAM's Club, a division of Wal-Mart Stores, Inc. From 1988 to 1995, he served as Vice President-Human Resources and from 1995 to 1996, he served as Vice President-Store Operations at Dollar General Corporation. Neal J. Rider joined us as Executive Vice President and Chief Financial Officer in January 2000. From 1999 until joining us, Mr. Rider was Executive Vice President and Chief Financial Officer at Regal Cinemas, Inc. From 1980 to 1999, Mr. Rider served in multiple capacities at American Stores Company, including Treasurer and Controller responsibilities from 1994 to 1997 before becoming Chief Financial Officer in 1998. Ronald C. Anderson joined us in 1995 and has served as our Senior Vice President, Central Operations since June 2000. Prior to that, Mr. Anderson served as our Senior Vice President, Operating Group President from 1998 to June 2000, and our Senior Vice President, General Merchandise from 1995 to 1998. John F. Baldi joined us as Senior Vice President, Convenience Stores and E-Commerce Fulfillment in August 2000. From February 1996 until joining us, Mr. Baldi was Division President at Alliant Foodservice. Mark K. Batenic joined us in 1973 and has served as our Senior Vice President, Northeast Operations since December 2000. Prior to that, Mr. Batenic has served us in various Senior Vice President positions since 1994, including Senior Vice President, Sales and Business Development Food Distribution, Senior Vice President, Customer Management, and Senior Vice President, Operations. Michael J. Carey joined us in 1983 and has served as our Senior Vice President, Western Operations since June 2000. Prior to that, Mr. Carey served as our Operating Group President from 1998 to June 2000, our President, LaCrosse Division from 1996 to 1998, and our Director of IGA Marketing from 1994 to 1996. Charles L. Hall joined us as Senior Vice President, Real Estate and Store Development in June 1999. From 1998 until joining us, he was Senior Vice President-Real Estate and Store Development at Eagle Hardware and Garden, Inc. From 1992 to 1998, he served as Vice President of Real Estate Development at PETsMART, Inc. Carlos M. Hernandez joined us in March 2000 as Associate General Counsel and Assistant Secretary and has served as our Senior Vice President, General Counsel and Secretary since February 2001. Prior to joining us, Mr. Hernandez was employed in various capacities at Armco Inc. from 1981 to 1999, and then as an attorney at AK Steel Holding Corporation from October to December 1999. Leonard Kaye joined us in 1963 and has served as our Senior Vice President, Eastern Operations since June 2000. Prior to that, Mr. Kaye served us in various positions, including Operating Group President, President, Memphis Division and Operations Manager. Herbert M. Baum joined us as a director in 1998. He is Chairman, president and chief executive officer of The Dial Corporation (a consumer products company). Prior to joining The Dial Corporation in August 2000, Mr. Baum served as president and chief operating officer of Hasbro, Inc. from January 1999. From 1993 to 1998, Mr. Baum served as chairman and chief executive officer of Quaker State 57 63 Corporation. From 1978 to 1993, Mr. Baum served in a variety of positions for Campbell Soup Company where his last position held was President Campbell North and South America. Mr. Baum is a director of Grocery Manufacturers of America, The Dial Corporation, Midas, Inc., Meredith Corporation, and PepsiAmerica, Inc. (formerly Whitman Corporation). Archie R. Dykes joined us as a director in 1981. He is chairman and chief executive officer of Capital City Holdings, Inc. (a venture capital organization). He is nonexecutive chairman and a director of PepsiAmerica, Inc. (formerly Whitman Corporation), Midas, Inc. and the Employment Corporation. A former chancellor of the University of Kansas and of the University of Tennessee, Mr. Dykes also serves as a trustee of the Kansas University Endowment Association and of the William Allen White Foundation. Carol B. Hallett joined us as a director in 1993. She is president and chief executive officer of the Air Transport Association of America, Washington, D.C. (the nation's oldest and largest airline trade organization). Prior to joining the Air Transport Association in April 1995, Mrs. Hallett served as senior government relations advisor with Collier, Shannon, Rill & Scott from February 1993 to March 1995. From November 1989 through January 1993, Mrs. Hallett served as the Commissioner of the United States Customs Service. From September 1986 to May 1989, she served as the U.S. Ambassador to The Commonwealth of the Bahamas. From July 1983 to August 1986, Mrs. Hallett served as the national vice chairman and field director of Citizens for America. Mrs. Hallett also served three terms in the California legislature and as minority leader in the State Assembly. Mrs. Hallett is a director of Litton Industries, Inc. and Mutual of Omaha Insurance Company. She is a trustee for the Junior Statesmen of America. Mrs. Hallett also serves on the President's Cabinet of California Polytechnic State University. Robert S. Hamada joined us as a director in February 2001. Mr. Hamada is Dean of the University of Chicago Graduate School of Business where he also serves as the Edward Eagle Brown Distinguished Service Professor of Finance. An internationally known authority in finance, Mr. Hamada has been a member of the faculty of the University of Chicago since 1966, during which time he has served as director of the Center for International Business and Research from 1992 to 1993, as deputy dean for the faculty at the Graduate School of Business from 1985 to 1990, and as director of the Center for Research in Security Prices from 1980 to 1985. Mr. Hamada is a director of Northern Trust Corporation, A.M. Castle & Co., Flying Food Fare, Window to the World Communications, Inc., and the National Bureau of Economic Research. Edward C. Joullian III joined us as a director in 1984. He has been chairman of Mustang Fuel Corp. (energy development and services) since 1964. He also served as chief executive officer of that company until his retirement in 1998. Mr. Joullian also served Fleming as interim chairman of the board of directors from July 18, 1998 until November 30, 1998. He is a director of The LTV Corp. Guy A. Osborn joined us as a director in 1992. He retired as chairman of Universal Foods Corp. in April 1997. He joined that company in 1971, became president in 1984 and chairman in 1990. He serves on the boards of Boys and Girls Club of Greater Milwaukee and Alverno College and is a trustee of Northwestern Mutual Life Insurance Company. Alice M. Peterson joined us as a director in 1998. She has been President of RIM Finance, LLC (a wholly-owned subsidiary of the Canadian company, Research In Motion Limited, the maker of BlackBerry wireless handheld devices), since December 2000. From April 2000 to September 2000, Ms. Peterson served as Chief Executive Officer of GuidanceResources.com (an Internet-based service that employers provide as a value-added benefit to enhance employee productivity). From October 1998 to February 2000, Ms. Peterson served as vice president and general manager of Sears Online, the unit of Sears, Roebuck and Co. where all business-to-consumer Internet activities are conducted, including interactive marketing. Ms. Peterson was vice president and treasurer of Sears, Roebuck and Co. from 1993 to 1998. She joined that company in 1989 as corporate director of finance, became managing director -- corporate finance in 1992, and vice president -- treasurer in 1993. Prior to joining Sears, Ms. Peterson served as assistant treasurer of Kraft, Inc. from 1988 to 1989. From 1984 to 1988, Ms. Peterson served in a variety of financial positions for PepsiCo, Inc. where her last position held was director of capital markets. Ms. Peterson is a director of RIM Finance, LLC and she serves on the Ravinia Festival Board of Trustees. 58 64 PRINCIPAL AND MANAGEMENT SHAREHOLDERS This table indicates how much of our common stock was beneficially owned as of March 22, 2001, by our directors and each of our five most highly compensated executive officers and by beneficial owners of more than 5% as of the dates indicated in the footnotes. Beneficial ownership of directors and executive officers as a group (20 persons) represents 2.90% of the total outstanding shares. No director or executive officer beneficially owns in excess of 1% of the outstanding shares except for Mr. Hansen who beneficially owns 1.08% of the outstanding shares. As of March 22, 2001, 43,641,772 shares of our common stock were issued and outstanding.
SHARES OF COMMON STOCK PERCENT OF NAME BENEFICIALLY OWNED(1) CLASS ---- ---------------------- ---------- Mark S. Hansen(2)(3)................................. 474,998 1.08% Herbert M. Baum(3)(4)................................ 6,250 -- Archie R. Dykes(4)(5)................................ 14,970 -- Carol B. Hallett(3)(4)............................... 8,427 -- Robert S. Hamada(3).................................. -- -- Edward C. Joullian III(4)(5)......................... 29,105 -- Guy A. Osborn(3)(4).................................. 23,450 -- Alice M. Peterson(4)................................. 12,750 -- E. Stephen Davis(2)(3)(4)(5)......................... 138,695 -- Dennis C. Lucas(2)(4)................................ 108,450 -- William H. Marquard(2)(4)............................ 71,625 -- Neal J. Rider(2)(3)(5)............................... 121,420 -- All directors and executive officers As a group(2)(3)(4)(5)............................. 1,288,187 2.90% Dimensional Fund Advisors, Inc.(6)................... 2,432,997 5.57% 1299 Ocean Avenue, 11th Floor Santa Monica, California 90401 FMR Corp.(7)......................................... 2,291,139 5.25% 82 Devonshire Street Boston, Massachusetts 02109 Mellon Financial Corporation(8)...................... 2,218,167 5.08% One Mellon Center Pittsburgh, Pennsylvania 15258 Southeastern Asset Management, Inc.(9)............... 7,636,900 17.50% 6410 Poplar Avenue, Suite 900 Memphis, Tennessee 38119 U.S. Transportation, LLC(10)......................... 5,911,307 13.55% c/o The Yucaipa Companies 9130 West Sunset Boulevard Los Angeles, California 90069
- ------------------------- (1) This column includes our common stock held by directors and officers or by certain members of their families (for which the directors and executive officers have sole or shared voting or investment power), our common stock which the officers have the right to acquire within 60 days of March 22, 2001 under our stock option and stock incentive plans and shares of our restricted common stock, subject to forfeiture, awarded under our stock incentive plans. Thomas G. Dahlen joined us as our Executive Vice President and President, Retail and Corporate Marketing in April 2001. As of April 23, 2001, he does not beneficially own any shares of our common stock. 59 65 (2) The amounts shown include shares which the following persons have the right to acquire within 60 days of March 22, 2001 under our stock option and stock incentive plans: Hansen...................................................... 399,998 shares Davis....................................................... 54,500 shares Lucas....................................................... 81,250 shares Marquard.................................................... 28,125 shares Rider....................................................... 87,500 shares
All directors and officers as a group (including those named above): 833,273 (3) The following shares have been excluded from the share totals for the individuals and group named in the table as they do not have voting or investment power with respect to such shares: Hansen.............................................. 300,000 shares of restricted stock Davis............................................... 100,000 shares of restricted stock Rider............................................... 12,500 shares of restricted stock Baum................................................ 3,500 shares of restricted stock Hallett............................................. 3,500 shares of restricted stock Hamada.............................................. 3,500 shares of restricted stock Osborn.............................................. 3,500 shares of restricted stock
All directors and officers as a group (including those named above): 439,000 shares of restricted stock (4) The individuals and group named in the table have sole voting power with respect to the following shares of restricted stock: Baum........................................................ 5,250 shares Dykes....................................................... 8,750 shares Hallett..................................................... 5,250 shares Joullian.................................................... 8,750 shares Osborn...................................................... 5,250 shares Peterson.................................................... 8,750 shares Davis....................................................... 68,000 shares Lucas....................................................... 10,000 shares Marquard.................................................... 20,000 shares
All directors and officers as a group (including those named above): 179,400 shares (5) The individuals and group named in the table have shared voting and investment power with respect to the following shares of common stock: Davis....................................................... 9,000 shares Dykes....................................................... 643 shares Joullian.................................................... 20,355 shares Rider....................................................... 32,500 shares
All directors and officers as a group (including those named above): 69,498 shares (6) In a Schedule 13G dated February 2, 2001, Dimensional Fund Advisors, Inc. disclosed it held 2,432,997 shares of our common stock and had sole power to vote and dispose of all shares. Dimensional disclaims beneficial ownership of all of the shares. (7) In a Schedule 13G filed January 10, 2001, FMR Corp. disclosed that it held 2,291,139 shares of our common stock, had sole power to vote none of the shares and the sole power to dispose of, or direct the disposition of, all shares. 60 66 (8) In a Schedule 13G dated January 17, 2001, Mellon Financial Corporation disclosed that it held 2,218,167 shares of our common stock, shared voting power with respect to 199,600 shares, had sole voting power with respect to 1,936,497 shares, and had the sole power to dispose of all shares. (9) In a Schedule 13G dated February 8, 2001, Southeastern Asset Management, Inc. disclosed that it held 7,636,900 shares of our common stock and that it shared voting and investment power with respect to 6,444,000 of the held shares with Longleaf Partners Small-Cap Fund. In the same Schedule 13G, Southeastern Asset Management disclosed that it had sole power to vote 564,900 shares, had sole power to dispose of 1,192,900 shares, and had no voting power with regard to 628,000 shares. The Schedule 13G identifies Mr. O. Mason Hawkins as Chairman of the Board and Chief Executive Officer of Southeastern Asset Management, but Mr. Hawkins does not claim any voting or dispositive power with regard to the shares of our common stock held by Southeastern. (10) In a Schedule 13D dated March 26, 2001, U.S. Transportation, LLC, The Yucaipa Companies and Ronald W. Burkle disclosed that they held jointly 5,911,307 shares of our common stock and that each entity had sole power to vote and dispose of all shares. Pursuant to a Stock and Warrant Purchase Agreement dated February 6, 2001, between the Company and U.S. Transportation, LLC, the 5,911,307 shares of common stock consist of 3,850,301 shares issued to and purchased by U.S. Transportation, LLC on March 22, 2001, and 2,061,006 shares that would have been issued to and purchased by U.S. Transportation, LLC had it exercised its warrant to purchase $50 million of additional shares on March 22, 2001, based on an exercise price of $24.26 per share, which in accordance with the agreement, is the average closing price of the common stock on the New York Stock Exchange for the 30 consecutive trading days immediately preceding the date of exercise. As of April 23, 2001, U.S. Transportation, LLC has not exercised the warrant. 61 67 DESCRIPTION OF OTHER INDEBTEDNESS SENIOR SECURED CREDIT FACILITY Our senior secured credit facility consists of a $600 million revolving credit facility, with a final maturity of July 25, 2003, and an amortizing term loan with a balance of $154 million at year end 2000, and with a maturity of July 25, 2004. Up to $300 million of the revolver may be used for issuing letters of credit. Borrowings and letters of credit issued under this credit facility may be used for general corporate purposes and are secured by a first priority security interest in our accounts receivable and inventories and those of our subsidiaries, and in the capital stock or other equity interests owned by us or our subsidiaries. In addition, this credit facility is guaranteed by substantially all of our subsidiaries. The stated interest rate on borrowings under our credit facility is equal to a referenced index interest rate, normally the London interbank offered interest rate, or LIBOR, plus a margin. The level of the margin is dependent upon credit ratings on our senior secured bank debt. Our credit facility contains customary covenants associated with similar facilities. Our credit facility currently contains the following more significant financial covenants: - maintenance of a fixed charge coverage ratio of at least 1.7 to 1, based on adjusted earnings (as defined in the credit facility agreement) before interest, taxes, depreciation and amortization and net rent expense; - maintenance of a ratio of inventory-plus-accounts receivable to funded bank debt (including letters of credit) of at least 1.4 to 1; - a limitation on restricted payments, including dividends, based on a formula tied to net earnings and equity issuances; and - a limitation on incurrence of indebtedness. We are in compliance with all financial covenants under our credit facility. Our credit facility may be terminated in the event of a defined change of control. At year-end 2000, borrowings under the credit facility totaled $154 million in term loans and $300 million of revolver borrowings, and $43 million of letters of credit had been issued. Letters of credit are needed primarily for insurance reserves associated with our normal risk management activities. To the extent that any of these letters of credit would be drawn, payments would be financed by borrowings under our credit facility. 10.5% SENIOR SUBORDINATED NOTES DUE 2004 AND 10.625% SENIOR SUBORDINATED NOTES DUE 2007 Our senior subordinated notes consist of two issues: $250 million of 10.5% Senior Subordinated Notes due December 1, 2004 and $250 million of 10.625% Senior Subordinated Notes due July 31, 2007. These senior subordinated notes are general unsecured obligations, subordinated in right of payment to all of our existing and future senior indebtedness and are guaranteed on a senior subordinated basis by each of the same subsidiaries that will guarantee the Notes. The senior subordinated notes contain negative covenants substantially similar to those that will govern the Notes. The indenture governing the senior subordinated notes contains a change of control provision substantially similar to the Notes, except that any such change of control must be accompanied by a decline in credit ratings. 5.25% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2009 Our $150 million 5.25% Convertible Senior Subordinated Notes due 2009 are general unsecured obligations, subordinated in right of payment to all of our existing and future senior indebtedness and are guaranteed on a senior subordinated basis by each guarantor of the notes. The indenture governing the Convertible Senior Subordinated Notes includes a change of control provision substantially similar to the notes, except that the offer price is 100%. 62 68 DESCRIPTION OF NOTES We issued the private notes, and will issue the exchange notes, under an indenture (the "Indenture"), among us, the Subsidiary Guarantors and Bankers Trust Company, as Trustee (the "Trustee"). The following is a summary of the material provisions of the Indenture. It does not include all of the provisions of the Indenture. We urge you to read the Indenture because it defines your rights. The terms of the notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "TIA"). A copy of the Indenture may be obtained from the Company. You can find definitions of certain capitalized terms used in this description under "-- Certain Definitions." For purposes of this section, references to the "Company" include only Fleming Companies, Inc. and not its Subsidiaries. GENERAL The notes are unsecured obligations of the Company, ranking pari passu in right of payment with all other senior unsecured obligations of the Company. Principal of, premium, if any, and interest on the notes and any additional interest payable pursuant to the Registration Rights Agreement ("Additional Interest"), if any, is payable, and the notes are exchangeable and transferable, at the office or agency of the Paying Agent in The City of New York maintained for such purposes; provided, however, that payment of interest may be made, at the option of the Company, by check or by wire transfer to Holders of at least $5,000,000 aggregate principal amount of notes. The Company may change any Paying Agent without notice to holders of the notes (the "Holders"). The notes will be issued only in fully registered form without coupons in denominations of $1,000 and any integral multiple thereof. No service charge will be made for any registration of transfer, exchange or redemption of notes or, except in certain circumstances, for any tax or other governmental charge that may be imposed in connection therewith. The Company may issue up to $550 million aggregate principal amount of notes, $355 million of which were issued as private notes to which this exchange offer relates. Any offering of additional notes is subject to, among other things, the covenant described under the caption "Description of Notes -- Certain Covenants -- Limitation on Indebtedness." The notes subject to this exchange offer and any additional notes subsequently issued under the Indenture will be treated as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. MATURITY, INTEREST AND PRINCIPAL The notes will mature on April 1, 2008, and are unsecured senior obligations of the Company. The notes bear interest at an annual rate of 10 1/8% from the original date of issuance or from the most recent interest payment date to which interest has been paid, payable semiannually on April 1 and October 1 of each year commencing October 1, 2001, to the Person in whose name the notes were registered at the close of business on the March 15 or September 15 next preceding such interest payment date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The notes will not be entitled to the benefit of any sinking fund. GUARANTEES Payment of the principal of, premium, if any, interest on and any Additional Interest in respect of the notes, when and as the same become due and payable (whether at Stated Maturity or on a redemption date, or pursuant to a Change of Control Purchase Offer or an Asset Sale Offer, and whether by declaration of acceleration, call for redemption, purchase or otherwise), are guaranteed, jointly and severally, on a senior basis by all of the Wholly Owned Restricted Subsidiaries of the Company and by Restricted Subsidiaries that guarantee certain other Indebtedness (the "Subsidiary Guarantors"). Upon the sale or disposition (whether by merger, stock purchase, asset sale or otherwise) of a Subsidiary Guarantor or all or substantially all of its assets to an entity which is not a Subsidiary 63 69 Guarantor (and a Restricted Subsidiary) or the designation of a Restricted Subsidiary to become an Unrestricted Subsidiary, which transaction is otherwise in compliance with the Indenture (including, without limitation, the provisions of "-- Certain Covenants -- Limitation on Sale of Assets" and "-- Limitation on Issuances and Sales of Capital Stock of Subsidiaries"), such Subsidiary Guarantor will be deemed released from its obligations under its Note Guarantee; provided, however, that any such termination shall occur 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, any Indebtedness of the Company or any other Restricted Subsidiary shall also terminate upon such release, sale or transfer. REDEMPTION Optional Redemption. Except as described below, the notes are not redeemable before April 1, 2005. Thereafter, the Company may redeem the notes at its option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve month period commencing on April 1 of the year set forth below.
YEAR PERCENTAGE ---- ---------- 2005...................................................... 105.063% 2006...................................................... 102.531% 2007 and thereafter....................................... 100.000%
In addition, the Company must pay all accrued and unpaid interest on the notes redeemed. Optional Redemption upon Equity Offerings. In addition, up to 35% of the initial aggregate principal amount of the notes may be redeemed on or prior to April 1, 2004, at the option of the Company, within 90 days of an Equity Offering with the net proceeds of such offering at a redemption price equal to 110.125% 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 65% of the notes originally issued under the Indenture remains outstanding. As used in the preceding paragraph, "Equity Offering" means a public or private offering of Qualified Capital Stock of the Company generating gross proceeds to the Company of at least $50 million. SELECTION AND NOTICE In the event that less than all of the notes are to be redeemed at any time, selection of the notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that no note of a principal amount of $1,000 or less shall be redeemed in part. Notice of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of notes to be redeemed at its registered address. If any note is to be redeemed in part only, the notice of redemption that relates to such note shall state the portion of the principal amount thereof to be redeemed. A new note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original note. On or after the redemption date, interest will cease to accrue on notes or portions thereof called for redemption and accepted for payment. PURCHASE OF NOTES UPON A CHANGE OF CONTROL If a Change of Control shall occur at any time, then each Holder of notes shall have the right, to the extent not inconsistent with the Company's Bylaws as in effect on the Issue Date, to require the Company to purchase such Holder's notes in whole or in part in integral multiples of $1,000 at a purchase price (the "Change of Control Purchase Price") in cash in an amount equal to 101% of the principal amount of such notes, plus accrued and unpaid interest, if any, to the date of purchase (the "Change of Control Purchase 64 70 Date"), pursuant to the offer described below (the "Change of Control Purchase Offer") and the other procedures set forth in the Indenture. Within 30 days following the occurrence of any Change of Control, the Company shall notify the Trustee and give written notice of such Change of Control to each Holder of notes, by first-class mail, postage prepaid, at the address appearing in the security register, stating, among other things, the Change of Control Purchase Price and the Change of Control Purchase Date, which shall be a Business Day 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 requirements under the Exchange Act; that any note not tendered will continue to accrue interest; 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 certain other procedures that a Holder of notes must follow to accept a Change of Control Purchase Offer or to withdraw such acceptance. The Company will not be required to make a Change of Control Purchase Offer upon a Change of Control if a third party makes the Change of Control Purchase Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Purchase Offer made by the Company and purchases all notes properly tendered and not withdrawn under the Change of Control Purchase Offer. If a Change of Control were to occur, we cannot assure you that the Company would have sufficient funds to pay the Change of Control Purchase Price for all the notes tendered by the Holders. The Company's existing credit agreement and indentures contain, and any future other agreements relating to other indebtedness to which we become a party may contain, restrictions or prohibitions on the Company's ability to repurchase notes or may provide that an occurrence of a Change of Control constitutes an event of default under, or otherwise requires payment of amounts borrowed under those agreements. If a Change of Control occurs at a time when the Company is prohibited from repurchasing the notes, we could seek the consent of our then existing lenders and note holders to the repurchase of the notes or could attempt to refinance the borrowings that contain the prohibition. If the Company does not obtain such a consent or repay the borrowings, it would remain prohibited from repurchasing the notes. In that case, failure to repurchase tendered notes would constitute an Event of Default under the Indenture and may constitute a default under the terms of other indebtedness that we may enter into from time to time. Our bylaws contain a provision which limits the Company's ability to "adopt or maintain a poison pill, shareholder rights plan, rights agreement or any other form of "poison pill" which is designed to or which has the effect of making acquisitions of large holdings of the Corporation's shares of stock more difficult or expensive . . . unless such a plan is first approved by a majority shareholder vote" and prohibits the amendment, alteration, deletion or modification of such bylaw by the Board of Directors without prior shareholder approval. This bylaw provision raises a question as to whether the provisions of the Indenture described above (the "Change of Control Provisions") constitute a "poison pill,' "shareholder rights plan, rights agreement or any other form of "poison pill"' (collectively, a "Poison Pill") within the meaning of this provision. See "Risk Factors -- We may not have the ability to raise funds necessary to finance the change of control offer required by the indenture. In addition, our bylaws may not permit us to make the change of control payment even if we do have the funds." Although the matter is not free from doubt, the Company believes that a court, properly presented with the facts, should conclude that the Change of Control Provisions of the Indenture do not constitute a Poison Pill within the meaning of the bylaw provision, and accordingly are not inconsistent therewith. If the Change of Control Provisions were found to be inconsistent with the bylaw provision, the Company would not be able to make or consummate the Change of Control Purchase Offer or pay the Change of Control Purchase Price when due. One of the events which constitutes a Change of Control under the Indenture is the disposition of "all or substantially all" of the Company's assets. This term has not been interpreted under New York law (which is the governing law of the Indenture) to represent a specific quantitative test. As a consequence, in the event Holders of the notes elect to require the Company to purchase the notes and the Company 65 71 elects to contest such election, there can be no assurance as to how a court interpreting New York law would interpret the phrase. The Company will comply with the applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws or regulations in connection with a Change of Control Purchase Offer. CERTAIN COVENANTS The Indenture contains the following covenants, among others: Limitation on Indebtedness. (a) The Company will not, and will not permit any of its Restricted 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. Notwithstanding the foregoing sentence, the Company and the Subsidiary Guarantors may incur Indebtedness if, at the time of such event (and after giving effect on a pro forma basis to: (1) the incurrence of such Indebtedness and (if applicable) the application of the proceeds therefrom, including to refinance other Indebtedness; (2) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Restricted 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 (3) 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 Restricted 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 such pro forma adjustments as may be determined in accordance with GAAP and the rules, regulations and guidelines of the Commission (including without limitation Article 11 of Regulation S-X), would have been at least equal to 2.25 to 1. (b) The Company will not, and will not permit any Subsidiary Guarantor to, directly or indirectly, incur any Indebtedness which by its terms (or by the terms of any agreement governing such Indebtedness) is subordinated to any other Indebtedness of the Company or such Subsidiary Guarantor, as the case may be, unless such Indebtedness is also by its terms (or by the terms of any agreement governing such Indebtedness) made expressly subordinate to the notes or the Note Guarantee of such Subsidiary Guarantor to the same extent and in the same manner as such Indebtedness is subordinated to other Indebtedness of the Company or such Subsidiary Guarantor, as the case may be. (c) The Company will not, and will not permit any of its Restricted Subsidiaries to, incur any Indebtedness (other than Subordinated Indebtedness), whether pursuant to clause (a) above or pursuant to one or more items of Permitted Indebtedness, the proceeds of which will be used to repay in whole or in part any Subordinated Notes. Notwithstanding the foregoing sentence, the Company and the Restricted Subsidiaries (to the extent the Company and/or such Restricted Subsidiary is permitted to incur such Indebtedness pursuant to clause (a) above or pursuant to one or more items of Permitted Indebtedness) may incur such Indebtedness if, at the time of such event (and after giving effect on a pro forma basis to: (1) the incurrence of such Indebtedness and the application of the proceeds therefrom, including to refinance the Subordinated Notes; and 66 72 (2) 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 Restricted Subsidiaries, as the case may be, since the first day of the four-quarter period referred to in the definition of "Consolidated Senior Debt Leverage Ratio" as if such acquisition or disposition had occurred at the beginning of such four-quarter period), the Consolidated Senior Debt Leverage Ratio of the Company would have been less than to 2.75 to 1. Limitation on Restricted Payments. The Company will not, and will not permit any Restricted 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 or of any Restricted Subsidiary (other than dividends or distributions payable (a) solely in shares of Qualified Capital Stock of the Company or such Restricted Subsidiary or in options, warrants or other rights to purchase such Qualified Capital Stock or (b) by a Restricted Subsidiary to the Company or any Wholly Owned Restricted Subsidiary); (2) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any Capital Stock of the Company or any Restricted Subsidiary or any options, warrants or other rights to acquire such Capital Stock held by any Person (other than the Company or any Wholly Owned Restricted Subsidiary of the Company); (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 Subordinated Indebtedness; or (4) make any Investment (other than any Permitted Investment) in any Person (such payments described in clauses (1) through (4) 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, being the Fair Market Value thereof 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; (ii) the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in accordance with the provisions described under "-- Limitation on Indebtedness"; and (iii) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries on or after the Issue Date, is less than the sum of, without duplication: (w) 50% of the aggregate cumulative Consolidated Net Income of the Company for the period (taken as one accounting period) from the first day of the quarter beginning after the Issue Date to the end of the Company's most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus (x) 100% of the aggregate net cash proceeds received by the Company as capital contributions or from the issue or sale after the Issue Date of Equity Interests of the Company or of debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or convertible debt securities) sold to a Restricted Subsidiary of the Company and other than Redeemable Capital Stock or debt securities that have been converted into Redeemable Capital Stock and other than the initial $50 million equity investment made by an affiliate of The Yucaipa Companies); plus 67 73 (y) any cash received by the Company after the date of initial issuance of the notes as a dividend or distribution from any of its Unrestricted Subsidiaries less the cost of disposition and taxes, if any (but in each case excluding any such amounts included in Consolidated Net Income); plus (z) $55 million. Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may take the following actions so long as (with respect to clauses (2), (3), (4) and (6) below) at the time of and immediately after giving effect thereto 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 such dividend would have been permitted on the date of declaration; (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 Restricted 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 Restricted 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 Stated Maturity of the Subordinated Indebtedness to be acquired or retired); (4) 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 incurrence or sale (other than to a Restricted Subsidiary) of, new Subordinated Indebtedness of the Company or a Subsidiary Guarantor, as the case may be, 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 reasonable expenses of the Company or such Subsidiary Guarantor, as the case may be, incurred in connection with such refinancing; (b) such new Subordinated Indebtedness is subordinated to the notes or the Note Guarantee of such Subsidiary Guarantor, as the case may be, 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; (5) the payment of a dividend on the Company's Capital Stock (other than Redeemable Capital Stock) of up to $0.08 per quarter per share (or up to $0.32 per annum per share, provided that dividend payments may not be cumulated for more than four consecutive quarters); 68 74 (6) the purchase, redemption or other acquisition or retirement for value of shares of Capital Stock of the Company issued pursuant to options granted under stock option plans of the Company, in order to pay withholding taxes due as a result of income recognized upon the exercise of such options; provided that: (a) the Company is permitted, by the terms of such plans, to effect such purchase, redemption or other acquisition or retirement for value of such shares; and (b) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $2 million during any fiscal year of the Company; (7) the repurchase of Capital Stock of the Company deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof; and (8) in addition to clause (4) above, the purchase, redemption, defeasance or other acquisition or retirement for value of the Subordinated Notes in exchange for, or out of the net cash proceeds of a substantially concurrent incurrence or sale (other than to a Restricted Subsidiary) of, Indebtedness of the Company or a Restricted Subsidiary, as the case may be, so long as such Indebtedness is incurred in accordance with the provisions described in clause (c) under "-- Limitation on Indebtedness". The actions described in clauses (2), (3), (5) and (6) of this paragraph shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph but shall reduce the amount that would otherwise be available for Restricted Payments under clause (iii) of the preceding paragraph. Limitation on Liens. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer to exist any Lien of any nature whatsoever against any asset of the Company or any Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom, except for Permitted Liens, unless contemporaneously therewith: (1) in the case of any Lien securing Subordinated Indebtedness, effective provision is made to secure the notes or such Note Guarantee, as the case may be, with a Lien on the same collateral that is prior to the Lien securing such Subordinated Indebtedness; and (2) in all other cases, the notes or such Note Guarantee, as the case may be, are secured on an equal and ratable basis. Limitation on Transactions With Affiliates. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (other than the Company, a Wholly Owned Restricted Subsidiary or a Restricted Subsidiary that is a Subsidiary Guarantor) (each of the foregoing, an "Affiliate Transaction"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that could have been obtained in a comparable transaction with an unrelated Person; and (2) the Company delivers to the Trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5 million, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (1) above and that such Affiliate Transaction has been approved by a majority of the Disinterested Directors; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10 million, both an Officers' Certificate referred to 69 75 in clause (a) and an opinion as to the fairness of such Affiliate Transaction to the Company or the relevant Restricted Subsidiary from a financial point of view issued by an investment banking firm of national standing with total assets in excess of $1.0 billion; provided, however, that this covenant shall not apply to (i) fees, compensation and employee benefits, including bonuses, retirement plans and stock options, paid to or established for directors and officers of the Company or any Restricted Subsidiary in the ordinary course of business and approved by a majority of the Disinterested Directors and (ii) transactions in the ordinary course of business with customers, vendors and suppliers, the terms of which have been approved in good faith by an officer of the Company. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (1)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (x) on its Capital Stock or (y) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries; (4) grant Liens in favor of Holders of notes; or (5) guarantee the notes; except in each case for such encumbrances or restrictions existing under or by reason of: (a) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Issue Date; (b) the Credit Agreement as in effect as of the Issue Date, and any amendments, modifications, restatements, renewals, increase, supplements, refunding, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increase, supplements, refundings, replacements or refinancings are no more restrictive with respect to such dividend and other payment restrictions than those contained in the Credit Agreement in effect on the Issue Date; (c) the Indenture and the notes; (d) applicable law; (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the property or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (f) by reason of customary non-assignment provisions in existing and future leases entered into in the ordinary course of business and consistent with past practices; (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (3) above on the property so acquired; and (h) restrictions incurred by the Company or any Restricted Subsidiary in connection with any Permitted Receivables Financing. Limitation on Sale of Assets. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in an Asset Sale unless the Company or such Restricted Subsidiary, as the case may be, receives Permitted Consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of. 70 76 Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary must apply such Net Proceeds: (1) to permanently reduce Indebtedness of the Company or one or more Restricted Subsidiaries under the Credit Agreement (and to correspondingly reduce commitments with respect thereto) or to repay the Medium-Term Notes outstanding under the Medium-Term Notes Indenture on the Issue Date; or (2) to make capital expenditures or acquire long-term assets used or useful in its businesses or in businesses similar or related to the businesses of the Company immediately prior to the Issue Date. Pending the final application of any such Net Proceeds, the Company may temporarily reduce the revolving credit portion of the Credit Agreement or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15 million, the Company will be required to make an offer to all Holders of notes (an "Asset Sale Offer") to purchase the maximum principal amount of notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes (subject to the restrictions of the Indenture). If the aggregate principal amount of notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Notwithstanding the foregoing provisions of the prior paragraph, the Company and its Restricted Subsidiaries may sell or dispose of property, whether in the form of assets or capital stock of a Restricted Subsidiary, in the aggregate amount not exceeding $15 million in any year, and any notes received by the Company or its Restricted Subsidiaries as consideration in any disposition made pursuant to such $15 million exclusion from the provisions of this covenant shall not be taken into account in determining whether the $75 million limitation set forth in the definition of "Permitted Consideration" has been met. Limitation on Issuances and Sales of Capital Stock of Subsidiaries. The Company will not, and will not permit any of its Restricted Subsidiaries to, transfer, convey, sell or otherwise dispose of any Capital Stock of any Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company), unless: (1) such transfer, conveyance, sale or other disposition is of all of the Capital Stock of such Restricted Subsidiary owned by the Company and its Restricted Subsidiaries; and (2) such transaction is made in accordance with the provisions of "-- Limitation on Sale of Assets," provided that 85% of the proceeds from such a sale of Capital Stock of any Restricted Subsidiary that is a Significant Subsidiary shall consist of cash or Temporary Cash Investments. Notwithstanding the foregoing or the provisions of any other covenant, the Company or any Restricted Subsidiary may sell Qualified Capital Stock of any Restricted Subsidiary in a Public Equity Offering, provided that: (1) 100% of the Net Proceeds from such Public Equity Offering shall be in cash and shall be applied as provided in the provisions of "Certain Covenants -- Limitation on Sale of Assets"; and (2) the Tangible Assets of such Restricted Subsidiary do not exceed 10% of the Consolidated Tangible Assets of the Company, determined as of the last day of the quarter ending immediately before the commencement of such Public Equity Offering. 71 77 Additional Guarantees. If the Company or any of its Restricted Subsidiaries shall acquire or form a Wholly Owned Restricted Subsidiary or any existing or future majority-owned Restricted Subsidiary shall, after the Issue Date, guarantee any Indebtedness of the Company or any Subsidiary Guarantor, the Company will cause any such Restricted Subsidiary (other than an Investee Store or Joint Venture, provided that such Investee Store or Joint Venture does not guarantee the Indebtedness of any other Person) to: (1) execute and deliver to the Trustee a supplemental indenture in form and substance reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall guarantee all of the obligations of the Company with respect to the notes on a senior basis; and (2) deliver 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 Restricted Subsidiary and is in compliance with the terms of the Indenture. Rule 144A Information Requirement. The Company has agreed to furnish to the Holders or beneficial Holders of notes and prospective purchasers of notes designated by the Holders of notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time as the Company either exchanges all of the notes for the exchange notes or has registered all of the notes for resale under the Securities Act. Reports. Whether or not required by the rules and regulations of the Commission, including the reporting requirements of Section 13 or 15(d) of the Exchange Act, so long as any notes are outstanding, the Company will furnish to the Holders of notes: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Subsidiaries and, with respect to the annual information only, a report on the consolidated financial statements required by Form 10-K by the Company's independent certified public accountants; and (2) all reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to investors or prospective investors who request it in writing. Payments for Consent. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any notes for or as an inducement to any consent, waiver or amendment of any terms or provisions of the notes unless such consideration is offered to be paid or agreed to be paid to all Holders of the notes which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. Termination of Certain Covenants In Event of Investment Grade Rating. In the event that each of the Rating Categories assigned to the notes of the Company by the Rating Agencies is Investment Grade, the provisions of "-- Limitation on Indebtedness," "-- Limitation on Restricted Payments," "-- Limitation on Issuances and Sales of Capital Stock of Subsidiaries," "-- Limitation on Transactions With Affiliates" and "-- Limitation on Sale of Assets" and the Consolidated Net Worth requirement set forth in clause (3) of "-- Consolidation, Merger, Sale of Assets" shall cease to apply to the Company and its Restricted Subsidiaries from and after the date on which the second of the Rating Agencies notifies the Company of the assignment of such Rating Category. Notwithstanding the foregoing, if the Rating Category assigned by either Rating Agency to the notes should subsequently decline below Investment Grade, the foregoing covenants and such Consolidated Net Worth requirement shall be reinstituted as and from the date of such rating decline. 72 78 CONSOLIDATION, MERGER, SALE OF ASSETS 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 or 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 Restricted 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 Restricted 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") 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 shall, in any case, expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company, under the notes and the Indenture, and the 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 not previously an obligation of the Company or any of its Restricted Subsidiaries which becomes an obligation of the Company or any of its Restricted 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 after giving effect to such transaction, except in the case of a merger of the Company with or into a Wholly Owned Restricted Subsidiary, the Company (or the Surviving Entity if the Company is not the continuing obligor under the Indenture) will have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; (4) 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 the Indenture) could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions of "-- Certain Covenants -- Limitation on Indebtedness" above; (5) each Subsidiary Guarantor, unless it is the other party to the transactions described above, shall have confirmed, by supplemental indenture to the Indenture, that its respective Note Guarantee with respect to the notes shall apply to such Person's obligations under the Indenture and the notes; (6) if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of "-- Certain Covenants -- Limitation on Liens" are complied with; and (7) the Company shall have delivered, or caused to be delivered, to the Trustee, in form and substance satisfactory 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 the supplemental indenture in respect thereto, if required, comply with the provisions in clauses (1) through (6) of this paragraph and that all conditions precedent herein provided for relating to such transaction have been complied with. 73 79 The foregoing shall not prohibit a merger of any Restricted Subsidiary of the Company with and into the Company or a merger effected solely for the purpose of reincorporating the Company in another jurisdiction. In the event of any consolidation, merger, sale, assignment, conveyance, transfer, lease or other transaction described in, and complying with, the conditions listed in the immediately preceding paragraph 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 the 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. EVENTS OF DEFAULT The following events are defined in the Indenture as "Events of Default": (1) there shall be a default in the payment of any interest on the notes when such interest becomes due and payable, and continuance of such default for a period of 30 days; (2) there shall be a default in the payment of the principal of (or premium, if any, on) any notes at Maturity; (3)(a) there shall be a default in the performance, or breach, of any covenant or agreement of the Company or any Subsidiary Guarantor under the 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) or (2) or in clauses (b) or (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 aggregate principal amount of the outstanding notes; (b) there shall be a default in the performance or breach of the provisions described in "-- Consolidation, Merger, Sale of Assets" or "-- Certain Covenants -- Limitation on Asset Sales"; or (c) the Company shall have failed to comply with the provisions of "-- Purchase of Notes upon a Change of Control" for any reason, including the inconsistency of such covenant with the Company's Bylaws as in effect on the Issue Date; (4)(a) any default in the payment of the principal of any Indebtedness shall have occurred under any agreements, indentures or instruments under which the Company or any Restricted 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; (5) any Person entitled to take the actions described below 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 Restricted Subsidiary, shall notify the Trustee of the intended sale or disposition of any assets of the Company or any Restricted 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 Restricted Subsidiary (including funds on 74 80 deposit or held pursuant to lock-box and other similar arrangements), pursuant to the terms of such Indebtedness or in accordance with applicable law; (6) any Note Guarantee of any Significant Subsidiary individually or any other Subsidiaries if such Restricted Subsidiaries in the aggregate represent 15% or more of Consolidated Total Assets with respect to the notes shall for any reason cease to be, or be asserted in writing by the Company, any Subsidiary Guarantor or any other Restricted 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 the Indenture; (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 the aggregate, shall be entered against the Company or any Restricted Subsidiary of the Company or any of their respective properties and shall not be discharged and either: (a) any creditor shall have commenced an enforcement proceeding upon such judgment, order or decree; or (b) there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of an appeal or otherwise, shall not be in effect; (8) there shall have been 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 (9)(a) the Company or any Significant Subsidiary commences 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). 75 81 If an Event of Default (other than as specified in clause (8) or (9) of the immediately preceding paragraph) shall occur and be continuing with respect to the notes, the Trustee, by notice to the Company, or the Holders of at least 25% in aggregate principal amount then outstanding of such notes, by notice to the Trustee and to the Company, may declare such notes due and payable immediately. Upon such declaration, all amounts payable in respect of such notes shall be immediately due and payable. If an Event of Default specified in clause (8) or (9) of the immediately preceding paragraph occurs and is continuing, then all of the outstanding notes under the Indenture shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee thereunder or any Holder of such notes. After a declaration of acceleration, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of a majority in aggregate principal amount outstanding of notes, by written notice to the Company and the Trustee, may 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 under the notes and the reasonable compensation, expenses, disbursements, and advances of the Trustee, its agents and counsel; (b) all overdue interest on all of the 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. The Holders of a majority in aggregate principal amount of the notes outstanding may, on behalf of the Holders of all of such notes, waive any past defaults under the Indenture except a default in the payment of the principal of, premium, if any, or interest on any such note, or in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the Holder of each such outstanding note. The Company is also required to notify the Trustee within ten days of the occurrence of any Default. DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE The Company may, at its option and at any time, elect to have the obligations of the Company and any Subsidiary Guarantor discharged with respect to any notes issued under the Indenture ("defeasance"). Such defeasance means that the Company shall be deemed to have paid and discharged all obligations represented by the notes, except for: (1) the rights of Holders of such outstanding notes to receive payments in respect of the principal of, premium, if any, and interest on the notes when such payments are due or on the redemption date; (2) the Company's obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes, and the maintenance of an office or agency for payment and money for note payments held in trust; (3) the rights, powers, trusts, duties and immunities of the applicable Trustee; and (4) the defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("covenant defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or an Event of Default with respect to such notes. 76 82 In the event covenant defeasance occurs, certain events (not including non-payment, enforceability of any Note Guarantee, bankruptcy and insolvency events) described under "-- Events of Default" will no longer constitute an Event of Default with respect to such notes. In order to exercise either defeasance or covenant defeasance with respect to the notes: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of such notes, cash in United States dollars, U.S. Government Obligations (as defined in the Indenture), or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of, premium, if any, and interest on the notes outstanding on the Stated Maturity thereof 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 defeasance, the Company shall have delivered to the Trustee an opinion of independent counsel in the United States stating that: (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or (b) since the Issue Date, 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 covenant defeasance, 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) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default under, the 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; (5) 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 of the notes or any Subsidiary Guarantor over the other creditors of the Company or any Subsidiary Guarantor or with the intent of defeating, hindering, delaying or defrauding creditors of the Company, any Subsidiary Guarantor or others; and (6) the Company shall have delivered to the Trustee an Officers' Certificate stating that all conditions precedent relating to either the defeasance or the covenant defeasance, as the case may be, have been complied with. Notwithstanding the foregoing, the opinion of counsel required by clause (2) above with respect to a defeasance need not be delivered if all notes not theretofore delivered to the Trustee for cancellation (1) have become due and payable or (2) will become due and payable on the maturity date within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. 77 83 SATISFACTION AND DISCHARGE The Indenture shall cease to be of further effect (except for surviving rights of registration of transfer or exchange of the notes) as to all outstanding notes when: (1) either (a) all notes issued under the Indenture and theretofore authenticated and delivered (except lost, stolen or destroyed notes which have been replaced or paid and notes for whose payment funds have been deposited in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all notes issued under the Indenture and not theretofore delivered to the Trustee for cancellation (x) have become due and payable or (y) will become due and payable at their Stated Maturity or pursuant to an optional redemption 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 in respect of the notes, for principal of, premium and Additional Interest, if any, and interest to the date of redemption or Stated Maturity, as the case may be; (2) the Company or any Subsidiary Guarantor has paid all other sums payable by the Company and any Subsidiary Guarantor under the Indenture; and (3) the Company has delivered to the Trustee an Officers' Certificate and an opinion of counsel each stating that all conditions precedent to the satisfaction and discharge of the Indenture, as specified therein, have been complied with and that such satisfaction and discharge will not result in a breach or violation of, or constitute a default under, the 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. MODIFICATION AND AMENDMENTS From time to time, the Company, the Subsidiary Guarantors and the Trustee, without the consent of the Holders, may amend the Indenture for certain specified purposes, including curing ambiguities, defects or inconsistencies, so long as such change does not adversely affect the rights of any of the Holders in any material respect. Other modifications and amendments of the Indenture may be made by the Company, the Subsidiary Guarantors and the Trustee with the consent of the Holders of a majority in aggregate outstanding principal amount of the notes; provided, however, that no such modification or amendment may, without the consent of the Holder of each outstanding note: (1) change the Stated Maturity or 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 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; (2) after a Change of Control has occurred, amend, change or modify the obligation of the Company to make and consummate a Change of Control Purchase Offer with respect to such Change of Control or modify any of the provisions or definitions with respect thereto; (3) reduce the percentage in principal amount of outstanding notes, the consent of whose Holders is required for any modification or amendment to the Indenture, or the consent of whose Holders is required for any waiver thereof; (4) modify any of the provisions relating to supplemental indentures requiring the consent of Holders or relating to the waiver of past defaults or relating to the waiver of certain covenants, except 78 84 to increase the percentage of outstanding notes required for such actions or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of each Holder; or (5) except as otherwise permitted under "-- Consolidation, Merger, Sale of Assets," consent to the assignment or transfer by the Company or any Subsidiary Guarantor of any of its rights and obligations under the Indenture. The Holders of a majority in aggregate principal amount of the notes issued and outstanding may waive compliance with certain restrictive covenants and provisions of such Indenture. GOVERNING LAW The Indenture provides that it, the notes and the Note Guarantees will be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. THE TRUSTEE The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the Indenture, and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. The Indenture and the provisions of the TIA contain certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the TIA, the Trustee will be permitted to engage in other transactions; provided that if the Trustee acquires any conflicting interest as described in the TIA, it must eliminate such conflict or resign. CERTAIN DEFINITIONS "Acquired Indebtedness" means Indebtedness of a Person: (1) existing at the time such Person becomes a Restricted Subsidiary of the Company; or (2) 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 Restricted Subsidiary of the Company or such acquisition. "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. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of a sale and leaseback), other than sales of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "-- Purchase of Notes upon a Change of Control" and/or the provisions described above under the caption "Certain Covenants -- Consolidation, Merger, Sale of Assets" and not by the provisions of "-- Certain Covenants -- Limitation on Sale of Assets"); and 79 85 (2) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, whether in a single transaction or a series of related transactions, in either case: (a) that have a fair market value in excess of $1.0 million; or (b) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, a transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, or by a non-Wholly Owned Restricted Subsidiary to any other Restricted Subsidiary will not be deemed to be an Asset Sale. "Average Life to Stated Maturity" means, as of the date of determination with respect to any Indebtedness, the quotient obtained by dividing: (1) 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 (2) 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 and other financial institutions from time to time that are lenders under the Credit Agreement. "Borrowing Base Amount" means, as of any date, an amount equal to the sum of: (1) 85% of the aggregate book value of all accounts receivable of the Company and its Restricted Subsidiaries; and (2) 60% of the aggregate book value of all inventory owned by the Company and its Restricted Subsidiaries, all calculated on a consolidated basis and in accordance with GAAP. To the extent the information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company shall use the most recent available information for purposes of calculating the Borrowing Base. "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. "Capital Lease Obligation" of any Person means any obligation 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, interest, partnership interests, participations or other equivalents (however designated) of such Person's capital stock whether now outstanding or issued after the Issue Date, including, without limitation, all common stock and Preferred Stock. "Change of Control" means the occurrence of any of the following events: (1) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the 80 86 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; (2) 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 stockholders of the Company, was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors then in office; (3) 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 as described under "-- Certain Covenants -- Limitation on Restricted Payments" (and such amount shall be treated as a Restricted Payment subject to the provisions in the Indenture described under "-- Certain Covenants -- Limitation on Restricted Payments"); 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 (4) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions described under "-- Consolidation, Merger, Sale of Assets." "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 the 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. "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 EBITDA" means Consolidated Net Income plus, without duplication, Consolidated Interest Expense, Consolidated Income Tax Expense, Consolidated Non-Cash Charges and Excluded Non-Cash Charges (less the amount of all cash payments made by the Company or any of its Restricted Subsidiaries during such period to the extent such payments relate to Excluded Non-Cash Charges that were added back in determining the sum contemplated by this definition for such period or any prior 81 87 period) deducted in computing Consolidated Net Income, in each case, for such period, of the Company and its Restricted Subsidiaries on a Consolidated basis, all determined in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of: (1) Consolidated EBITDA for such period to: (2) Consolidated Interest Expense for such period; provided that: (a) in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness computed on a pro forma basis; and (x) 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 (y) 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; and (b) 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. "Consolidated Income Tax Expense" means for any period the provision for federal, state, local and foreign income taxes of the Company and its Restricted 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: (1) the interest expense of the Company and its Restricted Subsidiaries for such period, as determined on a Consolidated basis in accordance with GAAP including, without limitation; (a) amortization of debt discount; (b) the net cost under Interest Rate Agreements (including amortization of discount); (c) the interest portion of any deferred payment obligation; and (d) accrued interest; plus (2) the aggregate amount for such period of dividends on any Redeemable Capital Stock or Preferred Stock of the Company and its Restricted Subsidiaries; (3) 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 (4) all capitalized interest of the Company and its Restricted Subsidiaries in each case under each of (1) through (4) 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 Restricted 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: (1) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto); (2) solely with respect to fiscal 2001, Excluded Non-Cash Charges (less the amount of all cash payments made by the Company or any of its Restricted Subsidiaries during such period to the extent such payments relate to Excluded Non-Cash Charges that were added back in determining the sum contemplated by clause (1) of the definition of "Consolidated Fixed Charge Coverage Ratio"); 82 88 (3) the portion of net income (or loss) of the Company and its Restricted 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 Restricted Subsidiary; (4) net income (or loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination; (5) 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 (6) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted 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 Restricted Subsidiary or its shareholders. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of: (1) the consolidated equity of the common equity holders of such Person and its Restricted Subsidiaries as of such date; plus (2) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Redeemable Capital Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock; less (a) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the Issue Date in the book value of any asset owned by such Person or a consolidated Restricted Subsidiary of such Person; (b) all investments as of such date in unconsolidated Restricted Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments); and (c) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization and other non-cash charges of the Company and its Restricted 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 and any Excluded Non-Cash Charges). "Consolidated Senior Debt Leverage Ratio" of the Company means the ratio of (1) Consolidated Indebtedness of the Company and its Restricted Subsidiaries (other than Subordinated Indebtedness) as of the date of the transaction giving rise to the need to calculate such Consolidated Senior Debt Leverage Ratio to (2) Consolidated EBITDA for the four full fiscal quarters immediately preceding the date of the transaction giving rise to the need to calculate such Consolidated Senior Debt Leverage Ratio, taken as one period. "Consolidated Tangible Assets" means the total of all the assets appearing on the Consolidated balance sheet of the Company and its majority-owned or Wholly Owned Restricted Subsidiaries less: (1) intangible assets including, without limitation, items such as goodwill, trademarks, trade names, patents and unamortized debt discount; and (2) appropriate adjustments on account of minority interests of other persons holding stock in any majority-owned Restricted Subsidiary of the Company. 83 89 "Consolidated Total Assets" means, with respect to the Company, the total of all assets appearing on the Consolidated balance sheet of the Company and its majority-owned or Wholly Owned Restricted Subsidiaries, as determined on a Consolidated basis in accordance with GAAP. "Convertible Senior Subordinated Note Guarantees" means any guarantee by a subsidiary guarantor of the Company's obligations under Convertible Senior Subordinated Indenture. "Convertible Senior Subordinated Notes" means the 5.25% Convertible Senior Subordinated Notes due 2009 of the Company. "Convertible Senior Subordinated Indenture" means the Indenture dated as of March 15, 2001 among the Company, as issuer, each of the subsidiary guarantors named therein, as guarantors, and Bank One, N.A. as trustee. "Credit Agreement" means the credit agreement dated as of July 25, 1997 among the Company, the Banks, the agents listed therein and The Chase Manhattan Bank, as Administrative 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 Restricted Subsidiaries. "Default" means any event which is, or after notice or passage of any time or both would be, an Event of Default. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors under the Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Equity Interest" of any Person means any shares, interests, participations or other equivalents (however designated) in such Person's equity, and shall in any event include any Capital Stock issued by, or partnership or membership interests in, such Person. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Non-Cash Charges" means all non-cash charges with respect to: (1) write-downs of the carrying value in the Company's financial statements of certain retail and distribution facilities and related assets in connection with the proposed or actual disposition of such facilities or discontinuance of operations at such facilities or otherwise in accordance with GAAP; or (2) other consolidation and restructuring of facilities and operations. "Fair Market Value" means, with respect to any asset or property, a price which could be negotiated in an arm's length transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure to complete the transaction. Fair Market Value shall be determined by officers of the Company acting in good faith, provided, that any transaction that results in a price in excess of $10.0 million shall be determined by the Board of Directors of the Company acting in good faith and shall be evidenced by a Board Resolution attached to an Officers' Certificate delivered to the Trustee. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, as in effect on the Issue Date. "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 84 90 in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement: (1) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness; (2) 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 or to assure the holder of such Indebtedness against loss; (3) 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); (4) to maintain working capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor; or (5) 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. "Indebtedness" means, with respect to any Person, without duplication: (1) 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; (2) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments; (3) 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; (4) all Capital Lease Obligations of such Person; (5) all obligations under Interest Rate Agreements or Currency Agreements of such Person; (6) Indebtedness referred to in clauses (1) through (5) above 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; (7) all Guaranteed Debt of such Person; (8) all Redeemable Capital Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends; and (9) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing of any liability of the types referred to in clauses (1) through (8) 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 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 the Indenture, and if such price is based upon, or measured by, the 85 91 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. "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). "Investee Store" means a Person in which the Company or any of its Restricted Subsidiaries has invested equity capital, to which it has made loans or for which it has guaranteed loans, in accordance with the business practice of the Company and its Restricted Subsidiaries of making equity investments in, making loans to or guaranteeing loans made to Persons for the purpose of assisting any such Person in acquiring, remodeling, refurbishing, expanding or operating one or more retail grocery stores. "Investment" means, with respect to any Person, directly or indirectly: (1) 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 Restricted Subsidiaries), loan or other extension of credit (including by way of guarantee); or (2) 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 (3) any purchase, acquisition or ownership by such Person of any Capital Stock, bonds, notes, debentures or other securities or assets issued or owned by any other Person. The Company shall be deemed to make an Investment in an amount equal to the greater of the book value (as determined in accordance with GAAP) and Fair Market Value of the net assets of any Restricted Subsidiary (or, if neither the Company nor any of its Restricted Subsidiaries has theretofore made an Investment in such Restricted Subsidiary, in an amount equal to the Investments being made) at the time such Restricted Subsidiary is designated an Unrestricted Subsidiary, and any property transferred to an Unrestricted Subsidiary from the Company or any Restricted Subsidiary shall be deemed an Investment valued at the greater of its book value (as determined in accordance with GAAP) and its Fair Market Value at the time of such transfer. "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 S&P or Moody's shall cease rating the notes and the Company shall select any other Rating Agency, the equivalent of such ratings by such other Rating Agency. "Issue Date" means March 15, 2001, the date of original issuance of the private notes. "Joint Venture" means any Person in which the Company or any of its Restricted Subsidiaries owns 30% or more of the Voting Stock (other than as a result of a Public Equity Offering). "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. "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 the Indenture, whether at Stated Maturity or on a redemption date or pursuant to a Change of Control Purchase Offer or an Asset Sale Offer, and whether by declaration of acceleration, call for redemption, purchase or otherwise. "Medium-Term Notes" means the Medium-Term Notes, due 1997 to 2003, of the Company. "Medium-Term Notes Indenture" means the Indenture dated as of December 1, 1989 between the Company and First Trust of New York National Association, as trustee. "Moody's" means Moody's Investors Service, Inc. or any successor rating agency. 86 92 "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions), any relocation expenses incurred as a result thereof, any taxes paid or payable by the Company or any of its Restricted Subsidiaries as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the permanent repayment of Indebtedness secured by a Lien on the assets or assets that were the subject of such Asset Sale and any reserve for adjustment or indemnity in respect of the sale price of such asset or assets in each case established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries: (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute indebtedness); (b) is directly or indirectly liable (as a guarantor or otherwise); or (c) constitutes the lender; (2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the notes being offered hereby) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Note Guarantee" means any guarantee by a Subsidiary Guarantor of the Company's obligations under the Indenture. "Obligations" means any principal, premium, interest (including post-petition interest), penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Permitted Consideration" means consideration consisting of any combination of the following: (1) cash or Temporary Cash Investments; (2) assets used or intended for use in the Company's business as conducted on the Issue Date; (3) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; and (4) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary; provided that the aggregate amount of such securities, notes or other obligations received by the Company and its Restricted Subsidiaries pursuant to this clause (4) after the Issue Date and held or carried at any date of determination shall not exceed $75 million. 87 93 "Permitted Indebtedness" means any of the following Indebtedness of the Company or any Restricted Subsidiary, as the case may be: (1) Indebtedness of the Company and guarantees of the Subsidiary Guarantors under the Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the greater of: (a) $1.0 billion, less (x) the amount of mandatory repayments actually made by the Company or any such Restricted Subsidiary since the Issue Date with Net Proceeds of an Asset Sale in respect of term Indebtedness under the Credit Agreement; and (y) further reduced by the amount of mandatory repayments of revolving credit Indebtedness thereunder (accompanied by a corresponding commitment reduction thereunder) actually made by the Company or any such Restricted Subsidiary since the Issue Date with Net Proceeds of an Asset Sale; or (b) the Borrowing Base Amount. (2) Indebtedness of the Company and guarantees of the Subsidiary Guarantors under uncommitted bank lines of credit (including any refinancings of such Indebtedness); provided, however, that the aggregate principal amount of Indebtedness incurred pursuant to clauses (1), (2) and (11) of this definition does not exceed the maximum amount of Indebtedness permitted under clause (1) of this definition; (3) Indebtedness of the Company and the Subsidiary Guarantors evidenced by the notes and the Note Guarantees with respect thereto under the Indenture; (4) Indebtedness of the Company and the Subsidiary Guarantors evidenced by the Convertible Senior Subordinated Notes and the Convertible Senior Subordinated Note Guarantees with respect thereto under the Convertible Senior Subordinated Indenture; (5) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Issue Date; (6) obligations of the Company or any Restricted 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 such retailer notes receivables, 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; (7) Indebtedness of the Company owing to a Wholly Owned Restricted Subsidiary or of any Restricted Subsidiary owing to the Company or any Wholly Owned Restricted Subsidiary; provided that any disposition, pledge or transfer of any such Indebtedness to a Person (other than the Company or another Wholly Owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company or Restricted Subsidiary, as the case may be, not permitted by this clause (7); (8) Indebtedness in respect of letters of credit, surety bonds and performance bonds provided in the ordinary course of business; (9) 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 ten business days of its incurrence; 88 94 (10) Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets; (11) Indebtedness of the Company evidenced by commercial paper issued by the Company (including any refinancings of such Indebtedness); provided, however, that the aggregate principal amount of Indebtedness incurred pursuant to clauses (1), (2) and (11) of this definition does not exceed the maximum amount of Indebtedness permitted under clause (1) of this definition; (12) 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 20% of the book value of the Transferred Receivables at the time such Transferred Receivables are sold or in the case of receivables arising from direct financing leases, 30% of the book value thereof; (13) Indebtedness of the Company and its Restricted Subsidiaries in addition to that described in clauses (1) through (12) of this definition of "Permitted Indebtedness," together with any other outstanding Indebtedness incurred pursuant to this clause (13) (including any refinancings of such Indebtedness), not to exceed $100 million at any time outstanding in the aggregate; and (14) any renewals, extensions, substitutions, refunding, refinancings or replacements (each, a "refinancing") of any Indebtedness described in clauses (3), (4) and (5) 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 reasonable expenses of the Company or any Restricted Subsidiary, as the case may be, incurred in connection with such refinancing; (b) in the case of any refinancing of Subordinated Indebtedness, such new Indebtedness is subordinated to the notes or the applicable Note Guarantee, as the case may be, to the same extent as the Indebtedness being refinanced; and (c) such refinancing does not reduce the Average Life to Stated Maturity or the Stated Maturity of such Indebtedness; provided that with respect to the Medium-Term Notes, a refinancing shall be deemed to include a repayment of any such Medium-Term Notes and subsequent incurrence of Indebtedness so long as (x) after giving effect to such repayment and subsequent incurrence of new Indebtedness, the aggregate principal amount of Medium-Term Notes and such new Indebtedness does not exceed the principal amount of Medium-Term Notes outstanding on the Issue Date and (y) clauses (a) and (b) of this clause (14) are complied with. For purposes of determining compliance with the "Limitation on Indebtedness" covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (14) above or is permitted to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such covenant, the Company shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with such covenant. Accrual of interest, accretion or amortization of original issue discount and the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms will not be deemed to be an incurrence of Indebtedness for purposes of the "Limitation on Indebtedness" covenant. "Permitted Investment" means (1) Investments in any Wholly Owned Restricted Subsidiary or any Restricted Subsidiary that is a Subsidiary Guarantor or any Investment in any Person by the Company or any Restricted 89 95 Subsidiary as a result of which such Person becomes a Wholly Owned Restricted Subsidiary or a Restricted Subsidiary that is a Subsidiary Guarantor or any Investment in the Company by a Restricted Subsidiary; (2) intercompany Indebtedness to the extent permitted under clause (7) of the definition of "Permitted Indebtedness" and Indebtedness in connection with a Permitted Receivables Financing permitted under clause (12) of the definition of "Permitted Indebtedness"; (3) Temporary Cash Investments; (4) sales of goods and services on trade credit terms consistent with the Company's past practices or otherwise consistent with trade credit terms in common use in the industry; (5) Investments in direct financing leases for equipment and real estate owned or leased by the Company and leased to its customers in the ordinary course of business consistent with past practice; (6) Investments in Joint Ventures related to the Company's operations, not to exceed $50 million at any one time outstanding; (7) Investments in Investee Stores either in the form of equity, loans or other extensions of credit; provided that any such Investment may only be made if the amount thereof, when added to the aggregate outstanding amount of Permitted Investments in Investee Stores (excluding for purposes of this clause (7) any Investments made pursuant to clause (5)), after giving effect to any loan repayments or returns of capital in respect of any Permitted Investment in Investee Stores, does not exceed 12.5% of Consolidated Total Assets at the time of determination; (8) Investments as a result of non-cash consideration received by the Company or a Restricted Subsidiary in connection with an Asset Sale made in compliance with the "-- Certain Covenants -- Limitation on Sale of Assets" covenant; (9) other Investments, in addition to those permitted under (1) through (8) above, in an aggregate amount not to exceed $25 million; and (10) 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: (1) Liens existing as of the Issue Date; (2) Liens securing Indebtedness permitted to be incurred pursuant to clauses (1), (2) and (11) of the definition of "Permitted Indebtedness"; (3) Liens securing the notes and the Note Guarantees; (4) any Lien arising by reason of: (a) 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; (b) taxes, assessments, governmental charges or levies not yet delinquent or which are being contested in good faith; (c) security for payment of workers' compensation or other insurance; (d) 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); 90 96 (e) zoning restrictions, easements, licenses, reservations, title defects, rights of others for rights of way, 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 Restricted Subsidiary or the value of such property for the purpose of such business; (f) deposits to secure public or statutory obligations; (g) 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; (h) 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 (i) security for surety or appeal bonds; (5) any Lien on any property or assets of a Restricted Subsidiary in favor of the Company or any Wholly Owned Restricted Subsidiary; (6) 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 Restricted Subsidiary; provided that such Lien does not extend to any assets of the Company or any Restricted Subsidiary other than the assets acquired in the transaction resulting in such Acquired Indebtedness being incurred by the Company or Restricted Subsidiary, as the case may be; (7) 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 Restricted Subsidiary; (8) any Lien securing any Interest Rate Agreements or Currency Agreements permitted to be incurred pursuant to clause (6) of the definition of "Permitted Indebtedness" or any collateral for the Indebtedness to which such Interest Rate Agreements or Currency Agreements relate; (9) 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 covers only such asset and attaches concurrently or within 180 days after the acquisition or completion of construction thereof; (10) any Lien on real or personal property securing Capital Lease Obligations of the Company or any Restricted Subsidiary as lessee with respect to such real or personal property: (a) to the extent that the Company or such Restricted Subsidiary has entered into (and not terminated), or has a binding commitment for, subleases on terms which, to the Company or such Restricted Subsidiary, are at least as favorable, on a current basis, as the terms of the corresponding capital lease; or (b) under which the aggregate principal component of the annual rent payable does not exceed $5 million; (11) any Lien on a Transferred Receivable or other receivable that is transferred in a Permitted Receivables Financing; and 91 97 (12) any Lien consisting of any pledge to any Person of Indebtedness owed by any Restricted Subsidiary to the Company or to any Wholly Owned Restricted Subsidiary; provided that: (a) such Restricted Subsidiary is a Subsidiary Guarantor; and (b) the principal amount pledged does not exceed the Indebtedness secured by such pledge; (13) Liens securing Indebtedness which is incurred to refinance any Indebtedness which has been secured by a Lien permitted under the Indenture and which has been incurred in accordance with the provisions of the Indenture; provided, however, that such Liens: (a) are no less favorable to the Holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being refinanced; and (b) do not extend to or cover any property or assets of the Company or any of the Restricted Subsidiaries not securing the Indebtedness so refinanced; and (14) any extension, renewal, substitution or replacement, in whole or in part, of any Lien described in the foregoing clauses (4) through (12); provided, that the Lien so extended, renewed, substituted or replaced does not extend to any additional property or assets. "Permitted Receivables Financing" means any transaction involving the transfer (by way of sale, pledge or otherwise) by the Company or any of its Restricted Subsidiaries of receivables to any other Person, provided that after giving effect to such transaction the sum of: (1) the aggregate uncollected balances of the receivables so transferred ("Transferred Receivables"); plus (2) 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 $600 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. "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 Issue Date, and including, without limitation, all classes and series of preferred or preference stock of such Person. "Public Equity Offering" means with respect to the last sentence of "Certain Covenants -- Limitation On Issuances and Sales of Capital Stock of Subsidiaries," a primary or secondary public offering of equity securities of any Restricted Subsidiary of the Company pursuant to an effective registration statement under the Securities Act. "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: (1) S&P; (2) Moody's; or (3) 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, and, in each case, any successors thereto. 92 98 "Rating Category" means: (1) 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); (2) 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 (3) 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). "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. "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "Securities Act" means the Securities Act of 1933, as amended. "Significant Subsidiary" of the Company means any Subsidiary of the Company that is a "significant subsidiary" as defined in Regulation S-X under the Exchange Act. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill Inc., a New York corporation, or any successor rating agency. "Stated Maturity" when used with respect to any Indebtedness or any installment of interest thereon means the dates specified in such Indebtedness as the fixed date on which the principal of or premiums on such Indebtedness or such installment of interest is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company or the Subsidiary Guarantors that is subordinate or junior in right of payment to the notes or the Note Guarantees, as the case may be. "Subordinated Note Indentures" means: (1) the Indenture dated as of December 15, 1994 among the Company, as issuer, each of the subsidiary guarantors named therein as guarantors, and Manufacturers and Traders Trust Company, as trustee, in respect of the Subordinated Notes due 2004; and (2) the Indenture dated as of December 15, 1994 among the Company, as issuer, each of the subsidiary guarantors named therein as guarantors, and Manufacturers and Traders Trust Company, as trustee, in respect of the Subordinated Notes due 2007. "Subordinated Notes" means: (1) the 10 1/2% Senior Subordinated Notes due 2004 of the Company; and (2) the 10 5/8% Senior Subordinated Notes due 2007 of the Company. "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 Restricted Subsidiaries, or by the Company and one or more other Restricted Subsidiaries. "Subsidiary Guarantor" means each Wholly Owned Restricted Subsidiary of the Company and each such subsidiary's Wholly Owned Restricted Subsidiaries as of the Issue Date and any Restricted Subsidiary that is required pursuant to the "Additional Guarantees" covenant, on or after the Issue Date, 93 99 to execute a Note Guarantee pursuant to the Indenture until a successor replaces any such party pursuant to the applicable provisions of the Indenture and, thereafter, shall mean such successor. "Tangible Assets" means the total of all the assets appearing on the Consolidated balance sheet of a majority-owned or Wholly Owned Restricted Subsidiary of the Company less the following: (1) intangible assets including, without limitation, items such as goodwill, trademarks, trade names, patents and unamortized debt discount and expense; and (2) appropriate adjustments on account of minority interests of other Persons holding stock in any such majority-owned Restricted Subsidiary of the Company. "Temporary Cash Investments" means: (1) 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; (2) any certificate of deposit issued by, or time deposit of, a financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million, whose debt has a rating, at the time of which any investment therein is made, of "A" (or higher) according to Moody's or "A" (or higher) according to S&P; (3) commercial paper issued by a corporation (other than an Affiliate or Restricted Subsidiary of the Company) organized and existing under the laws of the United States 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; (4) any money market deposit accounts issued or offered by a financial institution that is a member of the Federal Reserve System having capital and surplus in excess of $500 million; (5) short term tax-exempt bonds with a rating, at the time as of which any investment is made therein, of "Aa3" (or higher) according to Moody's or "AA-" (or higher) according to S&P; (6) shares in a mutual fund, the investment objectives and policies of which require it to invest substantially in the investments of the type described in clause (1) through (5); and (7) repurchase and reverse repurchase obligations with the term of not more than seven days for underlying securities of the types described in clauses (1) and (2) entered into with any financial institution meeting the qualifications specified in clause (2); provided that in the case of clauses (1), (2), (3) and (5), 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" set forth herein. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Unrestricted Subsidiary" means any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with the Company or any of its Restricted Subsidiaries unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; 94 100 (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (5) does not directly or through any of its Subsidiaries own any Capital Stock of, or own or hold any Lien on any property of, the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenant described above under the caption "Certain Covenants -- Limitations on Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "Certain Covenants -- Limitations on Indebtedness," the Company shall be in default of such covenant). The Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if: (1) such Indebtedness is permitted under the covenant described under the caption "Certain Covenants -- Limitation on Indebtedness"; and (2) no Default or Event of Default would be in existence following such designation. "Voting Stock" means stock or securities of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a Person (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 Restricted Subsidiary" means a Restricted Subsidiary all the Capital Stock (other than directors qualifying shares) of which is owned by the Company or another Wholly Owned Restricted Subsidiary. BOOK-ENTRY; DELIVERY AND FORM We will issue the exchange notes in the form of a Global Note. The Global Note will be deposited with, or on behalf of, the clearing agency registered under the Exchange Act that is designated to act as depositary for the Notes and registered in the name of the depositary or its nominee. The DTC will be the initial depositary. Except as set forth below, a Global Note may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee. DTC has advised us that DTC is: - a limited-purpose trust company organized under the laws of the State of New York; - a member of the Federal Reserve System; - a "clearing corporation" within the meaning of the New York Uniform Commercial Code; and - a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities of institutions that have accounts with DTC and to facilitate the clearance and settlement of securities transactions among its participants in securities through electronic 95 101 book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC's participants include: - securities brokers and dealers; - banks; - trust companies; - clearing corporations; and - certain other organizations. Access to DTC's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, whether directly or indirectly. We expect that pursuant to the procedures established by DTC (1) upon the issuance of a Global Note, DTC will credit, on its book-entry registration and transfer system, the respective principal amount of the individual beneficial interests represented by the Global Note to the accounts of participants and (2) ownership of beneficial interests in a Global Note will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by DTC (with respect to participants' interests) and the participants (with respect to the owners of beneficial interests in the Global Note other than participants). The accounts to be credited will be designated by the initial purchasers of the beneficial interests. Ownership of beneficial interests in a Global Note is limited to participants or persons that may hold interests through participants. So long as DTC or its nominee is the registered holder and owner of a Global Note, DTC or its nominee, as the case may be, will be considered the sole legal owner of the Notes represented by the Global Note for all purposes under the indenture and the Notes. Except as set forth below, owners of beneficial interests in a Global Note will not be entitled to receive definitive Notes and will not be considered to be the owners or holders of any Notes under the Global Note. We understand that under existing industry practice, in the event an owner of a beneficial interest in a Global Note desires to take any action that DTC, as the holder of the Global Note, is entitled to take, DTC would authorize the participants to take the action, and that participants would authorize beneficial owners owning through the participants to take the action or would otherwise act upon the instructions of beneficial owners owning through them. No beneficial owner of an interest in a Global Note will be able to transfer the interest except in accordance with DTC's applicable procedures, in addition to those provided for under the indenture and, if applicable, those of Euroclear and Clearstream Banking. We will make payments of the principal of, and interest on, the Notes represented by a Global Note registered in the name of and held by DTC or its nominee to DTC or its nominee, as the case may be, as the registered owner and holder of the Global Note. We expect that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Note as shown on the records of DTC or its nominee. We also expect that payments by participants and indirect participants to owners of beneficial interests in a Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for accounts of customers registered in the names of nominees for these customers. The payments, however, will be the responsibility of the participants and indirect participants, and neither we, the Trustee nor any paying agent will have any responsibility or liability for: - any aspect of the records relating to, or payments made on account of, beneficial ownership interests in a Global Note; - maintaining, supervising or reviewing any records relating to the beneficial ownership interests; 96 102 - any other aspect of the relationship between DTC and its participants; or - the relationship between the participants and indirect participants and the owners of beneficial interests in a Global Note. Unless and until it is exchanged in whole or in part for definitive Notes, a Global Note may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC. Participants in DTC will effect transfers with other participants in the ordinary way in accordance with DTC rules and will settle transfers in same-day funds. Participants in Euroclear and Clearstream Banking will effect transfers with other participants in the ordinary way in accordance with the rules and operating procedures of Euroclear and Clearstream Banking, as applicable. If a holder requires physical delivery of a definitive Note for any reason, including to sell Notes to persons in jurisdictions which require physical delivery or to pledge Notes, the holder must transfer its interest in a Global Note in accordance with the normal procedures of DTC and the procedures set forth in the indenture. Cross-market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream Banking participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of Euroclear or Clearstream Banking, as the case may be, by its respective depositary; however, these cross-market transactions will require delivery of instructions to Euroclear or Clearstream Banking, as the case may be, by the counterparty in the system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream Banking, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in a Global Note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream Banking participants may not deliver instructions directly to the depositories for Euroclear or Clearstream Banking. Because of time zone differences, the securities account of a Euroclear or Clearstream Banking participant purchasing an interest in a Global Note from a DTC participant will be credited during the securities settlement processing day (which must be a business day for Euroclear or Clearstream Banking, as the case may be) immediately following the DTC settlement date, and the credit of any transactions interests in a Global Note settled during the processing day will be reported to the relevant Euroclear or Clearstream Banking participant on that day. Cash received in Euroclear or Clearstream Banking as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream Banking participant to a DTC participant will be received with value on the DTC settlement date, but will be available in the relevant Euroclear or Clearstream Banking cash account only as of the business day following settlement in DTC. We expect that DTC will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose accounts at the DTC interests in a Global Note are credited and only in respect of the portion of the aggregate principal amount of the Notes as to which the participant or participants has or have given direction. However, if there is an event of default under the Notes, DTC will exchange the Global Notes for definitive Notes, which it will distribute to its participants. These definitive Notes are subject to certain restrictions on registration of transfers and will bear appropriate legends restricting their transfer. Although we expect that DTC, Euroclear and Clearstream Banking will agree to the foregoing procedures in order to facilitate transfers of interests in Global Notes among participants of DTC, Euroclear, and Clearstream Banking, DTC, Euroclear and Clearstream Banking are under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. Neither we nor the trustee have any responsibility for the performance by DTC, Euroclear or Clearstream Banking or their participants or indirect participants of their obligations under the rules and procedures governing their operations. 97 103 If DTC is at any time unwilling or unable to continue as a depositary for Global Notes or ceases to be a clearing agency registered under the Securities Exchange Act and we do not appoint a successor depositary within 90 days, we will issue definitive Notes in exchange for the Global Notes. The definitive Notes will be subject to certain restrictions on registration of transfers and will bear appropriate legends concerning these restrictions. 98 104 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. Broker-dealers may use this prospectus, as it may be amended or supplemented from time to time, in connection with the resale of exchange notes received in exchange for private notes where the broker-dealer acquired the private notes as a result of market-making activities or other trading activities. We have agreed that for a period of up to 180 days after the date that this registration statement is declared effective by the SEC, we will make this prospectus, as amended or supplemented, available to any broker-dealer that requests it in the letter of transmittal for use in connection with any such resale. We will not receive any proceeds from any sale of exchange notes by broker-dealers or any other persons. Broker-dealers may sell exchange notes received by broker-dealers for their own account pursuant to the exchange offer from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or negotiated prices. Broker-dealers may resell exchange notes directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any broker-dealer and/or the purchasers of the exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of the exchange notes may be deemed to be "underwriters" within the meaning of the Securities Act and any profit on any resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. We have agreed to pay all expenses incident to our performance of, or compliance with, the registration rights agreement and will indemnify you against liabilities under the Securities Act. By its acceptance of the exchange offer, any broker-dealer that receives exchange notes pursuant to the exchange offer agrees to notify us before using the prospectus in connection with the sale or transfer of exchange notes. The broker-dealer further acknowledges and agrees that, upon receipt of notice from us of the happening of any event which makes any statement in the prospectus untrue in any material respect or which requires the making of any changes in the prospectus to make the statements in the prospectus not misleading or which may impose upon us disclosure obligations that my have a material adverse effect on us, which notice we agree to deliver promptly to the broker-dealer, the broker-dealer will suspend use of the prospectus until we have notified the broker-dealer that delivery of the prospectus may resume and have furnished copies of any amendment or supplement to the prospectus to the broker-dealer. MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of the material United States federal income tax considerations relating to the exchange your private notes for exchange notes in the exchange offer, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based on laws, regulations, rulings and decisions now in effect, all of which are subject to change or differing interpretation possibly with retroactive effect. We have not sought any ruling from the Internal Revenue Service or an opinion of counsel with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the Internal Revenue Service will agree with such statements and conclusions. This discussion only applies to you if you exchange your private notes for exchange notes in the exchange offer. This discussion does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction. This discussion also does not address tax considerations applicable to 99 105 your particular circumstances or if you are subject to special tax rules, including, without limitation, if you are: - a bank; - a holder subject to the alternative minimum tax; - a tax-exempt organization; - an insurance company; - a foreign person or entity; - a dealer in securities or currencies; - a person that will hold notes as a position in a hedging transaction, "straddle" or "conversion transaction" for tax purposes; or - a person deemed to sell notes under the constructive sale provisions of the Internal Revenue Code. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY. The exchange of private notes for exchange notes will be treated as a "non-event" for federal income tax purposes because the exchange notes will not be considered to differ materially in kind or extent from the private notes. As a result, no material federal income tax consequences will result to you from exchanging private notes for exchange notes. LEGAL MATTERS Certain legal matters in connection with the notes offered hereby will be passed upon for us by Latham & Watkins, San Francisco, California and McAfee & Taft, Oklahoma City, Oklahoma. INDEPENDENT AUDITORS Our consolidated financial statements as of December 30, 2000 and December 25, 1999 and for each of the three years in the period ended December 30, 2000 included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein. AVAILABLE INFORMATION We are subject to the information requirements of the Securities Exchange Act of 1934, as amended (File No. 001-08140). Accordingly, we file annual, quarterly and periodic reports, proxy statements and other information with the SEC relating to our business, financial statements and other matters. You may read and copy any documents we have filed with the SEC at prescribed rates at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. You can obtain copies of these materials at prescribed rates by writing to the SEC's Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549, or by calling (800) SEC-0330. Our SEC filings are also available to you free of charge at the SEC's web site at http://www.sec.gov. Information contained in our web site is not part of this prospectus. 100 106 INCORPORATION BY REFERENCE We have elected to "incorporate by reference" certain information into this prospectus. By incorporating by reference, we can disclose important information to you by referring you to another document we have filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for information incorporated by reference that is superseded by information contained in this prospectus. This prospectus incorporates by reference the documents set forth below that we have previously filed with the SEC:
FLEMING SEC FILINGS (FILE NO. 001-08140) FILED ON ---------------------------------------- -------- Annual Report on Form 10-K (including information specifically incorporated by reference into our Form 10-K from our Proxy Statement for our 2001 Annual Meeting of Stockholders)............................................. March 23, 2001 Amended Annual Report on Form 10-K/A........................ March 23, 2001 Current Report on Form 8-K.................................. March 16, 2001 Current Report on Form 8-K.................................. March 13, 2001
We are also incorporating by reference all other reports that we file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this prospectus and the date of the completion of the exchange offer. Our trademarks, service marks and trade names include "Fleming," "FlexPro," "FlexStar," "FlexMate," "Piggly Wiggly," "Sentry," "Super 1 Foods," "Festival Foods," "Jubilee Foods," "Jamboree Foods," "MEGAMARKET," "Shop 'N Kart," "American Family," "ABCO Desert Market," "Big Star," "Big T," "Buy for Less," "County Pride Markets," "Rainbow Foods," "Red Fox," "Shop N Bag," "Super Duper," "Super Foods," "Super Thrift," "Thriftway" and "Value King." This prospectus also contains trademarks, service marks, copyrights and trade names of other companies. 101 107 FLEMING COMPANIES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Independent Auditors' Report................................ F-2 Consolidated Statements of Operations for the years ended December 30, 2000, December 25, 1999, and December 26, 1998...................................................... F-3 Consolidated Balance Sheets at December 30, 2000 and December 25, 1999......................................... F-4 Consolidated Statements of Cash Flows for the years ended December 30, 2000, December 25, 1999, and December 26, 1998...................................................... F-5 Consolidated Statements of Shareholders' Equity for the years ended December 30, 2000, December 25, 1999, and December 26, 1998......................................... F-6 Notes to Consolidated Financial Statements for the years ended December 30, 2000, December 25, 1999, and December 26, 1998.................................................. F-7
F-1 108 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 30, 2000 and December 25, 1999, and the related consolidated statements of operations, cash flows, and shareholders' equity for each of the three years in the period ended December 30, 2000. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 at December 30, 2000, and December 25, 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 2000, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Oklahoma City, Oklahoma February 14, 2001 (except for the information under long-term debt and contingencies included in the notes to consolidated financial statements as to which the date is March 22, 2001) F-2 109 FLEMING COMPANIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999 AND DECEMBER 26, 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 1999 1998 ----------- ----------- ----------- Net sales........................................... $14,443,815 $14,272,036 $14,677,904 Costs and expenses (income): Cost of sales..................................... 13,096,915 12,834,869 13,227,530 Selling and administrative........................ 1,185,003 1,261,631 1,251,592 Interest expense.................................. 174,569 165,180 161,581 Interest income................................... (32,662) (40,318) (36,736) Equity investment results......................... 8,034 10,243 11,622 Litigation charges................................ -- -- 7,780 Impairment/restructuring charge................... 212,845 103,012 652,737 ----------- ----------- ----------- Total costs and expenses....................... 14,644,704 14,334,617 15,276,106 ----------- ----------- ----------- Loss before taxes................................... (200,889) (62,581) (598,202) Taxes on loss....................................... (78,747) (17,853) (87,607) ----------- ----------- ----------- Net loss............................................ $ (122,142) $ (44,728) $ (510,595) =========== =========== =========== Basic and diluted net loss per share................ $ (3.15) $ (1.17) $ (13.48) =========== =========== =========== Basic and diluted weighted average shares outstanding....................................... 38,716 38,305 37,887 =========== =========== ===========
See notes to consolidated financial statements. F-3 110 FLEMING COMPANIES, INC. CONSOLIDATED BALANCE SHEETS AT DECEMBER 30, 2000 AND DECEMBER 25, 1999 (IN THOUSANDS) ASSETS
2000 1999 ---------- ---------- Current assets: Cash and cash equivalents................................. $ 30,380 $ 6,683 Receivables, net.......................................... 509,045 496,159 Inventories............................................... 831,265 997,805 Assets held for sale...................................... 165,800 68,615 Other current assets...................................... 86,583 159,488 ---------- ---------- Total current assets................................... 1,623,073 1,728,750 Investments and notes receivable, net....................... 104,467 108,895 Investment in direct financing leases....................... 102,011 126,309 Property and equipment: Land...................................................... 40,242 45,507 Buildings................................................. 356,376 389,651 Fixtures and equipment.................................... 565,472 636,501 Leasehold improvements.................................... 210,970 236,570 Leased assets under capital leases..................... 197,370 231,236 ---------- ---------- 1,370,430 1,539,465 Less accumulated depreciation and amortization.............. (653,973) (701,289) ---------- ---------- Net property and equipment............................. 716,457 838,176 Deferred income taxes....................................... 139,852 54,754 Other assets................................................ 172,632 150,214 Goodwill, net............................................... 544,319 566,120 ---------- ---------- Total Assets........................................... $3,402,811 $3,573,218 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 943,279 $ 981,219 Current maturities of long-term debt...................... 38,171 70,905 Current obligations under capital leases.................. 21,666 21,375 Other current liabilities................................. 229,272 210,220 ---------- ---------- Total current liabilities.............................. 1,232,388 1,283,719 Long-term debt.............................................. 1,232,400 1,234,185 Long-term obligations under capital leases.................. 377,239 367,960 Other liabilities........................................... 133,592 126,652 Commitments and contingencies Shareholders' equity: Common stock, $2.50 par value, authorized -- 100,000 shares, issued and outstanding -- 39,618 and 38,856 shares................................................. 99,044 97,141 Capital in excess of par value............................ 513,645 511,447 Reinvested earnings (deficit)............................. (144,468) (22,326) Accumulated other comprehensive income -- additional minimum pension liability.............................. (41,029) (25,560) ---------- ---------- Total shareholders' equity............................. 427,192 560,702 ---------- ---------- Total Liabilities and Shareholders' Equity............. $3,402,811 $3,573,218 ========== ==========
See notes to consolidated financial statements. F-4 111 FLEMING COMPANIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 (IN THOUSANDS)
2000 1999 1998 --------- --------- --------- Cash flows from operating activities: Net loss.................................................. $(122,142) $ (44,728) $(510,595) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization.......................... 174,107 162,379 185,368 Credit losses.......................................... 28,872 25,394 23,498 Deferred income taxes.................................. (65,538) 3,357 (117,239) Equity investment results.............................. 8,034 10,243 11,622 Impairment/restructuring and related charges........... 288,408 135,346 668,028 Cash payments on impairment/restructuring and related charges.............................................. (118,190) (57,340) (10,408) Consolidation and restructuring reserve activity....... -- 423 (1,008) Change in assets and liabilities, excluding effect of acquisitions: Receivables.......................................... (26,005) (55,692) (156,822) Inventories.......................................... 65,639 (22,049) 6,922 Accounts payable..................................... (49,121) 35,744 114,136 Other assets and liabilities......................... (63,198) (70,112) (68,058) Other adjustments, net................................. 5,779 (5,348) (4,365) --------- --------- --------- Net cash provided by operating activities................... 126,645 117,617 141,079 --------- --------- --------- Cash flows from investing activities: Collections on notes receivable........................... 32,943 34,798 38,076 Notes receivable funded................................... (35,841) (43,859) (28,946) Businesses acquired....................................... (7,320) (78,440) (30,225) Proceeds from sale of businesses.......................... 45,693 7,042 32,277 Purchase of property and equipment........................ (150,837) (166,339) (200,211) Proceeds from sale of property and equipment.............. 50,957 35,487 17,056 Investments in customers.................................. -- (8,115) (1,009) Proceeds from sale of investments......................... 3,552 2,745 3,529 Other investing activities................................ 12,949 3,337 6,141 --------- --------- --------- Net cash used in investing activities....................... (47,904) (213,344) (163,312) --------- --------- --------- Cash flows from financing activities: Proceeds from long-term borrowings........................ 185,000 191,000 170,000 Principal payments on long-term debt...................... (219,519) (71,178) (159,651) Principal payments on capital lease obligations........... (20,888) (21,533) (13,356) Sale of common stock under incentive stock and stock ownership plans........................................ 4,051 1,267 4,830 Dividends paid............................................ (3,117) (3,082) (3,048) Other financing activities................................ (571) (31) (891) --------- --------- --------- Net cash provided by (used in) financing activities......... (55,044) 96,443 (2,116) --------- --------- --------- Net increase (decrease) in cash and cash equivalents........ 23,697 716 (24,349) Cash and cash equivalents, beginning of year................ 6,683 5,967 30,316 --------- --------- --------- Cash and cash equivalents, end of year...................... $ 30,380 $ 6,683 $ 5,967 ========= ========= =========
See notes to consolidated financial statements. F-5 112 FLEMING COMPANIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999 AND DECEMBER 26, 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ACCUMULATED COMMON STOCK CAPITAL REINVESTED OTHER ---------------- IN EXCESS OF EARNINGS COMPREHENSIVE COMPREHENSIVE ESOP TOTAL SHARES AMOUNT PAR VALUE (DEFICIT) INCOME INCOME NOTE ---------- ------ ------- ------------ ---------- ------------- ------------- ------- BALANCE AT DECEMBER 27, 1997...................... $1,089,672 38,264 $95,660 $504,451 $ 536,792 $(42,637) $(4,594) Comprehensive income Net loss.................. (510,595) (510,595) $(510,595) Other comprehensive income, net of tax Currency translation adjustment (net of $0 taxes)................ 4,922 4,922 4,922 Minimum pension liability adjustment (net of $12,914 of taxes)................ (19,418) (19,418) (19,418) --------- Comprehensive income...... $(525,091) ========= Incentive stock and stock ownership plans........... 5,847 278 696 5,151 Cash dividends, $0.08 per share..................... (3,042) (3,042) ESOP note payments.......... 2,545 2,545 ---------- ------ ------- -------- --------- -------- ------- BALANCE AT DECEMBER 26, 1998...................... 569,931 38,542 96,356 509,602 23,155 (57,133) (2,049) Comprehensive income Net loss.................. (44,728) (44,728) $ (44,728) Other comprehensive income, net of tax Minimum pension liability adjustment (net of $21,049 of taxes)................ 31,573 31,573 32,573 --------- Comprehensive income...... $ (13,155) ========= Incentive stock and stock ownership plans........... 4,955 314 785 4,170 Cash dividends, $0.08 per share..................... (3,078) (2,325) (753) ESOP note payments.......... 2,049 2,049 ---------- ------ ------- -------- --------- -------- ------- BALANCE AT DECEMBER 25, 1999...................... 560,702 38,856 97,141 511,447 (22,326) (25,560) -- Comprehensive income Net loss.................. (122,142) (122,142) $(122,142) Other comprehensive income, net of tax Minimum pension liability adjustment (net of $10,312 of taxes).............. (15,469) (15,469) (15,469) --------- Comprehensive income...... $(137,611) ========= Incentive stock and stock ownership plans........... 7,210 762 1,903 5,307 Cash dividends, $0.08 per share..................... (3,109) (3,109) ---------- ------ ------- -------- --------- -------- ------- BALANCE AT DECEMBER 30, 2000...................... $ 427,192 39,618 $99,044 $513,645 $(144,468) $(41,029) $ -- ========== ====== ======= ======== ========= ======== =======
See notes to consolidated financial statements. F-6 113 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations: Fleming is an industry leader in the distribution of consumable goods, and also has a growing presence in operating "price impact" supermarkets. Our activities encompass two major businesses: distribution and retail operations. Food and food-related product sales account for over 97 percent of our consolidated sales. Our largest customer accounts for approximately 10 percent of our consolidated sales with the next largest representing less than 2 percent. Fiscal Year: Our fiscal year ends on the last Saturday in December. Fiscal 2000 was 53 weeks; 1999 and 1998 were 52 weeks. The impact of the additional week in 2000 is not material to the results of operations or financial position. Basis of Presentation: The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation: The consolidated financial statements include all subsidiaries. Material intercompany items have been eliminated. The equity method of accounting is usually used for investments in certain entities in which we have an investment in common stock of between 20% and 50% or such investment is temporary. Under the equity method, original investments are recorded at cost and adjusted by our share of earnings or losses of these entities and for declines in estimated realizable values deemed to be other than temporary. Reclassifications: Certain reclassifications have been made to prior year amounts to conform to current year classifications. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 -- Revenue Recognition. SAB No. 101 provides guidance on recognition, presentation and disclosure of revenue in financial statements. In July 2000, the Financial Accounting Standards Board Emerging Issues Task Force issued EITF 99-19 -- Reporting Revenue Gross as a Principal versus Net as an Agent. EITF 99-19 provides further guidance on reflecting revenue gross or net. We adopted SAB No. 101 and EITF 99-19 in the fourth quarter of 2000. The implementation had an impact on the classification of previously reported net sales and cost of goods sold (ranging annually from $350 million to $400 million), but had no impact on earnings. Net sales and cost of goods sold have been restated for all periods presented. Basic and Diluted Net Loss Per Share: Both basic and diluted per share amounts are computed based on net loss divided by weighted average shares as appropriate for each calculation subject to anti-dilution limitations. Taxes on Income: Deferred income taxes arise from temporary differences between financial and tax bases of certain assets and liabilities. Cash and Cash Equivalents: Cash equivalents consist of liquid investments readily convertible to cash with an original 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 $27 million in 2000 and $25 million in 1999. Receivables are shown net of allowance for doubtful accounts of $34 million in 2000 and $32 million in 1999. We extend credit to our retail customers which are located over a broad F-7 114 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 geographic base. Regional concentrations of credit risk are limited. Interest income on impaired loans is recognized only when payments are received. Inventories: Inventories are valued at the lower of cost or market. Grocery and certain perishable inventories, aggregating approximately 70% of total inventories in 2000 and 1999 are valued on a last-in, first-out (LIFO) method. The cost for the remaining inventories is determined by the first-in, first-out (FIFO) method. Current replacement cost of LIFO inventories was greater than the carrying amounts by approximately $58 million at year-end 2000 ($13 million of which is recorded in assets held for sale in current assets) and $54 million at year-end 1999 ($4 million of which is recorded in assets held for sale in current assets). In 2000 and 1999, the liquidation of certain LIFO layers related to business closings decreased cost of products sold by approximately $7 million and $2 million, respectively. 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, is based on the estimated useful asset lives using the straight-line method. 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; and data processing equipment and software -- 3 to 7 years. Goodwill: The excess of purchase price over the fair 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 $193 million and $184 million in 2000 and 1999, respectively. Impairment: Asset impairments are recorded when the carrying amount of assets are not recoverable. Impairment is assessed and measured, by asset type, as follows: notes receivable -- fair value of the collateral for each note; and, long-lived assets, goodwill and other intangibles -- estimate of the future cash flows expected to result from the use of the asset and its eventual disposition aggregated to the operating unit level for distribution and store level for retail. Financial Instruments: Interest rate hedge transactions and other financial instruments have been utilized to manage interest rate exposure. 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. Stock-Based Compensation: We apply APB Opinion No. 25 -- Accounting for Stock Issued to Employees and related Interpretations in accounting for our plans. Comprehensive Income: Comprehensive income is reflected in the Consolidated Statements of Shareholders' Equity. Other comprehensive income is comprised of foreign currency translation adjustments and minimum pension liability adjustments. The cumulative effect of other comprehensive income is reflected in the Shareholders' Equity section of the Consolidated Balance Sheets. IMPAIRMENT/RESTRUCTURING CHARGE AND RELATED COSTS In December 1998, we announced the implementation of a strategic plan designed to improve the competitiveness of the retailers we serve and improve our performance by building stronger operations that can better support long-term growth. The strategic plan consisted of the following four major initiatives: - Consolidate distribution operations. The strategic plan initially included closing eleven operating units (El Paso, TX; Portland, OR; Houston, TX; Huntingdon, PA; Laurens, IA; Johnson City, TN; Sikeston, MO; San Antonio, TX; Buffalo, NY; and two other operating units scheduled for closure, F-8 115 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 but not closed due to increased cash flows). Of the nine closings announced, all were completed by the end of 2000. Three additional closings were announced which were not originally part of the strategic plan bringing the total operating units closed to twelve. The closing of Peoria was added to the plan in the first quarter of 1999 when costs associated with continuing to service customers during a strike coupled with costs of reopening the operating unit made closing the operating unit an economically sound decision. During the first quarter of 2000, the closings of York and Philadelphia were announced as part of an effort to grow in the northeast by consolidating distribution operations and expanding the Maryland facility. The York and Philadelphia closings are complete. The last full year of operations for the 12 operating units closed was in 1998 with sales totaling approximately $3.1 billion. Most of these sales have been retained by transferring customer business to our higher volume, better utilized facilities. We believe that this consolidation process is benefiting customers with improved buying opportunities. We have also benefited with better coverage of fixed expenses. The closings have resulted in savings due to reduced depreciation, payroll, lease and other operating costs, and we began to recognize these savings immediately upon closure. The capital returned from the divestitures and closings was reinvested in the business. - Grow distribution sales. Higher volume, better-utilized distribution operations represent an opportunity for sales growth. The improved efficiency and effectiveness of the remaining distribution operations enhances their competitiveness, and we have capitalized on these improvements by adding $1.2 billion in annualized sales in 2000. - Improve retail performance. This not only required divestiture or closing of under-performing company-owned retail chains, but also required increased investments in the retail concepts on which we are focused. As of year-end 1999, the strategic plan included the divestiture or closing of seven retail chains (Hyde Park, Consumers, Boogaarts, New York Retail, Pennsylvania Retail, Baker's(TM) Oklahoma, and Thompson Food Basket(R)). The sale of Baker's(TM) Oklahoma as well as the divestiture or closing of Thompson Food Basket(R) was added to the strategic plan because their format no longer fit into our business strategy. The last full year of operations for these seven chains was in 1998 with sales totaling approximately $844 million. The sale or closing of these chains is substantially complete. In April 2000, we announced the evaluation of strategic alternatives for the remaining conventional retail chains (Rainbow Foods(R), Baker's(TM) Nebraska, Sentry(R) Foods, and ABCO Foods(TM)). The evaluation was completed by the end of 2000 with the decision to reposition certain retail operations into our price impact format. The Rainbow Foods(R) chain reflected significant improvements in sales and earnings and consequently, was retained. The Minneapolis distribution center has been dedicated to supply the Rainbow Foods(R) operation, with the supply of the division's independent retailers moved to the LaCrosse and Superior divisions. We recently sold 11 of the ABCO Foods(TM) stores to Safeway, Inc. and we currently have an agreement to sell the assets of the 16-store Baker's chain to Kroger Co. We also plan to convert ten company-owned Sentry(R) Foods stores to the value retail format and steps are being taken to sell the remaining stores to existing and new distribution customers. The last full year of operations for ABCO Foods(TM), Baker's(TM) Nebraska and Sentry(R) Foods was in 1999 with sales totaling approximately $1,415 million. We expect to retain a substantial level of the distribution business for these operations and expect to receive a total of approximately $200 million in net proceeds from the sale of these stores. - Reduce overhead and operating expenses. We reduced overhead through our low cost pursuit program which includes organization and process changes, such as reducing workforce, centralizing administrative and procurement functions, and reducing the number of management layers. The low cost pursuit program also includes other initiatives to reduce complexity in business systems and F-9 116 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 remove non-value-added costs from operations, such as reducing the number of SKU's, creating a single point of contact with customers, reducing the number of decision points within Fleming, and centralizing vendor negotiations. These initiatives have reduced costs which ultimately improves profitability and competitiveness. The plan, as expected, took two years to implement. Additional charges of approximately $20 million will be incurred in 2001 due to the time involved to finish selling and closing certain retail stores. The remaining charges represent severance related expenses, inventory markdowns for clearance for closed operations and other exit costs that cannot be expensed until incurred. Charges after 2001 will be minimal exit costs. The total pre-tax charge for the strategic plan through 2000 was $1,114 million ($313 million cash and $801 million non-cash). The plan originally announced in December 1998 had an estimated pre-tax charge totaling $782 million. The result was an increase in the estimate of the strategic plan of $332 million ($164 million cash and $168 million non-cash). The net increase is due primarily to closing the Peoria, York and Philadelphia divisions ($104 million); updating impairment amounts on the five retail chains in the original plan ($18 million); the divestiture or closing of the two chains not in the original plan ($44 million); decreasing costs related to a scheduled closing no longer planned ($18 million); impairment amounts relating to the recent evaluation of conventional retail ($125 million); and other costs including those related to our low cost pursuit program and centralization of administrative functions ($59 million). Updating the impairment amounts was necessary as decisions to sell, close or convert additional operating units were made. There were changes in the list of operating units to be divested or closed since they no longer fit into the current business strategy. Also, the cost of severance, relocation and other periodic expenses related to our low cost pursuit program and centralization of administrative functions has been accrued as incurred. The pre-tax charge for 2000 was $309 million. After tax, the expense for 2000 was $183 million or $4.72 per share. The $309 million charge in 2000 was included on several lines of the Consolidated Statements of Operations as follows: $2 million was included in net sales related primarily to rent income impairment due to division closings; $57 million was included in cost of sales and was primarily related to inventory valuation adjustments, moving and training costs relating to procurement and product handling associates, and additional depreciation and amortization on assets to be disposed of but not yet held for sale; $37 million was included in selling and administrative expense and equity investment results as disposition related costs recognized on a periodic basis (such as moving and training costs related to the consolidation of certain administrative functions); and the remaining $213 million was included in the Impairment/restructuring charge line. The charge for 2000 consisted of the following components: - Impairment of assets of $91 million. The impairment components were $3 million for goodwill and $88 million for other long-lived assets relating to planned disposals and closures. All of the goodwill charge was related to a three store retail acquisition. - Restructuring charges of $122 million. The restructuring charges consisted partly of severance related expenses and estimated pension withdrawal liabilities for the closings of York and Philadelphia which were announced during the first quarter of 2000 as part of an effort to grow in the northeast by consolidating distribution operations and expanding the Maryland facility. The charge included severance related expenses due to the consolidation of certain administrative departments announced during the second quarter of 2000. Additionally, the charge included severance related expenses, estimated pension withdrawal liabilities and operating lease liabilities for the divestiture and closing of certain conventional retail stores evaluated during the second and third quarters of 2000. The restructuring charges also consisted of professional fees incurred related to the restructuring process. F-10 117 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 - Other disposition and related costs of $96 million. These costs consisted primarily of inventory markdowns for clearance for closed operations, additional depreciation and amortization on assets to be disposed of but not yet held for sale, disposition related costs recognized on a periodic basis and other costs. The charge for 2000 related to our business segments as follows: $99 million relates to the distribution segment and $164 million relates to the retail segment with the balance relating to support services expenses. The pre-tax charge for 1999 was $137 million. After tax, the expense for 1999 was $92 million or $2.39 per share. The $137 million charge in 1999 was included on several lines of the Consolidated Statements of Operations as follows: $18 million was included in cost of sales and was primarily related to inventory valuation adjustments; $16 million was included in selling and administrative expense and equity investment results as disposition related costs recognized on a periodic basis; and the remaining $103 million was included in the Impairment/restructuring charge line. The 1999 charge consisted of the following components: - Impairment of assets of $62 million. The impairment components were $36 million for goodwill and $26 million for other long-lived assets relating to planned disposals and closures. Of the goodwill charge of $36 million, $22 million related to the 1994 "Scrivner" acquisition with the remaining amount related to two retail acquisitions. - Restructuring charges of $41 million. The restructuring charges consisted primarily of severance related expenses and estimated pension withdrawal liabilities for the divested or closed operating units announced during 1999. The restructuring charges also consisted of operating lease liabilities and professional fees incurred related to the restructuring process. - Other disposition and related costs of $34 million. These costs consisted primarily of inventory markdowns for clearance for closed operations, impairment of an investment, disposition related costs recognized on a periodic basis and other costs. The 1999 charge relates to our business segments as follows: $48 million relates to the distribution segment and $70 million relates to the retail segment with the balance relating to support services expenses. The pre-tax charge for 1998 was $668 million. After tax, the expense was $543 million in 1998 or $14.33 per share. The $668 million charge was included on several lines of the Consolidated Statements of Operations as follows: $9 million was included in cost of sales and was primarily related to inventory valuation adjustments; $6 million was included in selling and administrative expense as disposition related costs recognized on a periodic basis; and the remaining $653 million was included in the Impairment/ restructuring charge line. The 1998 charge consisted of the following components: - Impairment of assets of $590 million. The impairment components were $372 million for goodwill and $218 million for other long-lived assets. Of the goodwill charge of $372 million, approximately 87% related to the 1989 "Malone & Hyde" acquisition and the 1994 "Scrivner" acquisition. The remaining 13% related to various other smaller acquisitions, both retail and wholesale. - Restructuring charges of $63 million. The restructuring charges consisted of severance related expenses and pension withdrawal liabilities for the operating units and the retail chain announced during 1998. The restructuring charges also consisted of operating lease liabilities for the distribution operating units and the retail chain announced during 1998 plus the additional planned closings at that time. F-11 118 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 - Other disposition and related costs of $15 million. These costs consist primarily of professional fees, inventory valuation adjustments and other costs. The 1998 charge relates to our business segments as follows: $491 million relates to the distribution segment and $153 million relates to the retail food segment with the balance relating to support services expenses. The charges related to workforce reductions are as follows:
AMOUNT HEADCOUNT -------- --------- ($ IN THOUSANDS) 1998 Activity: Charge............................................... $ 25,441 1,430 Terminations......................................... (3,458) (170) -------- ------ Ending Liability..................................... 21,983 1,260 1999 Activity: Charge............................................... 12,029 1,350 Terminations......................................... (24,410) (1,950) -------- ------ Ending Liability..................................... 9,602 660 2000 Activity: Charge............................................... 53,906 5,610 Terminations......................................... (26,180) (1,860) -------- ------ Ending Liability..................................... $ 37,328 4,410 ======== ======
The ending liability of approximately $37 million represents payments over time to associates already severed as well as union pension withdrawal liabilities. The breakdown of the 5,610 headcount reduction recorded for 2000 is: 1,290 from the distribution segment; 4,260 from the retail segment; and 60 from support services. Additionally, the strategic plan includes charges related to lease obligations which will be utilized as operating units or retail stores close, but ultimately reduced over remaining lease terms ranging from 1 to 20 years. The charges and utilization have been recorded to-date as follows:
AMOUNT ------------------ ($ IN THOUSANDS) 1998 Activity: Charge............................................ $ 28,101 Utilized.......................................... (385) -------- Ending Liability.................................. 27,716 1999 Activity: Charge............................................ 15,074 Utilized.......................................... (10,281) -------- Ending Liability.................................. 32,509 2000 Activity: Charge............................................ 37,149 Utilized.......................................... (48,880) -------- Ending Liability.................................. $ 20,778 ========
Asset impairments were recognized in accordance with SFAS No. 121 -- Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and such assets were written down to their estimated fair values based on estimated proceeds of operating units to be sold or F-12 119 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 discounted cash flow projections. The operating costs of operating units to be sold or closed are treated as normal operations during the period they remain in use. Salaries, wages and benefits of employees at these operating units are charged to operations during the time such employees are actively employed. Depreciation expense is continued for assets that we are unable to remove from operations. Assets held for sale, reflected on the balance sheet, consisted of $22 million of distribution operating units and $144 million of retail stores as of year-end 2000 and $8 million of distribution operating units and $61 million of retail stores as of year-end 1999. Gains on the sale of facilities for 2000 and 1999 totaled approximately $9 million and $6 million, respectively, and were included in net sales. Also during 2000 and 1999, we recorded charges of approximately $10 million and $31 million, respectively, related to the closing of certain retail stores which were included in selling and administrative expense. LITIGATION CHARGES Furr's Supermarkets filed suit against us in 1997 claiming they were overcharged for products. During 1997, Fleming and Furr's reached an agreement dismissing all litigation between them. Pursuant to the settlement, Furr's purchased our El Paso product supply center in 1998, together with related inventory and equipment. As part of the settlement, we paid Furr's $1.7 million in 1997 and $7.8 million in 1998 as a refund of fees and charges. PER SHARE RESULTS We did not reflect 1,220,000 weighted average potential shares for the 2000 diluted calculation or 364,000 weighted average potential shares for the 1999 diluted calculation because they would be antidilutive. Other options with exercise prices exceeding market prices consisted of 4.4 million shares in 2000 and 3.8 million shares in 1999 of common stock at a weighted average exercise price of $12.94 and $14.19 per share, respectively, that were not included in the computation of diluted earnings per share because the effect would be antidilutive. SEGMENT INFORMATION Considering the customer types and the processes for meeting the needs of customers, senior management manages the business as two reportable segments: distribution and retail operations. The distribution segment sells food and non-food products (e.g., food, general merchandise, health and beauty care, and Fleming Brands) to supermarkets, convenience stores, supercenters, discount stores, limited assortment stores, drug stores, specialty stores and other stores across the U.S. We also offer a variety of retail support services to independently-owned and company-owned retail stores. The aggregation is based primarily on the common customer base and the interdependent marketing and distribution efforts. Our senior management utilizes more than one measurement and multiple views of data to assess segment performance and to allocate resources to the segments. However, the dominant measurements are consistent with our consolidated financial statements and, accordingly, are reported on the same basis herein. Interest expense, interest income, equity investments, LIFO adjustments, support services expenses, other unusual charges and income taxes are managed separately by senior management and those items F-13 120 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 are not allocated to the business segments. Intersegment transactions are reflected at cost. The following table sets forth the composition of the segments' and total company's net sales, operating earnings, depreciation and amortization, capital expenditures and identifiable assets.
2000 1999 1998 ------- ------- ------- (IN MILLIONS) NET SALES Distribution........................ $12,926 $12,718 $13,120 Intersegment elimination............ (1,757) (2,165) (2,031) ------- ------- ------- Net distribution.................... 11,169 10,553 11,089 Retail.............................. 3,275 3,719 3,589 ------- ------- ------- Total............................ $14,444 $14,272 $14,678 ======= ======= ======= OPERATING EARNINGS Distribution........................ $ 297 $ 290 $ 259 Retail.............................. 62 (2) 62 Support services.................... (197) (112) (122) ------- ------- ------- Total operating earnings......... 162 176 199 Interest expense.................... (175) (165) (161) Interest income..................... 33 40 37 Equity investment results........... (8) (10) (12) Litigation charges.................. -- -- (8) Impairment/restructuring charge..... (213) (103) (653) ------- ------- ------- Loss before taxes..................... $ (201) $ (62) $ (598) ======= ======= ======= DEPRECIATION AND AMORTIZATION Distribution........................ $ 105 $ 88 $ 107 Retail.............................. 57 64 61 Support services.................... 12 10 17 ------- ------- ------- Total............................ $ 174 $ 162 $ 185 ======= ======= ======= CAPITAL EXPENDITURES Distribution........................ $ 99 $ 53 $ 81 Retail.............................. 45 112 118 Support services.................... 7 1 1 ------- ------- ------- Total............................ $ 151 $ 166 $ 200 ======= ======= ======= IDENTIFIABLE ASSETS Distribution........................ $ 2,499 $ 2,546 $ 2,524 Retail.............................. 681 848 697 Support services.................... 223 179 270 ------- ------- ------- Total............................ $ 3,403 $ 3,573 $ 3,491 ======= ======= =======
F-14 121 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 INCOME TAXES Components of taxes on loss are as follows:
2000 1999 1998 -------- -------- --------- (IN THOUSANDS) Current: Federal......................................... $(23,291) $(17,287) $ 23,896 State........................................... 10,082 (3,924) 5,737 -------- -------- --------- Total current................................ (13,209) (21,211) 29,633 -------- -------- --------- Deferred: Federal......................................... (41,123) 2,552 (94,254) State........................................... (24,415) 806 (22,986) -------- -------- --------- Total deferred............................... (65,538) 3,358 (117,240) -------- -------- --------- Taxes on loss..................................... $(78,747) $(17,853) $ (87,607) ======== ======== =========
Deferred tax expense (benefit) relating to temporary differences includes the following components:
2000 1999 1998 -------- -------- --------- (IN THOUSANDS) Depreciation and amortization..................... $(39,106) $ (9,603) $ (64,132) Inventory......................................... 4,313 7,019 (6,839) Capital losses.................................... 452 (4,825) 251 Asset valuations and reserves..................... 29,495 (18,114) 9,302 Equity investment results......................... 8,837 (172) (403) Credit losses..................................... 1,924 (4,527) (7,825) Lease transactions................................ (4,887) 7,996 (34,718) Associate benefits................................ (7,187) 31,700 3,200 Note sales........................................ (41) (139) (217) Net operating loss carryforwards.................. (62,951) -- -- Other............................................. 3,613 (5,977) (15,859) -------- -------- --------- Deferred tax expense (benefit).................... $(65,538) $ 3,358 $(117,240) ======== ======== =========
F-15 122 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 Temporary differences that give rise to deferred tax assets and liabilities as of year-end 2000 and 1999 are as follows:
2000 1999 -------- -------- (IN THOUSANDS) Deferred tax assets: Depreciation and amortization............................. $ 57,740 $ 23,002 Asset valuations and reserve activities................... 21,772 48,559 Associate benefits........................................ 67,258 54,457 Credit losses............................................. 24,927 28,263 Equity investment results................................. 2,522 9,983 Lease transactions........................................ 45,208 40,325 Inventory................................................. 26,918 26,342 Acquired loss carryforwards............................... 0 67 Capital losses............................................ 8,152 9,372 Net operating loss carryforwards.......................... 62,951 0 Other..................................................... 25,999 30,847 -------- -------- Total deferred tax assets.............................. 343,447 271,217 -------- -------- Deferred tax liabilities: Depreciation and amortization............................. 47,734 52,103 Equity investment results................................. 4,857 3,482 Lease transactions........................................ 1,528 1,532 Inventory................................................. 61,757 56,867 Associate benefits........................................ 24,725 29,424 Asset valuations and reserve activities................... 5,480 2,772 Note sales................................................ 2,253 3,387 Prepaid expenses.......................................... 3,277 3,874 Capital losses............................................ 320 1,088 Other..................................................... 27,203 28,225 -------- -------- Total deferred tax liabilities......................... 179,134 182,754 -------- -------- Net deferred tax asset................................. $164,313 $ 88,463 ======== ========
The change in net deferred tax asset from 1999 to 2000 is allocated $65.5 million to deferred income tax benefit and $10.3 million benefit to stockholders' equity. We have federal net operating loss carryforwards of approximately $122 million and state net operating loss carryforwards of approximately $342 million that are due to expire at various times through the year 2021. We also have charitable contribution carryforwards of approximately $2 million that will begin to expire in 2005. We believe it is more likely than not that all of our deferred tax assets will be realized. F-16 123 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 The effective income tax rates are different from the statutory federal income tax rates for the following reasons:
2000 1999 1998 ---- ---- ----- Statutory rate.............................................. 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit.............. 5.4 5.1 6.8 Acquisition-related differences............................. (.5) 0.0 12.3 Other....................................................... 2.5 (3.1) (.4) ---- ---- ----- Effective rate on operations................................ 42.4 37.0 53.7 Impairment/restructuring and related charges................ (3.2) (8.5) (39.1) ---- ---- ----- Effective rate after impairment/restructuring and related charges................................................... 39.2% 28.5% 14.6% ==== ==== =====
During 1999, we recorded interest income of $9 million related to refunds in federal income taxes from prior years. INVESTMENTS AND NOTES RECEIVABLE Investments and notes receivable consist of the following:
2000 1999 -------- -------- (IN THOUSANDS) Investments in and advances to customers............... $ 7,452 $ 14,136 Notes receivable from customers........................ 85,521 83,354 Other investments and receivables...................... 11,493 11,405 -------- -------- Investments and notes receivable....................... $104,466 $108,895 ======== ========
Investments and notes receivable are shown net of reserves of $26 million and $23 million in 2000 and 1999, respectively. Sales to customers accounted for under the equity method were approximately $0.2 billion, $0.3 billion and $0.6 billion in 2000, 1999 and 1998, respectively. Receivables include $4 million and $8 million in 2000 and 1999, respectively, due from customers accounted for under the equity method. We extend long-term credit to certain retail customers. Loans are primarily collateralized by inventory and fixtures. Interest rates are above prime with terms up to 10 years. Impaired notes receivable (including current portion) are as follows:
2000 1999 -------- -------- (IN THOUSANDS) Impaired notes with related allowances................. $ 45,711 $ 57,657 Credit loss allowance on impaired notes................ (20,101) (25,811) Impaired notes with no related allowances.............. 4,793 4,613 -------- -------- Net impaired notes receivable.......................... $ 30,403 $ 36,459 ======== ========
Average investments in impaired notes were as follows: 2000 -- $52 million; 1999 -- $65 million; and 1998 -- $59 million. F-17 124 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 Activity in the allowance for credit losses is as follows:
2000 1999 1998 -------- -------- -------- (IN THOUSANDS) Balance, beginning of year......................... $ 55,528 $ 47,232 $ 43,848 Charged to costs and expenses...................... 28,872 25,394 23,498 Uncollectible accounts written off, net of recoveries....................................... (24,682) (17,098) (20,114) -------- -------- -------- Balance, end of year............................... $ 59,718 $ 55,528 $ 47,232 ======== ======== ========
We sold certain notes receivable at face value with limited recourse in years prior to 1998. The outstanding balance at year-end 2000 on all notes sold is $5 million, of which we are contingently liable for $3 million should all the notes become uncollectible. LONG-TERM DEBT Long-term debt consists of the following:
2000 1999 ---------- ---------- (IN THOUSANDS) 10 5/8% senior notes due 2001....................... $ 300,000 $ 300,000 10 1/2% senior subordinated notes due 2004.......... 250,000 250,000 10 5/8% senior subordinated notes due 2007.......... 250,000 250,000 Revolving credit, average interest rates of 7.7% for 2000 and 6.5% for 1999, due 2003.................. 300,000 255,000 Term loans, due 2001 to 2004, average interest rate of 7.8% for 2000 and 7.3% for 1999................ 154,421 197,594 Other debt.......................................... 16,150 52,496 ---------- ---------- 1,270,571 1,305,090 Less current maturities............................. (38,171) (70,905) ---------- ---------- Long-term debt...................................... $1,232,400 $1,234,185 ========== ==========
Five-year Maturities: Aggregate maturities of long-term debt for the next five years are as follows: 2001 -- $38 million; 2002 -- $50 million; 2003 -- $347 million; 2004 -- $287 million; and 2005 -- $0. The 10 5/8% $300 million senior notes were issued in 1994 and mature December 15, 2001. The senior notes are unsecured senior obligations, ranking the same as all other existing and future senior indebtedness and senior in right of payment to the subordinated notes. The senior notes are effectively subordinated to secured senior indebtedness with respect to assets securing such indebtedness, including loans under our senior secured credit facility. On March 15, 2001, $355 million of 10 1/8% senior notes were issued and mature on March 15, 2008. Most of the net proceeds were deposited with the trustee for the 10 5/8% senior notes on March 15, 2001 to redeem all of the 10 5/8% senior notes due 2001, including an amount to cover accrued interest and the redemption premium, on April 16, 2001 and to defease our obligations under the indenture governing these notes. The balance of the net proceeds was used to pay down our revolver loans. The new senior notes are unsecured senior obligations, ranking the same as all other existing and future senior indebtedness and senior in right of payment to the subordinated notes. The senior notes are effectively subordinated to secured senior indebtedness with respect to assets securing such indebtedness, including loans under our senior secured credit facility. Both the 10 5/8% and 10 1/8% senior notes are guaranteed by substantially all subsidiaries (see -- Subsidiary Guarantee of Senior Notes below). F-18 125 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 The senior subordinated notes consist of two issues: $250 million of 10 1/2% Notes due December 1, 2004 and $250 million of 10 5/8% Notes due July 31, 2007. The subordinated notes are general unsecured obligations, subordinated in right of payment to all existing and future senior indebtedness, and senior to or of equal rank with all of our existing and future subordinated indebtedness. On March 15, 2001, $150 million of 5.25% convertible senior subordinated notes were issued and mature on March 15, 2009 and have a conversion price of $30.27 per share. The net proceeds were used to pay down the revolving credit facility. The convertible notes are callable after 2004, and are general unsecured obligations, subordinated in right of payment to all existing and future senior indebtedness, and rank senior to or of equal rank with all of our existing and future subordinated indebtedness. In July, 1997, we developed a senior secured credit facility which consists of a $600 million revolving credit facility, with a final maturity of July 25, 2003, and an amortizing term loan with a maturity of July 25, 2004. The term loan was originally $250 million but has been paid down to $154 million. Up to $300 million of the revolver may be used for issuing letters of credit. Borrowings and letters of credit issued under the new credit facility may be used for general corporate purposes and are secured by a first priority security interest in the accounts receivable and inventories of Fleming and our subsidiaries and in the capital stock or other equity interests we own in our subsidiaries. In addition, this credit facility is guaranteed by substantially all subsidiaries. The stated interest rate on borrowings under the credit agreement is equal to a referenced index interest rate, normally the London interbank offered interest rate ("LIBOR"), plus a margin. The level of the margin is dependent on credit ratings on our senior secured bank debt. The credit agreement and the indentures under which other debt instruments were issued contain customary covenants associated with similar facilities. The credit agreement currently contains the following more significant financial covenants: maintenance of a fixed charge coverage ratio of at least 1.7 to 1, based on adjusted earnings, as defined, before interest, taxes, depreciation and amortization and net rent expense; maintenance of a ratio of inventory-plus-accounts receivable to funded bank debt (including letters of credit) of at least 1.4 to 1; and a limitation on restricted payments, including dividends, up to $71 million at year-end 2000, based on a formula tied to net earnings and equity issuances. Under the credit agreement, new issues of certain kinds of debt must have a maturity after January 2005. Covenants contained in our indentures under which other debt instruments were issued are generally less restrictive than those of the credit agreement. We are in compliance with all financial covenants under the credit agreement and its indentures. The credit facility may be terminated in the event of a defined change of control. Under the indentures, noteholders may require us to repurchase notes in the event of a defined change of control coupled with a defined decline in credit ratings. At year-end 2000, borrowings under the credit facility totaled $154 million in term loans and $300 million of revolver borrowings, and $43 million of letters of credit had been issued. Letters of credit are needed primarily for insurance reserves associated with our 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. At year-end 2000, we would have been allowed to borrow an additional $257 million under the revolving credit facility contained in the credit agreement based on the actual borrowings and letters of credit outstanding. Medium-term Notes: Medium-term notes are included in other debt in the above table. Between 1990 and 1993, we registered $565 million in medium-term notes with a total of $275 million issued. The F-19 126 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 balances due at year-end 2000 and 1999 were $17 million and $53 million, respectively, with average interest rates of 7.8% for 2000 and 7.2% for 1999. The notes mature from 2001 to 2003. Credit Ratings: On March 5, 2001, Moody's Investors Service ("Moody's") announced it had upgraded its ratings for our various issues of long-term debt essentially by one notch, and that it had changed its outlook from positive to stable. On February 28, 2001, Standard & Poor's rating group ("S&P") announced it had revised its outlook for its ratings from stable to positive. Giving effect to these changes, the table below summarizes our credit ratings:
MOODY'S S&P ------- -------- Credit agreement loan............................ Ba2 BB Senior implied debt.............................. Ba3 BB- Senior unsecured debt............................ Ba3 B+ Senior subordinated notes........................ B2 B Outlook.......................................... Stable Positive
Average Interest Rates: The average interest rate for total debt (including capital lease obligations) before the effect of interest rate hedges was 9.5% for 2000, versus 10.2% for 1999. Including the effect of interest rate hedges, the average interest rate for total debt was 9.5% and 10.5% for 2000 and 1999, respectively. Interest Expense: Components of interest expense are as follows:
2000 1999 1998 -------- -------- -------- (IN THOUSANDS) Interest costs incurred: Long-term debt........................... $135,474 $127,271 $123,054 Capital lease obligations................ 39,609 36,768 37,542 Other.................................... 1,537 2,258 1,589 -------- -------- -------- Total incurred............................. 176,620 166,297 162,185 Less interest capitalized.................. (2,051) (1,117) (604) -------- -------- -------- Interest expense........................... $174,569 $165,180 $161,581 ======== ======== ========
Derivatives: From time to time we may use interest rate hedge agreements with the objective of managing interest costs and exposure to changing interest rates. The classes of derivative financial instruments used have included interest rate swap and cap agreements. The counterparties to these agreements have been major U.S. and international financial institutions with credit ratings higher than ours. Our policy regarding derivatives is to engage in a financial risk management process to manage our defined exposures to uncertain future changes in interest rates which impact net earnings. At fiscal year-end 2000, there were no interest rate hedge agreements outstanding. The Financial Accounting Standards Board issued SFAS No. 133 -- Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and became effective on January 1, 2001. We revised our written policies regarding financial derivatives, as needed, prior to the effective date. There was no significant impact on our financial statements upon adopting the new standard. Fair Value of Financial Instruments: The fair value of long-term debt was determined using valuation techniques that considered market prices for actively traded debt, and cash flows discounted at current market rates for management's best estimate for instruments without quoted market prices. At F-20 127 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 year-end 2000, the carrying value of total debt (excluding capital leases) was higher than the fair value by $175 million, or 13.8% of the carrying value. Fair value was lower than the carrying value at year-end 2000 primarily because our credit agreement revolver and term loans were priced at borrowing margins set in 1997 which were significantly below market prices in 2000. The fair value of our senior subordinated notes was substantially below carrying value primarily because the interest rates on this debt, which were set in 1997, were significantly below market levels at year-end 2000. On March 7, 2001, the carrying value for our debt was only 2.1% higher than fair value primarily because our credit agreement borrowing margins have been increased and our perceived creditworthiness improved due to the $50 million equity investment by an affiliate of Yucaipa plus the anticipated economic benefits relating to the new Kmart strategic alliance. At year-end 1999, the carrying value of debt was higher than the fair value by $69 million, or 5.3% of the carrying value. The fair value of notes receivable is comparable to the carrying value because of the variable interest rates charged on certain notes and because of the allowance for credit losses. Subsidiary Guarantee of Senior Notes: The senior notes are guaranteed by all of Fleming's direct and indirect subsidiaries (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 Fleming (the parent) in the form of cash dividends, loans or advances. The following condensed consolidating financial information depicts, in separate columns, the parent company, those subsidiaries which are guarantors, those subsidiaries which are non-guarantors, elimination adjustments and the consolidated total. The financial information may not necessarily be indicative of the results of operations or financial position had the subsidiaries been operated as independent entities. F-21 128 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 30, 2000 ------------------------------------------------------------------ PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ---------- ---------- ---------- ------------ ------------ (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents........... $ 22,487 $ 6,753 $ 1,140 $ -- $ 30,380 Receivables, net.................... 406,203 101,884 958 -- 509,045 Inventories......................... 635,227 192,499 3,539 -- 831,265 Other current assets................ 247,400 4,943 40 -- 252,383 ---------- ---------- ------- --------- ---------- Total current assets............. 1,311,317 306,079 5,677 -- 1,623,073 Investment in subsidiaries............ 53,381 -- -- (53,381) -- Intercompany receivables.............. 384,450 -- -- (384,450) -- Property and equipment, net........... 424,321 285,117 7,019 -- 716,457 Goodwill, net......................... 411,094 129,440 3,785 -- 544,319 Other assets.......................... 463,008 42,918 13,036 -- 518,962 ---------- ---------- ------- --------- ---------- $3,047,571 $ 763,554 $29,517 $(437,831) $3,402,811 ========== ========== ======= ========= ========== LIABILITIES AND EQUITY (DEFICIT) Current liabilities: Accounts payable.................... $ 821,407 $ 120,145 $ 1,727 $ -- $ 943,279 Intercompany payables............... -- 342,627 41,823 (384,450) -- Other current liabilities........... 244,524 43,275 1,310 -- 289,109 ---------- ---------- ------- --------- ---------- Total current liabilities........ 1,065,931 506,047 44,860 (384,450) 1,232,388 Obligations under capital leases...... 214,611 162,628 -- -- 377,239 Long-term debt and other liabilities......................... 1,339,837 26,096 59 -- 1,365,992 Equity (deficit)...................... 427,192 68,783 (15,402) (53,381) 427,192 ---------- ---------- ------- --------- ---------- $3,047,571 $ 763,554 $29,517 $(437,831) $3,402,811 ========== ========== ======= ========= ==========
F-22 129 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998
DECEMBER 25, 1999 ------------------------------------------------------------------ PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ---------- ---------- ---------- ------------ ------------ (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents............. $ (54,803) $ 61,307 $ 179 $ -- $ 6,683 Receivables, net...................... 405,076 90,128 955 -- 496,159 Inventories........................... 795,899 198,769 3,137 -- 997,805 Other current assets.................. 222,461 5,624 18 -- 228,103 ---------- -------- -------- --------- ---------- Total current assets............... 1,368,633 355,828 4,289 -- 1,728,750 Investment in subsidiaries.............. 53,381 -- -- (53,381) -- Intercompany receivables................ 463,191 -- -- (463,191) -- Property and equipment, net............. 559,424 273,137 5,615 -- 838,176 Goodwill, net........................... 428,667 133,368 4,085 -- 566,120 Other assets............................ 369,500 70,646 26 -- 440,172 ---------- -------- -------- --------- ---------- $3,242,796 $832,979 $ 14,015 $(516,572) $3,573,218 ========== ======== ======== ========= ========== LIABILITIES AND EQUITY (DEFICIT) Current liabilities: Accounts payable...................... $ 859,694 $120,538 $ 987 $ -- $ 981,219 Intercompany payables................. -- 435,028 28,163 (463,191) -- Other current liabilities............. 246,010 56,258 232 -- 302,500 ---------- -------- -------- --------- ---------- Total current liabilities.......... 1,105,704 611,824 29,382 (463,191) 1,283,719 Obligations under capital leases........ 230,983 136,977 -- -- 367,960 Long-term debt and other liabilities.... 1,345,407 15,395 35 -- 1,360,837 Equity (deficit)........................ 560,702 68,783 (15,402) (53,381) 560,702 ---------- -------- -------- --------- ---------- $3,242,796 $832,979 $ 14,015 $(516,572) $3,573,218 ========== ======== ======== ========= ==========
CONDENSED CONSOLIDATING OPERATING STATEMENT INFORMATION
53 WEEKS ENDED DECEMBER 30, 2000 ------------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- ---------- ------------ ------------ (IN THOUSANDS) Net sales.......................... $12,013,293 $3,768,333 $70,022 $(1,407,833) $14,443,815 Costs and expenses: Cost of sales.................... 11,349,595 3,102,660 52,493 (1,407,833) 13,096,915 Selling and administrative....... 575,408 591,144 18,451 -- 1,185,003 Other............................ 100,721 46,796 2,424 -- 149,941 Impairment/restructuring charge........................ 155,813 56,971 61 -- 212,845 Equity loss from subsidiaries.... 20,108 -- -- (20,108) -- ----------- ---------- ------- ----------- ----------- Total costs and expenses...... 12,201,645 3,797,571 73,429 (1,427,941) 14,644,704 ----------- ---------- ------- ----------- ----------- Income (loss) before taxes......... (188,352) (29,238) (3,407) 20,108 (200,889) Taxes on income (loss)............. (66,210) (11,095) (1,442) -- (78,747) ----------- ---------- ------- ----------- ----------- Net income (loss).................. $ (122,142) $ (18,143) $(1,965) $ 20,108 $ (122,142) =========== ========== ======= =========== ===========
F-23 130 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998
52 WEEKS ENDED DECEMBER 25, 1999 ------------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- ---------- ------------ ------------ (IN THOUSANDS) Net sales........................... $13,624,272 $1,043,109 $141,700 $(537,045) $14,272,036 Costs and expenses: Cost of sales..................... 12,434,048 821,782 116,084 (537,045) 12,834,869 Selling and administrative........ 1,012,393 224,572 24,666 -- 1,261,631 Other............................. 112,593 19,400 3,112 -- 135,105 Impairment/restructuring charge... 101,058 1,954 -- -- 103,012 Equity loss from subsidiaries..... 16,896 -- -- (16,896) -- ----------- ---------- -------- --------- ----------- Total costs and expenses....... 13,676,988 1,067,708 143,862 (553,941) 14,334,617 ----------- ---------- -------- --------- ----------- Income (loss) before taxes.......... (52,716) (24,599) (2,162) 16,896 (62,581) Taxes on income (loss).............. (7,988) (8,949) (916) -- (17,853) ----------- ---------- -------- --------- ----------- Net income (loss)................... $ (44,728) $ (15,650) $ (1,246) $ 16,896 $ (44,728) =========== ========== ======== ========= ===========
52 WEEKS ENDED DECEMBER 26, 1998 ------------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- ---------- ------------ ------------ (IN THOUSANDS) Net sales............................. $14,299,725 $377,970 $203,861 $(203,652) $14,677,904 Costs and expenses: Cost of sales....................... 12,957,205 307,666 166,311 (203,652) 13,227,530 Selling and administrative.......... 1,143,656 71,250 36,686 -- 1,251,592 Other............................... 139,033 1,881 3,333 -- 144,247 Impairment/restructuring charge..... 608,378 26,495 17,864 -- 652,737 Equity loss from subsidiaries....... 38,503 -- -- (38,503) -- ----------- -------- -------- --------- ----------- Total costs and expenses......... 14,886,775 407,292 224,194 (242,155) 15,276,106 ----------- -------- -------- --------- ----------- Income (loss) before taxes............ (587,050) (29,322) (20,333) 38,503 (598,202) Taxes on income (loss)................ (76,455) (6,480) (4,672) -- (87,607) ----------- -------- -------- --------- ----------- Net income (loss)..................... $ (510,595) $(22,842) $(15,661) $ 38,503 $ (510,595) =========== ======== ======== ========= ===========
F-24 131 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 CONDENSED CONSOLIDATING CASH FLOW INFORMATION
53 WEEKS ENDED DECEMBER 30, 2000 ---------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED -------- ---------- ---------- ------------ ------------ (IN THOUSANDS) Net cash provided by operating activities............................. $ 40,039 $ 86,008 $ 598 $-- $ 126,645 -------- -------- -------- -- --------- Cash flows from investing activities: Purchases of property and equipment.... (75,354) (60,221) (15,262) -- (150,837) Other.................................. 101,247 1,686 -- -- 102,933 -------- -------- -------- -- --------- Net cash provided by (used in) investing activities................ 25,893 (58,535) (15,262) -- (47,904) -------- -------- -------- -- --------- Cash flows from financing activities: Repayments on capital lease obligations......................... (15,398) (5,490) -- -- (20,888) Advances (to) from parent.............. 60,912 (76,537) 15,625 -- -- Other.................................. (34,156) -- -- -- (34,156) -------- -------- -------- -- --------- Net cash provided by (used in) financing activities................ 11,358 (82,027) 15,625 -- (55,044) -------- -------- -------- -- --------- Net increase (decrease) in cash and cash equivalents.................... 77,290 (54,554) 961 -- 23,697 Cash and cash equivalents at beginning of year............................. (54,803) 61,307 179 -- 6,683 -------- -------- -------- -- --------- Cash and cash equivalents at end of year................................... $ 22,487 $ 6,753 $ 1,140 $-- $ 30,380 ======== ======== ======== == =========
52 WEEKS ENDED DECEMBER 25, 1999 ----------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED --------- ---------- ---------- ------------ ------------ (IN THOUSANDS) Net cash provided by (used in) operating activities............................ $ 86,780 $ 25,659 $ 5,178 $-- $ 117,617 --------- -------- ------- -- --------- Cash flows from investing activities: Purchases of property and equipment... (121,414) (42,482) (2,443) -- (166,339) Other................................. (51,214) 4,209 -- -- (47,005) --------- -------- ------- -- --------- Net cash used in investing activities......................... (172,628) (38,273) (2,443) -- (213,344) --------- -------- ------- -- --------- Cash flows from financing activities: Repayments on capital lease obligations........................ (18,101) (3,112) (320) -- (21,533) Advances (to) from parent............. (76,668) 78,853 (2,185) -- -- Other................................. 117,976 -- -- -- 117,976 --------- -------- ------- -- --------- Net cash provided by (used in) financing activities............... 23,207 75,741 (2,505) -- 96,443 --------- -------- ------- -- --------- Net increase (decrease) in cash and cash equivalents................... (62,641) 63,127 230 -- 716 Cash and cash equivalents at beginning of year............................ 7,838 (1,820) (51) -- 5,967 --------- -------- ------- -- --------- Cash and cash equivalents at end of year............................... $ (54,803) $ 61,307 $ 179 $-- $ 6,683 ========= ======== ======= == =========
F-25 132 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998
52 WEEKS ENDED DECEMBER 26, 1998 ----------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED --------- ---------- ---------- ------------ ------------ (IN THOUSANDS) Net cash provided by (used in) operating activities............................ $ 148,865 $ 7,789 $(15,575) $-- $ 141,079 --------- ------- -------- -- --------- Cash flows from investing activities: Purchases of property and equipment... (191,357) (5,571) (3,283) -- (200,211) Other................................. 35,551 1,348 -- -- 36,899 --------- ------- -------- -- --------- Net cash used in investing activities... (155,806) (4,223) (3,283) -- (163,312) --------- ------- -------- -- --------- Cash flows from financing activities: Repayments on capital lease obligations........................ (12,470) (589) (297) -- (13,356) Advances (to) from parent............. (10,046) (8,181) 18,227 -- -- Other................................. 11,240 -- -- -- 11,240 --------- ------- -------- -- --------- Net cash provided by (used in) financing activities............................ (11,276) (8,770) 17,930 -- (2,116) --------- ------- -------- -- --------- Net decrease in cash and cash equivalents........................... (18,217) (5,204) (928) -- (24,349) Cash and cash equivalents at beginning of year............................... 26,054 3,385 877 -- 30,316 --------- ------- -------- -- --------- Cash and cash equivalents at end of year.................................. $ 7,837 $(1,819) $ (51) $-- $ 5,967 ========= ======= ======== == =========
LEASE AGREEMENTS Capital And Operating Leases: We lease certain distribution facilities with terms generally ranging from 20 to 35 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 each. We lease company-owned store facilities with terms generally ranging from 15 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 four renewal options of two to five years each. Certain equipment is leased under agreements ranging from two to eight years with no renewal options. Accumulated amortization related to leased assets under capital leases was $59 million and $38 million at year-end 1999 and 2000, respectively. F-26 133 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 Future minimum lease payment obligations for leased assets under capital leases as of year-end 2000 are set forth below:
LEASE YEARS OBLIGATIONS ----- -------------- (IN THOUSANDS) 2001................................................... $ 37,889 2002................................................... 36,995 2003................................................... 37,187 2004................................................... 37,066 2005................................................... 37,628 Later.................................................. 140,308 -------- Total minimum lease payments........................... 327,073 Less estimated executory costs......................... (50,042) -------- Net minimum lease payments............................. 277,031 Less interest.......................................... (60,237) -------- Present value of net minimum lease payments............ 216,794 Less current obligations............................... (9,194) -------- Long-term obligations.................................. $207,600 ========
Future minimum lease payments required at year-end 2000 under operating leases that have initial noncancelable lease terms exceeding one year are presented in the following table:
FACILITY FACILITIES EQUIPMENT NET YEARS RENTALS SUBLEASED RENTALS RENTALS ----- ---------- ---------- --------- -------- (IN THOUSANDS) 2001................................... $150,123 $ (69,768) $13,453 $ 93,808 2002................................... 137,987 (60,986) 9,575 86,576 2003................................... 126,293 (53,469) 4,273 77,097 2004................................... 113,833 (45,035) 1,584 70,382 2005................................... 99,759 (40,878) 314 59,195 Later.................................. 296,983 (116,352) -- 180,631 -------- --------- ------- -------- Total lease payments................. $924,978 $(386,488) $29,199 $567,689 ======== ========= ======= ========
F-27 134 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 The following table shows the composition of annual net rental expense under noncancelable operating leases and subleases with initial terms of one year or greater:
2000 1999 1998 -------- -------- -------- (IN THOUSANDS) Operating activity: Rental expense................................... $ 76,118 $ 95,760 $100,238 Contingent rentals............................... 902 1,329 1,971 Less sublease income............................. (9,014) (9,868) (7,349) -------- -------- -------- 68,006 87,221 94,860 -------- -------- -------- Financing activity: Rental expense................................... 68,747 64,107 70,914 Less sublease income............................. (66,757) (68,442) (63,920) -------- -------- -------- 1,990 (4,335) 6,994 -------- -------- -------- Net rental expense................................. $ 69,996 $ 82,886 $101,854 ======== ======== ========
We reflect net financing activity, as shown above, as a component of net sales. Direct Financing Leases: We lease retail store facilities with terms generally ranging from 15 to 20 years which are subsequently subleased to customers. Most leases provide for a percentage rental based on sales performance in excess of specified minimum rentals. The leases usually contain provisions for one to four renewal options of five years each. The sublease to the customer is normally for an initial five-year term with automatic five-year renewals at our discretion, which corresponds to the length of the initial term of the prime lease. 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 year-end 2000:
LEASE RENTALS LEASE YEARS RECEIVABLE OBLIGATIONS ----- ---------- ----------- (IN THOUSANDS) 2001.................................................. $ 32,714 $ 30,004 2002.................................................. 26,181 29,877 2003.................................................. 22,420 28,757 2004.................................................. 19,532 27,938 2005.................................................. 17,300 27,231 Later................................................. 55,123 92,109 -------- -------- Total minimum lease payments.......................... 173,270 235,916 Less estimated executory costs........................ (14,353) (20,888) -------- -------- Net minimum lease payments............................ 158,917 215,028 Less interest......................................... (43,420) (32,917) -------- -------- Present value of net minimum lease payments........... 115,497 182,111 Less current portion.................................. (13,486) (12,472) -------- -------- Long-term portion..................................... $102,011 $169,639 ======== ========
Contingent rental income and contingent rental expense are not material. F-28 135 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 SHAREHOLDERS' EQUITY Fleming offers a Dividend Reinvestment and Stock Purchase Plan which provides 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. Such programs resulted in issuing 31,000 and 54,000 new shares in 2000 and 1999, respectively. Our employee stock ownership plan (ESOP) established in 1990 allows substantially all associates to participate. In 1990, the ESOP entered into a note with a bank to finance the purchase of the shares. In 1994, we paid off the note and received a note from the ESOP. The ESOP completed payments of the loan balance to us in 1999. We made contributions to the ESOP based on fixed debt service requirements of the ESOP note. Such contributions were approximately $2 million in 1999, $2.5 million in 1998, and $2 million in 1997. The ESOP note was paid off in 1999 therefore there were no contributions in 2000. Dividends used by the ESOP for debt service and interest and compensation expense were not material. We issue shares of restricted stock to key employees under plans approved by the stockholders. Periods of restriction and/or performance goals are established for each award. The fair value of the restricted stock at the time of the grant is recorded as unearned compensation -- restricted stock which is netted against capital in excess of par within shareholders' equity. Compensation is amortized to expense when earned. At year-end 2000, 363,546 shares remained available for award under all plans. Information regarding restricted stock balances is as follows (in thousands):
2000 1999 ------ ------ Awarded restricted shares outstanding.............. 746 441 ====== ====== Unearned compensation -- restricted stock.......... $1,232 $3,503 ====== ======
We may grant stock options to key employees through stock option plans, providing for the grant of incentive stock options and non-qualified stock options. The stock options have a maximum term of 10 years and have time and/or performance based vesting requirements. At year-end 2000, there were approximately 1,848,000 shares available for grant under the unrestricted stock option plans. Subsequent to year end, approximately 61,500 stock options were granted. F-29 136 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 Stock option transactions for the three years ended December 30, 2000 are as follows:
WEIGHTED AVERAGE SHARES EXERCISE PRICE PRICE RANGE ------ ---------------- -------------- (SHARES IN THOUSANDS) Outstanding, year-end 1997..................... 2,266 $22.65 $16.38 - 38.38 Granted...................................... 550 10.18 $ 9.72 - 18.19 Exercised.................................... (3) 16.38 $16.38 - 16.38 Canceled and forfeited....................... (403) 25.40 $16.38 - 37.06 ----- ------ -------------- Outstanding, year-end 1998..................... 2,410 $19.35 $ 9.72 - 38.38 Granted...................................... 2,339 9.80 $ 7.53 - 12.25 Canceled and forfeited....................... (968) 16.53 $ 7.53 - 38.38 ----- ------ -------------- Outstanding, year-end 1999..................... 3,781 $14.19 $ 7.53 - 38.38 Granted...................................... 1,586 12.79 $ 8.94 - 17.22 Exercised.................................... (59) 9.69 $ 7.53 - 11.72 Canceled and forfeited....................... (897) 18.13 $ 7.53 - 37.06 ----- ------ -------------- Outstanding, year-end 2000..................... 4,411 $12.94 $ 7.53 - 38.38 ===== ====== ==============
Information regarding options outstanding at year-end 2000 is as follows:
ALL OPTIONS OUTSTANDING CURRENTLY OPTIONS EXERCISABLE ----------- ----------- (SHARES IN THOUSANDS) Option price $28.38 -- $37.06: Number of options................................... 3 1 Weighted average exercise price..................... 28.38 28.38 Weighted average remaining life in years............ 4 -- Option price $19.75 -- $26.44: Number of options................................... 413 193 Weighted average exercise price..................... 24.76 24.54 Weighted average remaining life in years............ 3 -- Option price $7.53 -- $17.50: Number of options................................... 3,987 1,142 Weighted average exercise price..................... 11.63 12.38 Weighted average remaining life in years............ 8 --
In the event of a change of control, the vesting of all awards will accelerate. We apply APB Opinion No. 25 -- Accounting for Stock Issued to Employees, and related Interpretations in accounting for our plans. Total compensation cost recognized in income for stock based employee compensation awards was $3,159,000, $1,388,000 and $3,160,000 for 2000, 1999 and 1998, respectively. If compensation cost had been recognized for the stock-based compensation plans based on fair values of the awards at the grant dates consistent with the method of SFAS No. 123 -- Accounting for Stock-Based Compensation, reported net earnings (loss) and earnings (loss) per share would have been $(124.7) million and $(3.22) for 2000, $(46.6) million and $(1.22) for 1999, and $(511.7) million and $(13.48) for 1998, respectively. The weighted average fair value on the date of grant of the individual options granted during 2000, 1999 and 1998 was estimated at $7.90, $5.08 and $4.82, respectively. Significant assumptions used to estimate the fair values of awards using the Black-Scholes option-pricing model with the following weighted average assumptions for 2000, 1999 and 1998 are: risk-free F-30 137 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 interest rate -- 4.50% to 7.00%; expected lives of options -- 10 years; expected volatility -- 30% to 50%; and expected dividend yield of 0.5% to 0.9%. ASSOCIATE RETIREMENT PLANS AND POSTRETIREMENT BENEFITS Fleming sponsors pension and postretirement benefit plans for substantially all non-union and some union associates. Benefit calculations for our 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. We fund these plans by contributing the actuarially computed amounts that meet funding requirements. Substantially all the plans' assets are invested in listed securities, short-term investments, bonds and real estate. We also have unfunded nonqualified supplemental retirement plans for selected associates. We offer 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. F-31 138 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 The following table provides a reconciliation of benefit obligations, plan assets and funded status of the plans mentioned above.
OTHER PENSION BENEFITS POSTRETIREMENT BENEFITS -------------------- ------------------------ 2000 1999 2000 1999 -------- -------- ---------- ---------- (IN THOUSANDS) Change in benefit obligation: Balance at beginning of year.................. $375,603 $418,604 $ 15,213 $ 16,503 Service cost.................................. 9,940 14,163 124 177 Interest cost................................. 28,924 26,511 964 1,020 Plan participants' contributions.............. -- -- 773 837 Actuarial gain/loss........................... 20,118 (53,098) 604 2,006 Benefits paid................................. (29,181) (30,577) (4,585) (5,330) -------- -------- -------- -------- Balance at end of year.......................... $405,404 $375,603 $ 13,093 $ 15,213 ======== ======== ======== ======== Change in plan assets: Fair value at beginning of year............... $331,862 $316,539 $ -- $ -- Actual return on assets....................... (10,968) 39,608 -- -- Employer contribution......................... 28,535 6,292 4,585 5,330 Benefits paid................................. (29,181) (30,577) (4,585) (5,330) -------- -------- -------- -------- Fair value at end of year....................... $320,248 $331,862 $ -- $ -- ======== ======== ======== ======== Funded status................................... $(85,156) $(43,741) $(13,093) $(15,213) Unrecognized actuarial loss................... 109,585 53,401 5,937 5,564 Unrecognized prior service cost............... 899 1,190 -- -- Unrecognized net transition asset............. (53) (320) -- -- -------- -------- -------- -------- Net amount recognized........................... $ 25,275 $ 10,530 $ (7,156) $ (9,649) ======== ======== ======== ======== Amounts recognized in the consolidated balance sheet: Prepaid benefit cost.......................... $ 8,302 $ 26,314 $ -- $ -- Accrued benefit liability..................... (52,181) (33,028) (7,156) (9,649) Intangible asset.............................. 773 958 -- -- Accumulated other comprehensive income........ 68,381 16,286 -- -- -------- -------- -------- -------- Net amount recognized........................... $ 25,275 $ 10,530 $ (7,156) $ (9,649) ======== ======== ======== ========
The following assumptions were used for the plans mentioned above.
OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ---------------- -------------- 2000 1999 2000 1999 ------ ------ ----- ----- Discount rate......................................... 7.50% 7.50% 7.50% 7.50% Expected return on plan assets........................ 9.00% 9.50% -- -- Rate of compensation increase......................... 4.50% 4.00% -- --
F-32 139 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 Net periodic pension and other postretirement benefit costs include the following components:
OTHER PENSION BENEFITS POSTRETIREMENT BENEFITS ------------------------------ ------------------------ 2000 1999 1998 2000 1999 1998 -------- -------- -------- ------ ------ ------ (IN THOUSANDS) Service cost............................. $ 9,940 $ 14,163 $ 12,981 $ 124 $ 177 $ 139 Interest cost............................ 28,924 26,511 25,334 964 1,020 1,052 Expected return on plan assets........... (29,527) (29,257) (25,234) -- -- -- Amortization of actuarial loss........... 4,429 11,134 9,105 231 222 -- Amortization of prior service cost....... 292 291 354 -- -- -- Amortization of net transition asset..... (268) (268) (268) -- -- -- -------- -------- -------- ------ ------ ------ Net periodic benefit cost................ $ 13,790 $ 22,574 $ 22,272 $1,319 $1,419 $1,191 ======== ======== ======== ====== ====== ======
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $405 million, $370 million, and $320 million, respectively, as of December 30, 2000, and $376 million, $341 million, and $332 million, respectively, as of December 25, 1999. For measurement purposes in 2000 and 1999, a 9.0% annual rate of increase in the per capita cost of covered medical care benefits was assumed. The rate was assumed to remain constant for both the measurement year and following year, then grade down by 0.5% per year until reaching 5.0%, then remain constant thereafter. For the 2000 and 1999 measurement years, the ultimate trend rate was realized at the year 2009 and 2008, respectively. The effect of a one-percentage point increase in assumed medical cost trend rates would have increased the accumulated postretirement benefit obligation as of December 31, 2000 from $13.0 to $13.8 million, and increased the total of the service cost and interest cost components of the net periodic cost from $1.09 million to $1.14 million. The effect of a one-percentage point decrease in assumed medical cost trend rates would have decreased the accumulated postretirement benefit obligation as of December 31, 2000 from $13.0 to $12.5 million, and decreased the total of the service cost and interest cost components of the net periodic cost from $1.09 million to $1.04 million. In some of the retail operations, contributory profit sharing plans were maintained for associates who meet certain types of employment and length of service requirements. These plans were discontinued at the beginning of 2000. Contributions under these defined contribution plans were made at the discretion of the Board of Directors and totaled $3 million in both 1999 and 1998. Beginning in 2000, we changed our benefit plans to offer a matching 401(k) plan to associates in addition to the pension plan previously offered. The pension plan was continued, but with a reduced benefit formula. The new plan was also offered to an increased number of associates. Under the plan, we annually commit to a minimum funding into the plan, match 100% of the first 2% of the employee's contribution, and match 25% of the next 4% of the employee's contribution for a maximum match contribution of 3% of the employee's base salary. Certain associates have pension and health care benefits provided under collectively bargained multi-employer agreements. Expenses for these benefits were $76 million, $77 million and $80 million for 2000, 1999 and 1998, respectively. F-33 140 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 SUPPLEMENTAL CASH FLOWS INFORMATION
2000 1999 1998 -------- -------- -------- (IN THOUSANDS) Acquisitions: Fair value of assets acquired.................... $ 18,529 $ 78,607 $ 32,080 Less: Liabilities assumed or created................... 11,181 -- 1,792 Cash acquired.................................... 28 167 63 -------- -------- -------- Cash paid, net of cash acquired............... $ 7,320 $ 78,440 $ 30,225 ======== ======== ======== Cash paid during the year for: Interest, net of amounts capitalized............. $175,246 $165,676 $182,449 ======== ======== ======== Income taxes, net of refunds..................... $(71,529) $ 14,863 $ 23,822 ======== ======== ======== Direct financing leases and related obligations.... $ 47,195 $ 45,645 $ 9,349 ======== ======== ======== Property and equipment additions by capital leases........................................... $ 32,660 $ 45,220 $ 70,684 ======== ======== ========
CONTINGENCIES In accordance with applicable accounting standards, we record a charge reflecting contingent liabilities (including those associated with litigation matters) when we determine that a material loss is "probable" and either "quantifiable" or "reasonably estimable." Additionally, we disclose material loss contingencies when the likelihood of a material loss is deemed to be greater than "remote" but less than "probable." Set forth below is information regarding certain material loss contingencies: Class Action Suits. In 1996, we and certain of our present and former officers and directors were named as defendants in nine purported class action suits filed by certain stockholders and one purported class action suit filed by two noteholders. All cases were filed in the United States District Court for the Western District of Oklahoma. In 1997, the court consolidated the stockholder cases; the noteholder case was also consolidated, but only for pre-trial purposes. The plaintiffs in the consolidated cases sought undetermined but significant damages, and asserted liability for our alleged "deceptive business practices," and our alleged failure to properly account for and disclose the contingent liability created by the David's Supermarkets litigation, a lawsuit we settled in April 1997 in which David's sued us for allegedly overcharging for products. The plaintiffs claimed that these alleged practices led to the David's litigation and to other material contingent liabilities, caused us to change our manner of doing business at great cost and loss of profit and materially inflated the trading price of our common stock. During 1998 the complaint in the noteholder case was dismissed, and during 1999 the complaint in the consolidated stockholder case was also dismissed, each without prejudice. The court gave the plaintiffs the opportunity to restate their claims in each case, and they did so in amended complaints. We again filed motions to dismiss all claims in both cases. On February 4, 2000, the court dismissed the amended complaint in the stockholder case with prejudice. The stockholder plaintiffs filed a notice of appeal on March 3, 2000, and briefing is presently under way in the Court of Appeals for the Tenth Circuit. On August 1, 2000, the court dismissed the claims in the noteholder complaint alleging violations of the Securities Exchange Act of 1934, but the court determined that the noteholder plaintiffs have stated a claim under Section 11 of the Securities Act of 1933. On September 15, 2000, defendants filed a motion to allow an immediate appeal of the court's denial of their motion to dismiss plaintiffs' claim under Section 11. That motion was denied on January 8, 2001. The case was set for a status and scheduling conference on January 30, 2001. The court has entered an order setting this case for trial in October 2001. F-34 141 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 Based upon some preliminary assumptions, plaintiffs' economic experts in the noteholder case have estimated "baseline" damages to be approximately $10 million and pre-judgment interest of approximately $3 million. In 1997, we won a declaratory judgment against certain of our insurance carriers regarding policies issued to us for the benefit of our officers and directors. On motion for summary judgment, the court ruled that our exposure, if any, under the class action suits is covered by D&O policies written by the insurance carriers, aggregating $60 million in coverage, and that the "larger settlement rule" will apply to the case. According to the trial court, under the larger settlement rule, a D&O insurer is liable for the entire amount of coverage available under a policy even if there is some overlap in the liability created by the insured individuals and the uninsured corporation. If a corporation's liability is increased by uninsured parties beyond that of the insured individuals, then that portion of the liability is the sole obligation of the corporation. The court also held that allocation is not available to the insurance carriers as an affirmative defense. The insurance carriers appealed. In 1999, the appellate court affirmed the decision that the class actions were covered by D&O policies aggregating $60 million in coverage but reversed the trial court's decision as to allocation as being premature. We intend to vigorously defend against the claims in these class action suits and pursue the issue of insurance discussed above, but we cannot predict the outcome of the cases. An unfavorable outcome could have a material adverse effect on our financial condition and prospects. Don's United Super (and related cases). We and two of our retired executives have been named in a suit filed in 1998 in the United States District Court for the Western District of Missouri by several current and former customers of the company (Don's United Super, et al. v. Fleming, et al.). The 18 plaintiffs operate retail grocery stores in the St. Joseph and Kansas City metropolitan areas. The plaintiffs in this suit allege product overcharges, breach of contract, breach of fiduciary duty, misrepresentation, fraud and RICO violations, and they are seeking actual, punitive and treble damages, as well as a declaration that certain contracts are voidable at the option of the plaintiffs. During the fourth quarter of 1999, plaintiffs produced reports of their expert witnesses calculating alleged actual damages of approximately $112 million. During the first quarter of 2000, plaintiffs revised a portion of these damage calculations, and although it is not clear what the precise damage claim will be, it appears that plaintiffs will claim approximately $120 million, exclusive of any punitive or treble damages. On May 2, 2000, the court granted partial summary judgment to the defendants, holding that plaintiffs' breach of contract claims that relate to events that occurred more than four years before the filing of the litigation are barred by limitations, and that plaintiffs' fraud claims based upon fraudulent inducement that occurred more than 15 years before the filing of the lawsuit likewise are barred. It is unclear what impact, if any, these rulings may have on the damage calculations of the plaintiffs' expert witnesses. The court has set August 13, 2001 as the date on which trial of the Don's case will commence. In October 1998, we and the same two retired executives were named in a suit filed by another group of retailers in the same court as the Don's suit (Coddington Enterprises, Inc., et al. v. Fleming, et al.). Currently, 16 plaintiffs are asserting claims in the Coddington suit, all but one of which have arbitration agreements with us. The plaintiffs assert claims virtually identical to those set forth in the Don's suit, and although plaintiffs have not yet quantified the damages in their pleadings, it is anticipated that they will claim actual damages approximating the damages claimed in the Don's suit. In July 1999, the court ordered two of the plaintiffs in the Coddington case to arbitration, and otherwise denied arbitration as to the remaining plaintiffs. We have appealed the district court's denial of F-35 142 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 arbitration to the Eighth Circuit Court of Appeals. The two plaintiffs who were ordered to arbitration have filed motions asking the district court to reconsider the arbitration ruling. Two other cases had been filed before the Don's case in the same district court (R&D Foods, Inc., et al. v. Fleming, et al.; and Robandee United Super, Inc., et al. v. Fleming, et al.) by 10 customers, some of whom are also plaintiffs in the Don's case. The earlier two cases, which principally seek an accounting of our expenditure of certain joint advertising funds, have been consolidated. All proceedings in these cases have been stayed pending the arbitration of the claims of those plaintiffs who have arbitration agreements with us. In March 2000, we and one former executive were named in a suit filed in the United States District Court for the Eastern District of Missouri by current and former customers that operated five retail grocery stores in and around Kansas City, Missouri, and four retail grocery stores in and around Phoenix, Arizona (J&A Foods, Inc., et al. v. Dean Werries and Fleming Companies, Inc.). The plaintiffs have alleged product overcharges, fraudulent misrepresentation, fraudulent nondisclosure and concealment, breach of contract, breach of duty of good faith and fair dealing and RICO violations, and they are seeking actual, punitive and treble damages, as well as other relief. The damages have not been quantified by the plaintiffs; however, we anticipate that substantial damages will be claimed. On August 8, 2000, the Judicial Panel on Multidistrict Litigation granted our motion and ordered the related Missouri cases (Don's United Super, Coddington Enterprises, Inc., and J&A Foods, Inc.) and the Storehouse Markets case (described below) transferred to the Western District of Missouri for coordinated or consolidated pre-trial proceedings. We intend to vigorously defend against the claims in these related cases but we are currently unable to predict the outcome of the cases. An unfavorable outcome could have a material adverse effect on our financial condition and prospects. On March 2, 2001, the court ordered the parties in the Missouri cases, the Storehouse Markets cases and the Welsh case to mediate the dispute within 45 days of the order. Storehouse Markets. In 1998, we and one of our former division officers were named in a suit filed in the United States District Court for the District of Utah by several current and former customers of the company (Storehouse Markets, Inc., et al. v. Fleming Companies, Inc., et al.). The plaintiffs have alleged product overcharges, fraudulent misrepresentation, fraudulent nondisclosure and concealment, breach of contract, breach of duty of good faith and fair dealing and RICO violations, and they are seeking actual, punitive and treble damages. The plaintiffs have made these claims on behalf of a class that would purportedly include current and former customers of our Salt Lake City division covering a four-state region. On June 12, 2000, the court entered an order certifying the case as a class action. On July 11, 2000, the United States Court of Appeals for the Tenth Circuit granted our request for permission to appeal the class certification order, and we are pursuing that appeal on an expedited basis. Oral argument of the appeal is set for March 14, 2001. On August 8, 2000, the Judicial Panel on Multidistrict Litigation granted our motion and ordered the Storehouse Markets case and the related Missouri cases (described above) transferred to the Western District of Missouri for coordinated or consolidated pre-trial proceedings. Damages have not been quantified by the plaintiffs; however, we anticipate that substantial damages will be claimed. We intend to vigorously defend against these claims but we cannot predict the outcome of the case. An unfavorable outcome could have a material adverse effect on our financial condition and prospects. F-36 143 FLEMING COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999, AND DECEMBER 26, 1998 On March 2, 2001, the court ordered the parties in the Missouri cases, the Storehouse Markets cases and the Welsh case to mediate the dispute within 45 days of the order. Welsh. In April 2000, the operators of two grocery stores in Van Horn and Marfa, Texas filed an amended complaint in the United States District Court for the Western District of Texas, Pecos Division (Welsh v. Fleming Foods of Texas, L.P.). The amended complaint alleges product overcharges, breach of contract, fraud, conversion, breach of fiduciary duty, negligent misrepresentation and breach of the Texas Deceptive Trade Practices Act. The amended complaint seeks unspecified actual damages, punitive damages, attorneys' fees and pre-judgment and post-judgment interest. Pursuant to the order of the Judicial Panel on Multidistrict Litigation, the Welsh case has been transferred to the Western District of Missouri for pre-trial proceedings. No trial date has been set in this case. On March 2, 2001, the court ordered the parties in the Missouri cases, the Storehouse Markets cases and the Welsh case to mediate the dispute within 45 days of the order. Other. Our facilities and operations are subject to various laws, regulations and judicial and administrative orders concerning protection of the environment and human health, including provisions regarding the transportation, storage, distribution, disposal or discharge of certain materials. In conformity with these provisions, we have a comprehensive program for testing, removal, replacement or repair of our underground fuel storage tanks and for site remediation where necessary. We have established reserves that we believe will be sufficient to satisfy the anticipated costs of all known remediation requirements. We and others have been designated by the U.S. Environmental Protection Agency and by similar state agencies as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, or similar state laws, as applicable, with respect to EPA-designated Superfund sites. While liability under CERCLA for remediation at these sites is generally joint and several with other responsible parties, we believe that, to the extent we are ultimately determined to be liable for the expense of remediation at any site, such liability will not result in a material adverse effect on our consolidated financial position or results of operations. We are committed to maintaining the environment and protecting natural resources and human health and to achieving full compliance with all applicable laws, regulations and orders. We are a party to or threatened with various other litigation and contingent loss situations arising in the ordinary course of our business including: disputes with customers and former customers; disputes with owners and former owners of financially troubled or failed customers; disputes with landlords and former landlords; disputes with employees and former employees regarding labor conditions, wages, workers' compensation matters and alleged discriminatory practices; disputes with insurance carriers; tax assessments and other matters, some of which are for substantial amounts. Except as noted herein, we do not believe that any such claim will have a material adverse effect on us. F-37 144 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [FLEMING COMPANIES, INC. LOGO] FLEMING COMPANIES, INC. OFFER TO EXCHANGE UP TO $355,000,000 OF ITS 10 1/8% SENIOR NOTES DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR UP TO $355,000,000 OF ITS OUTSTANDING 10 1/8% SENIOR NOTES DUE 2008 ------------------------- PROSPECTUS ------------------------- , 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 145 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Article Thirteen of the Restated Certificate of Incorporation of Registrant contains a provision, permitted by Section 1006B.7 of the Oklahoma General Corporation Act (the "OGCA"), limiting the personal monetary liability of directors for breach of fiduciary duty as a director. The OGCA and the Restated Certificate of Incorporation of the Registrant provide that such provision does not eliminate or limit liability, (1) for any breach of the director's duty of loyalty to Registrant or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) for unlawful payments of dividends or unlawful stock repurchases or redemptions, as provided in Section 1053 of the OGCA, or (4) for any transaction from which the director derived an improper personal benefit. Section 1031 of the OGCA permits indemnification against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with actions, suits or proceedings in which a director, officer, employee or agent is a party by reason of the fact that he or she is or was such a director, officer, employee or agent, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. However, in connection with actions by or in the right of the corporation, such indemnification is not permitted if such person has been adjudged liable to the corporation unless the court determines that, under all of the circumstances, such person is nonetheless fairly and reasonably entitled to indemnity for such expenses as the court deems proper. Section 1031 also permits a corporation to purchase and maintain insurance on behalf of its directors and officers against any liability which may be asserted against, or incurred by, such persons in their capacities as directors or officers of the corporation whether or not Registrant would have the power to indemnify such persons against such liabilities under the provisions of such section. Section 1031 further provides that the statutory provision is not exclusive of any other right to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or independent directors, or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. Article 8 of the by-laws of Registrant contains provisions regarding indemnification which parallel those described above. Registrant maintains insurance policies that insure its officers and directors against certain liabilities. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. A list of exhibits filed with this registration statement on Form S-4 is set forth on the Exhibit Index and is incorporated in this Item 21 by reference. ITEM 22. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the II-1 146 registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the bona fide offering thereof. (c) 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 a 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. (d) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into this prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (e) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-2 147 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. FLEMING COMPANIES, INC. By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Senior Vice President, General Counsel and Secretary POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Carlos M. Hernandez to be his true and lawful attorney-in-fact and agent, each acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this registration statement and any and all amendments thereto (including without limitation any post-effective amendments thereto and any registration statement pursuant to Rule 462(b)), and to file each of the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, and every act and thing necessary or desirable to be done, as fully to all intents and purposes as he might or could do in person, thereby ratifying and confirming all that said attorney-in-fact and agent, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ MARK S. HANSEN Chairman and Chief Executive Officer May 3, 2001 - --------------------------------------------------- (Principal Executive Officer) Mark S. Hansen /s/ NEAL J. RIDER Executive Vice President and Chief May 3, 2001 - --------------------------------------------------- Financial Officer (Principal Neal J. Rider Financial and Accounting Officer) Director - --------------------------------------------------- Herbert M. Baum /s/ ARCHIE R. DYKES Director May 3, 2001 - --------------------------------------------------- Archie R. Dykes Director - --------------------------------------------------- Carol B. Hallett /s/ ROBERT S. HAMADA Director May 3, 2001 - --------------------------------------------------- Robert S. Hamada /s/ EDWARD C. JOULLIAN III Director May 3, 2001 - --------------------------------------------------- Edward C. Joullian III /s/ GUY A. OSBORN Director May 3, 2001 - --------------------------------------------------- Guy A. Osborn /s/ ALICE M. PETERSON Director May 3, 2001 - --------------------------------------------------- Alice M. Peterson
II-3 148 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. ABCO FOOD GROUP, INC., a Nevada corporation By /s/ LOUIS F. MOORE ------------------------------------ Louis F. Moore Secretary II-4 149 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. ABCO MARKETS INC., an Arizona corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-5 150 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. ABCO REALTY CORP., an Arizona corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-6 151 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. AG, L.L.C., an Oklahoma limited liability company By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-7 152 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. AMERICAN LOGISTICS GROUP, INC., a Delaware corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-8 153 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. BAKER'S FOOD GROUP, INC., a Nevada corporation By /s/ LOUIS F. MOORE ------------------------------------ Louis F. Moore Secretary II-9 154 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. DUNIGAN FUELS, INC., a Texas corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-10 155 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. FAVAR CONCEPTS, LTD., a Delaware corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-11 156 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. FLEMING FOODS MANAGEMENT CO., L.L.C., an Oklahoma limited liability company By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-12 157 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. FLEMING FOODS OF TEXAS, L.P., an Oklahoma limited partnership By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-13 158 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. FLEMING INTERNATIONAL LTD., an Oklahoma corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-14 159 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. FLEMING SUPERMARKETS OF FLORIDA, INC., a Florida corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-15 160 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. FLEMING TRANSPORTATION SERVICE, INC., an Oklahoma corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-16 161 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. FLEMING WHOLESALE, INC., a Nevada corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-17 162 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. FUELSERV, INC., a Delaware corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-18 163 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. GATEWAY INSURANCE AGENCY, INC., a Wisconsin corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-19 164 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. LAS, INC., an Oklahoma corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-20 165 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. PIGGLY WIGGLY COMPANY, an Oklahoma corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-21 166 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. PROGRESSIVE REALTY, INC., an Oklahoma corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-22 167 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. RAINBOW FOOD GROUP, INC., a Nevada corporation By /s/ LOUIS F. MOORE ------------------------------------ Louis F. Moore Secretary II-23 168 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. RETAIL INVESTMENTS, INC., a Nevada corporation By /s/ LOUIS F. MOORE ------------------------------------ Louis F. Moore Secretary II-24 169 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. RETAIL SUPERMARKETS, INC., a Texas corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-25 170 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. RFS MARKETING SERVICES, INC., an Oklahoma corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-26 171 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. RICHMAR FOODS, INC., a California corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-27 172 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Lewisville, state of Texas, on the 3rd day of May, 2001. SCRIVNER TRANSPORTATION, INC., an Oklahoma corporation By /s/ CARLOS M. HERNANDEZ ------------------------------------ Carlos M. Hernandez Secretary II-28 173 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 4.1 Credit Agreement, dated as of July 25, 1997, among Fleming Companies, Inc. the Lenders party thereto, BancAmerica Securities, Inc., as syndication agent, Societe Generale, as documentation agent and the Chase Manhattan Bank, as administrative agent, filed as Exhibit 4.16 to Form 10-Q for the quarter ended July 12, 1997 and incorporated herein by reference. 4.2 Security Agreement, dated as of July 25, 1997, between Fleming Companies, Inc., the company subsidiaries party thereto and The Chase Manhattan Bank, as collateral agent, filed as Exhibit 4.17 to Form 10-Q for the quarter ended July 12, 1997 and incorporated herein by reference. 4.3 Pledge Agreement, dated as of July 25, 1997, among Fleming Companies, Inc., the company subsidiaries party thereto and The Chase Manhattan Bank, as collateral agent, filed as Exhibit 4.18 to Form 10-Q for the quarter ended July 12, 1997 and incorporated herein by reference. 4.4 Guarantee Agreement among the company subsidiaries party thereto and The Chase Manhattan Bank, as collateral agent, filed as Exhibit 4.19 to Form 10-Q for the quarter ended July 12, 1997 and incorporated herein by reference. 4.5 Indenture, dated as of July 25, 1997, among Fleming Companies, Inc., the Subsidiary Guarantors named therein and Manufacturers and Traders Trust Company, as Trustee, regarding 10 5/8% Senior Subordinated Notes due 2007, filed as Exhibit 4.20 to Form 10-Q for the quarter ended July 12, 1997 and incorporated herein by reference. 4.6 Indenture, dated as of July 25, 1997, among Fleming Companies, Inc., the Subsidiary Guarantors named therein and Manufacturers and Traders Trust Company regarding 10 1/2% Senior Subordinated Notes due 2004, filed as Exhibit 4.21 to Form 10-Q for quarter ended July 12, 1997 and incorporated herein by reference. 4.7 First Amendment, dated as of October 5, 1998, to Credit Agreement dated July 25, 1997, filed as Exhibit 4.8 to Form 10-Q for the quarter ended October 3, 1998 and incorporated herein by reference. 4.8 Second Amendment, dated as of December 21, 1999, to Credit Agreement dated July 25, 1997, filed as Exhibit 4.9 to Form 10-Q for quarter ended April 15, 2000 and incorporated herein by reference. 4.9 Indenture, dated as of March 15, 2001, among Fleming Companies, Inc., the Subsidiary Guarantors named therein and Bankers Trust Company, as Trustee, regarding the 10 1/8% Senior Notes due 2008. 4.10 Indenture, dated as of March 15, 2001, among Fleming Companies, Inc., the Subsidiary Guarantors named therein and Bank One, N.A., as Trustee, regarding the 5.25% Convertible Senior Subordinated Notes due 2009, filed as Exhibit 4.3 to Form S-3 filed on May 3, 2001 and incorporated herein by reference. 4.11 Registration Rights Agreement, dated as of March 15, 2001, among Fleming Companies, Inc., the Subsidiary Guarantors named therein, Deutsche Banc Alex. Brown Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc., Chase Securities Inc. and UBS Warburg LLC. 4.12 Registration Rights Agreement, dated as of March 15, 2001, among Fleming Companies, Inc., the Subsidiary Guarantors named therein, Deutsche Banc Alex. Brown Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc., JPMorgan Securities Inc. and UBS Warburg LLC, filed as Exhibit 4.4 to Form S-3 filed on May 3, 2001 and incorporated herein by reference. 5.1 Opinion of Latham & Watkins. 5.2 Opinion of McAfee & Taft. 12.1 Statement of Computation of Ratios. 23.1 Consent of Latham & Watkins (included in Exhibit 5.1). 23.2 Consent of McAfee & Taft (included in Exhibit 5.2).
174
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 23.3 Independent Auditors' Consent. 24.1 Power of Attorney (included on signature page hereto). 25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee of Bankers Trust Company (Form T-1). 99.1 Letter of Transmittal with Respect to the Exchange Offer. 99.2 Notice of Guaranteed Delivery with Respect to the Exchange Offer. 99.3 Letter to DTC Participants Regarding the Exchange Offer. 99.4 Letter to Beneficial Holders Regarding the Exchange Offer. 99.5 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
EX-4.9 2 f71028ex4-9.txt EXHIBIT 4.9 1 EXHIBIT 4.9 - -------------------------------------------------------------------------------- FLEMING COMPANIES, INC. up to $550,000,000 10 1/8% SENIOR NOTES DUE 2008 ----------------------------- INDENTURE Dated as of March 15, 2001 ----------------------------- BANKERS TRUST COMPANY Trustee ----------------------------- - -------------------------------------------------------------------------------- 2
CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310(a)(1)................................................................. 7.10 (a)(2)................................................................. 7.10 (a)(3)................................................................. N.A. (a)(4)................................................................. N.A. (a)(5)................................................................. 7.10 (b).................................................................... 7.10 (c).................................................................... N.A. 311(a).................................................................... 7.11 (b).................................................................... 7.11 (c).................................................................... N.A. 312(a).................................................................... 2.05 (b).................................................................... 14.03 (c).................................................................... 14.03 313(a).................................................................... 7.06 (b)(2)................................................................. 7.07 (c).................................................................... 7.06;14.02 (d).................................................................... 7.06 314(a).................................................................... 4.03;14.02 (c)(1)................................................................. 14.04 (c)(2)................................................................. 14.04 (c)(3)................................................................. N.A. (e).................................................................... 14.05 (f).................................................................... N.A. 315(a).................................................................... 7.01 (b).................................................................... 7.05,14.02 (c).................................................................... 7.01 (d).................................................................... 7.01 (e).................................................................... 6.11 316(a) (last sentence).................................................... 2.09 (a)(1)(A).............................................................. 6.05 (a)(1)(B).............................................................. 6.04 (a)(2)................................................................. N.A. (b).................................................................... 6.07 (c).................................................................... 2.13 317(a)(1)................................................................. 6.08 (a)(2)................................................................. 6.09 (b).................................................................... 2.04 318(a).................................................................... 14.01 (b).................................................................... N.A. (c).................................................................... 14.01
N.A. means not applicable. * This Cross Reference Table is not part of the Indenture. 3
TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions............................................................... 1 Section 1.02. Other Definitions......................................................... 27 Section 1.03. Incorporation by Reference of Trust Indenture Act......................... 28 Section 1.04. Rules of Construction..................................................... 28 ARTICLE 2. THE NOTES Section 2.01. Form and Dating........................................................... 29 Section 2.02. Execution and Authentication.............................................. 29 Section 2.03. Registrar and Paying Agent................................................ 30 Section 2.04. Paying Agent to Hold Money in Trust....................................... 30 Section 2.05. Holder Lists.............................................................. 31 Section 2.06. Transfer and Exchange..................................................... 31 Section 2.07. Replacement Notes......................................................... 43 Section 2.08. Outstanding Notes......................................................... 44 Section 2.09. Treasury Notes............................................................ 44 Section 2.10. Temporary Notes........................................................... 44 Section 2.11. Cancellation.............................................................. 44 Section 2.12. Defaulted Interest........................................................ 45 Section 2.13. Record Date............................................................... 45 Section 2.14. CUSIP Numbers............................................................. 45 ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee........................................................ 45 Section 3.02. Selection of Notes to Be Redeemed......................................... 45 Section 3.03. Notice of Redemption...................................................... 46 Section 3.04. Effect of Notice of Redemption............................................ 47 Section 3.05. Deposit of Redemption Price............................................... 47 Section 3.06. Notes Redeemed in Part.................................................... 47 Section 3.07. Optional Redemption....................................................... 47 Section 3.08. Mandatory Redemption...................................................... 48 Section 3.09. Offer to Purchase by Application of Excess Proceeds....................... 48
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Page ARTICLE 4. COVENANTS Section 4.01. Payment of Notes.......................................................... 50 Section 4.02. Maintenance of Office or Agency........................................... 50 Section 4.03. Reports................................................................... 50 Section 4.04. Compliance Certificate.................................................... 51 Section 4.05. Taxes..................................................................... 52 Section 4.06. Stay, Extension and Usury Laws............................................ 52 Section 4.07. Restricted Payments....................................................... 52 Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries............ 55 Section 4.09. Incurrence of Indebtedness................................................ 56 Section 4.10. Asset Sales............................................................... 58 Section 4.11. Transactions with Affiliates.............................................. 58 Section 4.12. Liens..................................................................... 59 Section 4.13. Corporate Existence....................................................... 60 Section 4.14. Offer to Repurchase Upon Change of Control................................ 60 Section 4.15. Limitation on Issuances and Sales of Capital Stock of Subsidiaries........ 61 Section 4.16. Payments for Consent...................................................... 62 Section 4.17. Additional Guarantees..................................................... 62 Section 4.18. Termination of Certain Covenants In Event of Investment Grade Rating...... 62 Section 4.19. Registration Rights....................................................... 63 Section 4.20. Additional Interest....................................................... 63 ARTICLE 5. SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets.................................. 63 Section 5.02. Successor Corporation Substituted......................................... 65 ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01. Events of Default......................................................... 65 Section 6.02. Acceleration.............................................................. 68 Section 6.03. Other Remedies............................................................ 68 Section 6.04. Waiver of Past Defaults................................................... 69 Section 6.05. Control by Majority....................................................... 69 Section 6.06. Limitation on Suits....................................................... 69 Section 6.07. Rights of Holders of Notes to Receive Payment............................. 69 Section 6.08. Collection Suit by Trustee................................................ 70 Section 6.09. Trustee May File Proofs of Claim.......................................... 70
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Page Section 6.10. Priorities................................................................ 70 Section 6.11. Undertaking for Costs..................................................... 71 ARTICLE 7. TRUSTEE Section 7.01. Duties of Trustee......................................................... 71 Section 7.02. Rights of Trustee......................................................... 72 Section 7.03. Individual Rights of Trustee.............................................. 72 Section 7.04. Trustee's Disclaimer...................................................... 73 Section 7.05. Notice of Defaults........................................................ 73 Section 7.06. Reports by Trustee to Holders of the Notes................................ 73 Section 7.07. Compensation and Indemnity................................................ 73 Section 7.08. Replacement of Trustee.................................................... 74 Section 7.09. Successor Trustee by Merger, etc.......................................... 75 Section 7.10. Eligibility; Disqualification............................................. 75 Section 7.11. Preferential Collection of Claims Against Company......................... 75 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.................. 76 Section 8.02. Legal Defeasance and Discharge............................................ 76 Section 8.03. Covenant Defeasance....................................................... 76 Section 8.04. Conditions to Legal or Covenant Defeasance................................ 77 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions............................................... 78 Section 8.06. Repayment to Company...................................................... 78 Section 8.07. Reinstatement............................................................. 79 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes....................................... 79 Section 9.02. With Consent of Holders of Notes.......................................... 80 Section 9.03. Compliance with Trust Indenture Act....................................... 81 Section 9.04. Revocation and Effect of Consents......................................... 81 Section 9.05. Notation on or Exchange of Notes.......................................... 81 Section 9.06. Trustee to Sign Amendments, etc........................................... 82
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Page ARTICLE 10. [RESERVED] ARTICLE 11. NOTE GUARANTEES Section 11.01. Guarantee................................................................. 82 Section 11.02. Limitation on Guarantor Liability......................................... 83 Section 11.03. Execution and Delivery of Note Guarantee.................................. 83 Section 11.04. Guarantors May Consolidate, etc., on Certain Terms........................ 84 Section 11.05. Releases of Note Guarantees............................................... 85 ARTICLE 12. [RESERVED] ARTICLE 13. SATISFACTION AND DISCHARGE Section 13.01. Satisfaction and Discharge................................................ 85 Section 13.02. Application of Trust Money................................................ 86 ARTICLE 14. MISCELLANEOUS Section 14.01. Trust Indenture Act Controls.............................................. 87 Section 14.02. Notices................................................................... 87 Section 14.03. Communication by Holders of Notes with Other Holders of Notes............. 88 Section 14.04. Certificate and Opinion as to Conditions Precedent........................ 88 Section 14.05. Statements Required in Certificate or Opinion............................. 88 Section 14.06. Rules by Trustee and Agents............................................... 89 Section 14.07. No Personal Liability of Directors, Officers, Employees and Stockholders.. 89 Section 14.08. Governing Law............................................................. 89 Section 14.09. No Adverse Interpretation of Other Agreements............................. 89 Section 14.10. Successors................................................................ 89 Section 14.11. Severability.............................................................. 89 Section 14.12. Counterpart Originals..................................................... 89 Section 14.13. Table of Contents, Headings, etc.......................................... 89
-iv- 7 Page EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTE GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE
-v- 8 INDENTURE dated as of March 15, 2001 among Fleming Companies, Inc., an Oklahoma corporation (the "Company"), the Guarantors and Bankers Trust Company, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Notes: ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "Acquired Indebtedness" means Indebtedness of a Person: (a) existing at the time such Person becomes a Restricted Subsidiary of the Company; or (b) 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 Restricted Subsidiary of the Company or such acquisition. "Additional Interest" has the meaning given such term in the Registration Rights Agreement. "Additional Notes" means up to $195 million in aggregate principal amount of Notes (other than the Initial Notes) issued under this Indenture in accordance with Section 2.02 and 4.09. "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. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Sale" means: (a) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of a sale and leaseback), other than sales of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by Section 4.14 and/or Article 5 and not by the provisions of Section 4.10); and 9 (b) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, whether in a single transaction or a series of related transactions, in either case: (i) that have a fair market value in excess of $1.0 million; or (ii) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, a transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, or by a non-Wholly Owned Restricted Subsidiary to any other Restricted Subsidiary will not be deemed to be an Asset Sale. "Average Life to Stated Maturity" means, as of the date of determination with respect to any Indebtedness, the quotient obtained by dividing: (a) the sum of the products of: (i) 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 (ii) the amount of each such principal payment; by (b) 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 and other financial institutions from time to time that are lenders under the Credit Agreement. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Borrowing Base Amount" means, as of any date, an amount equal to the sum of: (a) 85% of the aggregate book value of all accounts receivable of the Company and its Restricted Subsidiaries; and -2- 10 (b) 60% of the aggregate book value of all inventory owned by the Company and its Restricted Subsidiaries, all calculated on a consolidated basis and in accordance with GAAP. To the extent the information is not available as to the amount of accounts receivable or inventory as of a specific date, the Company shall use the most recent available information for purposes of calculating the Borrowing Base. "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. "Capital Lease Obligation" of any Person means any obligation 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 Issue Date, including, without limitation, all common stock and Preferred Stock. "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) 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; (b) 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 stockholders of the Company, was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors then in office; (c) 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: -3- 11 (i) the outstanding Voting Stock of the Company is changed into or exchanged for: (A) Voting Stock of the surviving corporation which is not Redeemable Capital Stock; or (B) 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 as described under Section 4.07 (and such amount shall be treated as a Restricted Payment pursuant to Section 4.07); and (ii) 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 (d) the Company is liquidated or dissolved or adopts a plan of liquidation or dissolution other than in a transaction which complies with the provisions of Article 5. "Clearstream" means Clearstream Banking, S.A. "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. "Company" means Fleming Companies, Inc. and any and all successors thereto that become a party to this Indenture in accordance with its terms. "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 EBITDA" means, for any period, Consolidated Net Income plus, without duplication, Consolidated Interest Expense, Consolidated Income Tax Expense, Consolidated Non-Cash Charges and Excluded Non-Cash Charges (less the amount of all cash payments made by the Company or any of its Restricted Subsidiaries during such period to the extent such payments relate to Excluded Non-Cash Charges that were added back in determining the sum contemplated by this definition for such period or any prior period) deducted in computing Consolidated Net Income, in each case, for such period, of the Company and its Restricted Subsidiaries on a Consolidated basis, all determined in accordance with GAAP. -4- 12 "Consolidated Fixed Charge Coverage Ratio" of the Company means, for any period, the ratio of: (a) Consolidated EBITDA for such period 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; and (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. "Consolidated Income Tax Expense" means for any period the provision for federal, state, local and foreign income taxes of the Company and its Restricted 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 Restricted 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 Restricted Subsidiaries; -5- 13 (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 Restricted Subsidiaries in each case under each of (a) through (d) 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 Restricted 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: (a) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto); (b) solely with respect to fiscal 2001, Excluded Non-Cash Charges (less the amount of all cash payments made by the Company or any of its Restricted Subsidiaries during such period to the extent such payments relate to Excluded Non-Cash Charges that were added back in determining the sum contemplated by clause (a) of the definition of "Consolidated Fixed Charge Coverage Ratio"); (c) the portion of net income (or loss) of the Company and its Restricted 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 Restricted Subsidiary; (d) net income (or loss) of any Person combined with the Company or any Restricted Subsidiary on a "pooling of interests" basis attributable to any period prior to the date of combination; (e) 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 (f) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Restricted 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 Restricted Subsidiary or its shareholders. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of: (a) the consolidated equity of the common equity holders of such Person and its Restricted Subsidiaries as of such date; plus (b) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Redeemable Capital Stock) that -6- 14 by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock; less (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the Issue Date in the book value of any asset owned by such Person or a consolidated Restricted Subsidiary of such Person; (ii) all investments as of such date in unconsolidated Restricted Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments); and (iii) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Consolidated Non-Cash Charges" means, for any period, the aggregate depreciation, amortization and other non-cash charges of the Company and its Restricted 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 and any Excluded Non-Cash Charges). "Consolidated Senior Debt Leverage Ratio" of the Company means the ratio of (i) Consolidated Indebtedness of the Company and its Restricted Subsidiaries (other than Subordinated Indebtedness) as of the date of the transaction giving rise to the need to calculate such Consolidated Senior Debt Leverage Ratio to (ii) Consolidated EBITDA for the four full fiscal quarters immediately preceding the date of the transaction giving rise to the need to calculate such Consolidated Senior Debt Leverage Ratio, taken as one period. "Consolidated Tangible Assets" means the total of all the assets appearing on the Consolidated balance sheet of the Company and its majority-owned or Wholly Owned Restricted Subsidiaries less: (a) intangible assets including, without limitation, items such as goodwill, trademarks, trade names, patents and unamortized debt discount; and (b) appropriate adjustments on account of minority interests of other persons holding stock in any majority-owned Restricted Subsidiary of the Company. "Consolidated Total Assets" means, with respect to the Company, the total of all assets appearing on the Consolidated balance sheet of the Company and its majority-owned or Wholly Owned Restricted Subsidiaries, as determined on a Consolidated basis in accordance with GAAP. "Convertible Senior Subordinated Note Guarantees" means any guarantee by a subsidiary guarantor of the Company's obligations under the Convertible Senior Subordinated Indenture. -7- 15 "Convertible Senior Subordinated Notes" means the $150 million aggregate principal amount of 5.25% Convertible Senior Subordinated Notes due 2009 of the Company. "Convertible Senior Subordinated Indenture" means the indenture dated as of March 15, 2001 among the Company, as issuer, each of the subsidiary guarantors named therein, as guarantors, and Bank One, N.A., as trustee. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 14.02 or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means the credit agreement dated as of July 25, 1997 among the Company, the Banks, the agents listed therein and The Chase Manhattan Bank, as administrative 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 Restricted Subsidiaries. "Custodian" means any custodian, receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event which is, or after notice or passage of any time or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06, in the form of Exhibit A except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors is required to deliver a resolution of the Board of Directors under this Indenture, a member of the Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions. "Equity Interest" of any Person means any shares, interests, participations or other equivalents (however designated) in such Person's equity, and shall in any event include any Capital Stock issued by, or partnership or membership interests in, such Person. -8- 16 "Equity Offering" means a public or private offering of Qualified Capital Stock of the Company generating gross proceeds to the Company of at least $50 million. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the 10 1/8% Senior Notes due 2008 to be issued in exchange for (1) the Initial Notes pursuant to the Registration Rights Agreement and (2) the Additional Notes, if any, issued under Section 2.02 pursuant to a registration rights agreement substantially similar to the Registration Rights Agreement. "Exchange Offer" means the Exchange Offer as defined in the Registration Rights Agreement. "Exchange Offer Registration Statement" means the Exchange Offer Registration Statement as defined in the Registration Rights Agreement. "Excluded Non-Cash Charges" means all non-cash charges with respect to: (a) write-downs of the carrying value in the Company's financial statements of certain retail and distribution facilities and related assets in connection with the proposed or actual disposition of such facilities or discontinuance of operations at such facilities or otherwise in accordance with GAAP; or (b) other consolidation and restructuring of facilities and operations. "Euroclear" means the Euroclear System. "Fair Market Value" means, with respect to any asset or property, a price which could be negotiated in an arm's length transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure to complete the transaction. Fair Market Value shall be determined by officers of the Company acting in good faith; provided, that any transaction that results in a price in excess of $10.0 million shall be determined by the Board of Directors of the Company acting in good faith and shall be evidenced by a Board Resolution attached to an Officers' Certificate delivered to the Trustee. "Generally Accepted Accounting Principles" or "GAAP" means generally accepted accounting principles in the United States, as in effect on the Issue Date. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii) which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A, issued in accordance with Section 2.01 or 2.06. -9- 17 "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and for the payment of which the United States pledges its full faith and credit. "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: (a) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness; (b) 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 or to assure the holder of such Indebtedness against loss; (c) 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); (d) to maintain working capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor; or (e) 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. "Guarantor" means each Wholly Owned Restricted Subsidiary of the Company and each such subsidiary's Wholly Owned Restricted Subsidiaries as of the Issue Date and any Restricted Subsidiary that is required pursuant to Section 4.17, on or after the Issue Date, to execute a Note Guarantee pursuant to this Indenture until a successor replaces any such party pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. "Holder" or "Noteholder" means a Person in whose name a Note is registered. "IAI Global Note" means a global note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to an Institutional Accredited Investor. "Indebtedness" means, with respect to any Person, without duplication: (a) 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 -10- 18 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; (b) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments; (c) 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; (d) all Capital Lease Obligations of such Person; (e) all obligations under Interest Rate Agreements or Currency Agreements of such Person; (f) indebtedness referred to in clauses (a) through (e) above 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; (g) all Guaranteed Debt of such Person; (h) all Redeemable Capital Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends; and (i) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing of any liability of the types referred to in clauses (a) through (h) 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 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 Indenture as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. -11- 19 "Initial Notes" means the $355 million principal amount of 10 1/8% Senior Notes due 2008 of the Company issued on the Issue Date. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is not also a QIB. "Interest Payment Date" means April 1 and October 1 of each year commencing October 1, 2001. "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). "Investee Store" means a Person in which the Company or any of its Restricted Subsidiaries has invested equity capital, to which it has made loans or for which it has guaranteed loans, in accordance with the business practice of the Company and its Restricted Subsidiaries of making equity investments in, making loans to or guaranteeing loans made to Persons for the purpose of assisting any such Person in acquiring, remodeling, refurbishing, expanding or operating one or more retail grocery stores. "Investment" means, with respect to any Person, directly or indirectly: (a) 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 Restricted Subsidiaries), loan or other extension of credit (including by way of guarantee); or (b) 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 (c) any purchase, acquisition or ownership by such Person of any Capital Stock, bonds, notes, debentures or other securities or assets issued or owned by any other Person. The Company shall be deemed to make an Investment in an amount equal to the greater of the book value (as determined in accordance with GAAP) and Fair Market Value of the net assets of any Restricted Subsidiary (or, if neither the Company nor any of its Restricted Subsidiaries has theretofore made an Investment in such Restricted Subsidiary, in an amount equal to the Investments being made) at the time such Restricted Subsidiary is designated an Unrestricted Subsidiary, and any property transferred to an Unrestricted Subsidiary from the Company or any Restricted Subsidiary shall be deemed an Investment valued at the greater of its book value (as determined in accordance with GAAP) and its Fair Market Value at the time of such transfer. "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 S&P or Moody's shall cease rating the Notes and the Company shall select any other Rating Agency, the equivalent of such ratings by such other Rating Agency. -12- 20 "Issue Date" means March 15, 2001, the date of original issuance of the Initial Notes. "Joint Venture" means any Person in which the Company or any of its Restricted Subsidiaries owns 30% or more of the Voting Stock (other than as a result of a Public Equity Offering). "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. "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 or on a redemption date or pursuant to a Change of Control Purchase Offer or an Asset Sale Offer, and whether by declaration of acceleration, call for redemption, purchase or otherwise. "Medium-Term Notes" means the Medium-Term Notes, due 1997 to 2003, of the Company. "Medium-Term Notes Indenture" means the Indenture dated as of December 1, 1989 between the Company and First Trust of New York National Association, as trustee. "Moody's" means Moody's Investors Service, Inc. or any successor rating agency. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions), any relocation expenses incurred as a result thereof, any taxes paid or payable by the Company or any of its Restricted Subsidiaries as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the permanent repayment of Indebtedness secured by a Lien on the assets or assets that were the subject of such Asset Sale and any reserve for adjustment or indemnity in respect of the sale price of such asset or assets in each case established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness: (a) as to which neither the Company nor any of its Restricted Subsidiaries: (i) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute indebtedness); (ii) is directly or indirectly liable (as a guarantor or otherwise); or (iii) constitutes the lender; -13- 21 (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Notes being offered hereby) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (c) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Note Guarantee" means any guarantee by a Guarantor of the Company's obligations under this Indenture. "Notes" means, collectively, the Initial Notes, the Additional Notes, if any, and the Exchange Notes, treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Obligations" means any principal, premium, interest (including post-petition interest), penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the President, Chief Executive Officer, any Vice President, Chief Operating Officer, Treasurer, Secretary or the Chief Financial Officer of such Person. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Officers of such Person; provided, however, that every Officers' Certificate with respect to compliance with a covenant or condition provided for in this Indenture shall include (i) a statement that the Officers making or giving such Officers' Certificate have read such condition and any definitions or other provisions contained in this Indenture relating thereto and (ii) a statement at to whether, in the opinion of the signers, such conditions has been complied with. "144A Global Note" means a global note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee that meets the requirements of Section 14.05. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). -14- 22 "Participating Broker-Dealer" means any broker-dealer that is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer. "Permitted Consideration" means consideration consisting of any combination of the following: (a) cash or Temporary Cash Investments; (b) assets used or intended for use in the Company's business as conducted on the Issue Date; (c) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; and (d) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary; provided that the aggregate amount of such securities, notes or other obligations received by the Company and its Restricted Subsidiaries pursuant to this clause (d) after the Issue Date and held or carried at any date of determination shall not exceed $75 million. "Permitted Indebtedness" means any of the following Indebtedness of the Company or any Restricted Subsidiary, as the case may be: (a) Indebtedness of the Company and guarantees of the Guarantors under the Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed the greater of: (i) $1.0 billion, less (A) the amount of mandatory repayments actually made by the Company or any such Restricted Subsidiary since the Issue Date with Net Proceeds of an Asset Sale in respect of term Indebtedness under the Credit Agreement; and (B) further reduced by the amount of mandatory repayments of revolving credit Indebtedness thereunder (accompanied by a corresponding commitment reduction thereunder) actually made by the Company or any such Restricted Subsidiary since the Issue Date with Net Proceeds of an Asset Sale; or (ii) the Borrowing Base Amount. -15- 23 (b) Indebtedness of the Company and guarantees of the Guarantors under uncommitted bank lines of credit (including any refinancings of such Indebtedness); provided, however, that the aggregate principal amount of Indebtedness incurred pursuant to clauses (a), (b) and (k) of this definition does not exceed the maximum amount of Indebtedness permitted under clause (a) of this definition; (c) Indebtedness of the Company and the Guarantors evidenced by the Notes and the Note Guarantees with respect thereto under this Indenture in aggregate amount not to exceed $355,000,000; (d) Indebtedness of the Company and the Guarantors evidenced by the Convertible Senior Subordinated Notes and the Convertible Senior Subordinated Note Guarantees with respect thereto under the Convertible Senior Subordinated Indenture; (e) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Issue Date; (f) obligations of the Company or any Restricted Subsidiary entered into in the ordinary course of business (i) 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 such retailer notes receivables, do not exceed the aggregate notional principal amount of such Indebtedness to which such Interest Rate Agreements relate, or (ii) 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; (g) Indebtedness of the Company owing to a Wholly Owned Restricted Subsidiary or of any Restricted Subsidiary owing to the Company or any Wholly Owned Restricted Subsidiary; provided that any disposition, pledge or transfer of any such Indebtedness to a Person (other than the Company or another Wholly Owned Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company or Restricted Subsidiary, as the case may be, not permitted by this clause (g); (h) Indebtedness in respect of letters of credit, surety bonds and performance bonds provided in the ordinary course of business; (i) 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 ten business days of its incurrence; -16- 24 (j) Indebtedness of the Company or any Restricted Subsidiary consisting of guarantees, indemnities or obligations in respect of purchase price adjustments in connection with the acquisition or disposition of assets; (k) Indebtedness of the Company evidenced by commercial paper issued by the Company (including any refinancings of such Indebtedness); provided, however, that the aggregate principal amount of Indebtedness incurred pursuant to clauses (a), (b) and (k) of this definition does not exceed the maximum amount of Indebtedness permitted under clause (a) of this definition; (l) Indebtedness of the Company pursuant to guarantees by the Company or any Guarantor in connection with any Permitted Receivables Financing; provided, however, that such Indebtedness shall not exceed 20% of the book value of the Transferred Receivables at the time such Transferred Receivables are sold or in the case of receivables arising from direct financing leases, 30% of the book value thereof; (m) Indebtedness of the Company and its Restricted Subsidiaries in addition to that described in clauses (a) through (l) of this definition of "Permitted Indebtedness," together with any other outstanding Indebtedness incurred pursuant to this clause (m) (including any refinancings of such Indebtedness), not to exceed $100 million at any time outstanding in the aggregate; and (n) any renewals, extensions, substitutions, refunding, refinancings or replacements (each, a "refinancing") of any Indebtedness described in clauses (c), (d) and (e) of this definition of "Permitted Indebtedness," including any successive refinancings, so long as: (i) 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 (A) 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 (B) the amount of premium or other payment actually paid at such time to refinance the Indebtedness, plus, in either case, the amount of reasonable expenses of the Company or any Restricted Subsidiary, as the case may be, incurred in connection with such refinancing; (ii) in the case of any refinancing of Subordinated Indebtedness, such new Indebtedness is subordinated to the Notes or the applicable Note Guarantee, as the case may be, to the same extent as the Indebtedness being refinanced; and (iii) such refinancing does not reduce the Average Life to Stated Maturity or the Stated Maturity of such Indebtedness; provided that with respect to the Medium-Term Notes, a refinancing shall be deemed to include a repayment of any such Medium-Term Notes and subsequent incurrence of Indebtedness so long as (A) after giving effect to such repayment and subsequent incurrence of new Indebtedness, the aggregate principal amount of Medium-Term Notes and such new Indebtedness does -17- 25 not exceed the principal amount of Medium-Term Notes outstanding on the Issue Date and (B) clauses (i) and (ii) of this clause (n) are complied with. For purposes of determining compliance with Section 4.09, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (a) through (n) above or is permitted to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such covenant, the Company shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with Section 4.09. Accrual of interest, accretion or amortization of original issue discount and the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms will not be deemed to be an incurrence of Indebtedness for purposes of Section 4.09. "Permitted Investment" means (a) Investments in any Wholly Owned Restricted Subsidiary or any Restricted Subsidiary that is a Guarantor or any Investment in any Person by the Company or any Restricted Subsidiary as a result of which such Person becomes a Wholly Owned Restricted Subsidiary or a Restricted Subsidiary that is a Guarantor or any Investment in the Company by a Restricted Subsidiary; (b) intercompany Indebtedness to the extent permitted under clause (g) of the definition of "Permitted Indebtedness" and Indebtedness in connection with a Permitted Receivables Financing permitted under clause (l) of the definition of "Permitted Indebtedness"; (c) Temporary Cash Investments; (d) sales of goods and services on trade credit terms consistent with the Company's past practices or otherwise consistent with trade credit terms in common use in the industry; (e) Investments in direct financing leases for equipment and real estate owned or leased by the Company and leased to its customers in the ordinary course of business consistent with past practice; (f) Investments in Joint Ventures related to the Company's operations, not to exceed $50 million at any one time outstanding; (g) Investments in Investee Stores either in the form of equity, loans or other extensions of credit; provided that any such Investment may only be made if the amount thereof, when added to the aggregate outstanding amount of Permitted Investments in Investee Stores (excluding for purposes of this clause (g) any Investments made pursuant to clause (e)), after giving effect to any loan repayments or returns of capital in respect of any Permitted Investment in Investee Stores, does not exceed 12.5% of Consolidated Total Assets at the time of determination; -18- 26 (h) Investments as a result of non-cash consideration received by the Company or a Restricted Subsidiary in connection with an Asset Sale made in compliance with Section 4.10; (i) other Investments, in addition to those permitted under (a) through (h) above, in an aggregate amount not to exceed $25 million; and (j) 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) Liens existing as of the Issue Date; (b) Liens securing Indebtedness permitted to be incurred pursuant to clauses (a), (b) and (k) of the definition of "Permitted Indebtedness"; (c) Liens securing the Notes and the Note Guarantees; (d) any Lien arising by reason of: (i) 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; (ii) taxes, assessments, governmental charges or levies not yet delinquent or which are being contested in good faith; (iii) security for payment of workers' compensation or other insurance; (iv) 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); (v) zoning restrictions, easements, licenses, reservations, title defects, rights of others for rights of way, 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 Restricted Subsidiary or the value of such property for the purpose of such business; -19- 27 (vi) deposits to secure public or statutory obligations; (vii) 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; (viii) 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 (ix) security for surety or appeal bonds; (e) any Lien on any property or assets of a Restricted Subsidiary in favor of the Company or any Wholly Owned Restricted Subsidiary; (f) 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 Restricted Subsidiary; provided that such Lien does not extend to any assets of the Company or any Restricted Subsidiary other than the assets acquired in the transaction resulting in such Acquired Indebtedness being incurred by the Company or Restricted Subsidiary, as the case may be; (g) 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 Restricted Subsidiary; (h) any Lien securing any Interest Rate Agreements or Currency Agreements permitted to be incurred pursuant to clause (f) of the definition of "Permitted Indebtedness" or any collateral for the Indebtedness to which such Interest Rate Agreements or Currency Agreements relate; (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 covers only such asset and attaches concurrently or within 180 days after the acquisition or completion of construction thereof; (j) any Lien on real or personal property securing Capital Lease Obligations of the Company or any Restricted Subsidiary as lessee with respect to such real or personal property: (i) to the extent that the Company or such Restricted Subsidiary has entered into (and not terminated), or has a binding commitment for, subleases on terms -20- 28 which, to the Company or such Restricted Subsidiary, are at least as favorable, on a current basis, as the terms of the corresponding capital lease; or (ii) under which the aggregate principal component of the annual rent payable does not exceed $5 million; (k) any Lien on a Transferred Receivable or other receivable that is transferred in a Permitted Receivables Financing; and (l) any Lien consisting of any pledge to any Person of Indebtedness owed by any Restricted Subsidiary to the Company or to any Wholly Owned Restricted Subsidiary; provided that: (i) such Restricted Subsidiary is a Guarantor; and (ii) the principal amount pledged does not exceed the Indebtedness secured by such pledge; (m) Liens securing Indebtedness which is incurred to refinance any Indebtedness which has been secured by a Lien permitted under this Indenture and which has been incurred in accordance with the provisions of this Indenture; provided, however, that such Liens: (i) are no less favorable to the Holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being refinanced; and (ii) do not extend to or cover any property or assets of the Company or any of the Restricted Subsidiaries not securing the Indebtedness so refinanced; and (n) any extension, renewal, substitution or replacement, in whole or in part, of any Lien described in the foregoing clauses (d) through (l); provided, that the Lien so extended, renewed, substituted or replaced does not extend to any additional property or assets. "Permitted Receivables Financing" means any transaction involving the transfer (by way of sale, pledge or otherwise) by the Company or any of its Restricted Subsidiaries of receivables to any other Person; provided that after giving effect to such transaction the sum of: (a) the aggregate uncollected balances of the receivables so transferred ("Transferred Receivables"); plus (b) 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 $600 million. -21- 29 "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. "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 Issue Date, and including, without limitation, all classes and series of preferred or preference stock of such Person. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Public Equity Offering" means with respect to the last sentence of Section 4.15, a primary or secondary public offering of equity securities of any Restricted Subsidiary of the Company pursuant to an effective registration statement under the Securities Act. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "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: (a) S&P; (b) Moody's; or (c) 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, and, in each case, any successors thereto. "Rating Category" means: (a) 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); (b) 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 (c) 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 -22- 30 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). "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. "refinancing" has the meaning specified in the definition of "Permitted Indebtedness" set forth herein. "Registrable Notes" has the meaning given such term in the Registration Rights Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the date hereof by and among the Company, the Guarantors and the initial purchasers named therein as the same may be amended or supplemented from time to time. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a permanent global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee and sold in reliance on Rule 903 of Regulation S. "Responsible Officer" means, when used with respect to the Trustee, any managing director, director, principal, vice president, assistant vice president, assistant treasurer, associate or any other officer within the corporate trust department of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also shall mean, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Period" means the applicable distribution compliance period under Rule 903. "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. -23- 31 "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" of the Company means any Subsidiary of the Company that is a "significant subsidiary" as defined in Regulation S-X under the Exchange Act. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill Inc., a New York corporation, or any successor rating agency. "Stated Maturity" when used with respect to any Indebtedness or any installment of interest thereon means the dates specified in such Indebtedness as the fixed date on which the principal of or premiums on such Indebtedness or such installment of interest is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company or the Guarantors that is subordinate or junior in right of payment to the Notes or the Note Guarantees, as the case may be. "Subordinated Note Indentures" means: (a) the indenture dated as of December 15, 1994 among the Company, as issuer, each of the subsidiary guarantors named therein as guarantors, and Manufacturers and Traders Trust Company, as trustee, in respect of the Subordinated Notes due 2004; and (b) the indenture dated as of December 15, 1994 among the Company, as issuer, each of the subsidiary guarantors named therein as guarantors, and Manufacturers and Traders Trust Company, as trustee, in respect of the Subordinated Notes due 2007. "Subordinated Notes" means: (a) the 10 1/2% Senior Subordinated Notes due 2004 of the Company; and (b) the 10 5/8% Senior Subordinated Notes due 2007 of the Company. "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 Restricted Subsidiaries, or by the Company and one or more other Restricted Subsidiaries. "Tangible Assets" means the total of all the assets appearing on the Consolidated balance sheet of a majority-owned or Wholly Owned Restricted Subsidiary of the Company less the following: -24- 32 (a) intangible assets including, without limitation, items such as goodwill, trademarks, trade names, patents and unamortized debt discount and expense; and (b) appropriate adjustments on account of minority interests of other Persons holding stock in any such majority-owned Restricted Subsidiary of the Company. "Temporary Cash Investments" means: (a) 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; (b) any certificate of deposit issued by, or time deposit of, a financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million, whose debt has a rating, at the time of which any investment therein is made, of "A" (or higher) according to Moody's or "A" (or higher) according to S&P; (c) commercial paper issued by a corporation (other than an Affiliate or Restricted Subsidiary of the Company) organized and existing under the laws of the United States 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; (d) any money market deposit accounts issued or offered by a financial institution that is a member of the Federal Reserve System having capital and surplus in excess of $500 million; (e) short term tax-exempt bonds with a rating, at the time as of which any investment is made therein, of "Aa3" (or higher) according to Moody's or "AA--" (or higher) according to S&P; (f) shares in a mutual fund, the investment objectives and policies of which require it to invest substantially in the investments of the type described in clause (a) through (e); and (g) repurchase and reverse repurchase obligations with the term of not more than seven days for underlying securities of the types described in clauses (a) and (b) entered into with any financial institution meeting the qualifications specified in clause (b); provided that in the case of clauses (a), (b), (c) and (e), 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" set forth herein. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. -25- 33 "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent global Note in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Subsidiary" means any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any of its Restricted Subsidiaries unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Equity Interests or (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) does not directly or through any of its Subsidiaries own any Capital Stock of, or own or hold any Lien on any property of, the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09, the Company shall be in default of Section 4.09). The Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if: -26- 34 (a) such Indebtedness is permitted under the covenant described under Section 4.09; and (b) no Default or Event of Default would be in existence following such designation. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" means stock or securities of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of a Person (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 Restricted Subsidiary" means a Restricted Subsidiary all the Capital Stock (other than directors qualifying shares) of which is owned by the Company or another Wholly Owned Restricted Subsidiary. Section 1.02. Other Definitions.
Defined Term in ---- Section ------- "Affiliate Transaction"............................................. 4.11 "Asset Sale Offer".................................................. 3.09 "Authentication Order".............................................. 2.02 "Bankruptcy Law".................................................... 4.01 "Change of Control Date"............................................ 4.14 "Change of Control Purchase Date"................................... 4.14 "Change of Control Purchase Offer".................................. 4.14 "Change of Control Purchase Price".................................. 4.14 "Covenant Defeasance"............................................... 8.03 "DTC"............................................................... 2.03 "Event of Default".................................................. 6.01 "Excess Proceeds"................................................... 4.10 "incur"............................................................. 4.09 "Legal Defeasance".................................................. 8.02 "Offer Amount"...................................................... 3.09 "Offer Payment Date"................................................ 4.14 "Offer Period"...................................................... 3.09 "Paying Agent"...................................................... 2.03 "Purchase Date"..................................................... 3.09 "Registrar"......................................................... 2.03 "Restricted Payment"................................................ 4.07
-27- 35
Defined Term in ---- Section ------- "Surviving Entity".................................................. 5.01
Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04. Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; (e) provisions apply to successive events and transactions; and (f) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. -28- 36 ARTICLE 2. THE NOTES Section 2.01. Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with written instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Cedel Bank (as adopted by Clearstream) and any alternative or additional procedures from time to time adopted by Euroclear or Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream. Section 2.02. Execution and Authentication. One or more Officers shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. -29- 37 The Trustee shall, upon a written order of the Company signed by one or more Officers (an "Authentication Order"), authenticate Notes for original issue on the Issue Date in aggregate principal amount not to exceed $355,000,000 (other than as provided in Section 2.07). The Trustee shall authenticate Additional Notes thereafter (so long as permitted by the terms of this Indenture) for original issue upon one or more Authentication Orders in aggregate principal amount as specified in such order (other than as provided in Section 2.07); provided, however, such amount shall not exceed $195,000,000 in the aggregate. Each such Authentication Order shall specify the amount of Notes to be authenticated, whether the Notes are to be Initial Notes, Additional Notes or Exchange Notes and whether the Notes are to be issued as Definitive Notes or Global Notes or such other information as the Trustee shall reasonably request. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.04. Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Notes, and will notify the Trustee in writing of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reor- -30- 38 ganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. Section 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders and the Company shall otherwise comply with TIA Section 312(a). Section 2.06. Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee written notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee in writing. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global -31- 39 Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of -32- 40 Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an -33- 41 Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or -34- 42 (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take -35- 43 delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; -36- 44 (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; -37- 45 (C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon written request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such -38- 46 registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from -39- 47 such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a written request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES -40- 48 ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (C) IT IS AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT (AN "ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED -41- 49 STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. -42- 50 (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company and the Trustee may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07. Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating -43- 51 agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Affiliate of the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee actually knows are so owned shall be so disregarded. Section 2.10. Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy canceled Notes (subject to the record retention requirement of the Exchange Act). The -44- 52 Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. 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. The Company shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. Section 2.13. Record Date . The Company may set a record date for purposes of determining the identity of Holders entitled to vote or to consent to any action by vote or consent authorized or permitted by Sections 6.04 and 6.05. Section 2.14. CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or the omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers. ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed, (iv) the redemption price and (v) the CUSIP numbers of the Notes to be redeemed. Section 3.02. Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee in its sole discretion considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed -45- 53 shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03. Notice of Redemption. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail (at its own expense), a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed, including the CUSIP numbers, and shall state: (a) the redemption date; (b) the redemption price and the amount of accrued and unpaid interest, if any, to be paid; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's written request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date (unless a shorter notice shall be satisfactory to -46- 54 the Trustee), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05. Deposit of Redemption Price. One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date and any amounts owed the Trustee. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed and any amounts owed the Trustee. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07. Optional Redemption. (a) Except as set forth in paragraph (b) below, the Notes are not redeemable before April 1, 2005. Thereafter, the Company may redeem the Notes at its option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve month period commencing on April 1 of the year set forth below.
YEAR PERCENTAGE ---- ---------- 2005......................... 105.063% 2006......................... 102.531% 2007 and thereafter.......... 100.000%
In addition, the Company must pay all accrued and unpaid interest on the Notes redeemed. -47- 55 (b) Notwithstanding the foregoing, up to 35% of the initial aggregate principal amount of the Notes may be redeemed on or prior to April 1, 2004, at the option of the Company, within 90 days of an Equity Offering with the net proceeds of such offering at a redemption price equal to 110.125% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of redemption; provided, that after giving effect to such redemption at least 65% of the Notes originally issued under this Indenture remains outstanding. Other than as specifically provided in this Section 3.07, any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. Section 3.08. Mandatory Redemption. The Company shall not be required to make mandatory redemption payments with respect to the Notes prior to Maturity. Section 3.09. Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest; -48- 56 (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent at the expense of the Company, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver at the expense of the Company, such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. -49- 57 ARTICLE 4. COVENANTS Section 4.01. Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. Section 4.03..Reports. (a) Whether or not required by the rules and regulations of the Commission, including the reporting requirements of Section 13 or 15(d) of the Exchange Act, so long as any Notes are outstanding, the Company will furnish to the Holders: (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the finan- -50- 58 cial condition and results of operations of the Company and its Subsidiaries and, with respect to the annual information only, a report on the consolidated financial statements required by Form 10-K by the Company's independent certified public accountants; and (ii) all reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to investors or prospective investors who request it in writing. (b) The Company will furnish to the Holders or beneficial holders of Notes and prospective purchasers of Notes designated by the Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time as the Company either exchanges all of the Notes for the Exchange Notes or has registered all of the Notes for resale under the Securities Act. Section 4.04. Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company and the Guarantors (as applicable) have kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company and the Guarantors (as applicable) have kept, observed, performed and fulfilled each and every covenant contained in this Indenture and are not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company or the Guarantors (as applicable) is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company or the Guarantors (as applicable) is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. -51- 59 (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders. Section 4.06. Stay, Extension and Usury Laws. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the 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 shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07. Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary of the Company to, directly or indirectly: (i) declare or pay any dividend on, or make any distribution to, the holders of, any Capital Stock of the Company or of any Restricted Subsidiary (other than dividends or distributions payable (A) solely in shares of Qualified Capital Stock of the Company or such Restricted Subsidiary or in options, warrants or other rights to purchase such Qualified Capital Stock or (B) by a Restricted Subsidiary to the Company or any Wholly Owned Restricted Subsidiary); (ii) purchase, redeem or otherwise acquire or retire for value, directly or indirectly, any Capital Stock of the Company or any Restricted Subsidiary or any options, warrants or other rights to acquire such Capital Stock held by any Person (other than the Company or any Wholly Owned Restricted Subsidiary of the Company); (iii) 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 Subordinated Indebtedness; or (iv) make any Investment (other than any Permitted Investment) in any Person (such payments described in clauses (i) through (iv) 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, being the Fair Market Value thereof as -52- 60 determined by the Board of Directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution): (1) no Default or Event of Default shall have occurred and be continuing; (2) the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in accordance with Section 4.09 hereof; and (3) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries on or after the Issue Date, is less than the sum of, without duplication: (w) 50% of the aggregate cumulative Consolidated Net Income of the Company for the period (taken as one accounting period) from the first day of the quarter beginning after the Issue Date to the end of the Company's most recently ended fiscal quarter for which financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus (x) 100% of the aggregate net cash proceeds received by the Company as capital contributions or from the issue or sale after the Issue Date of Equity Interests of the Company or of debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or convertible debt securities) sold to a Restricted Subsidiary of the Company and other than Redeemable Capital Stock or debt securities that have been converted into Redeemable Capital Stock and other than the proposed initial $50 million equity investment to be made by U.S. Transportation, LLC); plus (y) any cash received by the Company after the date of initial issuance of the Notes as a dividend or distribution from any of its Unrestricted Subsidiaries less the cost of disposition and taxes, if any (but in each case excluding any such amounts included in Consolidated Net Income); plus (z) $55 million. (b) Notwithstanding paragraph (a) above, the Company and its Restricted Subsidiaries may take the following actions so long as (with respect to clauses (ii), (iii), (iv) and (vi) below) at the time of and immediately after giving effect thereto no Default or Event of Default shall have occurred and be continuing: (i) the payment of any dividend within 60 days after the date of declaration thereof, if such dividend would have been permitted on the date of declaration; (ii) 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 Restricted -53- 61 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); (iii) 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 Restricted 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 Stated Maturity of the Subordinated Indebtedness to be acquired or retired); (iv) 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 incurrence or sale (other than to a Restricted Subsidiary) of, new Subordinated Indebtedness of the Company or a Guarantor, as the case may be, 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 reasonable expenses of the Company or such Guarantor, as the case may be, incurred in connection with such refinancing; (B) such new Subordinated Indebtedness is subordinated to the Notes or the Note Guarantee of such Guarantor, as the case may be, 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; (v) the payment of a dividend on the Company's Capital Stock (other than Redeemable Capital Stock) of up to $0.08 per quarter per share (or up to $0.32 per annum per share; provided that dividend payments may not be cumulated for more than four consecutive quarters); -54- 62 (vi) the purchase, redemption or other acquisition or retirement for value of shares of Capital Stock of the Company issued pursuant to options granted under stock option plans of the Company, in order to pay withholding taxes due as a result of income recognized upon the exercise of such options; provided that: (A) the Company is permitted, by the terms of such plans, to effect such purchase, redemption or other acquisition or retirement for value of such shares; and (B) the aggregate consideration paid by the Company for such shares so purchased, redeemed or otherwise acquired or retired for value does not exceed $2 million during any fiscal year of the Company; (vii) the repurchase of Capital Stock of the Company deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof; and (viii) in addition to clause (iv) above, the purchase, redemption, defeasance or other acquisition or retirement for value of the Subordinated Notes in exchange for, or out of the net cash proceeds of a substantially concurrent incurrence or sale (other than to a Restricted Subsidiary) of, Indebtedness of the Company or a Restricted Subsidiary, as the case may be, so long as such Indebtedness is incurred in accordance with Section 4.09(c) hereof. (c) The actions described in clauses (ii), (iii), (v) and (vi) of paragraph (b) above shall be Restricted Payments that shall be permitted to be taken in accordance with paragraph (b) above but shall reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a) above. Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to: (a) (i) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or (B) with respect to any other interest or participation in, or measured by, its profits, or (ii) pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (b) make loans or advances to the Company or any of its Restricted Subsidiaries; (c) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries; (d) grant Liens in favor of Holders; or -55- 63 (e) guarantee the Notes; except in each case for such encumbrances or restrictions existing under or by reason of: (i) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Issue Date; (ii) the Credit Agreement as in effect as of the Issue Date, and any amendments, modifications, restatements, renewals, increase, supplements, refunding, replacements or refinancings thereof; provided that such amendments, modifications, restatements, renewals, increase, supplements, refundings, replacements or refinancings are no more restrictive with respect to such dividend and other payment restrictions than those contained in the Credit Agreement in effect on the Issue Date; (iii) this Indenture and the Notes; (iv) applicable law; (v) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the property or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; (vi) by reason of customary non-assignment provisions in existing and future leases entered into in the ordinary course of business and consistent with past practices; (vii) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (c) above on the property so acquired; and (viii) restrictions incurred by the Company or any Restricted Subsidiary in connection with any Permitted Receivables Financing. Section 4.09. Incurrence of Indebtedness. (a) The Company will not, and will not permit any of its Restricted 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. Notwithstanding the foregoing, the Company and the Guarantors may incur Indebtedness if, at the time of such event (and after giving effect on a pro forma basis to: (i) the incurrence of such Indebtedness and (if applicable) the application of the proceeds therefrom, including to refinance other Indebtedness; -56- 64 (ii) the incurrence, repayment or retirement of any other Indebtedness by the Company or its Restricted 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 Restricted Subsidiaries, as the case maybe, 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 such pro forma adjustments as may be determined in accordance with GAAP and the rules, regulations and guidelines of the Commission (including without limitation Article 11 of Regulation S-X under the Exchange Act), would have been at least equal to 2.25 to 1. (b) The Company will not, and will not permit any Guarantor to, directly or indirectly, incur any Indebtedness which by its terms (or by the terms of any agreement governing such Indebtedness) is subordinated to any other Indebtedness of the Company or such Guarantor, as the case may be, unless such Indebtedness is also by its terms (or by the terms of any agreement governing such Indebtedness) made expressly subordinate to the Notes or the Note Guarantee of such Guarantor to the same extent and in the same manner as such Indebtedness is subordinated to other Indebtedness of the Company or such Guarantor, as the case may be. (c) The Company will not, and will not permit any of its Restricted Subsidiaries to, incur any Indebtedness (other than Subordinated Indebtedness), whether pursuant to clause (a) of this Section 4.09 or pursuant to one or more items of Permitted Indebtedness, the proceeds of which will be used to repay in whole or in part any Subordinated Notes. Notwithstanding the foregoing sentence, the Company and the Restricted Subsidiaries (to the extent the Company and/or such Restricted Subsidiary is permitted to incur such Indebtedness pursuant to clause (a) above or pursuant to one or more items of Permitted Indebtedness) may incur such Indebtedness if, at the time of such event (and after giving effect on a pro forma basis to: (i) the incurrence of such Indebtedness and the application of the proceeds therefrom, including to refinance the Subordinated Notes; and (ii) 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 Restricted Subsidiaries, as the case may be, since the first day of the four-quarter period referred to in the definition of "Con- -57- 65 solidated Senior Debt Leverage Ratio" as if such acquisition or disposition had occurred at the beginning of such four-quarter period), the Consolidated Senior Debt Leverage Ratio of the Company would have been less than 2.75 to 1. Section 4.10. Asset Sales. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in an Asset Sale unless the Company or such Restricted Subsidiary, as the case may be, receives Permitted Consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of. (b) Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary must apply such Net Proceeds: (i) to permanently reduce Indebtedness of the Company or one or more Restricted Subsidiaries under the Credit Agreement (and to correspondingly reduce commitments with respect thereto) or to repay the Medium Term Notes outstanding under the Medium-Term Notes Indenture on the Issue Date; or (ii) to make capital expenditures or acquire long-term assets used or useful in its businesses or in businesses similar or related to the businesses of the Company immediately prior to the Issue Date. (c) Pending the final application of any such Net Proceeds, the Company may temporarily reduce the revolving credit portion of the Credit Agreement or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15 million, the Company will be required to make an Asset Sale Offer to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase, in accordance with Section 3.09 hereof. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes (subject to the restrictions of this Indenture). Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. (d) Notwithstanding the foregoing provisions of paragraph (c) of this Section 4.10, the Company and its Restricted Subsidiaries may sell or dispose of property, whether in the form of assets or capital stock of a Restricted Subsidiary, in the aggregate amount not exceeding $15 million in any year, and any notes received by the Company or its Restricted Subsidiaries as consideration in any disposition made pursuant to such $15 million exclusion from the provisions of this covenant shall not be taken into account in determining whether the $75 million limitation set forth in the definition of "Permitted Consideration" has been met. Section 4.11. Transactions with Affiliates. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or -58- 66 otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (other than the Company, a Wholly Owned Restricted Subsidiary or a Restricted Subsidiary that is a Guarantor) (each of the foregoing, an "Affiliate Transaction"), unless: (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that could have been obtained in a comparable transaction with an unrelated Person; and (b) the Company delivers to the Trustee: (i) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5 million, an Officers' Certificate certifying that such Affiliate Transaction complies with clause (a) above and that such Affiliate Transaction has been approved by a majority of the Disinterested Directors; and (ii) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10 million, both an Officers' Certificate referred to in clause (i) and an opinion as to the fairness of such Affiliate Transaction to the Company or the relevant Restricted Subsidiary from a financial point of view issued by an investment banking firm of national standing with total assets in excess of $1.0 billion; provided, however, that this Section 4.11 shall not apply to (A) fees, compensation and employee benefits, including bonuses, retirement plans and stock options, paid to or established for directors and officers of the Company or any Restricted Subsidiary in the ordinary course of business and approved by a majority of the Disinterested Directors and (B) transactions in the ordinary course of business with customers, vendors and suppliers, the terms of which have been approved in good faith by an officer of the Company. Section 4.12. Liens. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer to exist any Lien of any nature whatsoever against any asset of the Company or any Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom, except for Permitted Liens, unless contemporaneously therewith: (a) in the case of any Lien securing Subordinated Indebtedness, effective provision is made to secure the Notes or such Note Guarantee, as the case may be, with a Lien on the same collateral that is prior to the Lien securing such Subordinated Indebtedness; and (b) in all other cases, the Notes or such Note Guarantee, as the case may be, are secured on an equal and ratable basis. -59- 67 Section 4.13. Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.14. Offer to Repurchase Upon Change of Control. (a) If a Change of Control shall occur at any time (the date of such occurrence, the "Change of Control Date"), then each Holder of Notes shall have the right, to the extent not inconsistent with the Company's bylaws as in effect on the Issue Date, to require the Company to purchase such Holder's Notes in whole or in part in integral multiples of $1,000 at a purchase price (the "Change of Control Purchase Price") in cash in an amount equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest, if any, at the date of purchase (the "Change of Control Purchase Date:), pursuant to and in accordance with the offer described in this Section 4.14 (the "Change of Control Purchase Offer"). (b) Within 30 days following the Change of Control Date the Company shall send, by first class mail, a notice to the Holders and the Trustee stating: (i) that the Change of Control Offer is being made pursuant to this Section 4.14 and that all Notes validly tendered will be accepted for payment; (ii) the Change of Control Purchase Price and the Change of Control Purchase Date, which shall be a Business Day that is no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Offer Payment Date") other than as may be required by law; (iii) that any Note not tendered will continue to accrue interest; (iv) that any Note accepted for payment pursuant to the Change of Control Purchase Offer shall cease to accrue interest after the Offer Payment Date unless the Company shall default in the payment of the Change of Control Purchase Price of the Notes and the only remaining right of the Holder is to receive payment of the Change of Control Purchase Price upon surrender of the applicable Note to the Paying Agent; (v) that Holders electing to have a portion of a Note purchased pursuant to a Change of Control Purchase Offer may only elect to have such Note purchased in integral multiples of $1,000; (vi) that if a Holder elects to have a Note purchased pursuant to the Change of Control Purchase Offer it will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or -60- 68 transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Offer Payment Date; (vii) that a Holder will be entitled to withdraw its election if the Company receives, not later than the third Business Day preceding the Offer Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes such Holder delivered for purchase, and a statement that such Holder is withdrawing its election to have such Note purchased; and (viii) that if Notes are purchased only in part a new Note of the same type will be issued in principal amount equal to the unpurchased portion of the Notes surrendered. (c) On or before the Offer Payment Date, the Company shall, to the extent lawful, accept for payment, all Notes or portions thereof validly tendered pursuant to the Change of Control Purchase Offer, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 4.14. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Offer Payment Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. (d) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes pursuant to an offer hereunder. To the extent the provisions of any securities laws or regulations conflict with the provisions under this Section 4.14, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.14 by virtue thereof. (e) The Company is not required to make a Change of Control Purchase Offer upon a Change of Control if a third party (i) makes the Change of Control Purchase Offer in the manner and at the time and otherwise in compliance with the terms of this Section 4.14, and (ii) purchases all Notes validly tendered and not withdrawn under the Change of Control Purchase Offer. Section 4.15. Limitation on Issuances and Sales of Capital Stock of Subsidiaries. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, transfer, convey, sell or otherwise dispose of any Capital Stock of any Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company), unless: -61- 69 (i) such transfer, conveyance, sale or other disposition is of all of the Capital Stock of such Restricted Subsidiary owned by the Company and its Restricted Subsidiaries; and (ii) such transaction is made in accordance with Section 4.10 hereof provided that 85% of the proceeds from such a sale of Capital Stock of any Restricted Subsidiary that is a Significant Subsidiary shall consist of cash or Temporary Cash Investments. (b) Notwithstanding the foregoing or the provisions of any other covenant, the Company or any Restricted Subsidiary may sell Qualified Capital Stock of any Restricted Subsidiary in a Public Equity Offering; provided that: (i) 100% of the Net Proceeds from such Public Equity Offering shall be in cash and shall be applied as provided in Section 4.10 hereof; and (ii) the Tangible Assets of such Restricted Subsidiary do not exceed 10% of the Consolidated Tangible Assets of the Company, determined as of the last day of the quarter ending immediately before the commencement of such Public Equity Offering. Section 4.16. Payments for Consent. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any terms or provisions of the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. Section 4.17. Additional Guarantees. If the Company or any of its Restricted Subsidiaries shall acquire or form a Wholly Owned Restricted Subsidiary or any existing or future majority-owned Restricted Subsidiary shall, after the Issue Date, guarantee any Indebtedness of the Company or any Guarantor, the Company will cause any such Restricted Subsidiary (other than an Investee Store or Joint Venture, provided that such Investee Store or Joint Venture does not guarantee the Indebtedness of any other Person) to: (a) execute and deliver to the Trustee a supplemental indenture in form and substance reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall guarantee all of the obligations of the Company with respect to the Notes on a senior basis; and (b) deliver 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 Restricted Subsidiary and is in compliance with the terms of this Indenture. Section 4.18. Termination of Certain Covenants In Event of Investment Grade Rating. In the event that each of the Rating Categories assigned to the Notes by the Rating Agencies is Invest- -62- 70 ment Grade, the obligations under the covenants contained in Sections 4.07, 4.09, 4.10, 4.11, 4.15 and clause (iii) of Section 5.01 hereof shall cease to apply to the Company and its Restricted Subsidiaries from and after the date on which the second of the Rating Agencies notifies the Company of the assignment of such Rating Category. Notwithstanding the foregoing, if the Rating Category assigned by either Rating Agency to the Notes should subsequently decline below Investment Grade, the foregoing covenants and such Consolidated Net Worth requirement shall be reinstituted as and from the date of such rating decline. Section 4.19. Registration Rights. (a) The Company agrees that the Holders (and any Person that has a beneficial interest in a Note) from time to time of Registrable Notes are entitled to the benefits of the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company has agreed for the benefit of the Holders from time to time of Registrable Notes, at the Company's expense, to file an Exchange Offer Registration Statement with respect to an Exchange Offer to exchange the Notes for Exchange Notes of the Company, guaranteed on a senior basis by the Subsidiary Guarantors, which Exchange Notes will have terms substantially identical in all material respects to the Notes. In certain circumstance, the Company may be required by the terms of the Registration Rights Agreement to file a Shelf Registration Statement covering resales of the Notes. (b) Any amounts of Additional Interest due pursuant to the Registration Rights Agreement shall be payable in cash on the regular Interest Payment Dates. Whenever in this Indenture there is mentioned, in any context, the payment of the principal of, premium, if any, or interest on, or in respect of, any Note, such mention shall be deemed to include mention of the payment of Additional Interest provided for in this Section 4.19. Section 4.20. Additional Interest. If Additional Interest is payable pursuant to the Registration Rights Agreement, the Company shall deliver to the Trustee a certificate to that effect stating the amount of such Additional Interest that is payable. ARTICLE 5. SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets. (a) 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 or 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 Restricted 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 Restricted Subsidiaries on a Consolidated basis to any other Person or group of affiliated Persons, unless at the time and after giving effect thereto: (i) either: -63- 71 (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") 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 shall, in any case, expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company, under the Notes and this Indenture, and this Indenture shall remain in full force and effect; (ii) immediately before and immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness not previously an obligation of the Company or any of its Restricted Subsidiaries which becomes an obligation of the Company or any of its Restricted 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; (iii) immediately after giving effect to such transaction, except in the case of a merger of the Company with or into a Wholly Owned Restricted Subsidiary, the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) will have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; (iv) 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 Section 4.09 above; (v) each Guarantor, unless it is the other party to the transactions described above, shall have confirmed, by supplemental indenture to this Indenture, that its respective Note Guarantee with respect to the Notes shall apply to such Person's obligations under this Indenture and the Notes; (vi) if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon become subject to any Lien, the provisions of Section 4.12 hereof are complied with; and -64- 72 (vii) the Company shall have delivered, or caused to be delivered, to the Trustee, in form and substance satisfactory 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 the supplemental indenture in respect thereto, if required, comply with the provisions in clauses (i) through (vi) of this paragraph (a) and that all conditions precedent herein provided for relating to such transaction have been complied with. (b) The foregoing paragraph (a) shall not prohibit a merger of any Restricted Subsidiary of the Company with and into the Company or a merger effected solely for the purpose of reincorporating the Company in another jurisdiction. Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that, in the case of a transfer by lease, the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01. Events of Default. An "Event of Default" occurs if: (a) there shall be a default in the payment of any interest on the Notes when such interest becomes due and payable, and continuance of such default for a period of 30 days; (b) there shall be a default in the payment of the principal of (or premium, if any, on) any Notes at Maturity; (c) (i) there shall be a default in the performance, or breach, of any covenant or agreement of the Company or any 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 (a) or (b) or in clauses (ii) or (iii) of this clause (c)), and such default or breach shall continue for a period of 60 days after written notice has been given, by certified mail: (A) to the Company by the Trustee; or -65- 73 (B) to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the outstanding Notes; (ii) there shall be a default in the performance or breach of the provisions described in Article 5 or Section 4.10; or (iii) the Company shall have failed to comply with the provisions of Section 4.14 for any reason, including the inconsistency of such covenant with the Company's Bylaws as in effect on the Issue Date; (d) (i) any default in the payment of the principal of any Indebtedness shall have occurred under any agreements, indentures or instruments under which the Company or any Restricted 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 (ii) an event of default as defined in any of the agreements, indentures or instruments described in clause (i) of this clause (d) shall have occurred and the Indebtedness thereunder, if not already matured at its final maturity in accordance with its terms, shall have been accelerated; (e) any Person entitled to take the actions described below in this clause (e), after the occurrence of any event of default on Indebtedness in excess of $50 million in the aggregate of the Company or any Restricted Subsidiary, shall notify the Trustee in writing of the intended sale or disposition of any assets of the Company or any Restricted 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 Restricted Subsidiary (including funds on deposit or held pursuant to lock-box and other similar arrangements), pursuant to the terms of such Indebtedness or in accordance with applicable law; (f) any Note Guarantee of any Significant Subsidiary individually or any other Subsidiaries if such Restricted Subsidiaries in the aggregate represent 15% or more of Consolidated Total Assets with respect to the Notes shall for any reason cease to be, or be asserted in writing by the Company, any Guarantor or any other Restricted 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; (g) 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 the aggregate, shall be entered against the Company or any Restricted Subsidiary of the Company or any of their respective properties and shall not be discharged and either: -66- 74 (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 an appeal or otherwise, shall not be in effect; (h) there shall have been the entry by a court of competent jurisdiction of: (i) 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 (ii) 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 (i) (i) the Company or any Significant Subsidiary commences a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent; (ii) 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; (iii) the Company or any Significant Subsidiary files a petition or answer or consent seeking reorganization or relief under any applicable federal or state law; (iv) the Company or any Significant Subsidiary: (A) 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; (B) makes an assignment for the benefit of creditors; or (C) admits in writing its inability to pay its debts generally as they become due; or -67- 75 (v) the Company or any Significant Subsidiary takes any corporate action in furtherance of any such actions in this clause (i). Section 6.02. Acceleration. (a) If an Event of Default (other than as specified in clause (h) or (i) of Section 6.01 hereof), shall occur and be continuing with respect to the Notes, the Trustee, by notice to the Company, or the Holders of at least 25% in aggregate principal amount then outstanding of such Notes, by notice in writing to the Trustee and to the Company, may declare such Notes due and payable immediately. Upon such declaration, all amounts payable in respect of such Notes shall be immediately due and payable. If an Event of Default specified in clause (h) or (i) of Section 6.01 hereof occurs and is continuing, then all of the outstanding Notes under this Indenture shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee thereunder or any Holder. (b) After a declaration of acceleration, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of a majority in aggregate principal amount outstanding of Notes, by written notice to the Company and the Trustee, may annul such declaration if: (i) the Company has paid or deposited with the Trustee a sum sufficient to pay: (A) all sums paid or advanced by the Trustee under the Notes and the reasonable compensation, expenses, disbursements, and advances of the Trustee, its agents and counsel; (B) all overdue interest on all of the 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 (ii) 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 in writing. (c) The Holders of a majority in aggregate principal amount of the Notes outstanding may, on behalf of the Holders of all of such Notes, waive any past defaults under this Indenture except a default in the payment of the principal of, premium, if any, or interest on any such Note, or in respect of a covenant or provision which under this Indenture cannot be modified or amended without the consent of the Holder of each such outstanding Note. Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a -68- 76 Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04. Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice in writing to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may, by written notice, direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in any personal liability. Section 6.06. Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) a Holder gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a written direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. Section 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal, premium, if any, -69- 77 and interest on the Note so held, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any amounts due the Trustee under Section 7.07 hereof. Section 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent in writing to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second:to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any and interest, respectively; and -70- 78 Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE Section 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own grossly negligent action, its own grossly negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is conclusively determined in a court of competent jurisdiction that the Trustee was grossly negligent in ascertaining the pertinent facts; and -71- 79 (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a written direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability, financial or otherwise. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02. Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its own choosing and, the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) 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 unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, -72- 80 apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is actually known to the Trustee, the Trustee shall mail to Holders of Notes, at the expense of the Company, a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. In no event shall the Trustee be charged with the knowledge of any Default or Event of Default unless it has actual notice thereof. Section 7.06. Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail at the expense of the Company to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee in writing when the Notes are listed on any stock exchange. Section 7.07. Compensation and Indemnity. The Company and the Guarantors shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company and the Guarantors shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company and the Guarantors shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture -73- 81 against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its gross negligence or bad faith as conclusively determined in a court of competent jurisdiction. The Trustee shall notify the Company and the Guarantors promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company and the Guarantors shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company and the Guarantors need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company and the Guarantors under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations under this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee., except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. Section 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. -74- 82 If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, at the Company's expense, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee, at the Company's expense, shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). Section 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. -75- 83 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on written demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03. Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17 and 4.18 hereof and clauses (iii), (iv) and (vi) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, 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 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 -76- 84 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c), (d), (e) and (g) hereof shall not constitute Events of Default. Section 8.04. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and any other amounts owing under this Indenture, if in the case of an optional redemption date prior to electing to exercise either Legal Defeasance or Covenant Defeasance, the Company has delivered to the Trustee an irrevocable notice to redeem all of the outstanding Notes on such redemption date; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an opinion of independent counsel in the United States stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) 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 independent counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; provided, that the foregoing opinion of independent counsel required by this clause (b) with respect to a Legal Defeasance need not be delivered if all Notes not theretofore delivered to the Trustee for cancellation (A) have become due and payable or (B) will become due and payable at Maturity within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company; (c) in the case of an election under Section 8.03 hereof, 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; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence); -77- 85 (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under this Indenture or any material agreement or instrument to which the Company or any of the Guarantors is a party or by which the Company or any of the Guarantors is bound; (f) 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 of the Notes or any Guarantor over any other creditors of the Company or any Guarantor or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company, any Guarantor or others; and (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with. Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the written request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06. Repayment to Company. 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, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter 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 -78- 86 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 the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Note Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders by a successor to the Company or a Guarantor pursuant to Article 5 or Article 11 hereof, as the case may be; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect in any material respect the rights hereunder of any Holder of the Note; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (f) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes; or -79- 87 (g) to evidence and provide for the acceptance of appointment under this Indenture of a successor Trustee. Upon the written request of the Company accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02. With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.14 hereof), the Note Guarantees and the Notes with the written consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Note Guarantees or the Notes may be waived with the written consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Upon the written request of the Company accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive in writing compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, -80- 88 without the written consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) change the Stated Maturity or 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 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; (b) after a Change of Control has occurred, amend, change or modify the obligation of the Company to make and consummate a Change of Control Purchase Offer with respect to such Change of Control or modify any of the provisions or definitions with respect thereto; (c) reduce the percentage in principal amount of outstanding Notes whose Holders must consent to a modification, amendment, supplement or waiver; (d) modify any of the provisions relating to supplemental indentures requiring the consent of Holders or relating to the waiver of past defaults or relating to the waiver of certain covenants, except to increase the percentage of outstanding Notes required for such actions or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of each Holder; (e) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions; or (f) except as otherwise permitted under Article 5 consent to the assignment or transfer by the Company or any Guarantor of any of its rights and obligations under this Indenture. Section 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Com- -81- 89 pany in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying conclusively upon, in addition to the documents required by Section 14.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10. [reserved] ARTICLE 11. NOTE GUARANTEES Section 11.01.Guarantee. Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a -82- 90 proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. Section 11.02.Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. Section 11.03.Execution and Delivery of Note Guarantee. To evidence its Note Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. Each Guarantor hereby agrees that its Note Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. -83- 91 If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company creates or acquires any new Wholly Owned Restricted Subsidiaries subsequent to the Issue Date or in case any existing or future majority-owned Restricted Subsidiary shall, after the Issue Date, guarantee any Indebtedness of the Company or any Guarantor, in each case if required by Section 4.17 hereof, the Company shall cause such Restricted Subsidiaries to execute supplemental indentures to this Indenture and Note Guarantees in accordance with Section 4.17 hereof and this Article 11, to the extent applicable. Section 11.04.Guarantors May Consolidate, etc., on Certain Terms. Except as otherwise provided in Section 11.05, no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person whether or not affiliated with such Guarantor unless: (a) subject to Section 11.05 hereof, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture and the Note Guarantee on the terms set forth herein or therein; and (b) immediately after giving effect to such transaction, no Default or Event of Default exists. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. -84- 92 Section 11.05.Releases of Note Guarantees. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation, liquidation, dissolution or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Restricted Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee shall execute any documents reasonably required and requested of it in writing in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. (b) Upon the designation of a Restricted Subsidiary to become an Unrestricted Subsidiary otherwise in compliance with this Indenture, such Guarantor will be deemed released from its obligations under its Note Guarantee; provided, however, that any such termination shall occur only to the extent that all obligations of such Guarantor under all of its guarantees of, and under all of its pledges of assets or other security interests which secure, any Indebtedness of the Company or any other Restricted Subsidiary shall also terminate upon such release, sale or transfer. (c) Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. ARTICLE 12. [reserved] ARTICLE 13. satisfaction and discharge Section 13.01.Satisfaction and Discharge. This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when: (a) either: (i) all Notes issued under the Indenture and theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment funds have been deposited in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation; or -85- 93 (ii) all Notes issued under the Indenture and not theretofore delivered to the Trustee for cancellation; (A) have become due and payable or (B) will become due and payable at their Stated Maturity or pursuant to an optional redemption within one year, and either the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness in respect of the Notes, for principal of, premium and interest to the date of redemption or Stated Maturity, as the case may be; (b) the Company or any Guarantor has paid all other sums payable by the Company and any Guarantor under the Indenture; (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent to the satisfaction and discharge of the Indenture, as specified therein, 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 Guarantor is a party or by which it is bound; and (d) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at Stated Maturity or the redemption date, as the case may be. Notwithstanding the satisfaction and discharge of this Indenture, if money shall have been deposited with the Trustee pursuant to subclause (ii)(B) of clause (a) of this Section, the provisions of Section 7.07, Section 11.02 and Section 8.06 shall survive. Section 13.02.Application of Trust Money. Subject to the provisions of Section 8.06, all money deposited with the Trustee pursuant to Section 13.01 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. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 13.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 13.01; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of 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 or Government Securities held by the Trustee or Paying Agent. -86- 94 ARTICLE 14. MISCELLANEOUS Section 14.01.Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. Section 14.02.Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company and/or any Guarantor: Fleming Companies, Inc. 1945 Lakepointe Drive Lewisville, Texas 75029 Telecopier No.: (972) 906-1555 Attention: Chief Financial Officer With a copy to: Latham & Watkins 505 Montgomery Street, 19th Floor San Francisco, CA 94111 Telecopier No.: (415) 395-8095 Attention: Tracy Edmonson, Esq. If to the Trustee: Bankers Trust Company Corporate Trust and Agency Services Four Albany Street - 10th Floor New York, NY 10006 Telecopier No.: (212) 250-6961 Attention: Tara Netherton The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. -87- 95 Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 14.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 14.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 14.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and -88- 96 (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 14.06.Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 14.07.No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or such Guarantor under the Notes, the Note Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Section 14.08.Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 14.09.No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 14.10.Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 11.05. Section 14.11.Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 14.12.Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 14.13.Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] -89- 97 SIGNATURES Dated as of March 15, 2001 FLEMING COMPANIES, INC. By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Senior Vice President, General Counsel and Secretary ABCO FOOD GROUP, INC., as Guarantor By: /s/ Louis F. Moore ----------------------------------- Name: Louis F. Moore Title: Secretary ABCO MARKETS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary ABCO REALTY CORP., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary AG, L.L.C., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary AMERICAN LOGISTICS GROUP, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary -90- 98 BAKER'S FOOD GROUP, INC., as Guarantor By: /s/ Louis F. Moore ----------------------------------- Name: Louis F. Moore Title: Secretary DUNIGAN FUELS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FAVAR CONCEPTS, LTD., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FLEMING FOODS MANAGEMENT CO., L.L.C., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FLEMING FOODS OF TEXAS, L.P., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FLEMING INTERNATIONAL LTD., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FLEMING SUPERMARKETS OF FLORIDA, INC. By: /s/ Carlos M. Hernandez ----------------------------------- -91- 99 Name: Carlos M. Hernandez Title: Secretary FLEMING TRANSPORTATION SERVICE, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FLEMING WHOLESALE, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FUELSERV, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary GATEWAY INSURANCE AGENCY, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary LAS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary PIGGLY WIGGLY COMPANY, as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary -92- 100 PROGRESSIVE REALTY, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary RAINBOW FOOD GROUP, INC., as Guarantor By: /s/ Louis F. Moore ----------------------------------- Name: Louis F. Moore Title: Secretary RETAIL INVESTMENTS, INC., as Guarantor By: /s/ Louis F. Moore ----------------------------------- Name: Louis F. Moore Title: Secretary RETAIL SUPERMARKETS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary RFS MARKETING SERVICES, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary RICHMAR FOODS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary -93- 101 SCRIVNER TRANSPORTATION, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary BANKERS TRUST COMPANY, not in its individual capacity, but solely as Trustee By: /s/ Wanda Camacho ----------------------------------- Name: Wanda Camacho Title: Vice President -94- 102 EXHIBIT A [Face of Note] - -------------------------------------------------------------------------------- CUSIP/CINS ____________ 10 1/8% Senior Notes due 2008 No. ___ $___________ FLEMING COMPANIES, INC. promises to pay to _____________________________________________________________ or registered assigns, the principal sum of ___________________________________________________________ Dollars on April 1, 2008. Interest Payment Dates: April 1 and October 1 Record Dates: March 15 and September 15 Dated: March 15, 2001 FLEMING COMPANIES, INC. By: ----------------------------------- Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: BANKERS TRUST COMPANY, as Trustee By: ------------------------------------ Authorized Signatory - -------------------------------------------------------------------------------- A-1 103 [Back of Note] 10 1/8% Senior Notes due 2008 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Fleming Companies, Inc., an Oklahoma corporation (the "Company"), promises to pay interest on the principal amount of this Note at 10 1/8% per annum from March 15, 2001 until maturity. The Company will pay interest semi-annually in arrears on April 1 and October 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be October 1, 2001. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the March 15 or September 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, and premium, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. The Company reserves the right to pay interest to Holders of Notes by check mailed to such Holders at their registered addresses or by wire transfer to Holders of at least $5 million aggregate principal amount of Notes. 3. PAYING AGENT AND REGISTRAR. Initially, Bankers Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or A-2 104 Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of March 15, 2001 ("Indenture") among the Company, the Guarantors named therein and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the indenture shall govern and be controlling. The Notes are obligations of the Company limited to $550 million in aggregate principal amount, of which the Company is issuing $355 million in aggregate principal amount on the Issue Date. 5. OPTIONAL REDEMPTION. Optional Redemption. (a) Except as described below, the Notes are not redeemable before April 1, 2005. Thereafter, the Company may redeem the Notes at its option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve month period commencing on April 1 of the year set forth below.
YEAR PERCENTAGE ---- ---------- 2005......................... 105.063% 2006......................... 102.531% 2007 and thereafter.......... 100.000%
In addition, the Company must pay all accrued and unpaid interest on the Notes redeemed. (b) Notwithstanding the foregoing, up to 35% of the initial aggregate principal amount of the Notes may be redeemed on or prior to April 1, 2004, at the option of the Company, within 90 days of an Equity Offering with the net proceeds of such offering at a redemption price equal to 110.125% 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 65% of the Notes originally issued under the Indenture remains outstanding. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. A-3 105 (a) Upon the occurrence of a Change of Control, the Company will be required to offer to purchase all of the outstanding Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of repurchase. (b) The Company is, subject to certain conditions, obligated to make an offer to purchase the Notes at 100% of their principal amount, plus accrued and unpaid interest, if any, thereon to the date of repurchase with certain net cash proceeds of certain sales or other dispositions of assets in accordance with the Indenture. 8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company and the Trustee may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Note Guarantees or the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture, the Note Guarantees or the Notes may be waived with the written consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or Guarantor's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect in any material respects the rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Note Guarantee with respect to the Notes, or to evidence and provide for the acceptance of appointment under the Indeture of a successor Trustee. A-4 106 12. DEFAULTS AND REMEDIES. Events of Default are set forth in the Indenture. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in writing in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of March 15, 2001, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to A-5 107 Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. A-6 108 The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Fleming Companies, Inc. 1945 Lakepointe Drive Lewisville, Texas 75029 Attention: Investor Relations A-7 109 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: __________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _______________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________ Your Signature: ____________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-8 110 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.14 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $_______________ Date: _______________ Your Signature:_____________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.:_____________________ Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-9 111 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Amount of Amount of Principal Amount Signature of decrease in increase in of this Global authorized Principal Amount Principal Amount Note following officer of of this Global of this Global such decrease Trustee or Note Date of Exchange Note Note (or increase) Custodian ---------------- ---------------- ---------------- ---------------- ---------------
A-10 112 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Fleming Companies, Inc. 1945 Lakepointe Drive Lewisville, Texas 75029 [Registrar address block] Re: 10 1/8% Senior Notes due 2008 Reference is hereby made to the Indenture, dated as of March 15, 2001 (the "Indenture"), among Fleming Companies, Inc., an Oklahoma corporation, as issuer (the "Company"), the Guarantors named therein and Bankers Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States B-1 113 or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Coun- B-2 114 sel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. B-3 115 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. [Insert Name of Transferor] By: -------------------------------------- Name: Title: Dated: ------------------------- B-4 116 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (iii)[ ] IAI Global Note (CUSIP _________); or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (iii) [ ] IAI Global Note (CUSIP _________); or (iv) [ ] Unrestricted Global Note (CUSIP _________); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-5 117 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Fleming Companies, Inc. 1945 Lakepointe Drive Lewisville, Texas 75029 [Registrar address block] Re: 10 1/8% Senior Notes due 2008 (CUSIP ____________) Reference is hereby made to the Indenture, dated as of March 15, 2001 (the "Indenture"), among Fleming Companies, Inc., an Oklahoma corporation, as issuer (the "Company"), the Guarantors named therein and Bankers Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without trans- C-1 118 fer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note, Regulation S Global Note, IAI Global Note with an equal principal amount, the Owner hereby C-2 119 certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. C-3 120 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ---------------------------------------- [Insert Name of Transferor] By: -------------------------------------- Name: Title: Dated: ------------------- C-4 121 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Fleming Companies, Inc. 1945 Lakepointe Drive Lewisville, Texas 75029 [Registrar address block] Re: 10 1/8% Senior Notes due 2008 Reference is hereby made to the Indenture, dated as of March 15, 2001 (the "Indenture"), among Fleming Companies, Inc., an Oklahoma corporation, as issuer (the "Company"), the Guarantors named therein and Bankers Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule D-1 122 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ---------------------------------------- [Insert Name of Accredited Investor] By: ------------------------------------- Name: Title: Dated: ---------------------- D-2 123 EXHIBIT E FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of March 15, 2001 (the "Indenture") among Fleming Companies, Inc., an Oklahoma corporation (the "Company"), the Guarantors listed on the signature pages thereto and Bankers Trust Company, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, 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 the Indenture and (b) in 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, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee. [NAME OF GUARANTOR(S)] By: ---------------------------------------- Name: Title: E-1 124 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Fleming Companies, Inc. (or its permitted successor), an Oklahoma corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and Bankers Trust Company, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of March 15, 2001 providing for the issuance of an aggregate principal amount of up to $550 million of 10 1/8% Senior Notes due 2008 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will F-1 125 be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. F-2 126 (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) Pursuant to Section 11.02 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 11 of the Indenture, this new Note Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guarantor under this Note Guarantee will not constitute a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Sections 11.04 and 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Note Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of the F-3 127 Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 and Section 11.05 of Article 11 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation, liquidation, dissolution or otherwise, or a sale or other disposition of all to the capital stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation, liquidation, dissolution or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. (b) Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL IN- F-4 128 DENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. F-5 129 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, ____ [GUARANTEEING SUBSIDIARY] By: --------------------------------- Name: Title: FLEMING COMPANIES, INC. By: --------------------------------- Name: Title: BANKERS TRUST COMPANY, not in its individual capacity but solely as Trustee By: --------------------------------- Authorized Signatory F-6 EX-4.11 3 f71028ex4-11.txt EXHIBIT 4.11 1 EXHIBIT 4.11 ================================================================================ REGISTRATION RIGHTS AGREEMENT Dated as of March 15, 2001 Among FLEMING COMPANIES, INC. and THE GUARANTORS NAMED HEREIN, as Issuers, and THE INITIAL PURCHASERS NAMED HEREIN, 10 1/8% Senior Notes due 2008 ================================================================================ 2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is dated as of March 15, 2001, among FLEMING COMPANIES, INC., an Oklahoma corporation (the "Company"), as issuer, the other entities listed on the signature pages hereto, as guarantors (the "Guarantors" and, together with the Company, the "Issuers"), and the Initial Purchasers named herein, as initial purchasers (the "Initial Purchasers"). This Agreement is entered into in connection with the Purchase Agreement, dated as of March 9, 2001, among the Issuers and the Initial Purchasers (the "Purchase Agreement"), which provides for, among other things, the sale by the Company to the Initial Purchasers of $355,000,000 aggregate principal amount of the Company's 10 1/8% Senior Notes due 2008 (the "Notes"), guaranteed by the Guarantors (the "Guarantees") on a senior unsecured basis. The Notes and the Guarantees are collectively referred to herein as the "Securities". In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and any subsequent holder or holders of the Securities. The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Securities under the Purchase Agreement. The parties hereby agree as follows: 1. Definitions As used in this Agreement, the following terms shall have the following meanings: Additional Interest: See Section 4 hereof. Advice: See the last paragraph of Section 5 hereof. Applicable Period: See Section 2 hereof. Company: See the introductory paragraphs hereto. Effectiveness Date: The 180th day after the Issue Date; provided, however, that with respect to any Shelf Registration, the Effectiveness Date shall be the 180th day after the delivery of a Shelf Notice as required pursuant to Section 2(c) hereof. Effectiveness Period: See Section 3 hereof. 3 -2- Event Date: See Section 4 hereof. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. Exchange Notes: See Section 2(a) hereof. Exchange Offer: See Section 2(a) hereof. Exchange Offer Registration Statement: See Section 2 hereof. Filing Date: (A) If no Exchange Offer Registration Statement has been filed by the Issuers pursuant to this Agreement, the 90th day after the Issue Date; and (B) with respect to a Shelf Registration Statement, the 90th day after the delivery of a Shelf Notice as required pursuant to Section 2(c) hereof. Guarantees: See the introductory paragraphs hereto. Guarantors: See the introductory paragraphs hereto. Holder: Any holder of a Registrable Note or Registrable Notes. Indemnified Person: See Section 7(c) hereof. Indemnifying Person: See Section 7(c) hereof. Indenture: The Indenture, dated as of March 15, 2001, by and among the Issuers and Bankers Trust Company as trustee, pursuant to which the Securities are being issued, as the same may be amended or supplemented from time to time in accordance with the terms thereof. Initial Purchasers: See the introductory paragraphs hereto. Initial Shelf Registration: See Section 3(a) hereof. Inspectors: See Section 5(m) hereof. Issue Date: March 15, 2001, the date of original issuance of the Notes. Issuers: See the introductory paragraphs hereto. NASD: See Section 5(r) hereof. Notes: See the introductory paragraphs hereto. 4 -3- Offering Memorandum: The final offering memorandum of the Company dated March 9, 2001, in respect of the offering of the Securities. Participant: See Section 7(a) hereof. Participating Broker-Dealer: See Section 2(b) hereof. Person: An individual, trustee, corporation, partnership, limited liability company, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity. Private Exchange: See Section 2(b) hereof. Private Exchange Notes: See Section 2(b) hereof. Prospectus: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act and any term sheet filed pursuant to Rule 434 under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Purchase Agreement: See the introductory paragraphs hereof. Records: See Section 5(m) hereof. Registrable Notes: Each Security upon its original issuance and at all times subsequent thereto, each Exchange Note (and the related Guarantee) as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note (and the related Guarantee) upon original issuance thereof and at all times subsequent thereto, until (i) a Registration Statement (other than, with respect only to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the Exchange Offer Registration Statement) covering such Security, Exchange Note or Private Exchange Note has been declared effective by the SEC and such Security, Exchange Note or such Private Exchange Note (and the related guarantees), as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Security has been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes (and the related guarantees) that may be resold without restriction under state and federal securities laws, (iii) such Security, Exchange Note or Private Exchange Note (and the related guarantees), as the case may be, ceases to be outstanding for purposes of the Indenture or (iv) such Security, 5 -4- Exchange Note or Private Exchange Note (and the related guarantees), as the case may be, may be resold without restriction pursuant to Rule 144 (or any similar provision then in force) under the Securities Act. Registration Statement: Any registration statement of the Issuers that covers any of the Notes, the Exchange Notes or the Private Exchange Notes (and the related guarantees) filed with the SEC under the Securities Act, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of the issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. Securities: See the introductory paragraphs hereto. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. Shelf Notice: See Section 2(c) hereof. Shelf Registration: See Section 3(b) hereof. Subsequent Shelf Registration: See Section 3(b) hereof. TIA: The Trust Indenture Act of 1939, as amended. 6 -5- Trustee: The trustee under the Indenture and the trustee (if any) under any indenture governing the Exchange Notes and Private Exchange Notes (and the related guarantees). Underwritten registration or underwritten offering: A registration in which securities of one or more of the Issuers are sold to an underwriter for reoffering to the public. 2. Exchange Offer (a) To the extent not prohibited by any applicable law or applicable interpretation of the staff of the SEC, the Issuers shall file with the SEC, no later than the Filing Date, a Registration Statement (the "Exchange Offer Registration Statement") on an appropriate registration form with respect to a registered offer (the "Exchange Offer") to exchange any and all of the Registrable Notes for a like aggregate principal amount of notes of the Company, guaranteed by the Guarantors, that are identical in all material respects to the Securities (the "Exchange Notes"), except that (i) the Exchange Notes shall contain no restrictive legend thereon and (ii) interest thereon shall accrue (A) from the latter of (x) the last interest payment date on which interest was paid on the Security surrendered in exchange therefor, or (y) if the Security is surrendered for exchange on a date in a period which includes the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date or (B) if no interest has been paid on such Security, from the Issue Date, and which are entitled to the benefits of the Indenture or a trust indenture which is identical in all material respects to the Indenture (other than such changes to the Indenture or any such trust indenture as are necessary to comply with the TIA) and which, in either case, has been qualified under the TIA. The Exchange Offer shall comply with all applicable tender offer rules and regulations under the Exchange Act and other applicable law. The Issuers shall use all reasonable efforts to (x) cause the Exchange Offer Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to the 225th day after the Issue Date. If, after the Exchange Offer Registration Statement is initially declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, the Exchange Offer Registration Statement shall be deemed not to have become effective for purposes of this Agreement during the period of such interference, until the Exchange Offer may legally resume. Each Holder that participates in the Exchange Offer will be required, as a condition to its participation in the Exchange Offer, to represent to the Issuers in writing (which may be contained in the applicable letter of transmittal) that: (i) any Exchange Notes to be 7 -6- received by it will be acquired in the ordinary course of its business, (ii) at the time of the commencement of the Exchange Offer such Holder has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes in violation of the Securities Act, (iii) such Holder is not an affiliate (as defined in Rule 405 promulgated under the Securities Act) of the Company, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of Exchange Notes, (v) if such Holder is a Participating Broker-Dealer (as defined below) that will receive Exchange Notes for its own account in exchange for Securities that were acquired as a result of market-making or other trading activities, that it will deliver a prospectus in connection with any resale of such Exchange Notes and (vi) the Holder is not acting on behalf of any persons or entities who could not truthfully make the foregoing representations. Such Holder will also be required to be named as a selling security holder in the related prospectus and to make such other representations as may be necessary under applicable SEC rules, regulations or interpretations to render available the use of Form S-4 or any other appropriate form under the Securities Act. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply solely with respect to Registrable Notes that are Private Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange Notes held by Participating Broker-Dealers (as defined below), and the Issuers shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and other than in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof. No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement. (b) The Issuers shall include within the Prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies represent the prevailing views of the staff of the SEC. Such "Plan of Distribution" section shall also expressly permit, to the extent permitted by applicable policies and regulations of the SEC, the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including, to the extent permitted by applicable policies and regulations of the SEC, all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Notes in compliance with the Securities Act. 8 -7- The Issuers shall use all reasonable efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for such period of time as is necessary to comply with applicable law in connection with any resale of the Exchange Notes covered thereby, provided, however, that such period shall not be required to exceed 180 days, or such longer period if extended pursuant to the last sentence of Section 5 (the "Applicable Period"). If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Securities acquired by them that have the status of an unsold allotment in the initial distribution, the Issuers upon the request of the Initial Purchasers shall simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to the Initial Purchasers, in exchange (the "Private Exchange") for such Securities held by the Initial Purchasers, a like principal amount of notes (the "Private Exchange Notes") of the Company, guaranteed by the Guarantors, that are identical in all material respects to the Exchange Notes except for the placement of a restrictive legend on such Private Exchange Notes. The Private Exchange Notes shall be issued pursuant to the same indenture as the Exchange Notes and bear the same CUSIP number as the Exchange Notes. In connection with the Exchange Offer, the Issuers shall: (1) mail, or cause to be mailed, to each Holder of record entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (2) use all reasonable efforts to keep the Exchange Offer open for not less than 30 days after the date that notice of the Exchange Offer is mailed to Holders (or longer if required by applicable law); (3) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; (4) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open; and (5) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Issuers shall: 9 -8- (1) accept for exchange all Registrable Notes validly tendered and not validly withdrawn pursuant to the Exchange Offer and the Private Exchange, if any; (2) deliver to the Trustee for cancellation all Registrable Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each holder of Securities, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or the Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Issuers to proceed with the Exchange Offer or the Private Exchange, (iii) all governmental approvals shall have been obtained, which approvals the Issuers deem necessary for the consummation of the Exchange Offer or the Private Exchange, (iv) there has not been any material change, or development involving a prospective material change, in the business or financial affairs of the Issuers which, in the reasonable judgment of the Issuers, would materially impair the Issuers' ability to consummate the Exchange Offer or the Private Exchange, and (v) there has not been proposed, adopted or enacted any law, statute, rule or regulation which, in the reasonable judgment of the Issuers, would materially impair the Issuers' ability to consummate the Exchange Offer or the Private Exchange or have a material adverse effect on the Issuers if the Exchange Offer or the Private Exchange was consummated. In the event that the Issuers are unable to consummate the Exchange Offer or the Private Exchange due to any event listed in clauses (i) through (v) above, the Issuers shall not be deemed to have breached any covenant under this Section 2. The Exchange Notes and the Private Exchange Notes shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the TIA or is exempt from such qualification and shall provide that the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Securities will have the right to vote or consent as a separate class on any matter. (c) If (i) because of any change in law or in currently prevailing interpretations of the staff of the SEC, the Issuers are not permitted to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 225 days of the Issue Date, (iii) a Holder of Pri- 10 -9- vate Exchange Notes notifies the Company in writing within 60 days after the consummation of the Exchange Offer that (A) such Holder is prohibited by law or SEC policy from participating in the Exchange Offer or (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Participating Broker-Dealer and holds Securities acquired directly from the Company or any of its affiliates (as defined in Rule 405 promulgated under the Securities Act), or (iv) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of one of the Issuers within the meaning of the Securities Act), then in the case of each of clauses (i) to and including (iv) of this sentence, the Issuers shall promptly deliver to the Holders and the trustee written notice thereof (the "Shelf Notice") and shall file a Shelf Registration pursuant to Section 3 hereof. 3. Shelf Registration If at any time a Shelf Notice is delivered as contemplated by Section 2(c) hereof, then: (a) Shelf Registration. The Issuers shall file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable (the "Initial Shelf Registration"). The Issuers shall use all reasonable efforts to file with the SEC the Initial Shelf Registration on or before the applicable Filing Date. The Initial Shelf Registration shall be on Form S-3 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Notes to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below). The Issuers shall, subject to applicable law or applicable interpretation of the staff of the SEC, use all reasonable efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date which is two years from the Issue Date or such shorter period ending when (i) all Registrable Notes covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration or cease to be outstanding, (ii) all Registrable Notes are eligible to be sold to the public pursuant to Rule 144(k) under the Securities Act or (iii) a Subsequent Shelf Registration covering all of the Registrable Notes covered by and not sold under the 11 -10- Initial Shelf Registration or an earlier Subsequent Shelf Registration has been declared effective under the Securities Act (the "Effectiveness Period"), provided, however, that the Effectiveness Period in respect of the Initial Shelf Registration shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the Securities Act and as otherwise provided herein. No Holder of Registrable Notes may include any of its Registrable Notes in any Shelf Registration pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 15 business days after receipt of a request therefor, such information concerning such Holder required to be included in any Shelf Registration or Prospectus or preliminary prospectus included therein. No holder of Registrable Notes shall be entitled to Additional Interest pursuant to Section 4 hereof unless and until such Holder shall have provided all such information, if so requested. Each Holder of Registrable Notes as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed so that the information previously furnished to the Company by such Holder not materially misleading and does not omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in light of the circumstances under which they were made. (b) Subsequent Shelf Registrations. If the Initial Shelf Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Issuers shall use their reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness amend the Initial Shelf Registration in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers shall use all reasonable efforts to cause the Subsequent Shelf Registration to be declared effective under the Securities Act as soon as practicable after such filing and to keep such subsequent Shelf Registration continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously continuously effective. As used herein the term "Shelf Registration" means the Initial Shelf Registration and any Subsequent Shelf Registration. (c) Supplements and Amendments. The Issuers shall promptly supplement and amend any Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the 12 -11- Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes, provided, however, that the Issuers shall not be required to supplement or amend any Shelf Registration upon the request of a Holder or any underwriter if such requested supplement or amendment would, in the good faith judgment of the Company, violate the Securities Act, the Exchange Act or the rules and regulations promulgated thereunder. 4. Additional Interest (a) The Issuers and the Initial Purchasers agree that the Holders will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Issuers agree to pay, as liquidated damages, additional interest on the Notes ("Additional Interest") under the circumstances and to the extent set forth below (each of which shall be given independent effect): (i) if (A) neither the Exchange Offer Registration Statement nor the Initial Shelf Registration has been filed with the SEC on or prior to the date 90 days after the Issue Date or (B) notwithstanding that the Issuers have consummated or will consummate the Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not filed on or prior to the Filing Date applicable thereto, then, commencing on the day after any such Filing Date, Additional Interest shall accrue on the principal amount of the Securities at a rate of 0.50% per annum for the first 90 days immediately following each such Filing Date, and such Additional Interest rate shall increase by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (ii) if (A) neither the Exchange Offer Registration Statement nor the Initial Shelf Registration is declared effective by the SEC on or prior to the date 180 days after the Issue Date or (B) notwithstanding that the Issuers have consummated or will consummate the Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not declared effective by the SEC on or prior to the Effectiveness Date in respect of such Shelf Registration, then, commencing on the day after such Effectiveness Date, Additional Interest shall accrue on the principal amount of the Securities at a rate of 0.50% per annum for the first 90 days immediately following such Effectiveness Date, and such Additional Interest rate shall increase by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (iii) if (A) the Issuers have not exchanged Exchange Notes for all Securities validly tendered in accordance with the terms of the Exchange Offer on or prior to the 45th day after the date on which the applicable Exchange Offer Registration 13 -12- Statement or Shelf Registration is declared effective or (B) if applicable, a Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time prior to the second anniversary of the Issue Date (other than after such time as all Notes have been disposed of thereunder or all Notes are eligible to be sold pursuant to Rule 144(k)), then Additional Interest shall accrue on the principal amount of the Securities at a rate of 0.50% per annum for the first 90 days commencing on (x) the 46th day after such effective date, in the case of (A) above, or (y) the day such Shelf Registration ceases to be effective, in the case of (B) above, and such Additional Interest rate shall increase by an additional 0.50% per annum at the beginning of each such subsequent 90-day period; provided, however, that the Additional Interest rate on the Notes may not accrue under more than one of the foregoing clauses (i)-(iii) at any one time and at no time shall the aggregate amount of Additional Interest accruing exceed in the aggregate 1.00% per annum; provided, further, however, that (1) upon the filing of the applicable Exchange Offer Registration Statement or the applicable Shelf Registration as required hereunder (in the case of clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange Offer Registration Statement or the applicable Shelf Registration as required hereunder (in the case of clause (ii) of this Section 4), or (3) upon the exchange of the applicable Exchange Notes for all Securities tendered (in the case of clause (iii)(A) of this Section 4), or upon the effectiveness of the applicable Shelf Registration Statement which had ceased to remain effective (in the case of (iii)(B) of this Section 4), Additional Interest on the Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Issuers shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). Any amounts of Additional Interest due pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash semiannually on each April 1 and October 1 (to the holders of record on the March 15 and September 15 immediately preceding such dates), commencing with the first such date occurring after any such Additional Interest commences to accrue. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Registrable Notes, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. 5. Registration Procedures In connection with the filing of any Registration Statement pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of the securities 14 -13- covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Issuers hereunder each of the Issuers shall: (a) Prepare and file with the SEC no later than 90 days after the Issue Date, a Registration Statement or Registration Statements as prescribed by Sections 2 or 3 hereof, and use all reasonable efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Notes included in such Registration Statement or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five days prior to such filing, or such later date as is reasonable under the circumstances). The Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Notes included in such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object (orally or in writing) within five days after receipt thereof. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to each of them with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus. The Issuers shall be deemed not to have used their reasonable best efforts to keep a Registration Statement effective during the Effectiveness Period or the Applicable Period, as the case may be, relating thereto if any Issuer voluntarily takes any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period unless such action is required by applicable law or permitted by this Agreement. 15 -14- (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto from whom the Issuers have received written notice that it will be a Participating Broker-Dealer in the Exchange Offer, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, promptly (but in any event within two business days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request in writing, obtain, at the sole expense of the Issuers, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 5(l) hereof cease to be true and correct in all material respects, (iv) of the receipt by any Issuer of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the Issuers' determination that a post-effective amendment to a Registration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 16 -15- hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use all reasonable efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use all reasonable efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriter or underwriters (if any), the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering or any Participating Broker-Dealer, (i) as promptly as practicable incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders, any Participating Broker-Dealer or counsel for any of them reasonably request to be included therein, provided, however, that the Issuers shall not be required to include any such information upon the request of a Holder or any underwriter if the inclusion of such information would, in the good faith judgment of the Company, violate the Securities Act, the Exchange Act or the rules and regulations promulgated thereunder, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after an Issuer has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment, and (iii) supplement or make amendments to such Registration Statement. (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes, a single counsel to such Holders (chosen in accordance with Section 6(b)) and to each such Participating Broker-Dealer who so requests and to its counsel and each managing underwriter, if any, at the sole expense of the Issuers, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested in writing one copy of any document incorporated or deemed to be incorporated therein by reference and one copy of any exhibit. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes, a single counsel to such Holders (chosen in accordance with Section 17 -16- 6(b)), or each such Participating Broker-Dealer and its counsel, as the case may be, and the underwriters, if any, at the sole expense of the Issuers, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and if requested in writing, any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto (provided the manner of such use complies with any limitations resulting from any applicable state securities "Blue Sky" laws as provided in writing to such Holders by the Company and subject to the provisions of this Agreement) by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its all reasonable efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request in writing; provided, however, that where Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, the Issuers agree to cause their counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h), keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; provided, however, that no Issuer shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a 18 -17- form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or selling Holders may reasonably request. (j) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, the Issuers shall not be required to amend or supplement a Registration Statement, any related Prospectus or any document incorporated therein by reference, in the event that an event occurs and is continuing as a result of which the Shelf Registration would, in the good faith judgment of the Company, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or, for a period not to exceed an aggregate of 60 days in any calendar year, (a) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company or (b) the disclosure otherwise relates to a pending material business transaction that has not yet been publicly disclosed. (k) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes. (l) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Securities in form and substance reasonably satisfactory to the Issuers and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Is- 19 -18- suers and the subsidiaries of the Issuers (including any acquired business, properties or entity, if applicable) and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Securities, and confirm the same in writing if and when requested in form and substance reasonably satisfactory to the Issuers; (ii) upon the request of any underwriter use all reasonable efforts to obtain the written opinions of counsel to the Issuers and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions reasonably requested in underwritten offerings and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) upon the request of any underwriter use all reasonable efforts to obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent public accountants of the Issuers (and, if necessary, any other independent public accountants of the Issuers, any subsidiary of the Issuers or of any business acquired by the Issuers for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities similar to the Securities and such other matters as reasonably requested by the managing underwriter or underwriters as permitted by the Statement on Auditing Standards No. 72; and (iv) if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable to the sellers and underwriters, if any, than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents, if any). The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (m) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Issuers and subsidiaries of the Issuers (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, 20 -19- directors and employees of the Issuers and any of their subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement and Prospectus. The foregoing inspection and information gathering shall be coordinated on behalf of the other parties by one counsel designated by such parties as described in Section 6(b) hereof. Each Inspector shall agree in writing that it will keep the Records confidential and that it will not disclose any of the Records that the Issuers determine, in good faith, to be confidential unless (i) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (ii) the information in such Records has been made generally available to the public other than through the acts of such Inspector; provided, however, that prior notice shall be provided as soon as practicable to the Issuers of the potential disclosure of any information by such Inspector pursuant to clause (i) of this sentence to permit the Issuers to obtain a protective order or take other appropriate action to prevent the disclosure of such information at the Issuers' sole expense (or waive the provisions of this paragraph (m)) and that such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector. (n) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use all reasonable efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (o) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders with regard to any applicable Registration Statement, a consolidated earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 60 days after the end of any fiscal quarter (or 120 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. 21 -20- (p) Upon consummation of the Exchange Offer or a Private Exchange, if requested by the Trustee in writing, obtain an opinion of counsel to the Issuers, in a form customary for underwritten transactions, addressed to the Trustee for the benefit of all Holders of Registrable Notes participating in the Exchange Offer or the Private Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes, as the case may be, the related guarantee and the related indenture constitute legal, valid and binding obligations of the Issuers, enforceable against them in accordance with their respective terms, subject to customary exceptions and qualifications. (q) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Issuers (or to such other Person as directed by the Issuers) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers shall mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (r) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). (s) Use all reasonable efforts to take all other steps reasonably necessary to effect the registration of the Registrable Notes covered by a Registration Statement contemplated hereby. The Issuers may require each seller of Registrable Notes as to which any registration is being effected to furnish to the Issuers such information regarding such seller and the distribution of such Registrable Notes as the Issuers may, from time to time, reasonably request. The Issuers may exclude from such registration the Registrable Notes of any seller so long as such seller fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed so that the information previously furnished to the Company by such seller is not materially misleading and does not omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading in the light of the circumstances under which they were made. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon actual receipt of any notice from the Issuers 22 -21- of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(j) hereof, or until it is advised in writing (the "Advice") by the Issuers that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event that the Issuers shall give any such notice, the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y) the Advice. 6. Registration Expenses (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers (other than any underwriting discounts or commissions which shall not be borne by the Issuers) shall be borne by the Issuers including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (b) reasonable fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of one counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or in respect of Registrable Notes or Exchange Notes to be sold by any Participating Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Issuers, (v) fees and disbursements of all independent certified public accountants referred to in Section 5(l)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Issuers desire such insurance, (vii) fees and expenses of all other Persons retained by the Issuers, (viii) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Issu- 23 -22- ers performing legal or accounting duties), (ix) the expense of any annual audit, (x) any fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, and the obtaining of a rating of the securities, in each case, if applicable, and (xi) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, indentures and any other documents necessary in order to comply with this Agreement. (b) The Issuers shall reimburse the Holders of the Registrable Notes being registered in a Shelf Registration or the reasonable fees and disbursements of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Registrable Notes to be included in such Registration Statement. In addition, the Issuers shall reimburse the Initial Purchasers for the reasonable fees and expenses of one counsel in connection with the Exchange Offer, which shall be Cahill Gordon & Reindel, and shall not be required to pay any other legal expenses in connection therewith. 7. Indemnification (a) Each of the Issuers, jointly and severally, agrees to indemnify and hold harmless each Holder of Registrable Notes and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, the affiliates, officers, directors, representatives, employees and agents of each such Person, and each Person, if any, who controls any such Person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from and against any and all losses, claims, damages, judgments, liabilities and expenses (including, without limitation, the reasonable legal fees and other expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnished to the Issuers in writing by such Participant expressly for use therein and with respect to any preliminary Prospectus, or except to the extent that any such loss, claim, damage or liability arises solely from the fact that any Participant sold Notes to a person to whom there was not sent or given a copy of the Prospectus (as amended or supplemented) at or prior to the written confirmation of such sale if the Issuers shall have previ- 24 -23- ously furnished copies thereof to the Participant in accordance herewith and the Prospectus (as amended or supplemented) would have corrected any such untrue statement or omission. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless the Issuers, their respective affiliates, officers, directors, representatives, employees and agents of each Issuer and each Person who controls each Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent (but on a several, and not joint, basis) as the foregoing indemnity from the Issuers to each Participant, but only with reference to information relating to such Participant furnished to the Issuers in writing by such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus. The liability of any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Registrable Notes or Exchange Notes giving rise to such obligations. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "Indemnified Person") shall promptly notify the Persons against whom such indemnity may be sought (the "Indemnifying Persons") in writing, and the Indemnifying Persons, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 7 that the Indemnifying Person may reasonably designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such proceeding; provided, however, that the failure to so notify the Indemnifying Persons will not relieve it from any liability under paragraph (a) or (b) above unless and to the extent such failure results in the forfeiture by the Indemnifying Person of substantial rights and defenses and the Indemnifying Person was not otherwise aware of such action or claim. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Persons and the Indemnified Person shall have mutually agreed to the contrary in writing, (ii) the Indemnifying Persons shall have failed within a reasonable period of time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both any Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Persons shall not, in connection with such proceeding or separate but substantially similar related proceeding in the same jurisdiction arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed promptly as they are incurred. Any such separate firm for the Participants and such control Persons of Participants shall be designated 25 -24- in writing by Participants who sold a majority in interest of Registrable Notes and Exchange Notes sold by all such Participants and shall be reasonably acceptable to the Issuers, and any such separate firm for the Issuers, their affiliates, officers, directors, representatives, employees and agents and such control Persons of such Issuer shall be designated in writing by such Issuer and shall be reasonably acceptable to the Holders. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or delayed), but if settled with such consent or if there be a final non-appealable judgment for the plaintiff for which the Indemnified Person is entitled to indemnification pursuant to this Agreement, each Indemnifying Person agrees to indemnify and hold harmless each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. No Indemnifying Person shall, without the prior written consent of the Indemnified Person (which consent shall not be unreasonably withheld or delayed), effect any settlement or compromise of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party, or indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional written release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of such Indemnified Person. (d) If the indemnification provided for in the first and second paragraphs of this Section 7 is for any reason unavailable to, or insufficient to hold harmless, an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers on the one hand or such Participant or such other Indemnified Person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. 26 -25- (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages, judgments, liabilities and expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the amount of any damages that such Participant has otherwise been required to pay or has paid by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 7 shall be paid by the Indemnifying Person to the Indemnified Person as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 7 and the representations and warranties of the Issuers set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Holder or any person who controls a Holder, the Issuers, their directors, officers, employees or agents or any person controlling an Issuer, and (ii) any termination of this Agreement. (g) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. Rules 144 and 144A Each of the Issuers covenants and agrees that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, for so long as any Registrable Notes remain outstanding, and if such Issuer is not required to file such reports, such Issuer will, upon the request of any Holder or beneficial owner of Registrable Notes, make available such information of the type specified in Sections 13 and 15(d) of the Exchange Act. Each of the Issuers further covenants and agrees, for so long as any Registrable Notes remain outstanding, to 27 -26- make available to any Holder or beneficial owner of Registrable Notes in connection with any sale thereof and any prospective purchaser of such Registrable Notes from such Holder or beneficial owner the information required by Rule 144A(d)(4) and 144(c) under the Securities Act in order to permit resales of such Registrable Notes pursuant to Rule 144A and Rule 144(k). 9. Underwritten Registrations If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and shall be reasonably acceptable to the Issuers. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. Miscellaneous (a) No Inconsistent Agreements. The Issuers have not, as of the date hereof, and the Issuers shall not, after the date of this Agreement, enter into any agreement with respect to any of their securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuers' other issued and outstanding securities under any such agreements, except for such conflicts as are anticipated to be waived on the closing date of the Stock and Warrant Purchase Agreement between the Company and U.S. Transportation, LLC. The Issuers shall not, after the date of this agreement, enter into any agreement with respect to any of their securities which will grant to any Person piggy-back registration rights with respect to any Registration Statement. (b) Adjustments Affecting Registrable Notes. The Issuers shall not, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. 28 -27- (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of (I) the Issuers and (II)(A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes and (B) in circumstances that would adversely affect the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Notes held by all Participating Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may not be amended, modified or supplemented without the prior written consent of each Holder and each Participating Broker-Dealer (including any person who was a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification or supplement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold pursuant to such Registration Statement. (d) Notices. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or facsimile: (i) if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture. (ii) if to the Issuers, at the address as follows: Fleming Companies, Inc. 1945 Lakepointe Drive Lewisville, Texas 75057 Facsimile No.: (972) 906-1530 Attention: Chief Financial Officer 29 -28- with copies to: Latham & Watkins 505 Montgomery Street, Suite 1900 San Francisco, California 94111-2562 Facsimile No.: (415) 395-8095 Attention: Tracy K. Edmonson, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when transmission is confirmed, if sent by facsimile. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, the Holders and the Participating Broker-Dealers; provided, however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Notes in violation of the terms of the Purchase Agreement or the Indenture. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. 30 -29- (i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use all reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Securities Held by the Issuers or Their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Issuers or their affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (k) Third-Party Beneficiaries. Holders of Registrable Notes and Participating Broker-Dealers are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by such Persons. (l) Entire Agreement. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Holders on the one hand and the Issuers on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. 31 S-1 WITNESS the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above. FLEMING COMPANIES, INC., as Issuer By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Senior Vice President, General Counsel and Secretary ABCO FOOD GROUP, INC., as Guarantor By: /s/ Louis F. Moore ----------------------------------- Name: Louis F. Moore Title: Secretary ABCO MARKETS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary ABCO REALTY CORP., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary 32 S-2 AG, L.L.C., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary AMERICAN LOGISTICS GROUP, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary BAKER'S FOOD GROUP, INC., as Guarantor By: /s/ Louis F. Moore ----------------------------------- Name: Louis F. Moore Title: Secretary DUNIGAN FUELS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FAVAR CONCEPTS, LTD., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary 33 S-3 FLEMING FOODS MANAGEMENT CO., L.L.C., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FLEMING INTERNATIONAL LTD., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FLEMING SUPERMARKETS OF FLORIDA, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FLEMING TRANSPORTATION SERVICE, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary FLEMING WHOLESALE, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary 34 S-4 FUELSERV, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary GATEWAY INSURANCE AGENCY, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary LAS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary PIGGLY WIGGLY COMPANY, as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary PROGRESSIVE REALTY, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary 35 S-5 RAINBOW FOOD GROUP, INC., as Guarantor By: /s/ Louis F. Moore ----------------------------------- Name: Louis F. Moore Title: Secretary RETAIL INVESTMENTS, INC., as Guarantor By: /s/ Louis F. Moore ----------------------------------- Name: Louis F. Moore Title: Secretary RETAIL SUPERMARKETS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary RFS MARKETING SERVICES, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary RICHMAR FOODS, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary 36 S-6 SCRIVNER TRANSPORTATION, INC., as Guarantor By: /s/ Carlos M. Hernandez ----------------------------------- Name: Carlos M. Hernandez Title: Secretary 37 S-7 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. DEUTSCHE BANC ALEX. BROWN, INC. as Initial Purchaser By: /s/ William C. Frauen ----------------------------------- Name: William C. Frauen Title: Director By: /s/ David J. Flannery ----------------------------------- Name: David J. Flannery Title: Managing Director BEAR, STEARNS & CO. INC. as Initial Purchaser By: /s/ Jerry Marcus ----------------------------------- Name: Jerry Marcus Title: Senior Managing Director LEHMAN BROTHERS INC. as Initial Purchaser By: /s/ P.J. Moses ----------------------------------- Name: P.J. Moses Title: Senior Vice President CHASE SECURITIES INC. as Initial Purchaser By: /s/ Ira Ginsburg ----------------------------------- Name: Ira Ginsburg Title: Vice President 38 S-8 UBS WARBURG LLC as Initial Purchaser By: /s/ Robert Parsons ----------------------------------- Name: Robert Parsons Title: Managing Director By: /s/ Frank Hoener ----------------------------------- Name: Frank Hoener Title: Associate Director EX-5.1 4 f71028ex5-1.txt EXHIBIT 5.1 1 [LETTERHEAD OF LATHAM & WATKINS] Exhibit 5.1 May 3, 2001 Fleming Companies, Inc. 1945 Lakepointe Drive Lewisville, Texas 75057 Re: $355,000,000 Aggregate Principal Amount of 10 1/8% Senior Notes due 2008 Ladies and Gentlemen: In connection with the registration of $355,000,000 aggregate principal amount of 10 1/8% Senior Notes due 2008 (the "Securities") by Fleming Companies, Inc., an Oklahoma corporation (the "Company"), and the guarantees of the Securities (the "Guarantees") by the Company's wholly-owned domestic subsidiaries listed on Schedule A hereto (the "Guarantors"), under the Securities Act of 1933, as amended, on Form S-4 to be filed with the Securities and Exchange Commission on May 3, 2001 (the "Registration Statement"), you have requested our opinion with respect to the matters set forth below. The Securities and the Guarantees will be issued pursuant to an indenture dated as of March 15, 2001 (the "Indenture") by and among the Company, the Guarantors and Bankers Trust Company, as trustee (the "Trustee"). The Securities and the Guarantees will be issued in exchange for the Company's outstanding 10 1/8% Senior Notes due 2008 on the terms set forth in the prospectus contained in the Registration Statement and the Letter of Transmittal to be filed as an exhibit thereto. The Indenture, the Securities and the Guarantees are sometimes referred to herein collectively as the "Operative Documents." Capitalized terms used herein without definition have the meanings assigned to them in the Indenture. In our capacity as your special counsel in connection with such registration, we are familiar with the proceedings taken and proposed to be taken by the Company and the Guarantors in connection with the authorization and issuance of the Securities and the Guarantees, respectively. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies certified or otherwise identified to our satisfaction of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. 2 Fleming Companies, Inc. May 3, 2001 Page 2 We are opining herein as to the effect on the subject transaction only of the internal laws of the State of New York, and, solely with respect to paragraph 2, the internal laws of the State of California, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any local agencies within any state. Various matters concerning the Company and the Guarantors are addressed in the opinion of McAfee & Taft, which has been separately provided to you, and we express no opinion with respect to those matters. Subject to the foregoing and the other matters set forth herein, it is our opinion that as of the date hereof: 1. Assuming due authorization of the Securities by the Company, the Securities, when executed, authenticated and delivered by or on behalf of the Company against payment therefor in accordance with the terms of the Indenture, will be the legally valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 2. The Guarantee to be executed and delivered by Richmar Foods, Inc., a California corporation ("Richmar") has been duly authorized by all necessary corporate action of Richmar. 3. Assuming due authorization of each of the Guarantees by each of the Guarantors except Richmar, each of the Guarantees, when executed in accordance with the terms of the Indenture and upon due execution, authentication and delivery of the Securities and upon payment therefor, will be the legally valid and binding obligation of the respective Guarantor, enforceable against such Guarantor in accordance with its terms. The opinions rendered in paragraphs 1 and 3 relating to the enforceability of the Securities and the Guarantees are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights or remedies of creditors, (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought; (iii) the unenforceability under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy; (iv) we express no opinion concerning the enforceability of the waiver of rights or defenses contained in Section 4.06 of the Indenture; (v) we express no opinion concerning the enforceability of the Company's obligation to offer to repurchase the Securities upon the occurrence of a Change of Control (as such term is defined in the Indenture) pursuant to Section 4.14 of the Indenture; and (vi) we express no opinion with respect to whether acceleration of the Securities may affect the collectibility of that portion of the stated principal amount thereof which might be determined to constitute unearned interest thereon. 3 Fleming Companies, Inc. May 3, 2001 Page 3 We have not been requested to express, and with your knowledge and consent, do not render any opinion as to the applicability to the obligations of the Company under the Indenture and the Securities or the Guarantors under the Indenture or the Guarantees of Section 548 of the United States Bankruptcy Code or applicable state law (including, without limitation, Article 10 of the New York Debtor and Creditor Law) relating to fraudulent transfers and obligations. To the extent that the obligations of the Company and the Guarantors under the Operative Documents to which each is a party may be dependent upon such matters, we have assumed for purposes of this opinion that: (i) the Company, each of the Guarantors (except Richmar) and the Trustee (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (b) has the requisite organizational and legal power and authority to perform its obligations under each of the Operative Documents to which it is a party, (c) has duly authorized, executed and delivered each such Operative Document, and (d) is duly qualified to engage in the activities contemplated by each such Operative Document; (ii) the Indenture constitutes the legally valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms; and (iii) the Trustee is in compliance, generally and with respect to acting as a trustee under the Indenture, with all applicable laws and regulations. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm contained under the heading "Legal Matters" in the prospectus contained therein. Very truly yours, /s/ LATHAM & WATKINS 4 Schedule A GUARANTORS Guarantors State of Jurisdiction of Formation ---------- ---------------------------------- ABCO Food Group, Inc. Nevada ABCO Markets, Inc. Arizona ABCO Realty Corp. Arizona AG, L.L.C. Oklahoma American Logistics Group, Inc. Delaware Baker's Food Group, Inc. Nevada Dunigan Fuels, Inc. Texas FAVAR CONCEPTS, LTD. Delaware Fleming Food Management Co., L.L.C. Oklahoma Fleming Foods of Texas, L.P. Oklahoma Fleming International Ltd. Oklahoma Fleming Supermarkets of Florida, Inc. Florida Fleming Transportation Service, Inc. Oklahoma Fleming Wholesale, Inc. Nevada FuelServ, Inc. Delaware Gateway Insurance Agency, Inc. Wisconsin LAS, Inc. Oklahoma Piggly Wiggly Company Oklahoma Progressive Realty, Inc. Oklahoma Rainbow Food Group, Inc. Nevada Retail Investments, Inc. Nevada Retail Supermarkets, Inc. Texas RFS Marketing Services, Inc. Oklahoma Richmar Foods, Inc. California Scrivner Transportation, Inc. Oklahoma EX-5.2 5 f71028ex5-2.txt EXHIBIT 5.2 1 EXHIBIT 5.2 LAW OFFICES MCAFEE & TAFT A PROFESSIONAL CORPORATION 10TH FLOOR, TWO LEADERSHIP SQUARE 211 NORTH ROBINSON OKLAHOMA CITY, OKLAHOMA 73102-7103 (405) 235-9621 FAX (405) 235-0439 http://www.mcafeetaft.com April 25, 2001 Fleming Companies, Inc. PO Box 299013 Lewisville, TX 75029 Re: Senior Note Exchange Offer Ladies and Gentlemen: Reference is made to your Registration Statement on Form S-4 to be filed with the Securities and Exchange Commission today with respect to $355,000,000 aggregate principal amount of 10(1)/8 Senior Notes due 2008 (the "Securities"). The Securities will be unconditionally guaranteed (the "Guarantees") by the Guarantors (as hereafter defined). The Securities and the Guarantees will be issued under an indenture (the "Indenture") dated as of March 15, 2001, among Fleming Companies, Inc. (the "Company"), the Guarantors identified therein (the "Guarantors"), and Bankers Trust Company, as Trustee. We have examined your corporate records and made such other investigations as we deemed appropriate for the purpose of this opinion. Based upon the foregoing, we are of the opinion that: 1. The Securities have been duly authorized by all necessary corporate action of the Company, and when executed, authenticated and delivered by or on behalf of the Company against payment therefor in accordance with the terms of the Indenture, will constitute legally valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 2. Each of the Guarantees has been duly authorized by all necessary corporate action of the respective Guarantor, other than Richmar Foods, Inc., as to which no opinion is given (each Guarantor other than Richmar Foods, Inc. is referred to as a "Non-California Guarantor"), and when executed in accordance with the terms of the Indenture and upon due execution, authentication and delivery of the Securities and upon payment therefor, will be the legally valid and binding obligation of the respective Non-California Guarantor, enforceable against such Non-California Guarantor in accordance with its terms. We hereby consent to the inclusion of this opinion as an exhibit to the above mentioned Registration Statement. Very Truly Yours, /s/ MCAFEE & TAFT a Professional Corporation EX-12.1 6 f71028ex12-1.txt EXHIBIT 12.1 1 EXHIBIT 12.1 FLEMING COMPANIES, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES FISCAL YEAR ENDED THE LAST SATURDAY IN DECEMBER
2000 1999 1998 1997 1996 (IN THOUSANDS OF DOLLARS) Earnings: Pre-tax income (loss) $(200,889) $ (62,581) $(598,202) $ 82,685 $ 54,573 Fixed charges, net 198,413 193,263 195,956 197,923 202,184 Total earnings (loss) $ (2,476) $ 130,682 $(402,246) $ 280,608 $ 256,757 Fixed charges: Interest expense $ 174,569 $ 165,180 $ 161,581 $ 162,506 $ 163,466 Portion of rental charges deemed to be interest 23,331 27,626 33,948 35,050 38,356 Capitalized interest and debt issuance cost amortization 2,051 1,117 604 1,186 104 Total fixed charges $ 199,951 $ 193,923 $ 196,133 $ 198,742 $ 201,926 Deficiency $ 202,427 $ 62,451 $ 598,379 Ratio of earnings (loss) to fixed charges -- 0.67 -- 1.41 1.27
"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. Under the company's long-term debt agreements, "earnings" and "fixed charges" are defined differently and amounts and ratios differ accordingly. EX-23.3 7 f71028ex23-3.txt EXHIBIT 23.3 1 EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Fleming Companies, Inc. on Form S-4 of our report dated February 14, 2001 (except for the information under long-term debt and contingencies included in notes to consolidated financial statements as to which the date is March 22, 2001), appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Oklahoma City, Oklahoma April 30, 2001 EX-25.1 8 f71028ex25-1.txt EXHIBIT 25.1 1 EXHIBIT 25.1 - ----------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ------------------------------ BANKERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 13-4941247 (Jurisdiction of Incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification no.) FOUR ALBANY STREET NEW YORK, NEW YORK 10006 (Address of principal (Zip Code) executive offices) BANKERS TRUST COMPANY LEGAL DEPARTMENT 130 LIBERTY STREET, 31ST FLOOR NEW YORK, NEW YORK 10006 (212) 250-2201 (Name, address and telephone number of agent for service) ------------------------------------------------------ FLEMING COMPANIES (Exact name of obligor as specified in its charter) OKLAHOMA (State or other jurisdiction of (I.R.S. employer Incorporation or organization) Identification no.) 1945 LAKEPOINTE DRIVE LEWISVILLE, TX 75029 USA (Address, including zip code of principal executive offices) 10 1/8% Senior Notes due 2008 (Title of the indenture securities) 2 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee. (a) Name and address of each examining or supervising authority to which it is subject. NAME ADDRESS Federal Reserve Bank (2nd District) New York, NY Federal Deposit Insurance Corporation Washington, D.C. New York State Banking Department Albany, NY (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None. ITEM 3.-15. NOT APPLICABLE ITEM 16. LIST OF EXHIBITS. EXHIBIT 1 - Restated Organization Certificate of Bankers Trust Company dated August 6, 1998, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated September 25, 1998, and Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated December 16, 1998, and Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated July 30th, 1999, copies attached. EXHIBIT 2 - Certificate of Authority to commence business - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust powers - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended on June 22, 1999. Copy attached. -2- 3 EXHIBIT 5 - Not applicable. EXHIBIT 6 - Consent of Bankers Trust Company required by Section 321(b) of the Act. - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 22-18864. EXHIBIT 7 - The latest report of condition of Bankers Trust Company dated as of March 31, 2000. Copy attached. EXHIBIT 8 - Not Applicable. EXHIBIT 9 - Not Applicable. -3- 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on this 6th day of April, 2001. BANKERS TRUST COMPANY By: /s/ Wanda Camacho ---------------------------- Wanda Camacho Vice President -4- 5 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on this 6th day of April, 2001. BANKERS TRUST COMPANY /s/ Wanda Camacho ------------------------- By: Wanda Camacho Vice President -5- 6 RESTATED ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY ---------------------------- Under Section 8007 Of the Banking Law ---------------------------- Bankers Trust Company 130 Liberty Street New York, N.Y. 10006 Counterpart Filed in the Office of the Superintendent of Banks, State of New York, August 31, 1998 7 RESTATED ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8007 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and an Assistant Secretary and a Vice President and an Assistant Secretary of BANKERS TRUST COMPANY, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of the corporation was filed by the Superintendent of Banks of the State of New York on the March 5, 1903. 3. The text of the organization certificate, as amended heretofore, is hereby restated without further amendment or change to read as herein set forth in full, to wit: "Certificate of Organization of Bankers Trust Company Know All Men By These Presents That we, the undersigned, James A. Blair, James G. Cannon, E. C. Converse, Henry P. Davison, Granville W. Garth, A. Barton Hepburn, Will Logan, Gates W. McGarrah, George W. Perkins, William H. Porter, John F. Thompson, Albert H. Wiggin, Samuel Woolverton and Edward F. C. Young, all being persons of full age and citizens of the United States, and a majority of us being residents of the State of New York, desiring to form a corporation to be known as a Trust Company, do hereby associate ourselves together for that purpose under and pursuant to the laws of the State of New York, and for such purpose we do hereby, under our respective hands and seals, execute and duly acknowledge this Organization Certificate in duplicate, and hereby specifically state as follows, to wit: I. The name by which the said corporation shall be known is Bankers Trust Company. II. The place where its business is to be transacted is the City of New York, in the State of New York. III. Capital Stock: The amount of capital stock which the corporation is hereafter to have is Three Billion One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($3,001,666,670), divided into Two Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667) shares with a par value of $10 each designated as Common Stock and 1,000 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock. (a) Common Stock 1. Dividends: Subject to all of the rights of the Series Preferred Stock, dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the corporation legally available for the payment of dividends. 8 2. Voting Rights: Except as otherwise expressly provided with respect to the Series Preferred Stock or with respect to any series of the Series Preferred Stock, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the Common Stock being entitled to one vote for each share thereof held. 3. Liquidation: Upon any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, and after the holders of the Series Preferred Stock of each series shall have been paid in full the amounts to which they respectively shall be entitled, or a sum sufficient for the payment in full set aside, the remaining net assets of the corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests, to the exclusion of the holders of the Series Preferred Stock. 4. Preemptive Rights: No holder of Common Stock of the corporation shall be entitled, as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class or series whatsoever, any rights or options to purchase stock of any class or series whatsoever, or any securities convertible into, exchangeable for or carrying rights or options to purchase stock of any class or series whatsoever, whether now or hereafter authorized, and whether issued for cash or other consideration, or by way of dividend or other distribution. (b) Series Preferred Stock 1. Board Authority: The Series Preferred Stock may be issued from time to time by the Board of Directors as herein provided in one or more series. The designations, relative rights, preferences and limitations of the Series Preferred Stock, and particularly of the shares of each series thereof, may, to the extent permitted by law, be similar to or may differ from those of any other series. The Board of Directors of the corporation is hereby expressly granted authority, subject to the provisions of this Article III, to issue from time to time Series Preferred Stock in one or more series and to fix from time to time before issuance thereof, by filing a certificate pursuant to the Banking Law, the number of shares in each such series of such class and all designations, relative rights (including the right, to the extent permitted by law, to convert into shares of any class or into shares of any series of any class), preferences and limitations of the shares in each such series, including, buy without limiting the generality of the foregoing, the following: (i) The number of shares to constitute such series (which number may at any time, or from time to time, be increased or decreased by the Board of Directors, notwithstanding that shares of the series may be outstanding at the time of such increase or decrease, unless the Board of Directors shall have otherwise provided in creating such series) and the distinctive designation thereof; (ii) The dividend rate on the shares of such series, whether or not dividends on the shares of such series shall be cumulative, and the date or dates, if any, from which dividends thereon shall be cumulative; (iii) Whether or not the share of such series shall be redeemable, and, if redeemable, the date or dates upon or after which they shall be redeemable, the amount or amounts per share (which shall be, in the case of each share, not less than its preference upon involuntary liquidation, plus an amount equal to all dividends thereon accrued and unpaid, whether or not earned or declared) payable thereon in the case of the redemption thereof, which amount may vary at different redemption dates or otherwise as permitted by law; (iv) The right, if any, of holders of shares of such series to convert the same into, or exchange the same for, Common Stock or other stock as permitted by law, and the terms and conditions of such conversion or exchange, as well as provisions for adjustment of the conversion rate in such events as the Board of Directors shall determine; 9 (v) The amount per share payable on the shares of such series upon the voluntary and involuntary liquidation, dissolution or winding up of the corporation; (vi) Whether the holders of shares of such series shall have voting power, full or limited, in addition to the voting powers provided by law and, in case additional voting powers are accorded, to fix the extent thereof; and (vii) Generally to fix the other rights and privileges and any qualifications, limitations or restrictions of such rights and privileges of such series, provided, however, that no such rights, privileges, qualifications, limitations or restrictions shall be in conflict with the organization certificate of the corporation or with the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of which there are shares outstanding. All shares of Series Preferred Stock of the same series shall be identical in all respects, except that shares of any one series issued at different times may differ as to dates, if any, from which dividends thereon may accumulate. All shares of Series Preferred Stock of all series shall be of equal rank and shall be identical in all respects except that to the extent not otherwise limited in this Article III any series may differ from any other series with respect to any one or more of the designations, relative rights, preferences and limitations described or referred to in subparagraphs (I) to (vii) inclusive above. 2. Dividends: Dividends on the outstanding Series Preferred Stock of each series shall be declared and paid or set apart for payment before any dividends shall be declared and paid or set apart for payment on the Common Stock with respect to the same quarterly dividend period. Dividends on any shares of Series Preferred Stock shall be cumulative only if and to the extent set forth in a certificate filed pursuant to law. After dividends on all shares of Series Preferred Stock (including cumulative dividends if and to the extend any such shares shall be entitled thereto) shall have been declared and paid or set apart for payment with respect to any quarterly dividend period, then and not otherwise so long as any shares of Series Preferred Stock shall remain outstanding, dividends may be declared and paid or set apart for payment with respect to the same quarterly dividend period on the Common Stock out the assets or funds of the corporation legally available therefor. All Shares of Series Preferred Stock of all series shall be of equal rank, preference and priority as to dividends irrespective of whether or not the rates of dividends to which the same shall be entitled shall be the same and when the stated dividends are not paid in full, the shares of all series of the Series Preferred Stock shall share ratably in the payment thereof in accordance with the sums which would by payable on such shares if all dividends were paid in full, provided, however, that nay two or more series of the Series Preferred Stock may differ from each other as to the existence and extent of the right to cumulative dividends, as aforesaid. 3. Voting Rights: Except as otherwise specifically provided in the certificate filed pursuant to law with respect to any series of the Series Preferred Stock, or as otherwise provided by law, the Series Preferred Stock shall not have any right to vote for the election of directors or for any other purpose and the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes. 4. Liquidation: In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, each series of Series Preferred Stock shall have preference and priority over the Common Stock for payment of the amount to which each outstanding series of Series Preferred Stock shall be entitled in accordance with the provisions thereof and each holder of Series Preferred Stock shall be entitled to be paid in full such amount, or have a sum sufficient for the payment in full set aside, before any payments shall be made to the holders of the Common Stock. If, upon liquidation, dissolution or winding up of the corporation, the assets of the corporation or proceeds thereof, distributable among the holders of the shares of all series of the Series Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributed among such holders ratably in accordance with the respective amounts which would be payable if all amounts payable thereon were paid in full. After the payment to the holders of Series Preferred Stock of all such amounts to which they are entitled, as above provided, the remaining assets and funds of the corporation shall be divided and paid to the holders of the Common Stock. 10 5. Redemption: In the event that the Series Preferred Stock of any series shall be made redeemable as provided in clause (iii) of paragraph 1 of section (b) of this Article III, the corporation, at the option of the Board of Directors, may redeem at any time or times, and from time to time, all or any part of any one or more series of Series Preferred Stock outstanding by paying for each share the then applicable redemption price fixed by the Board of Directors as provided herein, plus an amount equal to accrued and unpaid dividends to the date fixed for redemption, upon such notice and terms as may be specifically provided in the certificate filed pursuant to law with respect to the series. 6. Preemptive Rights: No holder of Series Preferred Stock of the corporation shall be entitled, as such, as a matter or right, to subscribe for or purchase any part of any new or additional issue of stock of any class or series whatsoever, any rights or options to purchase stock of any class or series whatsoever, or any securities convertible into, exchangeable for or carrying rights or options to purchase stock of any class or series whatsoever, whether now or hereafter authorized, and whether issued for cash or other consideration, or by way of dividend. (c) Provisions relating to Floating Rate Non-Cumulative Preferred Stock, Series A. (Liquidation value $1,000,000 per share.) 1. Designation: The distinctive designation of the series established hereby shall be "Floating Rate Non-Cumulative Preferred Stock, Series A" (hereinafter called "Series A Preferred Stock"). 2. Number: The number of shares of Series A Preferred Stock shall initially be 250 shares. Shares of Series A Preferred Stock redeemed, purchased or otherwise acquired by the corporation shall be cancelled and shall revert to authorized but unissued Series Preferred Stock undesignated as to series. 3. Dividends: (a) Dividend Payments Dates. Holders of the Series A Preferred Stock shall be entitled to receive non-cumulative cash dividends when, as and if declared by the Board of Directors of the corporation, out of funds legally available therefor, from the date of original issuance of such shares (the "Issue Date") and such dividends will be payable on March 28, June 28, September 28 and December 28 of each year (:Dividend Payment Date") commencing September 28, 1990, at a rate per annum as determined in paragraph 3(b) below. The period beginning on the Issue Date and ending on the day preceding the firs Dividend Payment Date and each successive period beginning on a Dividend Payment Date and ending on the date preceding the next succeeding Dividend Payment Date is herein called a "Dividend Period". If any Dividend payment Date shall be, in The City of New York, a Sunday or a legal holiday or a day on which banking institutions are authorized by law to close, then payment will be postponed to the next succeeding business day with the same force and effect as if made on the Dividend Payment Date, and no interest shall accrue for such Dividend Period after such Dividend Payment Date. (b) Dividend Rate. The dividend rare from time to time payable in respect of Series A Preferred Stock (the "Dividend Rate") shall be determined on the basis of the following provisions: (i) On the Dividend Determination Date, LIBOR will be determined on the basis of the offered rates for deposits in U.S. dollars having a maturity of three months commencing on the second London Business Day immediately following such Dividend Determination Date, as such rates appear on the Reuters Screen LIBO Page as of 11:00 A.M. London time, on such Dividend Determination Date. If at least two such offered rates appear on the Reuters Screen LIBO Page, LIBOR in respect of such Dividend Determination Dates will be the arithmetic mean (rounded to the nearest one-hundredth of a percent, with five one-thousandths of a percent rounded upwards) of such offered rates. If fewer than those offered rates appear, LIBOR in respect of such Dividend Determination Date will be determined as described in paragraph (ii) below. (ii) On any Dividend Determination Date on which fewer than those offered rates for the applicable maturity appear on the Reuters Screen LIBO Page as specified in paragraph (I) above, LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars having a maturity of three months commending on the second London Business Day immediately following such Dividend Determination Date and in a principal amount of not less than $1,000,000 that is representative of a single transaction in such market at such time are offered by three major banks 11 in the London interbank market selected by the corporation at approximately 11:00 A.M., London time, on such Dividend Determination Date to prime banks in the London market. The corporation will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, LIBOR in respect of such Dividend Determination Date will be the arithmetic mean (rounded to the nearest one-hundredth of a percent, with five one-thousandths of a percent rounded upwards) of such quotations. If fewer than two quotations are provided, LIBOR in respect of such Dividend Determination Date will be the arithmetic mean (rounded to the nearest one-hundredth of a percent, with five one-thousandths of a percent rounded upwards) of the rates quoted by three major banks in New York City selected by the corporation at approximately 11:00 A.M., New York City time, on such Dividend Determination Date for loans in U.S. dollars to leading European banks having a maturity of three months commencing on the second London Business Day immediately following such Dividend Determination Date and in a principal amount of not less than $1,000,000 that is representative of a single transaction in such market at such time; provided, however, that if the banks selected as aforesaid by the corporation are not quoting as aforementioned in this sentence, then, with respect to such Dividend Period, LIBOR for the preceding Dividend Period will be continued as LIBOR for such Dividend Period. (ii) The Dividend Rate for any Dividend Period shall be equal to the lower of 18% of 50 basis points above LIBOR for such Dividend Period as LIBOR is determined by sections (I) or (ii) above. As used above, the term "Dividend Determination Date" shall mean, with resect to any Dividend Period, the second London Business Day prior to the commencement of such Dividend Period; and the term "London Business Day" shall mean any day that is not a Saturday or Sunday and that, in New York City, is not a day on which banking institutions generally are authorized or required by law or executive order to close and that is a day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. 4. Voting Rights: The holders of the Series A Preferred Stock shall have the voting power and rights set forth in this paragraph 4 and shall have no other voting power or rights except as otherwise may from time to time be required by law. So long as any shares of Series A Preferred Stock remain outstanding, the corporation shall not, without the affirmative vote or consent of the holders of at least a majority of the votes of the Series Preferred Stock entitled to vote outstanding at the time, given in person or by proxy, either in writing or by resolution adopted at a meeting at which the holders of Series A Preferred Stock (alone or together with the holders of one or more other series of Series Preferred Stock at the time outstanding and entitled to vote) vote separately as a class, alter the provisions of the Series Preferred Stock so as to materially adversely affect its rights; provided, however, that in the event any such materially adverse alteration affects the rights of only the Series A Preferred Stock, then the alteration may be effected with the vote or consent of at least a majority of the votes of the Series A Preferred Stock; provided, further, that an increase in the amount of the authorized Series Preferred Stock and/or the creation and/or issuance of other series of Series Preferred Stock in accordance with the organization certificate shall not be, nor be deemed to be, materially adverse alterations. In connection with the exercise of the voting rights contained in the preceding sentence, holders of all series of Series Preferred Stock which are granted such voting rights (of which the Series A Preferred Stock is the initial series) shall vote as a class (except as specifically provided otherwise) and each holder of Series A Preferred Stock shall have one vote for each share of stock held and each other series shall have such number of votes, if any, for each share of stock held as may be granted to them. The foregoing voting provisions will not apply if, in connection with the matters specified, provision is made for the redemption or retirement of all outstanding Series A Preferred Stock. 5. Liquidation: Subject to the provisions of section (b) of this Article III, upon any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the holders of the Series A Preferred Stock shall have preference and priority over the Common Stock for payment out of the assets of the corporation or proceeds thereof, whether from capital or surplus, of $1,000,000 per share (the "liquidation value") together with the amount of all dividends accrued and unpaid thereon, and after such payment the holders of Series A Preferred Stock shall be entitled to no other payments. 12 6. Redemption: Subject to the provisions of section (b) of this Article III, Series A Preferred Stock may be redeemed, at the option of the corporation in whole or part, at any time or from time to time at a redemption price of $1,000,000 per share, in each case plus accrued and unpaid dividends to the date of redemption. At the option of the corporation, shares of Series A Preferred Stock redeemed or otherwise acquired may be restored to the status of authorized but unissued shares of Series Preferred Stock. In the case of any redemption, the corporation shall give notice of such redemption to the holders of the Series A Preferred Stock to be redeemed in the following manner: a notice specifying the shares to be redeemed and the time and place or redemption (and, if less than the total outstanding shares are to be redeemed, specifying the certificate numbers and number of shares to be redeemed) shall be mailed by first class mail, addressed to the holders of record of the Series A Preferred Stock to be redeemed at their respective addressees as the same shall appear upon the books of the corporation, not more than sixty (60) days and not less than thirty (30) days previous to the date fixed for redemption. In the event such notice is not given to any shareholder such failure to give notice shall not affect the notice given to other shareholders. If less than the whole amount of outstanding Series A Preferred Stock is to be redeemed, the shares to be redeemed shall be selected by lot or pro rata in any manner determined by resolution of the Board of Directors to b fair and proper. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the corporation in providing moneys at the time and place of redemption for the payment of the redemption price) all dividends upon the Series A Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders of said Series A Preferred Stock as stockholders in the corporation, except the right to receive the redemption price (without interest) upon surrender of the certificate representing the Series A Preferred Stock so called for redemption, duly endorsed for transfer, if required, shall cease and terminate. The corporation's obligation to provide moneys in accordance with the preceding sentence shall be deemed fulfilled if, on or before the redemption date, the corporation shall deposit with a bank or trust company (which may e an affiliate of the corporation) having an office in the Borough of Manhattan, City of New York, having a capital and surplus of at least $5,000,000 funds necessary for such redemption, in trust with irrevocable instructions that such funds be applied to the redemption of the shares of Series A Preferred Stock so called for redemption. Any interest accrued on such funds shall be paid to the corporation from time to time. Any funds so deposited and unclaimed at the end of two (2) years from such redemption date shall be released or repaid to the corporation, after which the holders of such shares of Series A Preferred Stock so called for redemption shall look only to the corporation for payment of the redemption price. IV. The name, residence and post office address of each member of the corporation are as follows: Name RESIDENCE POST OFFICE ADDRESS James A. Blair 9 West 50th Street, 33 Wall Street, Manhattan, New York City Manhattan, New York City James G. Cannon 72 East 54th Street, 14 Nassau Street, Manhattan New York City Manhattan, New York City E. C. Converse 3 East 78th Street, 139 Broadway, Manhattan, New York City Manhattan, New York City Henry P. Davison Englewood, 2 Wall Street, New Jersey Manhattan, New York City Granville W. Garth 160 West 57th Street, 33 Wall Street Manhattan, New York City Manhattan, New York City A. Barton Hepburn 205 West 57th Street 83 Cedar Street Manhattan, New York City Manhattan, New York City 13 William Logan Montclair, 13 Nassau Street New Jersey Manhattan, New York City George W. Perkins Riverdale, 23 Wall Street, New York Manhattan, New York City William H. Porter 56 East 67th Street 270 Broadway, Manhattan, New York City Manhattan, New York City John F. Thompson Newark, 143 Liberty Street, New Jersey Manhattan, New York City Albert H. Wiggin 42 West 49th Street, 214 Broadway, Manhattan, New York City Manhattan, New York City Samuel Woolverton Mount Vernon, 34 Wall Street, New York Manhattan, New York City Edward F.C. Young 85 Glenwood Avenue, 1 Exchange Place, Jersey City, New Jersey Jersey City, New Jersey V. The existence of the corporation shall be perpetual. VI. The subscribers, the members of the said corporation, do, and each for himself does, hereby declare that he will accept the responsibilities and faithfully discharge the duties of a director therein, if elected to act as such, when authorized accordance with the provisions of the Banking Law of the State of New York. VII. The number of directors of the corporation shall not be less that 10 nor more than 25." 4. The foregoing restatement of the organization certificate was authorized by the Board of Directors of the corporation at a meeting held on July 21, 1998. IN WITNESS WHEREOF, we have made and subscribed this certificate this 6th day of August, 1998. /s/ James T. Byrne, Jr. ----------------------------------- James T. Byrne, Jr. Managing Director and Secretary /s/ Lea Lahtinen ----------------------------------- Lea Lahtinen Vice President and Assistant Secretary /s/ Lea Lahtinen ----------------------------------- Lea Lahtinen 14 State of New York ) ) ss: County of New York ) Lea Lahtinen, being duly sworn, deposes and says that she is a Vice President and an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. /s/ Lea Lahtinen ----------------------------------- Lea Lahtinen Sworn to before me this 6th day of August, 1998. /s/ Sandra L. West - --------------------------- Notary Public SANDRA L. WEST Notary Public State of New York No. 31-4942101 Qualified in New York County Commission Expires September 19, 1998 15 State of New York, BANKING DEPARTMENT I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "RESTATED ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8007 of the Banking Law," dated August 6, 1998, providing for the restatement of the Organization Certificate and all amendments into a single certificate. WITNESS, my hand and official seal of the Banking Department at the City of New York, this 31st day of AUGUST in the Year of our Lord one thousand nine hundred and NINETY-EIGHT. /s/ Manuel Kursky ---------------------------------- DEPUTY Superintendent of Banks CERTIFICATE OF AMENDMENT 16 OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and Secretary and a Vice President and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of March, 1903. 3. The organization certificate as heretofore amended is hereby amended to increase the aggregate number of shares which the corporation shall have authority to issue and to increase the amount of its authorized capital stock in conformity therewith. 4. Article III of the organization certificate with reference to the authorized capital stock, the number of shares into which the capital stock shall be divided, the par value of the shares and the capital stock outstanding, which reads as follows: "III. The amount of capital stock which the corporation is hereafter to have is Three Billion, One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($3,001,666,670), divided into Two Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667) shares with a par value of $10 each designated as Common Stock and 1000 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." is hereby amended to read as follows: "III. The amount of capital stock which the corporation is hereafter to have is Three Billion, Five Hundred One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($3,501,666,670), divided into Two Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667) shares with a par value of $10 each designated as Common Stock and 1500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." 17 5. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 25th day of September, 1998 /s/ James T. Byrne, Jr. ----------------------------------- James T. Byrne, Jr. Managing Director and Secretary /s/ Lea Lahtinen ----------------------------------- Vice President and Assistant Secretary State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is a Vice President and an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. /s/ Lea Lahtinen ----------------------------------- Lea Lahtinen Sworn to before me this 25th day of September, 1998 /s/ Sandra L. West - --------------------------- Notary Public SANDRA L. WEST Notary Public State of New York No. 31-4942101 Qualified in New York County Commission Expires September 19, 2000 18 State of New York, BANKING DEPARTMENT I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the Banking Law," dated September 16, 1998, providing for an increase in authorized capital stock from $3,001,666,670 consisting of 200,166,667 shares with a par value of $10 each designated as Common Stock and 1,000 shares with a par value of $1,000,000 each designated as Series Preferred Stock to $3,501,666,670 consisting of 200,166,667 shares with a par value of $10 each designated as Common Stock and 1,500 shares with a par value of $1,000,000 each designated as Series Preferred Stock. WITNESS, my hand and official seal of the Banking Department at the City of New York, this 25th day of SEPTEMBER in the Year of our Lord one thousand nine hundred and NINETY-EIGHT. /s/ Manuel Kursky ---------------------------------- DEPUTY Superintendent of Banks 19 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and Secretary and a Vice President and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of March, 1903. 3. The organization certificate as heretofore amended is hereby amended to increase the aggregate number of shares which the corporation shall have authority to issue and to increase the amount of its authorized capital stock in conformity therewith. 4. Article III of the organization certificate with reference to the authorized capital stock, the number of shares into which the capital stock shall be divided, the par value of the shares and the capital stock outstanding, which reads as follows: "III. The amount of capital stock which the corporation is hereafter to have is Three Billion, Five Hundred One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($3,501,666,670), divided into Two Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667) shares with a par value of $10 each designated as Common Stock and 1500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." is hereby amended to read as follows: "III. The amount of capital stock which the corporation is hereafter to have is Three Billion, Six Hundred Twenty-Seven Million, Three Hundred Eight Thousand, Six Hundred Seventy Dollars ($3,627,308,670), divided into Two Hundred Twelve Million, Seven Hundred Thirty Thousand, Eight Hundred Sixty- Seven (212,730,867) shares with a par value of $10 each designated as Common Stock and 1500 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." 20 5. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 16th day of December, 1998 /s/ James T. Byrne, Jr. ----------------------------------- James T. Byrne, Jr. Managing Director and Secretary /s/ Lea Lahtinen ----------------------------------- Vice President and Assistant Secretary State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is a Vice President and an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. /s/ Lea Lahtinen ----------------------------------- Lea Lahtinen Sworn to before me this 16th day of December, 1998 /s/ Sandra L. West - --------------------------- Notary Public SANDRA L. WEST Notary Public State of New York No. 31-4942101 Qualified in New York County Commission Expires September 19, 2000 21 State of New York, BANKING DEPARTMENT I, P. VINCENT CONLON, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the Banking Law," dated December 16, 1998, providing for an increase in authorized capital stock from $3,501,666,670 consisting of 200,166,667 shares with a par value of $10 each designated as Common Stock and 1,500 shares with a par value of $1,000,000 each designated as Series Preferred Stock to $3,627,308,670 consisting of 212,730,867 shares with a par value of $10 each designated as Common Stock and 1,500 shares with a par value of $1,000,000 each designated as Series Preferred Stock. WITNESS, my hand and official seal of the Banking Department at the City of New York, this 18th day of December in the Year of our Lord one thousand nine hundred and ninety-eight. /s/ P. VINCENT CONLON -------------------------------- P. Vincent Conlon Deputy Superintendent of Banks 22 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and Secretary and a Vice President and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of March, 1903. 3. The organization certificate as heretofore amended is hereby amended to reduce the minimum number of directors required from 10 to 7, and to reduce in the maximum number of directors from 25 to 15. 4. Article VII of the organization certificate with reference to number of directors, which reads as follows: "VII. The number of directors of the corporation shall be not less than 10 nor more than 25" is hereby amended to read as follows: "VII. The number of directors of the corporation shall be not less than 7 nor more than 15" 5. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 30th day of July 1999 /s/ JAMES T. BYRNE, JR. --------------------------------- James T. Byrne, Jr. Managing Director and Secretary Lea Lahtinen --------------------------------- Lea Lahtinen Vice President and Assistant Secretary 23 State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is a Vice President and an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. /s/ LEA LAHTINEN --------------------------------- Lea Lahtinen Sworn to before me this 30th day of July, 1999 /s/ SANDRA L. WEST - --------------------------- Sandra L. West Notary Public SANDRA L. WEST Notary Public State of New York No. 31-4942101 Qualified in New York County Commission Expires September 19, 2000 24 State of New York, BANKING DEPARTMENT I, P. VINCENT CONLON, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the Banking Law," dated July 30, 1999, providing for a reduction in the minimum number of directors required from ten to seven, and a reduction in the maximum number of directors from twenty-five to fifteen. Witness, my hand and official seal of the Banking Department at the City of New York, this 3rd day of September in the Year of our Lord one thousand nine hundred and ninety-nine. /s/ P. VINCENT CONLON ------------------------------ P. Vincent Conlon Deputy Superintendent of Banks 25 BY-LAWS JUNE 22, 1999 BANKERS TRUST COMPANY NEW YORK 26 BY-LAWS OF BANKERS TRUST COMPANY ARTICLE I MEETINGS OF STOCKHOLDERS SECTION 1. The annual meeting of the stockholders of this Company shall be held at the office of the Company in the Borough of Manhattan, City of New York, on the third Tuesday in January of each year, for the election of directors and such other business as may properly come before said meeting. SECTION 2. Special meetings of stockholders other than those regulated by statute may be called at any time by a majority of the directors. It shall be the duty of the Chairman of the Board, the Chief Executive Officer or the President to call such meetings whenever requested in writing to do so by stockholders owning a majority of the capital stock. SECTION 3. At all meetings of stockholders, there shall be present, either in person or by proxy, stockholders owning a majority of the capital stock of the Company, in order to constitute a quorum, except at special elections of directors, as provided by law, but less than a quorum shall have power to adjourn any meeting. SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive Officer or, in his absence, the President or, in their absence, the senior officer present, shall preside at meetings of the stockholders and shall direct the proceedings and the order of business. The Secretary shall act as secretary of such meetings and record the proceedings. ARTICLE II DIRECTORS SECTION 1. The affairs of the Company shall be managed and its corporate powers exercised by a Board of Directors consisting of such number of directors, but not less than seven nor more than fifteen, as may from time to time be fixed by resolution adopted by a majority of the directors then in office, or by the stockholders. In the event of any increase in the number of directors, additional directors may be elected within the limitations so fixed, either by the stockholders or within the limitations imposed by law, by a majority of directors then in office. One-third of the number of directors, as fixed from time to time, shall constitute a quorum. Any one or more members of the Board of Directors or any Committee thereof may participate in a meeting of the Board of Directors or Committee thereof by means of a conference telephone or similar communications equipment which allows all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such a meeting. All directors hereafter elected shall hold office until the next annual meeting of the stockholders and until their successors are elected and have qualified. 27 No Officer-Director who shall have attained age 65, or earlier relinquishes his responsibilities and title, shall be eligible to serve as a director. SECTION 2. Vacancies not exceeding one-third of the whole number of the Board of Directors may be filled by the affirmative vote of a majority of the directors then in office, and the directors so elected shall hold office for the balance of the unexpired term. SECTION 3. The Chairman of the Board shall preside at meetings of the Board of Directors. In his absence, the Chief Executive Officer or, in his absence, such other director as the Board of Directors from time to time may designate shall preside at such meetings. SECTION 4. The Board of Directors may adopt such Rules and Regulations for the conduct of its meetings and the management of the affairs of the Company as it may deem proper, not inconsistent with the laws of the State of New York, or these By-Laws, and all officers and employees shall strictly adhere to, and be bound by, such Rules and Regulations. SECTION 5. Regular meetings of the Board of Directors shall be held from time to time provided, however, that there shall be at least ten regular monthly meetings during a calendar year. Special meetings of the Board of Directors may be called upon at least two day's notice whenever it may be deemed proper by the Chairman of the Board or, the Chief Executive Officer or, in their absence, by such other director as the Board of Directors may have designated pursuant to Section 3 of this Article, and shall be called upon like notice whenever any three of the directors so request in writing. SECTION 6. The compensation of directors as such or as members of committees shall be fixed from time to time by resolution of the Board of Directors. ARTICLE III COMMITTEES SECTION 1. There shall be an Executive Committee of the Board consisting of not less than five directors who shall be appointed annually by the Board of Directors. The Chairman of the Board shall preside at meetings of the Executive Committee. In his absence, the Chief Executive Officer or, in his absence, such other member of the Committee as the Committee from time to time may designate shall preside at such meetings. The Executive Committee shall possess and exercise to the extent permitted by law all of the powers of the Board of Directors, except when the latter is in session, and shall keep minutes of its proceedings, which shall be presented to the Board of Directors at its next subsequent meeting. All acts done and powers and authority conferred by the Executive Committee from time to time shall be and be deemed to be, and may be certified as being, the act and under the authority of the Board of Directors. A majority of the Committee shall constitute a quorum, but the Committee may act only by the concurrent vote of not less than one-third of its members, at least one of whom must be a director other than an officer. Any one or more directors, even though not members of the Executive Committee, may attend any meeting of the Committee, and the member 28 or members of the Committee present, even though less than a quorum, may designate any one or more of such directors as a substitute or substitutes for any absent member or members of the Committee, and each such substitute or substitutes shall be counted for quorum, voting, and all other purposes as a member or members of the Committee. SECTION 2. There shall be an Audit Committee appointed annually by resolution adopted by a majority of the entire Board of Directors which shall consist of such number of directors, who are not also officers of the Company, as may from time to time be fixed by resolution adopted by the Board of Directors. The Chairman shall be designated by the Board of Directors, who shall also from time to time fix a quorum for meetings of the Committee. Such Committee shall conduct the annual directors' examinations of the Company as required by the New York State Banking Law; shall review the reports of all examinations made of the Company by public authorities and report thereon to the Board of Directors; and shall report to the Board of Directors such other matters as it deems advisable with respect to the Company, its various departments and the conduct of its operations. In the performance of its duties, the Audit Committee may employ or retain, from time to time, expert assistants, independent of the officers or personnel of the Company, to make studies of the Company's assets and liabilities as the Committee may request and to make an examination of the accounting and auditing methods of the Company and its system of internal protective controls to the extent considered necessary or advisable in order to determine that the operations of the Company, including its fiduciary departments, are being audited by the General Auditor in such a manner as to provide prudent and adequate protection. The Committee also may direct the General Auditor to make such investigation as it deems necessary or advisable with respect to the Company, its various departments and the conduct of its operations. The Committee shall hold regular quarterly meetings and during the intervals thereof shall meet at other times on call of the Chairman. SECTION 3. The Board of Directors shall have the power to appoint any other Committees as may seem necessary, and from time to time to suspend or continue the powers and duties of such Committees. Each Committee appointed pursuant to this Article shall serve at the pleasure of the Board of Directors. 29 ARTICLE IV OFFICERS SECTION 1. The Board of Directors shall elect from among their number a Chairman of the Board and a Chief Executive Officer; and shall also elect a President, and may also elect a Senior Vice Chairman, one or more Vice Chairmen, one or more Executive Vice Presidents, one or more Senior Managing Directors, one or more Managing Directors, one or more Senior Vice Presidents, one or more Principals, one or more Vice Presidents, one or more General Managers, a Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate General Counsels, a General Auditor, a General Credit Auditor, and one or more Deputy Auditors, who need not be directors. The officers of the corporation may also include such other officers or assistant officers as shall from time to time be elected or appointed by the Board. The Chairman of the Board or the Chief Executive Officer or, in their absence, the President, the Senior Vice Chairman or any Vice Chairman, may from time to time appoint assistant officers. All officers elected or appointed by the Board of Directors shall hold their respective offices during the pleasure of the Board of Directors, and all assistant officers shall hold office at the pleasure of the Board or the Chairman of the Board or the Chief Executive Officer or, in their absence, the President, the Senior Vice Chairman or any Vice Chairman. The Board of Directors may require any and all officers and employees to give security for the faithful performance of their duties. SECTION 2. The Board of Directors shall designate the Chief Executive Officer of the Company who may also hold the additional title of Chairman of the Board, President, Senior Vice Chairman or Vice Chairman and such person shall have, subject to the supervision and direction of the Board of Directors or the Executive Committee, all of the powers vested in such Chief Executive Officer by law or by these By-Laws, or which usually attach or pertain to such office. The other officers shall have, subject to the supervision and direction of the Board of Directors or the Executive Committee or the Chairman of the Board or, the Chief Executive Officer, the powers vested by law or by these By-Laws in them as holders of their respective offices and, in addition, shall perform such other duties as shall be assigned to them by the Board of Directors or the Executive Committee or the Chairman of the Board or the Chief Executive Officer. The General Auditor shall be responsible, through the Audit Committee, to the Board of Directors for the determination of the program of the internal audit function and the evaluation of the adequacy of the system of internal controls. Subject to the Board of Directors, the General Auditor shall have and may exercise all the powers and shall perform all the duties usual to such office and shall have such other powers as may be prescribed or assigned to him from time to time by the Board of Directors or vested in him by law or by these By-Laws. He shall perform such other duties and shall make such investigations, examinations and reports as may be prescribed or required by the Audit Committee. The General Auditor shall have unrestricted access to all records and premises of the Company and shall delegate such authority to his subordinates. He shall have the duty to report to the Audit Committee on all matters concerning the internal audit program and the adequacy of the system of internal controls of the Company which he deems advisable or which the Audit Committee may request. Additionally, the General Auditor shall have the duty of reporting independently of all officers of the Company to the Audit Committee at least quarterly on any matters concerning the internal audit program and the adequacy of the system of internal controls of the Company that should be brought to the attention of the directors except those matters responsibility for which has been vested in the General Credit Auditor. Should the General Auditor deem any matter 30 to be of special immediate importance, he shall report thereon forthwith to the Audit Committee. The General Auditor shall report to the Chief Financial Officer only for administrative purposes. The General Credit Auditor shall be responsible to the Chief Executive Officer and, through the Audit Committee, to the Board of Directors for the systems of internal credit audit, shall perform such other duties as the Chief Executive Officer may prescribe, and shall make such examinations and reports as may be required by the Audit Committee. The General Credit Auditor shall have unrestricted access to all records and may delegate such authority to subordinates. SECTION 3. The compensation of all officers shall be fixed under such plan or plans of position evaluation and salary administration as shall be approved from time to time by resolution of the Board of Directors. SECTION 4. The Board of Directors, the Executive Committee, the Chairman of the Board, the Chief Executive Officer or any person authorized for this purpose by the Chief Executive Officer, shall appoint or engage all other employees and agents and fix their compensation. The employment of all such employees and agents shall continue during the pleasure of the Board of Directors or the Executive Committee or the Chairman of the Board or the Chief Executive Officer or any such authorized person; and the Board of Directors, the Executive Committee, the Chairman of the Board, the Chief Executive Officer or any such authorized person may discharge any such employees and agents at will. ARTICLE V INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS SECTION 1. The Company shall, to the fullest extent permitted by Section 7018 of the New York Banking Law, indemnify any person who is or was made, or threatened to be made, a party to an action or proceeding, whether civil or criminal, whether involving any actual or alleged breach of duty, neglect or error, any accountability, or any actual or alleged misstatement, misleading statement or other act or omission and whether brought or threatened in any court or administrative or legislative body or agency, including an action by or in the right of the Company to procure a judgment in its favor and an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the Company is servicing or served in any capacity at the request of the Company by reason of the fact that he, his testator or intestate, is or was a director or officer of the Company, or is serving or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement, and costs, charges and expenses, including attorneys' fees, or any appeal therein; provided, however, that no indemnification shall be provided to any such person if a judgment or other final adjudication adverse to the director or officer establishes that (i) his acts were committed in bad faith or were the result of active and deliberate dishonesty and, in either case, were material to the cause of action so adjudicated, or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. SECTION 2. The Company may indemnify any other person to whom the Company is permitted to provide indemnification or the advancement of expenses by applicable law, 31 whether pursuant to rights granted pursuant to, or provided by, the New York Banking Law or other rights created by (i) a resolution of stockholders, (ii) a resolution of directors, or (iii) an agreement providing for such indemnification, it being expressly intended that these By-Laws authorize the creation of other rights in any such manner. SECTION 3. The Company shall, from time to time, reimburse or advance to any person referred to in Section 1 the funds necessary for payment of expenses, including attorneys' fees, incurred in connection with any action or proceeding referred to in Section 1, upon receipt of a written undertaking by or on behalf of such person to repay such amount(s) if a judgment or other final adjudication adverse to the director or officer establishes that (i) his acts were committed in bad faith or were the result of active and deliberate dishonesty and, in either case, were material to the cause of action so adjudicated, or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. SECTION 4. Any director or officer of the Company serving (i) another corporation, of which a majority of the shares entitled to vote in the election of its directors is held by the Company, or (ii) any employee benefit plan of the Company or any corporation referred to in clause (i) in any capacity shall be deemed to be doing so at the request of the Company. In all other cases, the provisions of this Article V will apply (i) only if the person serving another corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise so served at the specific request of the Company, evidenced by a written communication signed by the Chairman of the Board, the Chief Executive Officer or the President, and (ii) only if and to the extent that, after making such efforts as the Chairman of the Board, the Chief Executive Officer or the President shall deem adequate in the circumstances, such person shall be unable to obtain indemnification from such other enterprise or its insurer. SECTION 5. Any person entitled to be indemnified or to the reimbursement or advancement of expenses as a matter of right pursuant to this Article V may elect to have the right to indemnification (or advancement of expenses) interpreted on the basis of the applicable law in effect at the time of occurrence of the event or events giving rise to the action or proceeding, to the extent permitted by law, or on the basis of the applicable law in effect at the time indemnification is sought. SECTION 6. The right to be indemnified or to the reimbursement or advancement of expense pursuant to this Article V (i) is a contract right pursuant to which the person entitled thereto may bring suit as if the provisions hereof were set forth in a separate written contract between the Company and the director or officer, (ii) is intended to be retroactive and shall be available with respect to events occurring prior to the adoption hereof, and (iii) shall continue to exist after the rescission or restrictive modification hereof with respect to events occurring prior thereto. SECTION 7. If a request to be indemnified or for the reimbursement or advancement of expenses pursuant hereto is not paid in full by the Company within thirty days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled also to be paid the expenses of prosecuting such claim. Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of or reimbursement or advancement of expenses to the claimant is proper in the circumstance, nor an actual determination by the Company (including its Board of Directors, independent legal 32 counsel, or its stockholders) that the claimant is not entitled to indemnification or to the reimbursement or advancement of expenses, shall be a defense to the action or create a presumption that the claimant is not so entitled. SECTION 8. A person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in Section 1 shall be entitled to indemnification only as provided in Sections 1 and 3, notwithstanding any provision of the New York Banking Law to the contrary. ARTICLE VI SEAL SECTION 1. The Board of Directors shall provide a seal for the Company, the counterpart dies of which shall be in the charge of the Secretary of the Company and such officers as the Chairman of the Board, the Chief Executive Officer or the Secretary may from time to time direct in writing, to be affixed to certificates of stock and other documents in accordance with the directions of the Board of Directors or the Executive Committee. SECTION 2. The Board of Directors may provide, in proper cases on a specified occasion and for a specified transaction or transactions, for the use of a printed or engraved facsimile seal of the Company. ARTICLE VII CAPITAL STOCK SECTION 1. Registration of transfer of shares shall only be made upon the books of the Company by the registered holder in person, or by power of attorney, duly executed, witnessed and filed with the Secretary or other proper officer of the Company, on the surrender of the certificate or certificates of such shares properly assigned for transfer. ARTICLE VIII CONSTRUCTION SECTION 1. The masculine gender, when appearing in these By-Laws, shall be deemed to include the feminine gender. 33 ARTICLE IX AMENDMENTS SECTION 1. These By-Laws may be altered, amended or added to by the Board of Directors at any meeting, or by the stockholders at any annual or special meeting, provided notice thereof has been given. 34
11 CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 2000 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, reported the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET ------------- | C400 | Dollar Amounts in Thousands| RCFD | - ----------------------------------------------------------------------------------------------------------------------------- ASSETS | / / / / / / / / / / / / / / / / / | 1. Cash and balances due from depository institutions (from Schedule RC-A): | / / / / / / / / / / / / / / / / / | a. Noninterest-bearing balances and currency and coin (1).....................| 0081 1,560,000 |1.a. b. Interest-bearing balances (2) .............................................| 0071 1,335,000 |1.b. 2. Securities: | / / / / / / / / / / / / / / / / / | a. Held-to-maturity securities (from Schedule RC-B, column A) ................| 1754 0 |2.a. b. Available-for-sale securities (from Schedule RC-B, column D)...............| 1773 337,000 |2.b. 3. Federal funds sold and securities purchased under agreements to resell...........| 1350 1,784,000 |3. 4. Loans and lease financing receivables: | / / / / / / / / / / / / / / / / / | a. Loans and leases, net of unearned income (from Schedule RC-C) 2122 22,038,000 |4.a. b. LESS: Allowance for loan and lease losses................................| 3123 458,000 |4.b. c. LESS: Allocated transfer risk reserve....................................| 3128 0 |4.c. d. Loans and leases, net of unearned income, | / / / / / / / / / / / / / / / / / | allowance, and reserve (item 4.a minus 4.b and 4.c) .......................| 2125 16,211,000 |4.d. 5. Trading Assets (from schedule RC-D) ............................................| 3545 14,817,000 |5. 6. Premises and fixed assets (including capitalized leases) ........................| 2145 579,000 |6. 7. Other real estate owned (from Schedule RC-M) ....................................| 2150 104,000 |7. 8. Investments in unconsolidated subsidiaries and associated companies | (from Schedule RC-M).............................................................| 2130 65,000 |8. 9. Customers' liability to this bank on acceptances outstanding ....................| 2155 266,000 |9. 10. Intangible assets (from Schedule RC-M) ..........................................| 2143 72,000 |10. 11. Other assets (from Schedule RC-F) ...............................................| 2160 2,174,000 |11. 12. Total assets (sum of items 1 through 11) ........................................| 2170 39,344,000 |12. - -------------------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading.
35
Legal Title of Bank: Bankers Trust Company Call Date: 09/30/00 State#: 364840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D Cert#: 00623 Page RC-2 City, State Zip: New York, NY 10006 Transit#: 21001003 12 SCHEDULE RC--CONTINUED DOLLAR AMOUNTS IN THOUSANDS ___________________________________________________________________________________________________________________________________ LIABILITIES 13. Deposits: | / / / / / / / / / / / / / / / / | a. In domestic offices (sum of totals of columns A and C | RCON 2200 11,169,000 |13.a. from Schedule RC-E, part I) (1) Noninterest-bearing(1) .................................................| RCON 6631 2,964,000 |13.a.(1) (2) Interest-bearing .......................................................| RCON 6636 8,205,000 |13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, | / / / / / / / / / / / / / / / / | and IBFs (from Schedule RC-E part II) | RCFN 2200 8,335,000 |13.b. (1) Noninterest-bearing ....................................................| RCFN 6631 907,000 |13.b.(1) (2) Interest-bearing........................................................| RCFN 6636 7,428,000 |13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase | RCFD 2800 4,854,000 |14. 15. a. Demand notes issued to the U.S. Treasury ......................................| RCON 2840 500,000 |15.a. b. Trading liabilities (from Schedule RC-D).......................................| RCFD 3548 2,463,000 |15.b. 16. Other borrowed money (includes mortgage indebtedness and obligations under | / / / / / / / / / / / / / / / / | capitalized leases): a. With a remaining maturity of one year or less .................................| RCFD 2332 971,000 |16.a. b. With a remaining maturity of more than one year through three years...........| A547 819,000 |16.b. c. With a remaining maturity of more than three years.............................| A548 402,000 |16.c 17. Not Applicable. | / / / / / / / / / / / / / / / / |17. 18. Bank's liability on acceptances executed and outstanding .........................| RCFD 2920 266,000 |18. 19. Subordinated notes and debentures (2).............................................| RCFD 3200 283,000 |19. 20. Other liabilities (from Schedule RC-G) ...........................................| RCFD 2930 2,916,000 |20. 21. Total liabilities (sum of items 13 through 20) ...................................| RCFD 2948 32,978,000 |21. 22. Not Applicable | / / / / / / / / / / / / / / / / | | / / / / / / / / / / / / / / / / |22. EQUITY CAPITAL | / / / / / / / / / / / / / / / / | 23. Perpetual preferred stock and related surplus ....................................| RCFD 3838 1,500,000 |23. 24. Common stock .....................................................................| RCFD 3230 2,127,000 |24. 25. Surplus (exclude all surplus related to preferred stock) .........................| RCFD 3839 582,000 |25. 26. a. Undivided profits and capital reserves ........................................| RCFD 3632 2,255,000 |26.a. b. Net unrealized holding gains (losses) on available-for-sale securities ........| RCFD 8434 3,000 |26.b. c. Accumulated net gains (losses) on cash flow hedges.............................| RCFD 4336 0 |26.c. 27. Cumulative foreign currency translation adjustments ..............................| RCFD 3284 (101,000) |27. 28. Total equity capital (sum of items 23 through 27) ................................| RCFD 3210 6,366,000 |28. 29. Total liabilities and equity capital (sum of items 21 and 28).....................| RCFD 3300 9,344,000 |29 | | ---------------------------------
Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work Number performed for the bank by independent external auditors as of --------------------------------- any date during 1997..............................................................| RCFD 6724 N/A |M/1 1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other with generally accepted auditing standards by a certified external auditors (may be required by state chartering public accounting firm which submits a report on the bank authority) 2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external conducted in accordance with generally accepted auditing auditors standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by submits a report on the consolidated holding company external auditors (but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work) 3 = Directors' examination of the bank conducted in 8 = No external audit work accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) - ---------------------- (1) Including total demand deposits and noninterest-bearing time and savings deposits. (2) Includes limited-life preferred stock and related surplus.
EX-99.1 9 f71028ex99-1.txt EXHIBIT 99.1 1 EXHIBIT 99.1 [LETTER OF TRANSMITTAL WITH RESPECT TO THE EXCHANGE OFFER] 2 LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 10 1/8% SENIOR NOTES DUE 2008 OF FLEMING COMPANIES, INC. PURSUANT TO THE PROSPECTUS DATED , 2001 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. The Exchange Agent is: BANKERS TRUST COMPANY By Registered or Certified Mail: By Hand Delivery: Bankers Trust Company Bankers Trust Company Four Albany Street, 4th Floor Four Albany Street, 4th Floor New York, New York 10006 New York, New York 10006 Attention: Matthew Sherman Attention: Matthew Sherman By Overnight Delivery: By Facsimile: Bankers Trust Company (212) 250-6727 Four Albany Street, 4th Floor Attn: Matthew Sherman New York, New York 10006 Attention: Matthew Sherman Confirm by Telephone: (212) 250-6992
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated , 2001 (the "Prospectus"), of Fleming Companies, Inc., an Oklahoma corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together with the Prospectus constitutes the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 10 1/8% Senior Notes due 2008 (the "Exchange Notes") for each $1,000 principal amount of its outstanding 10 1/8% Senior Notes due 2008 (the "Private Notes"). Recipients of the Prospectus should read the requirements described in such Prospectus with respect to eligibility to participate in the Exchange Offer. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. The undersigned hereby tenders the Private Notes described in the box entitled "Description of Private Notes" below pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. The undersigned is the registered holder of all the Private Notes (the "Holder") and the undersigned represents that it has received from each beneficial owner of Private Notes (the "Beneficial Owners") a duly completed and executed form of "Instruction to Registered Holder from Beneficial Owner" accompanying this Letter of Transmittal, instructing the undersigned to take the action described in this Letter of Transmittal. 3 PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY COMPLETING ANY BOX BELOW. This Letter of Transmittal is to be used by a Holder (i) if certificates representing Private Notes are to be forwarded herewith and (ii) if a tender is made pursuant to the guaranteed delivery procedures in the section of the Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." Holders that are tendering by book-entry transfer to the Exchange Agent's account at DTC can execute the tender through ATOP for which the Exchange Offer will be eligible. DTC participants that are accepting the Exchange Offer must transmit their acceptance to DTC which will verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send an agent's message forming part of a book-entry transfer in which the participant agrees to be bound by the terms of the Letter of Transmittal (an "Agent's Message") to the Exchange Agent for its acceptance. Transmission of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent's Message. Any Beneficial Owner whose Private Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such Holder promptly and instruct such Holder to tender on behalf of the Beneficial Owner. If such Beneficial Owner wishes to tender on its own behalf, such Beneficial Owner must, prior to completing and executing this Letter of Transmittal and delivering its Private Notes, either make appropriate arrangements to register ownership of the Private Notes in such Beneficial Owner's name or obtain a properly completed bond power from the Holder. The transfer of record ownership may take considerable time. In order to properly complete this Letter of Transmittal, a Holder must (i) complete the box entitled "Description of Private Notes," (ii) if appropriate, check and complete the boxes relating to book-entry transfer, guaranteed delivery, Special Issuance Instructions and Special Delivery Instructions, (iii) sign the Letter of Transmittal by completing the box entitled "Sign Here To Tender Your Notes" and (iv) complete the Substitute Form W-9. Each Holder should carefully read the detailed instructions below prior to completing the Letter of Transmittal. Holders of Private Notes who desire to tender their Private Notes for exchange and (i) whose Private Notes are not immediately available or (ii) who cannot deliver their Private Notes, this Letter of Transmittal and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date, must tender the Private Notes pursuant to the guaranteed delivery procedures set forth in the section of the Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2. Holders of Private Notes who wish to tender their Private Notes for exchange must complete columns (1) through (3) in the box below entitled "Description of Private Notes," and sign the box below entitled "Sign Here To Tender Your Notes." If only those columns are completed, such Holder will have tendered for exchange all Private Notes listed in column (3) below. If the Holder wishes to tender for exchange less than all of such Private Notes, column (4) must be completed in full. In such case, such Holder should refer to Instruction 5. The Exchange Offer may be extended, terminated or amended, as provided in the Prospectus. During any such extension of the Exchange Offer, all Private Notes previously tendered and not withdrawn pursuant to the Exchange Offer will remain subject to such Exchange Offer. 2 4 The undersigned hereby tenders for exchange the Private Notes described in the box entitled "Description of Private Notes" below pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal.
- -------------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF PRIVATE NOTES - -------------------------------------------------------------------------------------------------------------------------- (1) (2) (3) (4) AGGREGATE PRINCIPAL AMOUNT PRINCIPAL AMOUNT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY TENDERED FOR (PLEASE FILL IN, IF BLANK) NUMBER(S) CERTIFICATE(S)(A) EXCHANGE(B) - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- TOTAL PRINCIPAL AMOUNT TENDERED - --------------------------------------------------------------------------------------------------------------------------
(A) Unless indicated in this column, any tendering Holder will be deemed to have tendered the entire aggregate principal amount represented by the Private Notes indicated in the column labeled "Aggregate Principal Amount Represented by Certificate(s)." See Instruction 5. (B) The minimum permitted tender is $1,000 in principal amount of Private Notes. All other tenders must be in integral multiples of $1,000. - -------------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH. [ ] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY): Name(s) of Registered Holder(s): Date of Execution of Notice of Guaranteed Delivery: Window Ticket Number (if any): Name of Institution that Guaranteed Delivery: Only Holders are entitled to tender their Private Notes for exchange in the Exchange Offer. Any financial institution that is a participant in DTC's system and whose name appears on a security position listing as the record owner of the Private Notes and who wishes to make book-entry delivery of Private Notes as described above must complete and execute a participant's letter (which will be distributed to participants by DTC) instructing DTC's nominee to tender such Private Notes for exchange. Persons who are Beneficial Owners of Private Notes but are not Holders and who seek to tender Private Notes should (i) contact the Holder and instruct such Holder to tender on his or her behalf, (ii) obtain and include with this Letter of Transmittal, Private Notes properly endorsed for transfer by the Holder or accompanied by a properly completed bond power from the Holder, with signatures on the endorsement or bond power guaranteed by a firm that is an eligible guarantor institution within the meaning of Rule 17Ad-5 under the Exchange Act, including a firm that is a member of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., a commercial bank or trading company having an office in the United States or certain other eligible guarantors (each, an "Eligible Institution"), or (iii) effect a record transfer of such Private Notes from the Holder to such Beneficial Owner and comply with the requirements applicable to Holders for tendering Private Notes prior to the Expiration Date. See the section of the Prospectus entitled "The Exchange Offer -- Procedures for Tendering." SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. 3 5 - ------------------------------------------------------------ - ------------------------------------------------------------ SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY (i) if the Exchange Notes To be completed ONLY (i) if the Exchange Notes issued in exchange for Private Notes, issued in exchange for Private Notes, certificates for Private Notes in a principal certificates for Private Notes in a principal amount not exchanged for Exchange Notes, or amount not exchanged for Exchange Notes, or Private Notes (if any) not tendered for Private Notes (if any) not tendered for exchange, are to be issued in the name of exchange, are to be mailed or delivered (i) to someone other than the undersigned or (ii) if someone other than the undersigned or (ii) to Private Notes tendered by book-entry transfer the undersigned at an address other than the which are not exchanged are to be returned by address shown below the undersigned's credit to an account maintained at DTC. signature. Issue to: Mail or deliver to: Name: Name: (Please Type or Print) (Please Type or Print) Address: Address: (Include Zip Code) (Include Zip Code) (Taxpayer Identification or Social Security (Taxpayer Identification or Social Security No.) No.) Credit Private Notes not exchanged and delivered by book-entry transfer to the DTC account set forth below: (Account Number)
- ------------------------------------------------------------ - ------------------------------------------------------------ 4 6 Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company for exchange the Private Notes indicated above. Subject to, and effective upon, acceptance for exchange of the Private Notes tendered for exchange herewith, the undersigned will have irrevocably sold, assigned, transferred and exchanged, to the Company, all right, title and interest in, to and under all of the Private Notes tendered for exchange hereby, and hereby will have appointed the Exchange Agent as the true and lawful agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as agent of the Company) of such Holder with respect to such Private Notes, with full power of substitution to (i) deliver certificates representing such Private Notes, or transfer ownership of such Private Notes on the account books maintained by DTC (together, in any such case, with all accompanying evidences of transfer and authenticity), to the Company, (ii) present and deliver such Private Notes for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights and incidents of beneficial ownership with respect to such Private Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed to be irrevocable and coupled with an interest. The undersigned hereby represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Private Notes; and that when such Private Notes are accepted for exchange by the Company, the Company will acquire good and marketable title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned further warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the Private Notes tendered for exchange hereby. The undersigned further agrees that acceptance of any and all validly tendered Private Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement. By tendering, the undersigned hereby further represents to the Company that (i) the Exchange Notes to be acquired by the undersigned in exchange for the Private Notes tendered hereby and any Beneficial Owner(s) of such Private Notes in connection with the Exchange Offer will be acquired by the undersigned and such Beneficial Owner(s) in the ordinary course of their respective businesses, (ii) the undersigned is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes, (iii) the undersigned and each Beneficial Owner acknowledge and agree that any person who is a broker-dealer registered under the Exchange Act or is participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of Section 10 of the Securities Act in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters, (iv) the undersigned and each Beneficial Owner understand that a secondary resale transaction described in clause (iii) above and any resales of Exchange Notes obtained by the undersigned in exchange for the Private Notes acquired by the undersigned directly from the Company should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (v) neither the undersigned nor any Beneficial Owner is an "affiliate," as defined under Rule 405 under the Securities Act, of the Company. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of Section 10 of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering such prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to the Private Notes acquired other than as a result of market-making activities or other trading activities. For purposes of the Exchange Offer, the Company will be deemed to have accepted for exchange, and to have exchanged, validly tendered Private Notes, if, as and when the Company gives oral or written notice thereof to the Exchange Agent. Tenders of Private Notes for exchange may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders" in the Prospectus. Any Private Notes tendered by the undersigned and not accepted for exchange will be returned to the undersigned at the address set forth above unless otherwise indicated in the box above entitled "Special Delivery Instructions" as promptly as practicable after the Expiration Date. The undersigned acknowledges that the Company's acceptance of Private Notes validly tendered for exchange pursuant to any one of the procedures described in the section of the Prospectus entitled "The Exchange Offer" and 5 7 in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated in the box entitled "Special Issuance Instructions," please return any Private Notes not tendered for exchange in the name(s) of the undersigned. Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail any certificates for Private Notes not tendered or exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Private Notes accepted for exchange in the name(s) of, and return any Private Notes not tendered for exchange or not exchanged to, the person(s) so indicated. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Private Notes from the name of the Holder(s) thereof if the Company does not accept for exchange any of the Private Notes so tendered for exchange or if such transfer would not be in compliance with any transfer restrictions applicable to such Private Note(s). IN ORDER TO VALIDLY TENDER PRIVATE NOTES FOR EXCHANGE, HOLDERS MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL. Except as stated in the Prospectus, all authority herein conferred or agreed to be conferred shall survive the death, incapacity or dissolution of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as otherwise stated in the Prospectus, this tender for exchange of Private Notes is irrevocable. 6 8 SIGN HERE TO TENDER YOUR PRIVATE NOTES __ __ SIGNATURE(S) OF OWNER(S) Dated: ____________________________ , 200__ Must be signed by the Holder(s) exactly as name(s) appear(s) on certificate(s) representing the Private Notes or on a security position listing or by person(s) authorized to become registered Private Note holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. (See Instruction 6.) Name(s): __ (PLEASE TYPE OR PRINT) Capacity (full title): __ __ Address: __ __ (INCLUDE ZIP CODE) Principal place of business (if different from address listed above): __ __ __ Area Code and Telephone No.: ( ): Tax Identification or Social Security Nos.: __ GUARANTEE OF SIGNATURE(S) (SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 1) Authorized Signature: __ Name and Title: __ __ (PLEASE TYPE OR PRINT) Name of Firm: __ Address: __ Area Code and Telephone No.: __ Dated: __ IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN THIS LETTER OF TRANSMITTAL. 7 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by an institution which is (1) a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., (2) a commercial bank or trust company having an office or correspondent in the United States, or (3) an Eligible Institution that is a member of one of the following recognized Signature Guarantee Programs: (a) The Securities Transfer Agents Medallion Program (STAMP); (b) The New York Stock Exchange Medallion Signature Program (MSP); or (c) The Stock Exchange Medallion Program (SEMP). Signatures on this Letter of Transmittal need not be guaranteed (i) if this Letter of Transmittal is signed by the Holder(s) of the Private Notes tendered herewith and such Holder(s) have not completed the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (ii) if such Private Notes are tendered for the account of an Eligible Institution. In all other cases, all signatures must be guaranteed by an Eligible Institution. 2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by Holders if certificates representing Private Notes are to be forwarded herewith. All physically delivered Private Notes, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other required documents, must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date or the tendering holder must comply with the guaranteed delivery procedures set forth below. Delivery of the documents to DTC does not constitute delivery to the Exchange Agent. The method of delivery of Private Notes, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the Holder. Except as otherwise provided below, the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. Instead of delivery by mail, it is recommended that Holders use an overnight or hand delivery service, properly insured. In all cases, sufficient time should be allowed to assure delivery to the Exchange Agent before the Expiration Date. Neither this Letter of Transmittal nor any Private Notes should be sent to the Company. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the above transactions for such Holders. Holders of Private Notes who elect to tender Private Notes and (i) whose Private Notes are not immediately available or (ii) who cannot deliver the Private Notes, this Letter of Transmittal or other required documents to the Exchange Agent prior the Expiration Date must tender their Private Notes according to the guaranteed delivery procedures set forth in the Prospectus. Holders may have such tender effected if: (a) such tender is made through an Eligible Institution; (b) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent has received from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, setting forth the name and address of the Holder, the certificate number(s) of such Private Notes and the principal amount of Private Notes tendered for exchange, stating that tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing such Private Notes (or a Book-Entry Confirmation), in proper form for transfer, and any other documents required by this Letter of Transmittal, will be deposited by such Eligible Institution with the Exchange Agent; and (c) a properly executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) for all tendered Private Notes in proper form for transfer or a Book-Entry Confirmation, together with 8 10 any other documents required by this Letter of Transmittal, are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. No alternative, conditional or contingent tenders will be accepted. All tendering Holders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive notice of the acceptance of their Private Notes for exchange. 3. INADEQUATE SPACE. If the space provided in the box entitled "Description of Private Notes" above is inadequate, the certificate numbers and principal amounts of the Private Notes being tendered should be listed on a separate signed schedule affixed hereto. 4. WITHDRAWALS. A tender of Private Notes may be withdrawn at any time prior to the Expiration Date by delivery of written notice of withdrawal (or facsimile thereof) to the Exchange Agent at the address set forth on the cover of this Letter of Transmittal. To be effective, a notice of withdrawal of Private Notes must (i) specify the name of the person who tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn (including the certificate number(s) and aggregate principal amount of such Private Notes), and (iii) be signed by the Holder in the same manner as the original signature on the Letter of Transmittal by which such Private Notes were tendered (including any required signature guarantees). All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sole discretion, whose determination shall be final and binding on all parties. Any Private Notes so withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Private Notes so withdrawn are validly retendered. Properly withdrawn Private Notes may be retendered by following one of the procedures described in the section of the Prospectus entitled "The Exchange Offer -- Procedures for Tendering" at any time prior to the Expiration Date. 5. PARTIAL TENDERS. Tenders of Private Notes will be accepted only in integral multiples of $1,000 principal amount. If a tender for exchange is to be made with respect to less than the entire principal amount of any Private Notes, fill in the principal amount of Private Notes which are tendered for exchange in column (4) of the box entitled "Description of Private Notes," as more fully described in the footnotes thereto. In the case of a partial tender for exchange, a new certificate, in fully registered form, for the remainder of the principal amount of the Private Notes, will be sent to the Holders unless otherwise indicated in the appropriate box on this Letter of Transmittal as promptly as practicable after the expiration or termination of the Exchange Offer. 6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, POWERS OF ATTORNEY AND ENDORSEMENTS. (a) The signature(s) of the Holder on this Letter of Transmittal must correspond with the name(s) as written on the face of the Private Notes without alternation, enlargement or any change whatsoever. (b) If tendered Private Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. (c) If any tendered Private Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal and any necessary or required documents as there are different registrations or certificates. (d) When this Letter of Transmittal is signed by the Holder listed and transmitted hereby, no endorsements of Private Notes or bond powers are required. If, however, Private Notes not tendered or not accepted, are to be issued or returned in the name of a person other than the Holder, then the Private Notes transmitted hereby must be endorsed or accompanied by a properly completed bond power, in a form satisfactory to the Company, in either case signed exactly as the name(s) of the Holder(s) appear(s) on the Private Notes. Signatures on such Private Notes or bond powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). (e) If this Letter of Transmittal or Private Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or 9 11 representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal. (f) If this Letter of Transmittal is signed by a person other than the Holder listed, the Private Notes must be endorsed or accompanied by a properly completed bond power, in either case signed by such Holder exactly as the name(s) of the Holder appear(s) on the certificates. Signatures on such Private Notes or bond powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). 7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company will pay all transfer taxes, if any, applicable to the exchange of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of Private Notes pursuant to the Exchange Offer, then the amount of such transfer taxes (whether imposed on the Holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemptions therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. 8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to be issued, or if any Private Notes not tendered for exchange are to be issued or sent to someone other than the Holder or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Holders of Private Notes tendering Private Notes by book-entry transfer may request that Private Notes not accepted be credited to such account maintained at DTC as such Holder may designate. 9. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt), compliance with conditions, acceptance and withdrawal of tendered Private Notes will be determined by the Company in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any and all Private Notes not properly tendered or any Private Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Private Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Private Notes must be cured within such time as the Company shall determine. Although the Company intends to notify Holders of defects or irregularities with respect to tenders of Private Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Private Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Private Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, amend or modify certain of the specified conditions as described under "The Exchange Offer -- Conditions" in the Prospectus in the case of any Private Notes tendered (except as otherwise provided in the Prospectus). 11. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any tendering Holder whose Private Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated herein for further instructions. 12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for information or for additional copies of the Prospectus and this Letter of Transmittal may be directed to the Exchange Agent at the address or telephone number set forth on the cover of this Letter of Transmittal. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR THE EXPIRATION DATE. 10 12 IMPORTANT INFORMATION Under current federal income tax law, a Holder whose tendered Private Notes are accepted for exchange may be subject to backup withholding unless the Holder provides the Company (as payor), through the Exchange Agent, with either (i) such Holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (A) the Holder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (B) the Internal Revenue Service has notified the Holder that he or she is no longer subject to backup withholding; or (ii) an adequate basis for exemption from backup withholding. If such Holder is an individual, the TIN is such Holder's social security number. If the Exchange Agent is not provided with the correct taxpayer identification number, the Holder may be subject to certain penalties imposed by the Internal Revenue Service. Certain Holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Exempt Holders should indicate their exempt status on Substitute Form W-9. A foreign individual may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8 (which the Exchange Agent will provide upon request) signed under penalty of perjury, attesting to the Holder's exempt status. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for additional instructions. If backup withholding applies, the Company is required to withhold 31% of any payment made to the Holder or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The Holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Private Notes. If the Private Notes are held in more than one name or are not held in the name of the actual owner, consult the enclosed Guidelines for additional guidance regarding which number to report. 11 13 PAYOR'S NAME: BANKERS TRUST COMPANY
- ----------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW ________________ FORM W-9 Social Security Number ---------------------------------------------------------- DEPARTMENT OF THE PART 2 -- Certification Under Penalties of Perjury, I OR TREASURY INTERNAL certify that: REVENUE SERVICE ________________ (1) The number shown on this form is my current taxpayer Employer Identification Payer's Request identification number (or I am waiting for a number to be Number for Taxpayer issued to me) and Identification PART 3 -- Number (TIN) (2) I am not subject to backup withholding either because Awaiting TIN [ ] and Certification I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. - ----------------------------------------------------------------------------------------------------------------- Certification instructions -- You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding you receive another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). Name Address City _____________________ State _________ Zip Code Signature Date _____________________
- -------------------------------------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 PAYOR'S NAME: BANKERS TRUST COMPANY CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide such a number. ____________________________________ ___________________________________ Signature Date NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 12 EX-99.2 10 f71028ex99-2.txt EXHIBIT 99.2 1 EXHIBIT 99.2 [NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO THE EXCHANGE OFFER] 2 NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO TENDER OF ANY AND ALL OUTSTANDING 10 1/8% SENIOR NOTES DUE 2008 IN EXCHANGE FOR 10 1/8% SENIOR NOTES DUE 2008 OF FLEMING COMPANIES, INC. PURSUANT TO THE PROSPECTUS DATED , 2001 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. The Exchange Agent is: BANKERS TRUST COMPANY By Registered or Certified Mail: By Hand Delivery: Bankers Trust Company Bankers Trust Company Four Albany Street, 4th Floor Four Albany Street, 4th Floor New York, New York 10006 New York, New York 10006 Attention: Matthew Sherman Attention: Matthew Sherman By Overnight Delivery: By Facsimile: Bankers Trust Company (212) 250-6727 Four Albany Street, 4th Floor Attn: Matthew Sherman New York, New York 10006 Attention: Matthew Sherman Confirm by Telephone: (212) 250-6992
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. As set forth in the prospectus (the "Prospectus") dated , 2001 of Fleming Companies, Inc. (the "Company") and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), this form or one substantially equivalent thereto must be used to accept the Company's offer (the "Exchange Offer") to exchange new 10 1/8% Senior Notes due 2008 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for all of its outstanding 10 1/8% Senior Notes due 2008 (the "Private Notes") if the Letter of Transmittal or any other documents required thereby cannot be delivered to the Exchange Agent, or Private Notes cannot be delivered or if the procedures for book-entry transfer cannot be completed prior to the Expiration Date. This form may be delivered by an Eligible Institution (as defined in the Prospectus) by mail or hand delivery or transmitted via facsimile to the Exchange Agent as set forth above. Capitalized terms used but not defined herein shall have the meaning given to them in the Prospectus. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal. 3 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to the Company upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Private Notes specified below pursuant to the guaranteed delivery procedures set forth in the section of the Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." By so tendering, the undersigned does hereby make, at and as of the date hereof, the representations and warranties of a tendering Holder of Private Notes set forth in the Letter of Transmittal. The undersigned understands that tenders of Private Notes may be withdrawn if the Exchange Agent receives at one of its addresses specified on the cover of this Notice of Guaranteed Delivery, prior to the Expiration Date, a facsimile transmission or letter which specifies the name of the person who deposited the Private Notes to be withdrawn and the aggregate principal amount of Private Notes delivered for exchange, including the certificate number(s) (if any) of the Private Notes, and which is signed in the same manner as the original signature on the Letter of Transmittal by which the Private Notes were tendered, including any signature guarantees, all in accordance with the procedures set forth in the Prospectus. All authority herein conferred or agreed to be conferred shall survive the death, incapacity, or dissolution of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. 2 4 The undersigned hereby tenders the Private Notes listed below: PLEASE SIGN AND COMPLETE
CERTIFICATE NUMBERS OF PRIVATE NOTES (IF AVAILABLE) PRINCIPAL AMOUNT OF PRIVATE NOTES TENDERED - -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY Name(s) (PLEASE TYPE OR PRINT) Title Address - -------------------------------------------------------------------------------- Area Code and Telephone No. Date If Private Notes will be tendered by book-entry transfer, check the trust company below: [ ] The Depository Trust Company Depository Account No.: 3 5 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a participant in a recognized Signature Guarantee Medallion Program, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Private Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Private Notes into the Exchange Agent's account at The Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus, and any other required documents, all by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day following the Expiration Date (as defined in the Prospectus). SIGN HERE Name of Firm: Authorized Signature: Name (please type or print): Address: Area Code and Telephone No.: Date: DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER OF CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. 4 6 INSTRUCTIONS 1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at one of its addresses set forth on the cover hereof prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and all other required documents to the Exchange Agent is at the election and risk of the Holder but, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that Holders use an overnight or hand delivery service, properly insured. If such delivery is by mail, it is recommended that the Holder use properly insured, registered mail with return receipt requested. For a full description of the guaranteed delivery procedures, see the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." In all cases, sufficient time should be allowed to assure timely delivery. No Notice of Guaranteed Delivery should be sent to the Company. 2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF SIGNATURES. If this Notice of Guaranteed Delivery is signed by the Holder(s) referred to herein, then the signature must correspond with the name(s) as written on the face of the Private Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a person other than the Holder(s) listed, this Notice of Guaranteed Delivery must be accompanied by a properly completed bond power signed as the name of the Holder(s) appear(s) on the face of the Private Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Notice of Guaranteed Delivery. 3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the Exchange Offer or the procedure for consenting and tendering as well as requests for assistance or for additional copies of the Prospectus, the Letter of Transmittal and this Notice of Guaranteed Delivery, may be directed to the Exchange Agent at the address set forth on the cover hereof or to your broker, dealer, commercial bank or trust company. 5 EX-99.3 11 f71028ex99-3.txt EXHIBIT 99.3 1 EXHIBIT 99.3 [LETTER TO DTC PARTICIPANTS REGARDING THE EXCHANGE OFFER] 2 LETTER TO DTC PARTICIPANTS REGARDING THE OFFER TO EXCHANGE ANY AND ALL OUTSTANDING 10 1/8% SENIOR NOTES DUE 2008 FOR 10 1/8% SENIOR NOTES DUE 2008 OF FLEMING COMPANIES, INC. PURSUANT TO THE PROSPECTUS DATED , 2001 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. , 2001 To Securities Dealers, Commercial Banks Trust Companies and Other Nominees: Enclosed for your consideration is a Prospectus dated , 2001 (the "Prospectus") and a Letter of Transmittal (the "Letter of Transmittal") that together constitute the offer (the "Exchange Offer") by Fleming Companies, Inc., an Oklahoma corporation (the "Company"), to exchange up to $355,000,000 in principal amount of its 10 1/8% Senior Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for any and all outstanding 10 1/8% Senior Notes due 2008, issued and sold in a transaction exempt from registration under the Securities Act (the "Private Notes"), upon the terms and conditions set forth in the Prospectus. The Prospectus and Letter of Transmittal more fully describe the Exchange Offer. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. We are asking you to contact your clients for whom you hold Private Notes registered in your name or in the name of your nominee. In addition, we ask you to contact your clients who, to your knowledge, hold Private Notes registered in their own name. Enclosed are copies of the following documents: 1. The Prospectus; 2. The Letter of Transmittal for your use in connection with the tender of Private Notes and for the information of your clients; 3. The Notice of Guaranteed Delivery to be used to accept the Exchange Offer if the Private Notes and all other required documents cannot be delivered to the Exchange Agent prior to the Expiration Date; 4. A form of letter that may be sent to your clients for whose accounts you hold Private Notes registered in your name or the name of your nominee, with space provided for obtaining the clients' instructions with regard to the Exchange Offer; and 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. DTC participants will be able to execute tenders through the DTC Automated Tender Offer Program. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED BY THE COMPANY. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. 3 You will be reimbursed by the Company for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Additional copies of the enclosed material may be obtained form the Exchange Agent, at the address and telephone numbers set forth below. Very truly yours, BANKERS TRUST COMPANY Four Albany Street, 4th Floor New York, New York 10006 Attention: Matthew Sherman (212) 250-6992 ------------------------ NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. 2 EX-99.4 12 f71028ex99-4.txt EXHIBIT 99.4 1 EXHIBIT 99.4 [LETTER TO BENEFICIAL HOLDERS REGARDING THE EXCHANGE OFFER] 2 LETTER TO BENEFICIAL HOLDERS REGARDING THE OFFER TO EXCHANGE ANY AND ALL OUTSTANDING 10 1/8% SENIOR NOTES DUE 2008 FOR 10 1/8% SENIOR NOTES DUE 2008 OF FLEMING COMPANIES, INC. PURSUANT TO THE PROSPECTUS DATED , 2001 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. , 2001 To Our Clients: Enclosed for your consideration is a Prospectus dated , 2001 (the "Prospectus") and a Letter of Transmittal (the "Letter of Transmittal") that together constitute the offer (the "Exchange Offer") by Fleming Companies, Inc., an Oklahoma corporation (the "Company"), to exchange up to $355,000,000 in principal amount of its 10 1/8% Senior Notes due 2008 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for any and all outstanding 10 1/8% Senior Notes due 2008, issued and sold in a transaction exempt from registration under the Securities Act (the "Private Notes"), upon the terms and conditions set forth in the Prospectus. The Prospectus and Letter of Transmittal more fully describe the Exchange Offer. Capitalized terms used but not defined herein have the meanings given to them in the Prospectus. These materials are being forwarded to you as the beneficial owner of Private Notes carried by us for your account or benefit but not registered in your name. A tender of any Private Notes may be made only by us as the registered holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Private Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if they wish to tender Private Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to tender any or all of your Private Notes, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to tender your Private Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Private Notes on your behalf in accordance with the provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2001. Private Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to the Expiration Date. If you wish to have us tender any or all of your Private Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Private Notes held by us and registered in our name for your account or benefit. 3 INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF 10 1/8% SENIOR NOTES DUE 2008 OF FLEMING COMPANIES, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed materials referred to therein relating to the Exchange Offer of the Company. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you to tender the principal amount of Private Notes indicated below held by you for the account or benefit of the undersigned, pursuant to the terms of and conditions set forth in the Prospectus and the Letter of Transmittal. The aggregate face amount of the Private Notes held by you for the account of the undersigned is (fill in amount): $ of the Private Notes. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): [ ] To TENDER the following Private Notes held by you for the account of the undersigned (insert principal amount of Private Notes to be tendered, if any): $ of the Private Notes. [ ] NOT to TENDER any Private Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Private Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner of the Private Notes, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (fill in state) , (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned has no arrangement or understanding with any person to participate in the distribution of Exchange Notes, (iv) the undersigned acknowledges that any person who is a broker-dealer registered under the Exchange Act or is participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of Section 10 of the Securities Act in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in certain no action letters (See the section of the Prospectus entitled "The Exchange Offer -- Resale of the Exchange Notes"), (v) the undersigned understands that a secondary resale transaction described in clause (iv) above and any resales of Exchange Notes obtained by the undersigned in exchange for the Private Notes acquired by the undersigned directly from the Company should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or Item 508, if applicable, of Regulation S-K of the Commission, (vi) the undersigned is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, and (vii) if the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of Section 10 of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering such prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of Private Notes. The purchaser status of the undersigned is (check the box that applies): [ ] A "Qualified Institutional Buyer" (as defined in Rule 144A under the Securities Act) [ ] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) 2 4 [ ] A non "U.S. person" (as defined in Regulation S under the Securities Act) that purchased the Private Notes outside the United States in accordance with Rule 904 under the Securities Act [ ] Other (describe) SIGN HERE Name of Beneficial Owner(s): Signature(s): Name(s) (please print): Address: Principal place of business (if different from address listed above): Telephone Number(s): Taxpayer Identification or Social Security Number(s): Date: 3 EX-99.5 13 f71028ex99-5.txt EXHIBIT 99.5 1 EXHIBIT 99.5 [GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9] 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER -- Social Security Numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer Identification Numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------------------- - ------------------------------------------------------------- FOR THIS TYPE OF ACCOUNT: - ------------------------------------------------------------- - ------------------------------------------------------------- 1. An individual's account 2. Two or more individuals (joint account) 3. Husband and wife (joint account) 4. Custodian account of a minor (Uniform Gift to Minors Act) 5. Adult and minor (joint account) 6. Account in the name of guardian or committee for a designated ward, minor, or incompetent person 7. a. The usual revocable savings trust account (grantor is also trustee) b. So-called trust account that is not a legal or valid trust under State law GIVE THE SOCIAL SECURITY NUMBER OF -- The individual The actual owner of the account or, if combined funds, any one of the individuals(1) The actual owner of the account or, if joint funds, either person(1) The minor(2) The adult or, if the minor is the only contributor, the minor(1) The ward, minor, or incompetent person(3) The grantor-trustee(1) The actual owner(1) FOR THIS TYPE OF ACCOUNT: 8. Sole proprietorship account 9. A valid trust, estate, or pension trust 10. Corporate account 11. Religious, charitable, or educational organization account 12. Partnership account held in the name of the business 13. Association, club, or other tax-exempt organization 14. A broker or registered nominee 15. Account with the Department of Agriculture in the name of a public entity (such as a State or local government, school district or prison) that receives agricultural program payments - ------------------------------------------------------------- - ------------------------------------------------------------- 1 List first and circle the name of the person whose number you furnish. 2 Circle the minor's name and furnish the minor's social security number. 3 Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. 4 You must show your individual name, but you may also enter your business or "doing business" name. You may use either your Social Security Number or Employer Identification Number. 5 List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GIVE THE EMPLOYER IDENTIFICATION NUMBER OF -- The Owner(4) The legal entity (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title)(5) The corporation The organization The partnership The organization The broker or nominee The public entity 3 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or if you do not know your number, obtain Form SS-5, Application for Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. Payees specifically exempted from backup withholding on ALL payments by brokers include the following: - - A corporation. - - A financial institution. - - An organization exempt from a tax under Section 501(a), or an individual retirement plan or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(F)(2). - - The United States or any agency or instrumentality thereof. - - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - - An international organization or any agency or instrumentality thereof. - - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - - A real estate investment trust. - - A common trust fund operated by a bank under Section 584(a). - - An entity registered at all times under the Investment Company Act of 1940. - - A foreign central bank of issue. - - A futures commission merchant registered with the Commodity Futures Trading Commission. - - A person registered under the Investment Advisors Act of 1940 who regularly acts as a broker. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - - Payments to nonresident aliens subject to withholding under Section 1441. - - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - - Payments of patronage dividends where the amount received is not paid in money. - - Payments made by certain foreign organizations. - - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - - Payments described in Section 6049(b)(5) to nonresident aliens. - - Payments on tax-free covenant bonds under Section 1451. - - Payments made by certain foreign corporations. - - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, CHECK "EXEMPT" IN PART II OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends, which are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under Section 6041, 6041(A)(a), 6045, and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1993, payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under- payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. -----END PRIVACY-ENHANCED MESSAGE-----