-----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, PGDBSfOFJyQO+yH4PCUm+p23KpUoddyV5Hvn0ChEdLq+8OdkbPQOG7CzEOO/Ca9F EGB3Iz22xmsSNKwq0UnQlg== 0001047469-98-021592.txt : 19980525 0001047469-98-021592.hdr.sgml : 19980525 ACCESSION NUMBER: 0001047469-98-021592 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19980522 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASH FINCH CO CENTRAL INDEX KEY: 0000069671 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 410431960 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-53363 FILM NUMBER: 98630198 BUSINESS ADDRESS: STREET 1: 7600 FRANCE AVE STREET 2: PO BOX 355 CITY: SOUTH MINNEAPOLIS STATE: MN ZIP: 55435-0355 BUSINESS PHONE: 6128320534 FORMER COMPANY: FORMER CONFORMED NAME: NASH CO DATE OF NAME CHANGE: 19710617 S-4 1 S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1998. REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- NASH-FINCH COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 5141 41-0431960 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code Number) Identification organization) No.)
7600 FRANCE AVENUE SOUTH P.O. BOX 355 MINNEAPOLIS, MINNESOTA 55440-0355 (612) 832-0534 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) SEE TABLE OF ADDITIONAL REGISTRANTS -------------------------- NORMAN R. SOLAND VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL NASH-FINCH COMPANY 7600 FRANCE AVENUE SOUTH P.O. BOX 355 MINNEAPOLIS, MINNESOTA 55440-0355 (612) 832-0534 (Name and address, including zip code, and telephone number, including area code, of agent for service) -------------------------- Copies to: MARK A. KIMBALL OPPENHEIMER WOLFF & DONNELLY LLP 3400 PLAZA VII, 45 SOUTH SEVENTH STREET MINNEAPOLIS, MINNESOTA 55402 (612) 607-7000 -------------------------- Approximate date of commencement of proposed sale to the public: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. -------------------------- 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, please check the following box: / / CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE 8 1/2% Senior Subordinated Notes, Series B........................................ $165,000,000 $1,000 $165,000,000 $48,675 Guarantees of 8 1/2% Senior Subordinated Notes, Series B.......................... $165,000,000 (2) (2) None(2)
(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457. (2) No separate consideration will be received for the guarantees of the 8 1/2% Senior Subordinated Notes, Series B by certain subsidiaries of Nash-Finch Company. -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE 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 OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF ADDITIONAL REGISTRANTS(1) EXACT NAME OF REGISTRANT STATE OR OTHER JURISDICTION OF PRIMARY STANDARD AS SPECIFIED IN ITS CHARTER INCORPORATION OR ORGANIZATION INDUSTRIAL - ------------------------------------------------- -------------------------------- CLASSIFICATION CODE NUMBER -------------------------- Nash-DeCamp Company California 5148 T. J. Morris Company Georgia 5141 Super Food Services, Inc. Delaware 5141 Forrest Transportation Service, Inc. California 4700 GTL Truck Lines, Inc. Nebraska 4213 Piggly Wiggly Northland Corporation Minnesota 7399 Gillette Dairy of the Black Hills, Inc. South Dakota 2026 Nebraska Dairies, Inc. Nebraska 5143
(1) The address, including zip code, and telephone number, including area code, of the additional Registrants' principal executive offices is 7600 France Avenue South, P.O. Box 355, Minneapolis, Minnesota 55440-0355, (612) 832-0534, except as follows: . Nash-DeCamp Company 3300 South Demaree Road Visalia, CA 93277 (209) 622-1850 T. J. Morris Company 917 US Highway 301 South Statesboro, GA 30458 (912) 681-4580 Forrest Transportation Service, Inc. 3300 South Demaree Road Visalia, CA 93277 (209) 622-1870 GTL Truck Lines, Inc. 4228 South 72nd Street Omaha, NE 68127 (402) 371-8223 Gillette Dairy of the Black Hills, Inc. 1699 Sedivy Lane Rapid City, SD 57709 (605) 348-1500 Nebraska Dairies, Inc. 1200 South Johnny Carson Blvd. Norfolk, NE 68702 (402) 371-3661 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JUNE , 1998 PRELIMINARY PROSPECTUS [LOGO] OFFER TO EXCHANGE UP TO $165,000,000 OF 8 1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B FOR ANY AND ALL OF THE OUTSTANDING 8 1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A OF NASH-FINCH COMPANY THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1998, UNLESS EXTENDED Nash-Finch Company, a Delaware corporation (the "Company"), hereby offers, upon the terms and conditions set forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter of Transmittal" and, together with this Prospectus, the "Exchange Offer"), to exchange an aggregate of up to $165,000,000 principal amount of 8 1/2% Senior Subordinated Notes due 2008, Series B (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for an identical face amount of the issued and outstanding 8 1/2% Senior Subordinated Notes due 2008, Series A (the "Series A Notes" and, together with the Exchange Notes, the "Notes") of the Company from the Holders (as defined herein) thereof in integral multiples of $1,000. As of the date of this Prospectus, there is $165,000,000 in aggregate principal amount of the Series A Notes outstanding. The terms of the Exchange Notes are identical in all material respects to the Series A Notes, except that the Exchange Notes have been registered under the Securities Act, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for an increase in the interest rate payable on the Series A Notes under certain circumstances relating to the Registration Rights Agreement (as defined herein), which provisions will terminate as to all of the Notes upon the consummation of the Exchange Offer. The Exchange Notes will be obligations of the Company evidencing the same indebtedness as the Series A Notes, and will be entitled to the benefits of the same Indenture (as defined herein). See "Exchange Offer." Interest on the Exchange Notes will be payable semi-annually on May 1 and November 1 of each year, commencing November 1, 1998. The Exchange Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after May 1, 2003, at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or prior to May 1, 2001, the Company may redeem up to 35% of the originally issued aggregate principal amount of the Exchange Notes at a redemption price of 108.5% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption, with the net proceeds of a Public Equity Offering (as defined herein); PROVIDED, HOWEVER, that at least $107.25 million in aggregate principal amount of Exchange Notes is outstanding immediately after giving effect to such redemption. Following the occurrence of a Change of Control (as defined herein), each holder of Exchange Notes will have the right to require the Company to purchase all or a portion of such holder's Exchange Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase. See "Description of the Exchange Notes." The Exchange Notes will represent unsecured senior subordinated obligations of the Company and will be subordinated in right of payment to all existing and future Senior Indebtedness (as defined herein) of the Company. The Exchange Notes will rank PARI PASSU in right of payment with all other existing and future senior subordinated indebtedness, if any, of the Company and senior in right of payment to all existing and future subordinated indebtedness, if any, of the Company. The Company has not issued, and does not have any current arrangements to issue, any significant indebtedness to which the Exchange Notes would be senior, subordinate or rank PARI PASSU in right of payment. The Exchange Notes will be effectively subordinate to essentially all of the currently outstanding indebtedness of the Company and its subsidiaries. The Exchange Notes will be guaranteed, jointly and severally, on a senior subordinated basis (the "Guarantees"), by all of the Company's existing material subsidiaries (and not by the Company's special purpose financing subsidiary) (the "Guarantors" and, together with the Company, the "Issuers"). The Guarantees will be unsecured senior subordinated obligations of the Guarantors and will be subordinated to all existing and future Senior Indebtedness of the Guarantors. See "Description of the Notes--Subordination." As of March 28, 1998, on an as adjusted basis for the offering of the Series A Notes and the application of the estimated net proceeds therefrom, the Issuers would have had an aggregate of approximately $221.5 million of Senior Indebtedness outstanding. See "Use of Proceeds." SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER. ----------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. The Date of this Prospectus is , 1998. The Company will accept for exchange any and all validly tendered Series A Notes on or prior to the Expiration Date (as defined herein). Any Series A Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to or on the Expiration Date, after which tenders of Series A Notes are irrevocable. The Exchange Offer is not conditioned upon any minimum principal amount of Series A Notes being tendered for exchange. For certain conditions to the Exchange Offer, see "The Exchange Offer--Conditions." The Series A Notes were offered and sold on April 24, 1998 at a price of $992.00 per $1,000 principal amount of the Series A Notes. For federal income tax purposes, the amount of original issue discount on the Series A Notes is considered to be DE MINIMIS and is treated as zero. See "Description of Certain Federal Income Tax Consequences of an Investment in the Notes." The Series A Notes were offered and sold in a transaction not registered under the Securities Act in reliance upon an exemption from the registration requirements thereof. In general, the Series A Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act. The Exchange Notes are being offered hereby in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated April 24, 1998 (the "Registration Rights Agreement") by and among the Issuers and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Nesbitt Burns Securities Inc. and Piper Jaffray Inc. (the "Initial Purchasers"). The Company has agreed to pay the expenses of the Exchange Offer. Based on interpretations by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Series A Notes may be offered for resale, resold or otherwise transferred by any Holder thereof (other than any such Holder that is an "affiliate" of the Company within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such Holder's business and such Holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. In some cases, certain broker-dealers may be required to deliver a prospectus in connection with the resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with any resale of Exchange Notes received in exchange for such Series A Notes where such Series A Notes were acquired by such broker-dealer for its own account as a result of market-making activities or other trading activities (other than Series A Notes acquired directly from the Company). The Company has agreed that it will make this Prospectus available to any broker-dealer for use in connection with any such resale. Prior to this Exchange Offer, there has been no public market for the Series A Notes or Exchange Notes. If a market for the Exchange Notes should develop, the Exchange Notes could trade at a discount from their principal amount. The Company does not intend to list the Exchange Notes on any securities exchange nor does the Company intend to apply for quotation of the Exchange Notes on the Nasdaq National Market or other quotation system. The Initial Purchasers have indicated to the Company that they intend to make a market in the Notes, but are not obligated to do so and such market-making activities may be discontinued at any time. As a result, no assurance can be given that an active trading market for the Exchange Notes will develop. The Exchange Notes issued pursuant to this Exchange Offer will be issued in the form of a Global Security (as defined herein), which will be deposited with, or on behalf of, The Depository Trust Company (the "Depository" or "DTC") and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the Global Security representing the Exchange Notes will be shown on, and transfers thereof will be effected through, records maintained by the DTC and its participants. Notwithstanding the foregoing, Series A Notes held in certificated form will be exchanged solely for Certificated Securities (as defined herein). After the initial issuance of the Global Security, Certificated Securities will be issued in exchange for interests in the Global Security only on the terms set forth in the Indenture. See "Book-Entry; Delivery and Form." 2 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Commission. The reports, proxy statements and other information filed by the Company with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and should be available at the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60621 and at the offices of the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006. Copies of such material can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission maintains a Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. While any Series A Notes remain outstanding, the Company will make available, upon request, to any holder and any prospective purchaser of Series A Notes the information required pursuant to Rule 144A(d)(4) under the Securities Act during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act. Any such request should be directed to the Company at 7600 France Avenue South, P.O. Box 355, Minneapolis, Minnesota 55440-0355. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents are incorporated herein by reference: 1. The Company's Annual Report on Form 10-K for the year ended January 3, 1998; 2. The Company's Quarterly Report on Form 10-Q for the twelve weeks ended March 28, 1998; and 3. The Company's Current Report on Form 8-K dated April 6, 1998. All documents subsequently filed by the registrant pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the consummation of the Exchange Offer, shall be deemed to be incorporated by reference herein. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM NORMAN R. SOLAND, VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL, NASH FINCH COMPANY, 7600 FRANCE AVENUE SOUTH, P.O. BOX 355, MINNEAPOLIS, MINNESOTA 55440-0355 (612) 832-0534. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED BY , 1998 (DATE FIVE BUSINESS DAYS PRIOR TO THE DATE ON WHICH THE FINAL INVESTMENT DECISION MUST BE MADE). 3 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS AND THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED AND INCORPORATED HEREIN BY REFERENCE. UNLESS OTHERWISE INDICATED, ALL REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" REFER TO NASH FINCH COMPANY, A DELAWARE CORPORATION, AND ITS SUBSIDIARIES. UNLESS OTHERWISE INDICATED, INDUSTRY DATA CONTAINED HEREIN IS DERIVED FROM PUBLICLY AVAILABLE INDUSTRY TRADE JOURNALS, REPORTS AND OTHER PUBLICLY AVAILABLE SOURCES, WHICH THE COMPANY HAS NOT INDEPENDENTLY VERIFIED, OR FROM COMPANY ESTIMATES WHICH THE COMPANY BELIEVES TO BE REASONABLE BUT WHICH HAVE NOT BEEN INDEPENDENTLY VERIFIED. UNLESS OTHERWISE INDICATED, ALL INFORMATION CONTAINED HEREIN WITH RESPECT TO THE NUMBERS OF THE COMPANY'S RETAIL STORES AND THE SQUARE FOOTAGE OF SUCH STORES IS AS OF JANUARY 3, 1998. ALL REFERENCES TO FISCAL YEARS IN THIS PROSPECTUS REFER TO THE FISCAL YEAR ENDING ON THE SATURDAY CLOSEST TO DECEMBER 31 OF THE YEAR INDICATED (E.G., FISCAL 1997 REFERS TO THE FISCAL YEAR ENDED JANUARY 3, 1998). THE COMPANY'S FISCAL YEAR GENERALLY CONSISTS OF 52 WEEKS, EXCEPT FOR CERTAIN YEARS SUCH AS FISCAL 1997, WHICH CONSISTED OF 53 WEEKS. THE COMPANY Nash Finch Company, organized in 1921 as the successor to a business founded in 1885, is the third largest publicly traded wholesale food distributor in the United States (based on 1997 estimates), serving primarily the Midwestern and Southeastern regions of the United States. In addition, the Company operates 97 conventional and warehouse supermarkets in 13 states. The Company's wholesale operations, which include 21 distribution centers serving approximately 2,250 affiliated and independent supermarkets, U.S. military commissaries and other customers in approximately 30 states, accounted for 79.8% of the Company's total revenues in fiscal 1997, while its retail operations accounted for 18.7%. In fiscal 1997, the Company had total revenues of $4.4 billion and EBITDA (as defined herein) of $113.1 million. The Company's wholesale operations serve two primary markets: (i) supermarkets (70.4% of wholesale revenues in fiscal 1997), where the Company combines a wide offering of national brand and private label products with comprehensive support services to develop strong relationships with customers; and (ii) military commissaries (29.6% of wholesale revenues in fiscal 1997), where the Company believes it is currently the largest distributor of groceries and related products to such facilities in the United States. The Company's broad product offering includes dry groceries, fresh fruits and vegetables, frozen foods, fresh and processed meat products and dairy products, as well as a wide variety of non-food products, including health and beauty care, tobacco, paper products, cleaning supplies and small household items. Private label products are branded primarily under the Our Family-Registered Trademark- trademark, a long-standing private label of the Company, and Fame-Registered Trademark-, a trademark acquired in the acquisition of Super Food Services, Inc. ("Super Food") in November 1996. The Company offers a wide range of support services to its independent retailers to help them compete more effectively in their markets and to build customer loyalty, including supermarket merchandising support, accounting services, price management systems, retail technology support, advertising and promotional programs, training and human resource development services, market research and store development services. The Company's retail stores, as well as many of the retail outlets supplied by the Company's wholesale operations, are located primarily in small to midsized markets and rural areas. The Company's retail operations consist of 66 conventional supermarkets, averaging approximately 23,300 square feet in size, operating principally under the Sun Mart-TM-, Easter Foods-TM- and Food Folks-Registered Trademark- trade names; 27 warehouse stores, averaging approximately 42,900 square feet in size, operating principally under the Econofoods-Registered Trademark- trade name; and four combination general merchandise/food stores averaging approximately 43,000 square feet in size, operating under the Family Thrift Center-TM- trade name. 4 COMPANY STRENGTHS LEADING WHOLESALE FOOD DISTRIBUTOR. Through recent acquisitions, the Company has become the third largest publicly traded wholesale food distributor in the United States (based on 1997 estimates) with geographically dispersed operations serving primarily the Midwestern and Southeastern regions of the United States. The Company serves a diversified group of approximately 2,250 affiliated and independent supermarkets, U.S. military commissaries and other customers, none of which accounted for more than 2.5% of the Company's total revenues in fiscal 1997. The Company believes it is the largest wholesale distributor of groceries and related products to military commissaries in the United States. The Company derives increased purchasing power and economies of scale from its large sales volume and distribution network. INTEGRATED AND EFFICIENT DISTRIBUTION NETWORK. The Company has and continues to develop a highly integrated and efficient distribution network by realizing synergies from acquisitions and implementing innovative logistical techniques. The Company continues to pursue opportunities to increase volume through strategic acquisitions and to realize greater efficiencies in its distribution network through consolidation of distribution centers. The Company believes it is an industry leader in the development of advanced information systems and the application of innovative logistics, such as port of entry purchasing in full truck load quantities, cross docking and redistribution, which have resulted in price and freight savings and operating efficiencies. EXPERTISE IN PRIVATE LABEL PRODUCTS AND PERISHABLES. The Company has developed extensive expertise in marketing and distributing a wide range of private label products, including approximately 1,600 SKUs under the Our Family private label and approximately 1,300 SKUs under the Fame private label. The Company's private labels enjoy strong brand name recognition in the Company's markets. Sales and transfers of private label products accounted for 9.8% of the Company's non-military wholesale revenues in fiscal 1997. The Company has also developed significant expertise in handling, marketing and distributing perishables, including produce and dairy products. The Company's commitment to distributing perishables enables it to provide a full spectrum of quality products to customers. The Company believes that offering high quality private label products and perishables provides it with certain competitive advantages in attracting and retaining independent retailers and consumers. Private label products and perishables generally result in higher margins than branded products and other food categories. STRONG RETAIL STORE BASE. The Company's 97 retail stores serve primarily small to midsized markets and rural areas. The Company believes that approximately 70% of the Company's stores are in markets where the Company is first or second in market share. The Company believes its strong market share positions result primarily from offering a variety of store formats and retail concepts targeted to different geographical markets under several store names, including Sun Mart, Easter Foods, Food Folks, Econofoods and Food Bonanza-Registered Trademark-. In addition, the Company believes its retail store base enhances the Company's wholesale operations by enabling it to (i) better understand the needs of independent retailers, thereby improving customer service; and (ii) test retail concepts and innovations, including advertising and promotional programs, in the Company's stores before they are rolled out to independent retailers. The Company's retail stores are typically located close to distribution centers, thereby creating certain operating efficiencies and logistical savings. LEADING DISTRIBUTOR TO DOMESTIC MILITARY COMMISSARIES. The Company believes that it is the largest wholesale distributor of groceries and related products to domestic military commissaries. The Company's military distribution centers also provide products for distribution to U.S. military commissaries in Europe and to ships afloat. The Company serves as a third party distributor to commissaries, contracting with a variety of food producers and other manufacturers to procure and warehouse products for distribution to commissaries. The Company's military distribution operations generally result in higher net margins than the Company's civilian distribution operations due primarily to lower operating expenses. 5 REPUTATION FOR SUPERIOR CUSTOMER SERVICE. The Company's 113 year operating history, centered on the theme "CUSTOMER SATISFACTION IS ALWAYS FIRST!"-Registered Trademark-, has resulted in strong relationships with long-standing customers. To further enhance its reputation and strengthen customer relationships, the Company offers a wide range of support services to customers to help them compete more effectively in their markets, including supermarket merchandising support, accounting services, price management systems, retail technology support, advertising and promotional programs, training and human resource development services, market research and store development services. EXPERIENCED MANAGEMENT TEAM. The Company is led by a strong and experienced executive management team, the members of which have on average 20 years with the Company and 24 years of industry expertise across all facets of wholesale distribution, marketing, merchandising and retail operations. COMPANY STRATEGY Management believes that the role of the distributor will continue to change from the warehousing of goods toward a greater emphasis on the strategic facilitation of goods and services for customers in a manner that provides greater efficiencies. In addition, the Company believes that food retailers will be required to offer a wider variety of goods and services at attractive prices to compete effectively. Accordingly, the Company's goals are to (i) profitably build the competitive strength of the Company's wholesale customers by being a reliable cost-effective provider of superior products and services, and (ii) achieve critical mass of profitable Company retail stores in target markets. To achieve these goals, the Company has adopted the following strategic initiatives: COST SAVINGS AND VALUE ADDED INITIATIVES. The Company has implemented and will continue to focus on a wide range of cost savings and value added initiatives, including (i) maximizing the Company's substantial purchasing power through centralized buying; (ii) consolidating operations and distribution centers to achieve operating efficiencies and economies of scale; (iii) reducing the Company's investment in working capital through strategic partnerships with suppliers and more aggressive management of receivables; (iv) implementing innovations in logistics and supply chain management to reduce procurement costs, freight charges, inventory levels and delivery lead times; (v) emphasizing greater cost consciousness among the Company's workforce; and (vi) identifying underperforming assets and adopting an aggressive "fix, sell or close" approach. IMPLEMENTATION OF HORIZONS INFORMATION SYSTEM. The Company, working in conjunction with SAP America and a number of other vendors and consultants, has committed significant resources over the last two years to develop and implement HORIZONS, a client server based enterprise management and financial information system. The HORIZONS system will be a fully integrated and scalable system that management believes will provide the Company with competitive advantages that can be aggressively marketed to independent retailers. Implementation of the HORIZONS system is scheduled to be substantially completed in 1999 and is expected to provide (i) a solution to the Company's Year 2000 software issues, (ii) greater flexibility for the changing business environment, (iii) greater connectivity opportunities with customers and suppliers, (iv) the ability to integrate and standardize information systems throughout the Company, (v) timely and easy-to-use information, (vi) greater business process and workflow efficiencies, and (vii) more powerful decision-making and analysis tools. To parallel the development and implementation of the HORIZONS project, management has led a cultural change and training initiative designed to prepare the Company's workforce for changes in the industry and in the use of the HORIZONS system to address these changes. GROWTH THROUGH STRATEGIC ACQUISITIONS AND ALLIANCES. The Company has grown significantly in recent years through strategic acquisitions that have (i) enhanced the Company's purchasing power, (ii) expanded the Company's geographic scope and breadth of product offering, (iii) increased the volume and efficiency of several of the Company's distribution centers, (iv) significantly enhanced the Company's presence in the military commissary market, and (v) added retail stores in the Company's target markets. The Company 6 will continue to strive to achieve additional synergies through further integration of recent acquisitions. In addition, the Company will continue to seek new opportunities for strategic acquisitions and alliances that will provide a superior return on investment and achieve one or more of the criteria described above. STRENGTHEN RETAIL STORE BASE. The Company will continue to focus on improving the profitability and contribution of the Company's retail store base by investing to achieve critical mass and market dominance in the Company's key retail markets, including seeking acquisition opportunities that provide synergies, constructing new stores, remodeling and expanding existing stores and remodeling, selling or closing underperforming stores. In the past two years, the Company has acquired seven stores, remodeled 16 stores, sold seven stores and closed 16 stores. In addition, the Company has and will continue to develop and utilize a number of different retail formats in its retail stores. The Company believes that multiple retail formats enable the Company to more effectively respond to competition in the varied markets in which it operates. Addressing each market individually has resulted in the strong market position the Company enjoys in the majority of the Company's retail markets. Multiple formats also allow the Company to test different concepts prior to extending such concepts to independent retail customers. 7 THE SERIES A NOTE OFFERING The Series A Notes................ The Series A Notes were sold by the Company to the Initial Purchasers in the Series A Note Offering on April 24, 1998, and were subsequently resold by the Initial Purchasers pursuant to Rule 144A and Regulation S under the Securities Act and other available exemptions under the Securities Act. Registration Rights Agreement..... In connection with the Series A Note Offering, the Company entered into the Registration Rights Agreement, which grants Holders of the Series A Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange and registration rights, which generally terminate upon the consummation of the Exchange Offer. THE EXCHANGE OFFER Securities Offered................ $165,000,000 in aggregate principal amount of 8 1/2% Senior Subordinated Notes due 2008, Series B. The Exchange Offer................ $1,000 principal amount of the Exchange Notes in exchange for each $1,000 principal amount of Series A Notes. As of the date hereof, $165,000,000 in aggregate principal amount of Series A Notes are outstanding. The Company will issue the Exchange Notes to Holders on or promptly after the Expiration Date. The terms of the Exchange Notes are substantially identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Series A Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (other than as provided herein), and are not subject to any covenant regarding registration under the Securities Act. See "The Exchange Offer." Other than compliance with applicable federal and state securities laws, including the requirement that the Registration Statement be declared effective by the Commission, there are no material federal or state regulatory requirements to be complied with in connection with the Exchange Offer. Interest Payments................. The Exchange Notes will bear interest from April 24, 1998, the date of issuance of the Series A Notes, or the most recent interest payment date to which interest on such Series A Notes has been paid, whichever is later. Accordingly, Holders of Series A Notes that are accepted for exchange will not receive interest on such Series A Notes that is accrued but unpaid at the time of tender, but such interest will be payable on the first interest payment date after the Expiration Date. Minimum Condition................. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Series A Notes being tendered for exchange. Expiration Date................... 5:00 p.m., New York City time, on , 1998 unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended.
8 Exchange Date..................... The date of acceptance for exchange of the Series A Notes will be the first business day following the Expiration Date. Withdrawal Rights................. Tenders 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." Acceptance of Series A Notes and Delivery of Exchange Notes...... The Company will accept for exchange any and all Series A Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Conditions to the Exchange Offer........................... The Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer--Conditions." Procedures for Tendering Series A Notes........................... To tender pursuant to the Exchange Offer, a Holder must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof, have the signatures therein guaranteed if required by instruction 4 of the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Series A Notes and any other required documentation to the Exchange Agent (as defined herein) at the address set forth herein prior to 5:00 p.m., New York time, on the Expiration Date. See "The Exchange Offer-- Procedures for Tendering" and "Plan of Distribution." By executing the Letter of Transmittal, each Holder will represent to the Company that, among other things, the Holder or the person receiving such Exchange Notes, whether or not such person is the Holder, is acquiring the Exchange Notes in the ordinary course of business and that neither the Holder nor any such other person intends to participate or has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes. In lieu of physical delivery of the certificates representing Series A Notes, tendering Holders may transfer Series A Notes pursuant to the procedure for book-entry transfer as set forth under "The Exchange Offer--Procedures for Tendering." Special Procedures for Beneficial Owners.......................... Any beneficial owner whose Series A Notes are registered in the name of a broker, commercial bank, trust company or other nominee and who wishes to tender in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such beneficial owner's own behalf, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering the Series A Notes, either make appropriate arrangements to register ownership of the Series A Notes in such beneficial owner's name or obtain a properly completed
9 bond power from the registered holder. The transfer of registered ownership may take considerable time. See "The Exchange Offer--Procedures for Tendering." Guaranteed Delivery Procedures.... Holders of Series A Notes who wish to tender their Series A Notes and whose Series A Notes are not immediately available or who cannot deliver their Series A Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the requirements for book-entry transfer) prior to the Expiration Date must tender their Series A Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Federal Income Tax Consequences... The issuance of the Exchange Notes to Holders pursuant to the terms set forth in this Prospectus will not constitute an exchange for federal income tax purposes. Consequently, no gain or loss would be recognized by Holders upon receipt of the Exchange Notes. See "The Exchange Offer--Certain Federal Income Tax Consequences of the Exchange Offer." Use of Proceeds................... There will be no proceeds to the Company from the exchange of Series A Notes pursuant to the Exchange Offer. Exchange Agent.................... U.S. Bank Trust National Association is serving as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. See "The Exchange Offer--Exchange Agent."
SUMMARY OF TERMS OF EXCHANGE NOTES The form and terms of the Exchange Notes are the same as the form and terms of the Series A Notes (which they replace) except that (i) the issuance of the Exchange Notes will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof, and (ii) the holders of Exchange Notes generally will not be entitled to further registration rights under the Registration Rights Agreement, which rights generally will be satisfied when the Exchange Offer is consummated. The Exchange Notes will evidence the same debt as the Series A Notes and will be entitled to the benefits of the Indenture. See "Description of the Exchange Notes." Securities Offered................ $165,000,000 aggregate principal amount of 8 1/2% Senior Subordinated Notes due 2008, Series B. Maturity Date..................... May 1, 2008. Interest Payment Dates............ May 1 and November 1 of each year, commencing November 1, 1998. Optional Redemption............... The Exchange Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after May 1, 2003, at the redemption prices set forth herein, plus accrued and unpaid interest thereon, if any, to the date of redemption. In addition, on or prior to May 1, 2001, the Company may redeem up to 35% of the originally issued aggregate principal amount of the Exchange Notes, at a redemption price of 108.5% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption with the net proceeds of a Public Equity Offering; PROVIDED, HOWEVER, that at least $107.25 million in aggregate principal amount of Exchange
10 Notes is outstanding immediately after giving effect to such redemption. See "Description of the Exchange Notes--Optional Redemption." Guarantees........................ The Exchange Notes will be guaranteed, jointly and severally, on a senior subordinated basis, by substantially all of the Company's existing material subsidiaries (and not by the Company's special purpose financing subsidiary). See "Description of the Exchange Notes--Subsidiary Guarantees." Subordination..................... The Exchange Notes and the Guarantees will represent unsecured senior subordinated obligations of the Company and the Guarantors, as applicable, and will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company or the Guarantors, as applicable. The Exchange Notes will rank PARI PASSU in right of payment with all other existing and future senior subordinated indebtedness, if any, of the Company and senior in right of payment to all existing and future subordinated indebtedness, if any, of the Company. The Company has not issued, and does not have any current arrangements to issue, any significant additional indebtedness to which the Exchange Notes would be senior, subordinate or rank PARI PASSU in right of payment. The Exchange Notes will be effectively subordinate to essentially all of the currently outstanding indebtedness of the Company and its subsidiaries. As of March 28, 1998, and as adjusted for the offering of the Series A Notes and the application of the estimated net proceeds therefrom, the Issuers would have had an aggregate of approximately $221.5 million of Senior Indebtedness outstanding. See "Description of the Exchange Notes-- Subordination" and "Use of Proceeds." Change of Control................. Following the occurrence of a Change of Control, each holder of Exchange Notes will have the right to require the Company to purchase all or a portion of such holder's Exchange Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of purchase. See "Description of the Exchange Notes--Change of Control." Certain Covenants................. The indenture under which the Exchange Notes will be issued (the "Indenture") contains certain restrictive covenants, including, but not limited to, covenants with respect to the following matters: (i) limitation on additional indebtedness; (ii) limitation on restricted payments; (iii) limitation on transactions with affiliates; (iv) limitation on liens; (v) limitation on incurrence of senior subordinated indebtedness; (vi) limitation on sale of assets; (vii) limitation on issuances of guarantees by Restricted Subsidiaries (as defined herein); (viii) limitation on preferred stock of Restricted Subsidiaries; (ix) limitation on dividends and other payment restrictions affecting Restricted Subsidiaries; and (x) limitations on Unrestricted Subsidiaries (as defined herein). See "Description of the Exchange Notes--Certain Covenants."
11 The Indenture will provide that after the Notes achieve an investment grade rating from both Standard & Poor's Ratings Group and Moody's Investors Service, Inc., the Company's obligation to comply with certain of the restrictive covenants described herein will be terminated. See "Description of the Notes--Certain Covenants." Exchange Offer; Registration Rights.......................... In the event that applicable law or interpretations of the staff of the Commission do not permit the Issuers to file the Exchange Offer Registration Statement or to effect the Exchange Offer, or if the Exchange Offer is not consummated within 120 days after the Issue Date, or if certain holders of the Notes notify the Issuers that they are not permitted to participate in, or would not receive freely tradable Notes pursuant to, the Exchange Offer, the Issuers will use their best efforts to cause to become effective a registration statement (the "Shelf Registration Statement") with respect to the resale of the Notes and to keep the Shelf Registration Statement effective until up to two years after the effective date thereof. If the Issuers default with respect to such registration obligations, then the Issuers will pay liquidated damages in cash to each holder of Transfer Restricted Notes (as defined) in an amount equal to 0.25% per annum of the principal amount of the Notes for the first 90-day period (or portion thereof) following each such default and will increase by an additional 0.25% per annum with respect to each subsequent 90-day period (or portion thereof) up to a maximum amount of 1.00% per annum until all registration defaults are cured, whereupon the accrual of liquidated damages will cease. See "Exchange Offer; Registration Rights." Absence of a Public Market for the Notes....................... The Exchange Notes are new securities for which there is currently no established trading market. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation of the Exchange Notes on any automated dealer quotation system. Although the Initial Purchasers have informed the Company that they currently intend to make a market in the Exchange Notes, they are not obligated to do so and any such market-making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Exchange Notes. If an active trading market for the Exchange Notes does not develop, the market price and liquidity of the Exchange Notes may be adversely affected. If the Exchange Notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, the performance of the Company and certain other factors. See "Risk Factors--Lack of Prior Market for the Exchange Notes."
RISK FACTORS See "Risk Factors" beginning on page 14 for a discussion of certain factors that should be considered by holders of Series A Notes before deciding to tender Series A Notes in the Exchange Offer. 12 SUMMARY CONSOLIDATED FINANCIAL DATA The following table presents summary consolidated financial data of the Company. The annual historical financial data have been derived from the Company's audited Consolidated Financial Statements. The summary consolidated financial data for the fiscal quarters ended March 28, 1998 and March 22, 1997 are derived from the Unaudited Consolidated Financial Statements of the Company included elsewhere in this Prospectus. Such Unaudited Consolidated Financial Statements, in the opinion of the Company's management, include all adjustments necessary (consisting of normal recurring accruals) for a fair presentation of the financial condition and results of operations of the Company for such periods and as of such dates. The summary consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with the Consolidated Financial Statements of the Company and the related notes thereto included elsewhere in this Prospectus.
TWELVE WEEKS ENDED YEAR ENDED (A) ------------------------ ------------------------------------------------------------------ MARCH 28, MARCH 22, JANUARY 3, DECEMBER 28, DECEMBER 30, DECEMBER 31, JANUARY 1, 1998 1997 1998 1996 1995 1994 1994 ----------- ----------- ----------- ------------ ------------ ------------ ----------- (DOLLARS IN THOUSANDS) INCOME STATEMENT DATA: Total revenues.................. $ 937,101 $ 947,832 $4,391,602 $3,375,485 $2,888,836 $2,832,000 $2,723,535 Cost of sales................... 820,360 825,189 3,826,377 2,932,709 2,469,841 2,410,292 2,325,249 ----------- ----------- ----------- ------------ ------------ ------------ ----------- Gross profit.................... 116,741 122,643 565,225 442,776 418,995 421,708 398,286 Selling, general and administrative, and other operating expenses (b)........ 94,310 99,158 453,645 359,456 350,201 352,683 332,349 Special charges (c)............. -- -- 31,272 -- -- -- -- Depreciation and amortization... 11,078 10,905 47,697 34,759 29,406 31,831 29,145 Interest expense................ 6,860 7,321 32,845 14,894 10,793 11,384 10,114 ----------- ----------- ----------- ------------ ------------ ------------ ----------- Income before income taxes and extraordinary charge.......... 4,493 5,259 (234) 33,667 28,595 25,810 26,678 Income taxes.................... 1,865 2,203 994 13,635 11,181 10,330 10,804 Extraordinary charge (d)........ (5,569) -- -- -- -- -- -- ----------- ----------- ----------- ------------ ------------ ------------ ----------- Net income (loss)............... $(2,941) $3,056 $(1,228 ) $20,032 $17,414 $15,480 $15,874 ----------- ----------- ----------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ ------------ ----------- Net income (loss) per share: Basic......................... (.26 ) .27 (.11 ) 1.83 1.60 1.42 1.46 ----------- ----------- ----------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ ------------ ----------- Diluted....................... (.26 ) .27 (.11 ) 1.81 1.60 1.42 1.46 ----------- ----------- ----------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ ------------ ----------- BALANCE SHEET DATA: Working capital................. $186,114 $247,394 $199,931 $228,508 $104,002 $89,457 $79,904 Total assets.................... 912,423 935,806 904,883 945,477 514,260 531,604 521,654 Total debt, including capitalized leases............ 381,185 433,527 383,270 427,617 95,889 143,045 140,167 Stockholders' equity............ 220,970 234,566 225,618 232,861 215,313 206,269 199,264 OTHER FINANCIAL DATA: Ratio of earnings to fixed charges (e)................... 1.46 x 1.53 x 1.00 x 2.34 x 2.49 x 2.28 x 2.35 x Capital expenditures (f)........ $13,474 $7,939 $67,725 $51,333 $33,264 $34,965 $36,382
- ---------------------------------- (a) Fiscal year operating results include 52 weeks for each year except fiscal 1997, which consisted of 53 weeks. (b) Includes expenses incurred in connection with HORIZONS estimated to be $1.8 million in the first quarter of fiscal 1998, $5.5 million in fiscal 1997 and $1.6 million in fiscal 1996. See "Business -- Information Systems." (c) Includes $14.5 million for the consolidation of selected warehouses, $2.5 million of integration costs associated with the acquisition of the business and assets of United-A.G. Cooperative, Inc. in Omaha, Nebraska, $5.2 million from closing or consolidating underperforming retail stores, a $5.4 million asset impairment charge relating to seven retail stores, a $1.0 million asset impairment charge relating to the Company's produce marketing operations, a $0.9 million write-off of current systems software being replaced by HORIZONS and a $0.6 million loss relating to the sale of the Company's investment in a Hungarian food wholesaler. (d) Reflects prepayment premiums from early extinguishment of debt, net of income tax benefits. See "Use of Proceeds." (e) For purposes of computing the ratios, earnings represent income before income taxes, the cumulative effect of accounting changes plus fixed charges. Fixed charges represent interest expense and that portion of rent expense under all lease commitments deemed to represent an appropriate interest factor. (f) Includes approximately $5.8 million, $2.1 million, $20.0 million and $8.1 million of capital expenditures incurred in connection with HORIZONS in the first quarter of fiscal 1998, the first quarter of fiscal 1997, fiscal 1997 and fiscal 1996, respectively. 13 RISK FACTORS HOLDERS OF SERIES A NOTES SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING TO TENDER SERIES A NOTES IN THE EXCHANGE OFFER. THE RISK FACTORS SET FORTH BELOW ARE GENERALLY APPLICABLE TO THE SERIES A NOTES AS WELL AS THE EXCHANGE NOTES. SUBSTANTIAL LEVERAGE The Company has substantial indebtedness and, as a result, significant debt service obligations. As of March 28, 1998, on an as adjusted basis for the offering of the Series A Notes and the application of the estimated net proceeds therefrom, the Company would have had approximately $370.3 million of long-term indebtedness which would have represented approximately 62.6% of total capitalization. See "Capitalization." In addition, the Indenture and the Company's other debt instruments will allow the Company to incur additional indebtedness, including secured indebtedness. As of March 28, 1998 and after giving pro forma effect to the offering of the Series A Notes and the application of the estimated net proceeds therefrom, a required reduction of the Revolving Credit Facility (as defined below) from $360.0 million to $350.0 million and the expiration of the Company's bank credit facility with Wachovia Bank of Georgia, N.A. effective as of June 9, 1998, the Company would have had an aggregate of $339.2 million available for borrowing under the Company's $350.0 million revolving credit facility with a variety of lending institutions (the "Revolving Credit Facility") and under the Company's $160.0 million of other bank credit facilities with Brinson Trust Company and Norwest Bank Minnesota, N.A. (the "Other Bank Credit Facilities" and, together with the Revolving Credit Facility, the "Bank Credit Facilities"). See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Description of Certain Other Indebtedness." Upon the issuance of the Series A Notes, the Company's interest expense increased as compared with prior years. See "Capitalization." The ability of the Company to pay interest and principal on the Notes and to satisfy its debt obligations will be dependent on the future operating performance of the Company, which could be affected by changes in economic conditions and financial, competitive, legislative, regulatory and other factors, including factors beyond the control of the Company. A failure to comply with the covenants and other provisions of its debt instruments could result in events of default under such instruments, which could permit acceleration of the debt under such instruments and in some cases acceleration of debts under other instruments that contain cross-default or cross-acceleration provisions. The Company believes, based on current circumstances, that the Company's cash flow, together with available borrowings under the Bank Credit Facilities, will be sufficient to permit the Company to meet its operating expenses, to pay dividends on its common stock and to service its debt requirements as they become due for the foreseeable future. Significant assumptions underlie this belief, including, among other things, that the Company will succeed in implementing its business strategy and that there will be no material adverse developments in the business, liquidity or capital requirements of the Company. There can be no assurance that the Company will be able to generate sufficient cash flow to service its interest payment obligations under its indebtedness or that cash flows, future borrowings or equity financing will be available for the payment or refinancing of the Company's indebtedness. If the Company is unable to service its indebtedness, it will be required to adopt alternative strategies, which may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing its indebtedness or seeking additional equity capital. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all. The degree to which the Company is leveraged could have important consequences to holders of the Notes, including: (i) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; (ii) a substantial portion of the Company's cash flows from operations may be dedicated to the payment of principal and interest on its indebtedness, thereby reducing the funds available to the Company for its future operations; (iii) certain 14 of the Company's indebtedness contains financial and other restrictive covenants, including those restricting the incurrence of additional indebtedness, the creation of liens, the payment of dividends, sales of assets and minimum net worth requirements; (iv) certain of the Company's borrowings are and will continue to be at variable rates of interest which exposes the Company to the risk of greater interest rates; and (v) the Company's substantial leverage may make it more vulnerable to changing economic conditions, limit its ability to withstand competitive pressures and reduce its flexibility in responding to changing business and economic conditions. As a result of the Company's current level of indebtedness, its financial capacity to respond to market conditions, capital needs and other factors may be limited. SUBORDINATION OF THE NOTES AND THE GUARANTEES; ASSET ENCUMBRANCES The payment of principal of, premium, if any, and interest on the Notes will be subordinated to the prior payment in full of all existing and future Senior Indebtedness of the Company, which includes all indebtedness under the Bank Credit Facilities. Therefore, in the event of a liquidation, dissolution, insolvency, bankruptcy, reorganization or any similar proceeding regarding the Company, the assets of the Company will be available to pay obligations on the Notes only after Senior Indebtedness has been paid in full, and there may not be sufficient assets to pay amounts due on all or any of the Notes. In addition, the Company may not pay principal of, premium, if any, interest on or any other amounts owing in respect of the Notes, make any deposit pursuant to defeasance provisions or purchase, redeem or otherwise retire the Notes, if any Senior Indebtedness is not paid when due or any other default on Senior Indebtedness occurs and the maturity of such indebtedness is accelerated in accordance with its terms unless, in either case, such default has been cured or waived, any such acceleration has been rescinded or such indebtedness has been repaid in full. Moreover, under certain circumstances, if any non-payment default exists with respect to Designated Senior Indebtedness (as defined herein), the Company may not make any payments on the Notes for a specified time, unless such default is cured or waived, any acceleration of such indebtedness has been rescinded or such indebtedness has been repaid in full. See "Description of the Exchange Notes--Subordination." The Guarantees by the Guarantors will be subordinated to all existing and future guarantees by the Guarantors of Senior Indebtedness of the Company and to any other Senior Indebtedness of the Guarantors on a similar basis. As of March 28, 1998, on an as adjusted basis for the Prepayments, the offering of the Series A Notes and the application of the estimated net proceeds therefrom, the Issuers would have had an aggregate of approximately $221.5 million in aggregate principal amount of Senior Indebtedness outstanding which ranked senior in right of payment to the Notes and the Guarantees and the ability to borrow an additional $339.2 million of Senior Indebtedness under the Bank Credit Facilities. Under the terms of the Indenture, and the Company's other debt instruments, the Company may incur additional indebtedness, including Senior Indebtedness or secured indebtedness, in the future. See "Description of the Notes--Certain Covenants." The Notes will not be secured by any of the Company's assets. Certain of the Company's other indebtedness is secured, to the extent permitted by law, by certain of the Company's assets, and the terms of the Indenture and the instruments governing the Company's other indebtedness permit the Company to incur additional secured indebtedness. The Bank Credit Facilities contain restrictive covenants and financial maintenance tests and the Company's ability to comply therewith may be affected by events beyond its control. A breach of any of these covenants could result in an event of default under the Bank Credit Facilities allowing the lenders thereunder to elect to declare all outstanding amounts thereunder to be immediately due and payable. If the Company becomes insolvent or is liquidated, or if payment under any of the instruments governing the Company's secured indebtedness is so accelerated, the lenders under such instruments would be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to instruments governing such indebtedness. Accordingly, such lenders will have a prior claim on the Company's assets securing their indebtedness. In any of such events, because the Notes will not be secured by any of the Company's assets, it is possible that there would be no assets remaining from which claims of the holders of the Notes could be satisfied or, if any such assets remained, such assets might be insufficient to satisfy such claims in full. See "Description of Certain Other Indebtedness." 15 DEPENDENCE UPON OPERATIONS OF SUBSIDIARIES; POSSIBLE INVALIDITY OF GUARANTEES; POTENTIAL RELEASE OF GUARANTEES The Notes are the obligations of the Company. As of the date of this Prospectus, a substantial portion of the consolidated assets of the Company were held by the Guarantors and a substantial portion of the Company's cash flow and net income was generated by the Guarantors. Therefore, the Company's ability to make interest and principal payments when due to holders of the Notes is dependent, in part, upon the receipt of sufficient funds from its subsidiaries. The payment of dividends or the making of loans or advances to the Company by its subsidiaries may be subject to statutory restrictions and are contingent upon the earnings of those subsidiaries. The Company's obligations under the Notes will be guaranteed, jointly and severally, on a senior subordinated basis by each of the Guarantors, which consist of all of the Company's existing material subsidiaries (and not the Company's special purpose financing subsidiary). To the extent that a court were to find, pursuant to federal or state fraudulent transfer laws or otherwise, that (i) a Guarantee was incurred by a Guarantor with intent to hinder, delay or defraud any present or future creditor or the Guarantor contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others; or (ii) such Guarantor did not receive fair consideration or reasonably equivalent value for issuing its Guarantee and such Guarantor (a) was insolvent, (b) was rendered insolvent by reason of the issuance of such Guarantee, (c) was engaged or about to engage in a business or transaction for which the remaining assets of such Guarantor constituted unreasonably small capital to carry on its business or (d) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, the court could avoid or subordinate such Guarantee in favor of the Guarantor's other creditors. Among other things, a legal challenge of a Guarantee on fraudulent conveyance grounds may focus on the benefits, if any, realized by the Guarantor as a result of the issuance by the Company of the Notes. The measure of insolvency of a Guarantor for purposes of the foregoing will vary depending upon the law of the relevant jurisdiction. Generally, however, a company would be considered insolvent for purposes of the foregoing if the sum of the company's debts were greater than all of the company's property at a fair valuation, or if the present fair salable value of the company's assets were less than the amount that will be required to pay its probable liability on its existing debts as they become absolute and mature. There can be no assurance as to what standards a court would apply to determine whether a Guarantor was solvent at the relevant time. To the extent any Guarantee were to be avoided as a fraudulent conveyance or held unenforceable for any other reason, holders of the Notes would cease to have any claim in respect of such Guarantor and would be creditors solely of the Company and any Guarantor whose Guarantee was not avoided or held unenforceable. In such event, the claims of the holders of the Notes against the issuer of an invalid Guarantee would effectively be subordinated to all indebtedness and other liabilities and commitments and subject to the prior payment in full of such indebtedness, other liabilities and commitments of such Guarantor. There can be no assurance that, after providing for all prior claims, there would be sufficient assets to satisfy the claims of the holders of the Notes relating to any voided Guarantee. Based upon financial and other information currently available to it, the Company believes that the Exchange Notes and the Guarantees are being incurred for proper purposes and in good faith and that the Company and each Guarantor is solvent and will continue to be solvent after issuing the Exchange Notes or its Guarantee, as the case may be, will have sufficient capital for carrying on its business after such issuance and will be able to pay its debts as they mature. See "Description of the Exchange Notes," "Description of Certain Other Indebtedness" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Any Guarantee of a Guarantor may be released at any time upon any sale, exchange or transfer by the Company of the stock of such Guarantor or all or substantially all of the assets of such Guarantor to a non-affiliate in compliance with the terms of the Indenture. See "Description of the Exchange Notes-- Subsidiary Guarantees." 16 LOW MARGIN BUSINESS; INCREASING COMPETITION AND MARGIN PRESSURE The wholesale food distribution and retail grocery industries in which the Company operates are characterized by low profit margins. As a result, the Company's results of operations are sensitive to, and may be materially adversely impacted by, among other things, competitive pricing pressures, vendor selling programs, increasing interest rates and food price deflation. There can be no assurance that one or more of such factors will not have a material adverse affect the Company's business, financial condition or results of operations. See "Business--Competition." The wholesale food distribution industry is undergoing change as producers, manufacturers, distributors and retailers seek to lower costs and increase services in an increasingly competitive environment of relatively static over-all demand, resulting in increasing pressure on the industry's already low profit margins. Alternative format food stores (such as warehouse stores and supercenters) have gained market share at the expense of traditional supermarket operators, including independent operators, many of whom are customers of the Company. Vendors, seeking to ensure that more of their promotional dollars are used by retailers to increase sales volume, increasingly direct promotional dollars to large self-distributing chains. The Company believes that these changes have led to reduced margins and lower profitability among many of its customers and at the Company itself. In response to these changes, the Company is pursuing a multi-faceted strategy that includes various cost savings and value added initiatives, growth through strategic acquisitions and alliances, and the development and implementation of the HORIZONS enterprise management and financial information system. The Company believes that its ultimate success will depend on its ability to pursue and execute these strategic initiatives, and on the effectiveness of these strategic initiatives in reducing costs of operations and enhancing operating margins. Any significant delay or failure in the implementation of these strategic initiatives could result in diminished sales and operating margins. No assurance can be given that the Company's strategic initiatives, if implemented, will result in increased sales or enhanced profit margins. ACQUISITION STRATEGY Partly in response to changes in the wholesale food distribution industry discussed above, the Company has for several years pursued a strategy of aggressive growth through acquisitions in the wholesale food distribution market, including both general and military distribution operations, and in retail store operations. The Company intends to continue to pursue strategic acquisition opportunities in these business segments, both in existing and new geographic markets. In pursuing this acquisition strategy, the Company faces risks commonly encountered with growth through acquisitions, including completed acquisitions. These risks include, but are not limited to, incurring significantly higher than anticipated capital expenditures and operating expenses, failing to assimilate the operations and personnel of acquired businesses, failing to install and integrate all necessary systems and controls, losing customers, entering markets in which the Company has no or limited experience, disrupting the Company's ongoing business and dissipating the Company's management resources. Realization of the anticipated benefits of a strategic acquisition may take several years or may not occur at all. The Company's acquisition strategy has placed, and will continue to place, a significant strain on the Company's management, operational, financial and other resources. The success of the Company's acquisition strategy will depend on many factors, including the ability of the Company to (i) identify suitable acquisition opportunities, (ii) successfully close acquisition opportunities at valuations that will provide superior returns on invested capital, (iii) successfully integrate acquired operations quickly and effectively in order to realize operating synergies, and (iv) obtain necessary financing on satisfactory terms. There can be no assurance that the Company will be able to successfully execute and manage its acquisition strategy, and any failure to do so could have a material adverse effect on the Company's business, financial condition and results of operations. 17 NEW INFORMATION SYSTEM; YEAR 2000 SOFTWARE Over the last two years, the Company has invested significant financial and other resources in pursuing the development and implementation of HORIZONS. The Company currently expects to spend approximately $76 million between 1996 and 2004 on the design and installation of, and training for, the HORIZONS project, approximately half of which has been spent through the end of fiscal 1997. No assurance can be given that the Company will be able to successfully develop and implement the HORIZONS system or that, if successfully implemented, the HORIZONS system will result in any operating efficiencies or competitive advantages. The primary elements of the HORIZONS system have not yet been activated, and the continuing development and implementation of the HORIZONS system can be expected to require substantial additional financial and other resources and may be subject to unforeseen delays or interruptions in development or implementation. The HORIZONS system has been designed and is being developed by a team consisting of outside vendors and Company business personnel and management information systems personnel. The loss of a key vendor to the HORIZONS project or the loss of key Company personnel involved in the HORIZONS project could result in a significant loss of expertise and delays in the implementation of the HORIZONS system. Any significant delay or failure in the implementation of the HORIZONS system could have a material adverse effect on the Company's business, financial condition and results of operations. Although the Company expects that HORIZONS will address Year 2000 software issues, the Company also plans to develop a contingency system in the event of any significant delays in implementation of HORIZONS. Nonetheless, the Company could still encounter significant business risks from the failure of any of its vendors or customers, or the failure of governmental agencies, to adequately address Year 2000 software issues. Any material failure of information systems on the part of such vendors, customers or governmental agencies, or the Company's contingency system in the event HORIZONS is not implemented by 2000, could have a material adverse effect on the Company's business, financial condition and results of operations. POTENTIAL CREDIT LOSSES FROM LOANS TO RETAILERS From time to time, the Company extends secured loans to independent retailers, often in conjunction with the establishment or expansion of supply arrangements with such retailers. Such loans are generally extended to small businesses which are unrated, and such loans are highly illiquid. The acquisition of Super Food included a large loan and trade receivable portfolio that resulted from a credit policy different from the policy historically used by the Company. As a result, the Company has taken additional reserves against certain receivables of Super Food. Provisions for doubtful accounts, including reserves for losses from receivables and loans to independent retailers, were approximately $26.2 million at March 28, 1998, approximately $26.7 million at January 3, 1998 and approximately $28.0 million at December 28, 1996. The Company's portfolio of loans to independent retailers had an aggregate balance of approximately $39.4 million at March 28, 1998, approximately $39.0 million at January 3, 1998 and approximately $37.3 million at December 28, 1996. See Notes 4 and 10 of Notes to the Consolidated Financial Statements. The Company also from time to time provides financial assistance to independent retailers by guaranteeing loans from financial institutions and leases entered into directly with lessors. As of March 28, 1998, the Company guaranteed approximately $28.2 million of loans and leases of its independent retailers. The Company intends to continue, and possibly increase, the amount of loans and guarantees to independent retailers, and there can be no assurance that credit losses from existing or future loans or commitments will not have a material adverse effect on the Company's business, financial condition and results of operations. MILITARY COMMISSARY SALES Approximately 23.6% of the Company's sales in fiscal 1997 resulted from distribution of products to domestic and foreign U.S. military commissaries and ships afloat. No assurance can be given that the U.S. military commissary system will not undergo significant changes in the foreseeable future, such as further 18 base closings, privatization of the military commissary system or a reduction in the number of persons having access to such commissaries. Such changes could result in disruptions to existing supply arrangements or reductions in volumes of purchases and could have a material adverse effect on the Company's business, financial condition and results of operations. COMPETITION The food marketing and distribution industry is highly competitive. The Company faces competition from national, regional and local food distributors on the basis of price, quality, breadth and availability of products offered, strength of private label brands offered, schedules and reliability of deliveries and the range and quality of services provided. In addition, food wholesalers compete based on willingness to invest capital in their customers. Such investments present substantial risks as described above under the caption "--Potential Credit Losses from Loans to Retailers." The Company also competes with retail supermarket chains that provide their own distribution function, purchasing directly from producers and distributing products to their supermarkets for sale to consumers. In its retail operations, the Company 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 market share with alternative store formats, such as warehouse stores and supercenters, which depend on concentrated buying power and low-cost distribution technology. Market share of stores with alternative formats is expected to continue to grow in the future. To meet the challenges of a rapidly changing and highly competitive retail environment, the Company must maintain operational flexibility and develop effective strategies across many market segments. The inability to adapt to changing environments could have a material adverse effect on the Company's business, financial condition and results of operations. Some of the Company's competitors have greater financial and other resources than the Company. In addition, consolidation in the industry, heightened competition among the Company's suppliers, new entrants and trends toward vertical integration could create additional competitive pressures that reduce margins and adversely affect the Company's business, financial condition and results of operations. There can be no assurance that the Company will be able to continue to compete effectively in its industry. See "Business--Competition." COMPETITIVE LABOR MARKET; INCREASING LABOR COSTS The Company's continued success depends on its ability to attract and retain qualified personnel in all areas of its business. The Company competes with other businesses in its markets with respect to attracting and retaining qualified employees. The labor market is currently very tight and the Company expects the tight labor market to continue. A shortage of qualified employees may require the Company to continue to enhance its wage and benefits package in order to compete effectively in the hiring and retention of qualified employees or to hire more expensive temporary employees. No assurance can be given that the Company's labor costs will not continue to increase, or that such increases can be recovered through increased prices charged to customers. Any significant failure of the Company to attract and retain qualified employees, to control its labor costs, or to recover any increased labor costs through increased prices charged to customers could have a material adverse effect on the Company's business, financial condition and results of operations. DEPENDENCE ON MANAGEMENT The Company depends on the services of its executive officers for the management of the Company. The loss or interruption of the continued full-time services of certain of these executives could have a material adverse effect on the Company and there can be no assurance that the Company will be able to find replacements with equivalent skills or experience at acceptable salaries. Generally, the Company does 19 not have employment contracts with its executive officers, other than agreements providing certain benefits upon certain changes in control of the Company. RISK OF ENVIRONMENTAL LIABILITY The Company is subject to increasingly stringent federal, state and local laws, regulations and ordinances that (i) govern activities or operations that may have adverse environmental effects, such as discharges to air and water, as well as handling and disposal practices for solid and hazardous wastes and (ii) impose liability for the costs of cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous materials (together, "Environmental Laws"). In particular, under applicable Environmental Laws, the Company may be responsible for remediation of environmental conditions and may be subject to associated liabilities (including liabilities resulting from lawsuits brought by private litigants) relating to its facilities and the land on which its facilities are situated, regardless of whether the Company leases or owns the facilities or land in question and regardless of whether such environmental conditions were created by the Company or by a prior owner or tenant. Although the Company typically conducts a limited environmental review prior to acquiring or leasing new facilities or raw land, there can be no assurance that known or unknown environmental conditions relating to prior, existing or future facility sites or the activities of the Company or its predecessor in interest will not have a material adverse effect on the Company. It is difficult to predict future environmental costs as the costs of environmental compliance vary significantly depending on the extent, source and location of the contamination, geological and hydrological conditions, available reimbursement by state agencies, the enforcement policies of regulatory agencies and other factors. ADVERSE PUBLICITY; PRODUCT LIABILITY The packaging, marketing and distribution of food products entails an inherent risk of product liability, product recall and resultant adverse publicity. There can be no assurance that such claims will not be asserted against the Company or that the Company will not be obligated to perform such a recall in the future. While the Company as a general practice receives indemnification guarantees from its suppliers whereby the supplier agrees to indemnify the Company from such claims and obligations, there can be no assurance that such indemnification will be sufficient or that such claims or obligations will not create adverse publicity that will have a material adverse effect on the Company's ability to successfully market its products and on the Company's business, financial condition and results of operations. POTENTIAL FAILURE TO MAKE PAYMENT UPON A CHANGE OF CONTROL Upon the occurrence of a Change of Control, each holder of the Notes may require the Company to purchase all or a portion of such holder's Notes at 101% of the principal amount of the Notes, together with accrued and unpaid interest, if any, to the date of purchase. In such circumstances, each of the Company and the Guarantors may be required to (i) repay all or a portion of the outstanding principal of, and pay any accrued interest on, its indebtedness, including indebtedness under the Bank Credit Facilities or (ii) obtain any requisite consent from its lenders to permit the purchase. If the Company is unable to repay all of such indebtedness or is unable to obtain the necessary consents, the Company may be unable to offer to purchase the Notes, which will constitute an Event of Default under the Indenture. There can be no assurance that the Company or the Guarantors will have sufficient funds available at the time of any Change of Control to make any debt payment (including purchases of Notes) as described above or that the Company or the Guarantors will be able to refinance their respective outstanding indebtedness in order to permit it to repurchase the Notes or, if such refinancing were to occur, that such financing will be on terms favorable to the Company and the Guarantors. See "Description of the Exchange Notes-- Change of Control." The events that constitute a Change of Control under the Indenture may also be events of default under the Bank Credit Facilities or other borrowings. Such events may permit the holders under such debt 20 instruments to reduce the borrowing base thereunder or accelerate the debt and, if the debt is not paid, to commence litigation that could ultimately result in a sale or liquidation of certain assets of the Company, thereby limiting the Company's ability to purchase the Notes and receive the special benefit of the offer to purchase provisions to the holders of the Notes. LACK OF PRIOR MARKET FOR THE EXCHANGE NOTES The Exchange Notes are being offered to the holders of the Series A Notes. The Series A Notes were offered and sold in April 1998 pursuant to Rule 144A and Regulation S under the Securities Act and are eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. The Exchange Notes will be new securities for which there currently is no established trading market. The Company does not intend to apply for listing of the Exchange Notes on any national securities exchange or for quotation of the Exchange Notes on any automated dealer quotation system. Although the Initial Purchasers have informed the Company that they currently intend to make a market in the Exchange Notes, the Initial Purchasers are not obligated to do so, and any such market-making may be discontinued at anytime without notice. In addition, such market-making activity will be subject to limits imposed by the Securities Act and the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the "Exchange Act"), and may be further limited during the Exchange Offer and the pendency of any Shelf Registration Statement (as defined herein). Although it is anticipated that the Exchange Notes will be eligible for trading in the PORTAL market, there can be no assurance as to the development of any market or the liquidity of any market that may develop. The liquidity of any market for the Exchange Notes will depend upon the number of holders of the Exchange Notes, the interest of securities dealers in making a market in the Exchange Notes and other factors. If an active trading market for the Exchange Notes does not develop, the market price and liquidity of the Exchange Notes may be adversely affected. If the Exchange Notes are traded, they may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar securities, the performance of the Company and certain other factors. The liquidity of, and trading markets for, the Exchange Notes may also be adversely affected by general declines in the market for non-investment grade debt. Such declines may adversely affect the liquidity of, and trading markets for, the Exchange Notes, independent of the financial performance of or prospects for the Company. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the Exchange Notes. There can be no assurance that the market, if any, for the Exchange Notes will not be subject to similar disruptions. Any such disruptions may have an adverse effect on the holders of the Exchange Notes. EXCHANGE OFFER PROCEDURES Issuance of the Exchange Notes for Series A Notes pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of such Series A Notes, a properly completed, duly executed Letter of Transmittal and all other required documents. Therefore, Holders desiring to tender their Series A Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respect to the tenders of Series A Notes for exchange. Any Series A Notes that are not tendered or are tendered but not accepted will, following the consummation of the Exchange Offer, continue to be subject to the existing restrictions on transfer thereof and, upon consummation of the Exchange Offer, the registration rights under the Registration Rights Agreement generally will terminate. In addition, any Holder who tenders pursuant to the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale. Each broker-dealer that receives Exchange Notes for its own account in exchange for Series A Notes, where such Series A 21 Notes were acquired by such broker-dealer 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 such Exchange Notes. See "The Exchange Offer." RESTRICTIONS ON TRANSFER The Series A Notes were offered and sold by the Company in a private offering exempt from registration pursuant to the Securities Act and have been resold pursuant to Rule 144A and other exemptions under the Securities Act. As a result, the Series A Notes may not be reoffered or resold by purchasers except pursuant to an effective registration statement under the Securities Act, or pursuant to an applicable exemption from such registration, and the Series A Notes are legended to restrict transfer as aforesaid. Each Holder (other than any Holder who is an affiliate or promoter of the Company) who duly exchanges Series A Notes for Exchange Notes in the Exchange Offer will receive Exchange Notes that are freely transferable under the Securities Act. Holders who participate in the Exchange Offer should be aware, however, that if they accept the Exchange Offer for the purpose of engaging in a distribution, the Exchange Notes may not be publicly reoffered or resold without complying with the registration and prospectus delivery requirements of the Securities Act. As a result, each Holder accepting the Exchange Offer will be deemed to have represented, by its acceptance of the Exchange Offer, that it acquired the Exchange Notes in the ordinary course of business and that it is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. If existing Commission interpretations permitting free transferability of the Exchange Notes following the Exchange Offer are changed prior to consummation of the Exchange Offer, the Company will use its best efforts to register the Series A Notes for resale under the Securities Act. See "Prospectus Summary--The Exchange Offer" and "Exchange Offer; Registration Rights." The Series A Notes currently may be sold pursuant to the restrictions set forth in Rule 144A under the Securities Act or pursuant to another available exemption under the Securities Act without registration under the Securities Act. To the extent that Series A Notes are tendered and accepted in the Exchange Offer, the trading market for the untendered and tendered but unaccepted Series A Notes could be adversely affected. FORWARD-LOOKING STATEMENTS This Prospectus contains certain forward-looking statements, including statements regarding (i) anticipated trends in the Company's industry, (ii) future expenditures for capital projects, and (iii) the Company's strategic initiatives. Such forward-looking statements can be identified by the use of forward-looking terminology, such as "believes," "expects," "may," "will," "should," "estimates," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Such statements are subject to certain risks and uncertainties, including those discussed below, that could cause actual results to differ materially from those that are expressed or implied from such forward-looking statements. These forward-looking statements speak only as of the date hereof. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. All of these forward-looking statements are based on estimates and assumptions made by management of the Company, which although believed to be reasonable, are inherently uncertain and difficult to predict; therefore, undue reliance should not be placed upon such forward-looking statements. As a result, no assurance is given that future results expressed or implied from such forward-looking statements will be achieved. The following important factors, among others, in addition to the information described under Risk Factors, could cause the Company not to achieve expressed or implied by forward-looking statements contained herein or otherwise cause the Company's results of operations to be adversely affected in future periods (i) continued or increased competitive pressures from existing competitors and new entrants, (ii) unanticipated costs related to the implementation of the Company's growth and operating strategies, 22 (iii) loss or retirement of key members of management, (iv) inability to negotiate favorable terms with customers and suppliers, (v) increases in interest rates or the Company's cost of borrowing or a default under any material debt agreements, (vi) inability of the Company to achieve its cost savings initiatives, to achieve synergies from acquisitions or to strengthen its retail store base, (vii) inability of the Company to achieve the objectives of the Horizons project, (viii) prolonged labor disruption, (ix) deterioration in general or regional economic conditions, (x) adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations, (xi) adverse determinations in connection with pending or future litigation or other material claims and judgments against the Company, (xii) inability to achieve future sales levels or other operating results that support the Company's cost savings initiatives, and (xiii) the unavailability of funds for capital expenditures. THE EXCHANGE OFFER The following discussion sets forth or summarizes what the Company believes are the material terms of the Exchange Offer, including those set forth in the Letter of Transmittal distributed with this Prospectus. This summary is qualified in its entirety by reference to the full text of the documents underlying the Exchange Offer, copies of which are filed as exhibits to the Registration Statement of which this Prospectus is a part, and are incorporated by reference herein. PURPOSE AND EFFECT OF THE EXCHANGE OFFER In connection with the sale of Series A Notes pursuant to the Purchase Agreement, dated April 20, 1998 (the "Purchase Agreement"), between the Company and the Initial Purchasers, the Initial Purchasers became entitled to the benefits of the Registration Rights Agreement. Under the Registration Rights Agreement, the Company must use its best efforts to (a) file a registration statement in connection with a registered exchange offer within 30 days after April 24, 1998, the date the Series A Notes were issued (the "Issue Date"), (b) cause such registration statement to become effective under the Securities Act within 90 days of the Issue Date, (c) keep such registration statement effective until the closing of the Exchange Offer and (d) cause the Exchange Offer to be consummated within 120 days after the Issue Date. Within the applicable time periods, the Company will endeavor to register under the Securities Act all of the Exchange Notes pursuant to a registration statement under which the Company will offer each Holder of Series A Notes the opportunity to exchange any and all of the outstanding Series A Notes held by such Holder for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of Series A Notes tendered for exchange by such Holder. Subject to limited exceptions, the Exchange Offer being made hereby, if commenced and consummated within such applicable time periods, will satisfy the obligations of the Company under the Registration Rights Agreement described above. In such event, any Series A Notes that are not tendered in the Exchange Offer or not accepted for exchange by the Company under the terms of the Exchange Offer would remain outstanding and would continue to accrue interest, but would not retain any rights under the Registration Rights Agreement. Holders of Series A Notes seeking liquidity in their investment would have to register the Series A Notes, or otherwise transfer the Series A Notes pursuant to an exemption, under applicable securities laws, including the Securities Act. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The term "Holder" with respect to the Exchange Offer means any person in whose name the Series A Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. Because the Exchange Offer is for any and all Series A Notes, the principal amount of Series A Notes tendered and exchanged in the Exchange Offer will reduce the principal amount of Series A Notes outstanding. Following the consummation of the Exchange Offer, Holders who did not tender their Series A Notes generally will not have any further registration rights under the Registration Rights Agreement, and such Series A Notes will continue to be subject to certain restrictions on transfer. Accordingly, the 23 liquidity of the market for such Series A Notes could be adversely affected. See "Exchange Offer; Registration Rights." TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, the Company will accept all Series A Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of outstanding Series A Notes accepted in the Exchange Offer. Holders may tender some or all of their Series A Notes pursuant to the Exchange Offer. The form and terms of the Exchange Notes are the same as the form and terms of the Series A Notes except that (i) the issuance of the Exchange Notes will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and (ii) the holders of Exchange Notes generally will not be entitled to certain rights under the Registration Rights Agreement, which rights generally will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same debt as the Series A Notes and will be entitled to the benefits of the Indenture. Holders of Series A Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. The Company shall be deemed to have accepted validly tendered Series A Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering Holders of Series A Notes for the purposes of receiving the Exchange Notes from the Company and delivering Exchange Notes to such Holders. If any tendered Series A Notes are not accepted for exchange because of an invalid tender or the occurrence of certain other events set forth herein, certificates for any such unaccepted Series A Notes will be returned, without expense, to the tendering Holder thereof as promptly as practicable after the Expiration Date. Holders of Series A Notes who tender pursuant to the Exchange Offer 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 Series A Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes, in connection with the Exchange Offer. See "-- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The Exchange Offer shall remain open for acceptance for a period of not less than 30 days after notice is mailed to Holders (the "Exchange Period"). The Expiration Date will be 5:00 p.m., New York City time, on , 1998, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the Expiration Date will be the latest business day to which the Exchange Offer is extended. In order to extend the Expiration Date, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the record Holders an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Such announcement may state that the Company is extending the Exchange Offer for a specified period of time. The Company reserves the right (i) to delay accepting any Series A Notes, to extend the Exchange Offer or to terminate the Exchange Offer and not accept Series A Notes not previously accepted if any of the conditions set forth under "-- Conditions" shall have occurred and shall not have been waived by the Company, by giving oral or written notice of such delay, extension or termination to the Exchange Agent, 24 or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment in a manner reasonably calculated to inform the Holders of such amendment and the Company will extend the Exchange Offer for a period of five to 10 business days, depending upon the significance of the amendment and the manner of disclosure to Holders, if the Exchange Offer would otherwise expire during such five to 10 business day period. Without limiting the manner in which the Company may choose to make public announcement of any extension, amendment or termination of the Exchange Offer, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to the Dow Jones News Service. INTEREST ON THE EXCHANGE NOTES Interest on the Exchange Notes is payable semi-annually on May 1 and November 1 of each year at the rate of 8 1/2% per annum. The Exchange Notes will bear interest from April 24, 1998, the date of issuance of the Series A Notes, or the most recent interest payment date to which interest on such Series A Notes has been paid, whichever is later. Accordingly, Holders of Series A Notes that are accepted for exchange will not receive interest that is accrued but unpaid on the Series A Notes at the time of tender, but such interest will be payable in respect of the Exchange Notes delivered in exchange for such Series A Notes on the first interest payment date after the Expiration Date. PROCEDURES FOR TENDERING Only a Holder of Series A Notes may tender such Series A Notes pursuant to the Exchange Offer. To tender pursuant to the Exchange Offer, a Holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by instruction 4 of the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Series A Notes and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Series A Notes may be made by book-entry transfer in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date. The tender by a Holder of Series A Notes and the acceptance thereof by the Company will constitute an agreement between such Holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF SERIES A NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT SUCH TENDER FOR SUCH HOLDERS. Any beneficial holder whose Series A Notes are registered in the name of such holder's broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on behalf of such beneficial holder. If such beneficial holder wishes to tender on such beneficial holder's behalf, such beneficial holder must, prior to completing and executing the Letter of Transmittal and delivering the Series A Notes, either make appropriate arrangements to register ownership of the Series A Notes in such holder's name or 25 obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or 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 (an "Eligible Institution") unless the Series A Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by an Eligible Institution. If the Letter of Transmittal is signed by a person other than the registered holder of any Series A Notes listed therein, such Series A Notes must be endorsed or accompanied by appropriate bond powers and a proxy which authorizes such person to tender the Series A Notes on behalf of the registered holder, in each case signed as the name of the registered holder or holders appears on the Series A Notes with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Series A 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, 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 the Letter of Transmittal. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Series A Notes at the DTC for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the DTC may make book-entry delivery of the Series A Notes by causing the DTC to transfer such Series A Notes into the Exchange Agent's account with respect to the Series A Notes in accordance with the DTC's procedures for such transfer. Although delivery of the Series A Notes may be effected through book entry transfer into the Exchange Agent's account at the DTC, a Letter of Transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to the DTC does not constitute delivery to the Exchange Agent. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Series A Notes and withdrawal of the tendered Series A Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Series A Notes not properly tendered or any Series A 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 irregularities or conditions of tender as to particular Series A 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 Series A Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Series A Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Series A Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Series A 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 without cost to such Holder by the Exchange Agent to the tendering 26 Holders of Series A Notes, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Series A Notes and (i) whose Series A Notes are not immediately available, or (ii) who cannot deliver their Series A Notes, the Letter of Transmittal or any other required documents to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date, may effect a tender if: (i) the tender is made through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder of the Series A Notes, the certificate or registration number or numbers of such Series A Notes and the principal amount of Series A Notes tendered, stating that the tender is being made thereby, and guaranteeing that, within five business days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Series A Notes to be tendered in proper form for transfer (or a confirmation of book-entry transfer of such Series A Notes into the Exchange Agent's account at the Depository) and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing all tendered Series A Notes in proper form for transfer (or a confirmation of book-entry transfer of such Series A Notes into the Exchange Agent's account at the Depository) and all other documents required by the Letter of Transmittal are received by the Exchange Agent within five business days after the Expiration Date. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Series A Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Series A Notes pursuant to the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at the address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Series A Notes to be withdrawn (the "Depositor"), (ii) identify the Series A Notes to be withdrawn (including the certificate or registration number(s) and principal amount of such Series A Notes, or, in the case of notes transferred by book-entry transfer, the name and number of the account at the DTC to be credited), (iii) be signed by the Depositor in the same manner as the original signature on the Letter of Transmittal by which such Series A Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee (as defined herein) register the transfer of such Series A Notes into the name of the Depositor withdrawing the tender, (iv) specify the name in which any such Series A Notes are to be registered, if different from that of the Depositor and (v) include a statement that such Holder is withdrawing such Holder's election to have such Series A Notes exchanged. All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Series A Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Series A Notes so withdrawn are validly rendered. Any Series A Notes which have been tendered but which are not accepted for payment will be returned to the Holder thereof without cost to such Holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Series A Notes may be retendered by following 27 one of the procedures described under "--Procedures for Tendering" at any time prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or to exchange Exchange Notes for, any Series A Notes, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Series A Notes, if: (i) any law, statute, rule, regulation or interpretation by the staff of the Commission is proposed, adopted or enacted, which, in the reasonable judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or (ii) any governmental approval has not been obtained, which approval the Company shall, in its reasonable judgment, deem necessary for the consummation of the Exchange Offer as contemplated hereby. If the Company determines in its reasonable judgment that any of the conditions are not satisfied, the Company may (i) refuse to accept any Series A Notes and return all tendered Series A Notes to the tendering Holders, (ii) extend the Exchange Offer and retain all Series A Notes tendered prior to the expiration of the Exchange Offer subject, however, to the rights of Holders to withdraw such Series A Notes (see "--Withdrawals of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Series A Notes which have not been withdrawn. If such waiver constitutes a material change to the Exchange Offer, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered Holders, and, depending upon the significance of the waiver and the manner of disclosure to the registered Holders, the Company will extend the Exchange Offer for a period of five to 10 business days if the Exchange Offer would otherwise expire during such five to 10 business-day period. EXCHANGE AGENT U.S. Bank Trust National Association has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance and requests for additional copies of this Prospectus or of the Letter of Transmittal should be directed to the Exchange Agent addressed as follows: By Mail By Facsimile By Hand or Overnight (registered or certified Transmission: Courier: mail recommended): (612) 244-1537 180 East 5th Street 180 East 5th Street Saint Paul, MN 55101 Saint Paul, MN 55101 Attention:Specialized Attention:Specialized Finance Finance Fourth Floor Fourth Floor
FEES AND EXPENSES The expenses of soliciting tenders pursuant to the Exchange Offer will be borne by the Company. The principal solicitation for tenders pursuant to the Exchange Offer is being made by mail; however, additional solicitations may be made by telegraph, telephone or in person by officers and regular employees of the Company, and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and 28 will reimburse the Exchange Agent for its reasonable out-of-pocket expenses in connection therewith and pay other registration expenses, including fees and expenses of the Trustee, filing fees, blue sky fees and printing and distribution expenses. The Company will pay all transfer taxes, if any, applicable to the exchange of Series A Notes pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes or Series A Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Series A Notes tendered, or if tendered Series A Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Series A Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. ACCOUNTING TREATMENT The Exchange Notes will be recorded at the same carrying value as the Series A Notes, which is the aggregate principal amount of the Series A Notes, as reflected in the Company's accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized in connection with the Exchange Offer. The cost of the Exchange Offer will be deferred and amortized over the term of the Exchange Notes. RESALE OF THE EXCHANGE NOTES Under existing Commission interpretations, the Exchange Notes would, in general, be freely transferable after the Exchange Offer by any holder of such Exchange Notes (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 of the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes acquired pursuant to the Exchange Offer are obtained in the ordinary course of such holder's business, and such holder does not intend to participate, and has no arrangement or understanding to participate in the distribution of such Exchange Notes. Any holder who tenders pursuant to the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the Exchange Notes may not rely on the position of the staff of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) or Morgan Stanley & Co., Incorporated (available June 5, 1991) or similar interpretive letters, but rather must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. In addition, any such resale transaction should be covered by an effective registration statement containing the selling security holders information required by Item 507 of Regulation S-K of the Securities Act. Each broker-dealer that receives Exchange Notes for its own account in exchange for Series A Notes, where such Series A Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, may be a statutory underwriter and must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Company has agreed to make available a prospectus meeting the requirements of the Securities Act to any such broker-dealer for use in connection with any resale of any Exchange Notes acquired in the Exchange Offer. A broker-dealer which delivers such a prospectus to purchasers in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Registration Rights Agreement (including certain indemnification rights and obligations). By tendering pursuant to the Exchange Offer, each Holder will represent to the Company, among other things, (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of its business, (ii) neither the holder nor any such other person has an arrangement or 29 understanding with any person to participate in the distribution of the Exchange Notes and (iii) the holder and any such other person acknowledge that if they participate in the Exchange Offer for the purpose of distributing the Exchange Notes (a) they must, in the absence of an exemption therefrom, comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes and cannot rely on the no-action letters referenced above and (b) failure to comply with such requirements in such instance could result in such holder incurring liability under the Securities Act for which such holder is not indemnified by the Company. Further, by tendering in the Exchange Offer, each holder that may be deemed an "affiliate" (as defined in Rule 405 of the Securities Act), of the Company will represent to the Company that such holder understands and acknowledges that the Exchange Notes may not be offered for resale, resold, or otherwise transferred by that Holder without registration under the Securities Act or an exemption therefrom. As set forth above, affiliates of the Company are not entitled to rely on the foregoing interpretations of the staff of the Commission with respect to resales of the Exchange Notes without compliance with the registration and prospectus delivery requirements of the Securities Act. CONSEQUENCES OF FAILURE TO EXCHANGE As a result of the making of this Exchange Offer, the Company will have fulfilled one of its obligations under the Registration Rights Agreement, and Holders of Series A Notes who do not tender their Series A Notes generally will not have any further registration rights under the Registration Rights Agreement or otherwise. Accordingly, any Holder that does not exchange such Holder's Series A Notes for Exchange Notes will continue to hold the untendered Series A Notes and will be entitled to all the rights and limitations applicable thereto under the Indenture, except to the extent that such rights or limitations, by their terms, terminate or cease to have further effectiveness as a result of the Exchange Offer. The Series A Notes that are not exchanged for Exchange Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Series A Notes may be resold only (i) to the Company (upon redemption thereof or otherwise), (ii) pursuant to an effective registration statement under the Securities Act, (iii) so long as the Series A Notes are eligible for resale pursuant to Rule 144A under the Securities Act, to a Qualified Institutional Buyer (as defined in Rule 144A) in a transaction meeting the requirements of Rule 144A, (iv) outside the United States to a foreign person pursuant to the exemption from the registration requirements of the Securities Act provided by Regulation S thereunder, (v) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available) or (vi) to an Accredited Investor in a transaction exempt from the registration requirements of the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States or other applicable jurisdiction. See "Risk Factors -- Restrictions on Transfer." OTHER Participation in the Exchange Offer is voluntary and Holders should carefully consider whether to accept. Holders are urged to consult their financial and tax advisors in making their own decision on what action to take. The Company may in the future seek to acquire untendered Series A Notes, to the extent permitted by applicable law, in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. The Company has no present plans to acquire any Series A Notes that are not tendered in the Exchange Offer or to file a registration statement to permit resales of any untendered Series A Notes. In any state where the Exchange Offer does not fall under a statutory exemption to the blue sky rules, the Company has filed the appropriate registrations and notices, and has made the appropriate requests, to permit the Exchange Offer to be made in such state. 30 CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER The following discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury Department regulations (the "Regulations") and existing administrative interpretations and court decisions. There can be no assurance that the Internal Revenue Service (the "IRS") will not take a contrary view, and no ruling from the IRS has been or will be sought. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conditions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to Holders. Certain Holders of the Series A Notes (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. Each Holder of a Series A Note should consult his, her or its own tax advisor as to the particular tax consequences of exchanging such Holder's Series A Notes for Exchange Notes, including the applicability and effect of any state, local or foreign tax laws. The issuance of the Exchange Notes to Holders of the Series A Notes pursuant to the terms set forth in this Prospectus will not constitute an exchange for United States federal income tax purposes because such exchange does not represent a significant modification of the debt instruments. Consequently, no gain or loss would be recognized by Holders of the Series A Notes upon receipt of the Exchange Notes, and ownership of the Exchange Notes will be considered a continuation of ownership of the Series A Notes. For purposes of determining gain or loss upon the subsequent sale or exchange of the Exchange Notes, a Holder's basis in the Exchange Notes should be the same as such Holder's basis in the Series A Notes exchanged therefor. A Holder's holding period for the Exchange Notes should include the Holder's holding period for the Series A Notes exchanged therefor. The issue price, original issue discount inclusion and other tax characteristics of the Exchange Notes should be identical to the issue price, original issue discount inclusion and other tax characteristics of the Series A Notes exchanged therefor. See also "Description of Certain Federal Income Tax Consequences of an Investment in the Exchange Notes." USE OF PROCEEDS There will be no net proceeds to the Company from the exchange of Notes pursuant to the Exchange Offer. The net proceeds to the Company from the offering of the Series A Notes were approximately $159.7 million. The Company used the net proceeds from the offering of the Series A Notes to repay outstanding borrowings under the Revolving Credit Facility, which may be reborrowed for general corporate purposes. Since January 3, 1998, the Company has increased the amount outstanding under the Revolving Credit Facility to repay (i) approximately $106.3 million in principal amount of senior unsecured indebtedness, including $30.0 million in principal amount of 8.38% senior notes that were due 2006, $25.0 million in principal amount of 9.20% senior notes that were due 2000, $15.0 million in principal amount of 10.00% senior notes that were due 2001, $5.3 million in principal amount of 10.90% senior notes that were due 2004, $23.0 million in principal amount of 8.54% senior notes that were due 2008 and $8.0 million in principal amount of 9.98% senior notes that were due 2002 (collectively, the "Senior Notes"), and (ii) approximately $9.4 million of related prepayment premiums (together with the Senior Notes, the "Prepayments"). See "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Description of Certain Other Indebtedness." 31 CAPITALIZATION The following table sets forth the capitalization of the Company as of March 28, 1998 (i) on an actual basis and (ii) as adjusted to give effect to the offering of the Series A Notes and the application of the estimated net proceeds therefrom. See "Use of Proceeds" and the Company's Consolidated Financial Statements and the related notes thereto included elsewhere in this Offering Memorandum.
AS OF MARCH 28, 1998 ----------------------- ACTUAL AS ADJUSTED ---------- ----------- (IN THOUSANDS) Short-term notes payable to banks........................................................ $16,155 $16,155 ---------- ----------- ---------- ----------- Long-term liabilities, including current portion (a): Brinson Trust Company Master Note (b).................................................. $65,000 $65,000 Revolving Credit Facility (b).......................................................... 249,000 89,300 8.38% Senior Notes..................................................................... -- -- 8.54% Senior Notes..................................................................... -- -- 9.20% Senior Notes..................................................................... -- -- 9.55% Senior Notes..................................................................... 1,250 1,250 9.98% Senior Notes..................................................................... -- -- 10.00% Senior Notes.................................................................... -- -- 10.90% Senior Notes.................................................................... -- -- Industrial development bonds........................................................... 4,220 4,220 Mortgage loans......................................................................... 5,833 5,833 Capitalized lease obligations.......................................................... 39,726 39,726 Series A Notes......................................................................... -- 165,000 ---------- ----------- Total long-term liabilities.......................................................... 365,029 370,329 Total stockholders' equity (c)........................................................... 220,970 220,970 ---------- ----------- Total capitalization................................................................. $585,999 $591,299 ---------- ----------- ---------- -----------
- ------------------------ (a) For information regarding the Company's long-term liabilities, see Note 5 of Notes to Consolidated Financial Statements. (b) The Company has an aggregate of $510.0 million of borrowing availability, subject to the satisfaction of certain conditions, under the $350.0 million Revolving Credit Facility and under the $160.0 million of Other Bank Credit Facilities (which include facilities with Brinson Trust Company and Norwest Bank Minnesota, N.A.). (c) Reflects approximately $9.5 million of prepayment premiums incurred on March 28, 1998 in connection with the Prepayments and the write-off of deferred financing costs related thereto, net of tax benefits. 32 SELECTED CONSOLIDATED FINANCIAL DATA The following table presents selected consolidated financial data of the Company. The annual historical data have been derived from the Company's Consolidated Financial Statements. The summary consolidated financial data for the fiscal quarters ended March 28, 1998 and March 22, 1997 are derived from the Unaudited Consolidated Financial Statements of the Company included elsewhere in this Prospectus. Such Unaudited Consolidated Financial Statements, in the opinion of the Company's management, include all adjustments necessary (consisting of normal recurring accruals) for a fair presentation of the financial condition and results of operations of the Company for such periods and as of such dates. The selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with the Consolidated Financial Statements of the Company and the related notes thereto included elsewhere in this Prospectus.
TWELVE WEEKS ENDED YEAR ENDED (A) ------------------------ ------------------------------------------------------------------ MARCH 28, MARCH 22, JANUARY 3, DECEMBER 28, DECEMBER 30, DECEMBER 31, JANUARY 1, 1998 1997 1998 1996 1995 1994 1994 ----------- ----------- ----------- ------------ ------------ ------------ ----------- (DOLLARS IN THOUSANDS) INCOME STATEMENT DATA: Total revenues................... $ 937,101 $ 947,832 $4,391,602 $3,375,485 $2,888,836 $2,832,000 $2,723,535 Cost of sales.................... 820,360 825,189 3,826,377 2,932,709 2,469,841 2,410,292 2,325,249 ----------- ----------- ----------- ------------ ------------ ------------ ----------- Gross profit..................... 116,741 122,643 565,225 442,776 418,995 421,708 398,286 Selling, general and administrative, and other operating expenses (b)......... 94,310 99,158 453,645 359,456 350,201 352,683 332,349 Special charges (c).............. -- -- 31,272 -- -- -- -- Depreciation and amortization.... 11,078 10,905 47,697 34,759 29,406 31,831 29,145 Interest expense................. 6,860 7,321 32,845 14,894 10,793 11,384 10,114 ----------- ----------- ----------- ------------ ------------ ------------ ----------- Income before income taxes and extraordinary charge........... 4,493 5,259 (234) 33,667 28,595 25,810 26,678 Income taxes..................... 1,865 2,203 994 13,635 11,181 10,330 10,804 Extraordinary charge (d)......... (5,569) -- -- -- -- -- -- ----------- ----------- ----------- ------------ ------------ ------------ ----------- Net income (loss)................ $(2,941) $3,056 $(1,228 ) $20,032 $17,414 $15,480 $15,874 ----------- ----------- ----------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ ------------ ----------- Net income (loss) per share: Basic.......................... (.26 ) .27 (.11 ) 1.83 1.60 1.42 1.46 ----------- ----------- ----------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ ------------ ----------- Diluted........................ (.26 ) .27 (.11 ) 1.81 1.60 1.42 1.46 ----------- ----------- ----------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ ------------ ----------- BALANCE SHEET DATA: Working capital.................. $186,114 $247,394 $199,931 $228,508 $104,002 $89,457 $79,904 Total assets..................... 912,423 935,806 904,883 945,477 514,260 531,604 521,654 Total debt, including capitalized leases......................... 381,185 433,527 383,270 427,617 95,889 143,045 140,167 Stockholders' equity............. 220,970 234,566 225,618 232,861 215,313 206,269 199,264 OTHER FINANCIAL DATA: Ratio of earnings to fixed charges (e).................... 1.46 x 1.53 x 1.00 x 2.34 x 2.49 x 2.28 x 2.35 x Capital expenditures (f)......... $13,474 $7,939 $67,725 $51,333 $33,264 $34,965 $36,382
- ------------------------------ (a) Fiscal year operating results include 52 weeks for each year except fiscal 1997, which includes 53 weeks. (b) Includes expenses incurred in connection with HORIZONS estimated to be $1.8 million in the first quarter of fiscal 1998, $5.5 million for fiscal 1997 and $1.6 million for fiscal 1996. See "Business -- Information Systems." (c) Includes $14.5 million for the consolidation of selected warehouses, $2.5 million of integration costs associated with the acquisition of the business and assets of United-A.G. Cooperative, Inc. in Omaha, Nebraska, $5.2 million from closing or consolidating underperforming retail stores, a $5.4 million asset impairment charge relating to seven retail stores, a $1.0 million asset impairment charge relating to the Company's produce marketing operations, a $0.9 million write-off of current systems software being replaced by HORIZONS and a $0.6 million loss relating to the sale of the Company's investment in a Hungarian food wholesaler. (d) Reflects prepayment premiums from early extinguishment of debt, net of income tax benefits. See "Use of Proceeds." (e) For purposes of computing the ratios, earnings represent income before income taxes, the cumulative effect of accounting changes plus fixed charges. Fixed charges represent interest expense and that portion of rent expense under all lease commitments deemed to represent an appropriate interest factor. (f) Includes approximately $5.8 million, $2.1 million, $20.0 million and $8.1 million of capital expenditures incurred in connection with HORIZONS in the first quarter of fiscal 1998, the first quarter of fiscal 1997, fiscal 1997 and fiscal 1996, respectively. 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION OF THE COMPANY'S RESULTS OF OPERATIONS AND FINANCIAL CONDITION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY, INCLUDING THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS REGISTRATION STATEMENT. GENERAL Nash Finch Company, organized in 1921 as the successor to a business founded in 1885, is engaged in the wholesale and retail distribution of groceries and related products primarily in the Midwestern and Southeastern regions of the United States. In January 1996, the Company acquired substantially all of the business and assets of Military Distributors of Virginia, Inc. ("MDV"), a Virginia corporation based in Norfolk, Virginia. MDV was engaged in the business of distributing groceries and related products to military commissaries in the eastern United States and Europe. The operations of MDV have been consolidated with the Company's existing military distribution operations in Baltimore, Maryland, and Chesapeake, Virginia, into a single military division with distribution centers in Norfolk and Baltimore. In July 1996, the Company acquired T. J. Morris Company ("T. J. Morris"), a Georgia-based grocery wholesaler. Following the acquisition of T. J. Morris, the Company closed its distribution center in Macon, Georgia and consolidated its operations with the T. J. Morris warehouse in Statesboro, Georgia. In November 1996, the Company completed the acquisition of all of the outstanding shares of capital stock of Super Food based in Dayton, Ohio. Super Food was incorporated in 1957 and, prior to the acquisition by the Company, was ranked as the 14th largest grocery wholesaler in the United States, with sales for its fiscal year ended August 31, 1996 of approximately $1.2 billion. Super Food services independent stores, including IGA stores, across six states, including primarily Ohio, Michigan and Kentucky. Super Food had four distribution centers located in Bellefontaine, Ohio, Cincinnati, Ohio, Bridgeport, Michigan, and Lexington, Kentucky, each providing a full line of groceries and related products, other than produce. The Company closed the Lexington distribution center and consolidated its operations with Super Food's Cincinnati, Ohio and the Company's Bluefield, Virginia distribution centers in March 1998. The distribution center in Bellefontaine, Ohio also has a portion of its space dedicated to distributing general merchandise to Super Food's other distribution centers, the Company's distribution centers in the Southeast and to outside customers. Since the completion of the acquisition, the Company has been, and continues to be, engaged in the process of coordinating the distribution operations of Super Food with existing distribution operations of the Company, addressing accounting system and control issues raised by the integration of Super Food's financial reporting systems with those of the Company and consolidating the general and administrative functions of Super Food with the general and administrative functions of the Company in Edina, Minnesota. In June 1997, the Company acquired the assets of United-A.G. Cooperative, Inc. ("United-A.G"), a cooperative based in Omaha, Nebraska. The Company subsequently consolidated the operations of the Company's Lincoln, Nebraska distribution center with the United-A.G. distribution center in Omaha and has closed the Lincoln distribution center and intends to sell the property. 34 RESULTS OF OPERATIONS
Q1 Q1 1998 1997 1997 1996 1995 --------- --------- --------- --------- --------- Total revenues..................................... 100.0% 100.0% 100.0% 100.0% 100.0% Gross margin....................................... 12.5 12.9 12.9 13.1 14.5 Selling, general and administrative, and other operating expenses............................... 10.1 10.5 10.3 10.7 12.1 Special charges.................................... -- -- 0.7 -- -- Depreciation and amortization...................... 1.2 1.2 1.1 1.0 1.0 Interest expense................................... 0.7 0.8 0.7 0.4 0.4 Earnings before income taxes and extraordinary charge........................................... 0.5 0.6 -- 1.0 1.0 Income taxes....................................... 0.2 0.2 -- 0.4 0.4 Net earnings (loss)................................ (0.3) 0.3 -- 0.6 0.6
REVENUES Total revenues for the first quarter 1998 were $937.1 million compared to $947.8 million last year, a decrease of 1.1%. The decline related to both the wholesale and retail segments of the Company. Although wholesale revenues for the quarter were positively impacted by sales resulting from the acquisition of the business and assets of United-A.G. in June 1997, overall wholesale segment revenues declined. Lower revenues were attributed to the planned consolidation of a distribution center in Lexington, Kentucky, and soft market conditions in certain areas of the Midwest. Also, the military division reported lower revenues compared to last year, when such revenues were exceptionally high. This reflected reduced sales to European commissaries as well as somewhat lower sales by military commissaries along the East Coast. Retail segment revenues were impacted by the closing or sale of 12 under-performing stores since the first quarter of fiscal 1997. Same store sales declined 1.2% as a result of continuing competitive market conditions in several market areas in the upper Midwest. Total revenues increased 30.1% during fiscal 1997 to $4.392 billion compared to $3.375 billion in 1996 and $2.889 billion in 1995. The increase in 1997 is largely attributed to the acquisition of Super Food, which took place during fiscal 1996 (see Note 2 of Notes to Consolidated Financial Statements), the addition of new independent retail accounts and an additional week of operations in 1997. Wholesale segment revenues increased 41.9% to $3.503 billion from $2.469 billion in 1996, primarily due to the acquisitions of Super Food and T. J. Morris in 1996 and the business and certain assets of United-A.G. in fiscal 1997. Wholesale revenues include an additional week of business and reflect a full year's volume from Sunshine Food Markets, a seven-store chain which the Company began servicing in November 1996, following its acquisition by a joint venture, 50% of which is owned by the Company. Fiscal 1996 revenues increased 25.4% over 1995 because of the expansion of business from acquisitions, in particular MDV which occurred in January 1996. Retail segment revenues declined 3.3% from $850.4 million in fiscal 1996 to $822.2 million in 1997. The decline is attributed to a net reduction of nine stores. During the year, the Company closed eight under-performing stores, sold four other units to non-affiliated retailers and opened three stores to strengthen existing market areas in South Dakota and North Carolina. Same store sales, expressed on an equivalent 52-week basis, declined 0.9% compared to last year. This decline is indicative of competitive market conditions in certain market areas and little or no food price inflation. Retail revenues during 1996 decreased 1.1% from 1995, again due to the closing or selling of stores not meeting performance expectations. 35 GROSS MARGINS Gross margins for the first quarter of 1998 were 12.5% compared to 12.9% last year. The decline is partially attributed to the growing proportion of lower margin wholesale business. During the quarter, wholesale segment business represented 81.3% of the Company's consolidated revenues compared to 79.9% for the same period last year. Food price deflation during the period resulted in a LIFO credit of $.5 million compared to $.25 million last year. Retail margins were flat compared to last year. Gains in dry grocery were offset by greater promotional activities in the perishables departments, primarily produce and dairy products. Margins compared to last year were also negatively affected by the timing of religious holidays which occurred later in the second quarter this year. Gross margins were 12.9% in 1997, compared to 13.1% in 1996 and 14.5% in 1995. The decline over the three-year period results from the growth of wholesale revenues which achieve lower margins than retail. Wholesale operations represented 80.0% of combined segment revenues in 1997, compared to 73.3% and 68.4% in 1996 and 1995, respectively. During 1997, wholesale margins increased as a result of three initiatives: (i) regionalizing procurement functions for the Company's Midwest and Southeast distribution centers, (ii) implementing more efficient logistical systems for handling of variety or specialty food products through the Company's distribution centers, and (iii) improving coordination with suppliers to optimize ordering and delivery of product. These initiatives have contributed to improved operating efficiencies and lower product costs. Retail margins for the year were flat. Improvements which resulted from a continued trend of sales of higher margin prepared foods, specialty products and services were offset by competitive pricing pressures which continued to intensify in certain market areas. Margins for fiscal 1995 reflect a greater proportion of retail segment business which achieves higher margins. OPERATING EXPENSES Operating expenses for the quarter as a percent of revenues were 10.1% compared to 10.5% last year. Expense levels continue to be positively affected by the increased wholesale business, which operates at lower expense levels than retail. The Company changed accounting procedures when it adopted Statement of Position (SOP) 98-1 which resulted in $1.5 million of internal development costs related to the HORIZONS project (described below) being capitalized during the quarter. Previously these costs had been expensed as incurred. During the quarter, the Company continued to execute its strategic plan to consolidate selected warehouses by closing its distribution center in Lexington, Kentucky, and transferring a substantial portion of that facility's volume to the Company's Cincinnati, Ohio and Bluefield, Virginia distribution centers. Although costs associated with the closing had been provided for through the special charges recorded in 1997, certain expenses totaling approximately $.7 million associated with transferring the business were incurred during the quarter. Some unaccrued expenses may continue until shutdown is complete, but these are not expected to have a material impact on the second quarter. Selling, general and administrative expenses as a percent of total revenues were 10.3% in 1997 compared to 10.7% in 1996 and 12.1% in 1995. The decline in expense levels as a percent of revenues is due to the increasing proportion of wholesale business which operates at lower expense levels than retail. For fiscal 1997, operating expenses includes costs associated with a project involving new business information systems technology, which the Company has named HORIZONS. Although the project began in fiscal 1996, incremental expenses associated with HORIZONS were of greater significance throughout 1997 as costs associated with system design, software configuration and installation of hardware across the Company were incurred. Operating expenses related to the Company's management information systems were $3.2 million higher in 1997 compared to 1996, substantially all of which related to HORIZONS. This 36 incremental expenditure is expected to continue through 1998 and into 1999 as the Company implements HORIZONS in substantially all operating units and trains associates in the optimal use of the system. Because HORIZONS is anticipated to become an integral part of the future of the Company's business, incremental technology-related spending is anticipated to continue beyond 1999 although at a lesser rate. The Company expects benefits from the project to begin to accrue as the system becomes operational unit by unit, and to reach more significant levels beyond 1999 when the system is in place in substantially all operating units. The project represents a major strategic investment for the Company's future and is expected to provide greater flexibility to ultimately change business processes, thereby improving efficiency and effectiveness. Bad debt expense in 1997 was $5.1 million compared to $1.9 million in 1996. The increase is attributed to maintaining adequate reserve levels consistent with the growth, through acquisition, of customer receivables. Fiscal 1995 expense of $4.0 million included additional provisions primarily for grower accounts and notes at the Company's produce marketing subsidiary. SPECIAL CHARGES During 1997, the Company accelerated its strategic plan relative to strengthening its competitive position for the future. Coincident with the implementation of the plan, the Company recorded special charges, totaling $31.3 million, during the third quarter relating to all three operating segments of its business. The aggregate special charges include $14.5 million for the consolidation of selected warehouses. This charge contains provisions for non-cancelable lease obligations, expected losses on disposals of tangible assets, and other continuing occupancy costs. Also included are employee severance costs consistent with existing practices and the unamortized portion of goodwill for one of the locations. Also, related to wholesale operations, the special charges include $2.5 million of integration costs, incurred in the third quarter, associated with the acquisition of the business and certain assets of United-A.G. early in the third quarter. These expenses resulted from incremental labor costs due to a substantial turnover in workforce, training and other start-up activities. Stabilization of the workforce improved substantially during the fourth quarter, lowering expenses from levels experienced just after the acquisition. In retail operations, the strategic plan involves the closing or consolidation of fourteen, primarily leased stores. The special charges include a $5.2 million provision for the continuing non-cancelable lease obligations, anticipated losses on disposals of tangible assets, abandonment of certain leaseholds and the write-off of intangibles. The time frame for individual store closings will vary but should be completed by the first quarter of fiscal 1999. In some instances, closed stores are expected to be consolidated with other retail locations in the same relative market area, thereby minimizing the loss of wholesale volume. Continued operating losses through the dates of closing are unpredictable and were not included in the special charges. For 1997, the retail units included in the provision had aggregate sales and pretax losses of $82.9 million and $2.7 million, respectively, compared with $88.3 million and $1.8 million for 1996. The aggregate special charges contain a provision of $5.4 million for asset impairment of seven retail stores. Declining market share due to increasing competition, deterioration of operating performance in the third quarter, and forecasted future results that were less than previously planned, were the factors leading to the impairment determination. The impaired assets covered by the charge primarily include real estate, leasehold improvements and, to a lesser extent, goodwill related to two of the stores. 37 An asset impairment charge of $1.0 million relating to agricultural assets was also recorded against several farming operations of the Company's produce marketing subsidiary. The impairment determination was based on recent downturns in the market for certain varieties of fruit. The impairment resulted from anticipated future operating losses and inadequate projected cash flows from agricultural production of these products. Other special charges aggregating $2.8 million consist primarily of $0.9 million related to the abandonment of current system software which is being replaced by the Company's HORIZONS project, and a loss of $0.6 million realized on the sale of the Company's 22.4% equity investment in Alfa Trading Company, a Hungarian food wholesaler. Negotiations for the sale were substantially completed during the third quarter, and the transaction was completed in the fourth quarter. The remaining special charges relate principally to writing down idle real estate held for resale to current market values. The consolidations of wholesale and retail operations, as well as the impairment adjustment to the assets identified, will favorably impact earnings in the future due to reduced depreciation and amortization expenses and the elimination of losses from certain affected operations. However, such amounts are expected to be substantially offset by continuing costs related to HORIZONS. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense increased 1.6% in the first quarter of 1998 compared to last year. The increase reflects capital additions placed in service since last year, offset by the reduction in depreciable assets resulting from the sale of retail stores, and lower depreciation resulting from the write down of impaired assets recorded as part of the special charges in 1997. Amortization of goodwill and other intangibles for the current and prior year quarter was $1.5 million. Depreciation expense is expected to increase during 1998 as implementation of HORIZONS continues, and greater portions of the developed software are ready for use. Depreciation and amortization expense increased 37.2% from 1996 to $47.7 million in 1997. The increase was primarily due to a full year of amortization of goodwill and depreciation of property, plant and equipment associated with acquisition of Super Food which occurred in 1996. In addition, capital expenditures related to the HORIZONS project resulted in increased depreciation expense of $2.0 million compared to last year. The increase in 1996 compared to 1995 is the result of acquisitions occurring in 1996, partially offset by lower depreciation expenses resulting from sale or closing of several retail stores. INTEREST EXPENSE Interest expense decreased from $7.3 million in the prior year quarter, to $6.9 million this year, a decline of 6.3%. The reduction is attributable to lower debt levels brought about by the sale of receivables at the end of 1997 and improved asset management. While the Company reduced its long-term borrowing rates through refinancing, interest expense is expected to increase because a greater portion of total debt is now based on a fixed interest rate which is higher than the revolving debt rate it replaced. Interest expense increased from $14.9 million in 1996 to $32.8 million in 1997 largely due to the full year debt costs related to financing the Super Food acquisition in November 1996. The acquisition of the business and certain assets of United-A.G. also contributed to higher interest expense in 1997. Interest expense as a percent of revenues was 0.75%, 0.44% and 0.37% for 1997, 1996 and 1995, respectively. The increase in interest expense in 1996 compared to 1995 was primarily due to financing the acquisition of MDV early in 1996. 38 EARNINGS (LOSS) BEFORE INCOME TAXES Earnings before extraordinary charge were $2.6 million or $.23 per share for the first quarter of 1998, compared to $3.1 million or $.27 per share last year. The change in accounting for direct software development costs resulted in an after tax benefit of $.8 million, or $.08 per share. Conversely, costs associated with the transfer of business from Lexington, Kentucky to other facilities adversely affected after tax earnings by $.4 million, or $.04 per share. In conjunction with the offering of the Series A Notes, the Company prepaid $106.3 million of senior notes, and paid prepayment premiums and wrote off related deferred financing costs totaling $9.5 million, all with drawings under the Company's revolving credit facility. This transaction resulted in an extraordinary charge of $5.6 million or $.49 per share after income tax benefits of $4.0 million in the first quarter of 1998. Including the special charges, the Company reported a pretax loss of $234,000 for 1997 compared to pretax earnings of $33.7 million in 1996 and $28.6 million in 1995. Each segment of the Company's business was negatively affected by these charges (see Note 14 of Notes to Consolidated Financial Statements). Operating profit of $26.2 million in 1997 declined 44.1% from $46.9 million in 1996, while 1996 improved 28.2% compared to $36.6 million in 1995. Excluding special charges, wholesale segment operating profit would have been $50.8 million, or 1.45% of segment sales and other operating revenues, compared to $37.1 million, or 1.50% of such revenues a year ago. The lower margin reflects a decline in earnings as a percent of revenues for the existing and newly acquired wholesale operations, where independent retail customers were affected by a weak sales environment, somewhat offset by increases in earnings contributions of the military division. Retail segment operating profit before special charges would have been $5.8 million compared to $7.7 million last year. The decline resulted from competitive pricing pressures in certain markets throughout the year, and the loss of sales volume due to the sale or closure of certain underperforming stores. Nash-DeCamp Company, the Company's produce marketing subsidiary, would have reported operating profit of $934,000 before special charges in 1997, compared to $2.1 million and $2.4 million in 1996 and 1995, respectively. The weak performance resulted from poor market prices caused by a surplus of available product, particularly tree fruit. INCOME TAXES The effective tax rate for 1998 is estimated at 41.5%, compared to 41.9% in 1997. The effective income tax rate for 1997 is influenced by a number of factors that do not allow for a meaningful comparison to prior years. The tax provision substantially results from the nondeductibility of goodwill relating to the acquisitions of Super Food and T. J. Morris, partially offset by other items as shown in tax rate tables in Note 6 of Notes to Consolidated Financial Statements. YEAR 2000 COMPLIANCE Some of the Company's older computer programs were written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that recognizes a date using "00" as the year 1900 rather than the Year 2000. This could cause a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company uses a significant number of computer software programs and embedded operating systems that are essential to its business. The Company's resolution to the Year 2000 issue is substantially incorporated in the system design of the HORIZONS project. In addition, since all segments of the Company 39 will not be initially impacted by HORIZONS, the Company has been actively engaged in a process designed to mitigate any detrimental effects from the Year 2000 to any of these segments. The Company has also initiated communications with its significant suppliers and large customers with whom the Company's systems interface, exchange data or are dependent upon, for the purpose of coordinating efforts to minimize its vulnerability resulting from third parties' failure to resolve their own Year 2000 issues. However, there can be no guarantee that the systems of such third parties will be timely corrected and would not have an adverse effect on the Company's system. The Company expects to be completed with Year 2000 compliance in mid-1999 and believes that with the HORIZONS project and modifications of its existing software and systems, Year 2000 compliance will not pose significant operating problems. However, the Company's business, results of operations or financial condition could be adversely affected by the failure of its system, or others' systems, to operate properly beyond 1999. Wherever possible, the Company will be developing and executing contingency plans designed to allow continued operation in the event of failure of the Company's or other third party systems. Costs associated with a substantial portion of Year 2000 compliance coincide with the new software and system design of the HORIZONS project. The cost of Year 2000 compliance for business operations not affected by HORIZONS is not expected to have a material effect on results of operations. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has financed its capital needs through a combination of internal and external sources. These sources include cash flow from operations, short-term bank borrowings, various types of long-term debt, lease and equity financing. Operating activities generated positive net cash flows of $27.1 million during the first quarter of 1998 compared to $5.0 million a year ago. The increase is primarily due to higher accounts payable and accrued expenses and lower accounts receivable. Working capital was $186.1 million at the end of the quarter, a reduction of $13.8 million during the quarter. The current ratio decreased from 1.68 at the end of fiscal 1997 to 1.59 at the end of the first quarter. At March 28, 1998, the Company had $16.2 million in short-term debt compared to $11.3 million at the end of 1997. As part of a plan to extend the maturity of the Company's outstanding indebtedness and to provide the Company with greater financial and operating flexibility, on March 27, 1998, the Company prepaid approximately $106.3 million of Senior Notes. The Prepayments (including related prepayment premiums of $9.4 million) were financed with borrowings under the Revolving Credit Facility. The net proceeds from the issuance of the Series A Notes were used to reduce such borrowings, effectively extending the maturity of the Company's outstanding indebtedness. Other transactions affecting liquidity during the quarter include capital expenditures of $13.4 million, of which approximately $4.0 million related to HORIZONS, and payment of a cash dividend of $.18 per share on March 13, 1998 to shareholders of record on February 27, 1998. Cash provided from operating activities was $87.7 million in 1997 compared to $32.9 million in 1996. The increase is attributed to the improvements in operating profit before special charges and depreciation and amortization expenses. Working capital at January 3, 1998 declined to $199.9 million compared to $228.5 million at the end of 1996, reflecting the reduction in current assets. The current ratio was 1.68 in 1997 compared to 1.77 in 1996. At January 3, 1998, the Company had $11.3 million in short-term debt compared to $16.2 million at fiscal year-end 1996. As of January 3, 1998, the Company had uncommitted lines of credit totaling $25.0 million with two banks, under which a total of $13.7 million was unused. The Revolving Credit 40 Facility provides for borrowings of up to $360.0 million, under which a total of $204.0 million was outstanding at year-end. An agreement with a trust company provides for borrowings of up to $150.0 million, under which $10.0 million was borrowed at year-end. During the year, the Company utilized the existing revolving agreements to finance the acquisition of United-A.G. and capital outlays related to HORIZONS. During fiscal 1997, the Company provided financial assistance in the form of secured loans totaling $18.8 million to new or existing independent retailers. These loans are generally used to maintain and expand their businesses. In addition, the Company sold $37.0 million of trade accounts receivable and used proceeds from the sale to reduce long-term debt. Of the $31.3 million pretax special charges, approximately $13.6 million involve cash outflows, while the balance are non-cash. On an after tax basis, the cash impact is estimated to be $8.5 million, to be funded primarily from internally generated funds. Capital projects designed to maintain operating capacity, expand operations or improve efficiency totaled $67.7 million in 1997 compared to $51.3 million in 1996. Included in 1997 and 1996 expenditures are approximately $20.0 million and $8.1 million, respectively, related to the HORIZONS project. Total cash outlay for the design, installation of, and training for HORIZONS is projected to be about $76 million over the period of 1996 through 2004. Approximately half of such amount had been expended as of January 3, 1998. Of the $76 million, $58.7 million is expected to be capitalized. A majority of the remaining projected capital expenditures relating to HORIZONS are expected to be made in 1998. Subsequent to the completion of the offering of the Series A Notes and the application of the net proceeds thereof, the Company will continue to have available approximately $339.2 million of additional borrowing capacity under the Bank Credit Facilities. The Company believes that borrowings under the Bank Credit Facilities, cash flow from operating activities and lease financings will be adequate to meet the Company's working capital needs, planned capital expenditures and debt service obligations for the foreseeable future. 41 BUSINESS Nash Finch Company, organized in 1921 as the successor to a business founded in 1885, is the third largest publicly traded wholesale food distributor in the United States (based on 1997 estimates), serving primarily the Midwestern and Southeastern regions of the United States. In addition, the Company operates 97 conventional and warehouse supermarkets in 13 states. The Company's wholesale operations, which include 21 distribution centers serving approximately 2,250 affiliated and independent supermarkets, U.S. military commissaries and other customers in approximately 30 states, accounted for 79.8% of the Company's total revenues in fiscal 1997, while its retail operations accounted for 18.7%. In fiscal 1997, the Company had total revenues of $4.4 billion and EBITDA (as defined herein) of $113.1 million. The Company's wholesale operations serve two primary markets: (i) supermarkets (70.4% of wholesale revenues in fiscal 1997), where the Company combines a wide offering of national brand and private label products with comprehensive support services to develop strong relationships with customers; and (ii) military commissaries (29.6% of wholesale revenues in fiscal 1997), where the Company believes it is currently the largest distributor of groceries and related products to such facilities in the United States. The Company's broad product offering includes dry groceries, fresh fruits and vegetables, frozen foods, fresh and processed meat products and dairy products, as well as a wide variety of non-food products, including health and beauty care, tobacco, paper products, cleaning supplies and small household items. Private label products are branded primarily under the Our Family trademark, a long-standing private label of the Company, and Fame, a trademark acquired in the acquisition of Super Food in November 1996. The Company offers a wide range of support services to its independent retailers to help them compete more effectively in their markets and to build customer loyalty, including supermarket merchandising support, accounting services, price management systems, retail technology support, advertising and promotional programs, training and human resource development services, market research and store development services. The Company's retail stores, as well as many of the retail outlets supplied by the Company's wholesale operations, are located primarily in small to midsized markets and rural areas. The Company's retail operations consist of 66 conventional supermarkets, averaging approximately 23,300 square feet in size, operating principally under the Sun Mart, Easter Foods and Food Folks trade names; 27 warehouse stores, averaging approximately 42,900 square feet in size, operating principally under the Econofoods trade name; and four combination general merchandise/food stores averaging approximately 43,000 square feet in size, operating under the Family Thrift Center trade name. COMPANY STRENGTHS LEADING WHOLESALE FOOD DISTRIBUTOR. Through recent acquisitions, the Company has become the third largest publicly traded wholesale food distributor in the United States (based on 1997 estimates) with geographically dispersed operations serving primarily the Midwestern and Southeastern regions of the United States. The Company serves a diversified group of approximately 2,250 affiliated and independent supermarkets, U.S. military commissaries and other customers, none of which accounted for more than 2.5% of the Company's total revenues in fiscal 1997. The Company believes it is the largest wholesale distributor of groceries and related products to military commissaries in the United States. The Company derives increased purchasing power and economies of scale from its large sales volume and distribution network. INTEGRATED AND EFFICIENT DISTRIBUTION NETWORK. The Company has and continues to develop a highly integrated and efficient distribution network by realizing synergies from acquisitions and implementing innovative logistical techniques. The Company continues to pursue opportunities to increase volume through strategic acquisitions and to realize greater efficiencies in its distribution network through consolidation of distribution centers. The Company believes it is an industry leader in the development of advanced information systems and the application of innovative logistics, such as port of entry purchasing 42 in full truck load quantities, cross docking and redistribution, which have resulted in price and freight savings and operating efficiencies. EXPERTISE IN PRIVATE LABEL PRODUCTS AND PERISHABLES. The Company has developed extensive expertise in marketing and distributing a wide range of private label products, including approximately 1,600 SKUs under the Our Family private label and approximately 1,300 SKUs under the Fame private label. The Company's private labels enjoy strong brand name recognition in the Company's markets. Sales and transfers of private label products accounted for 9.8% of the Company's non-military wholesale revenues in fiscal 1997. The Company has also developed significant expertise in handling, marketing and distributing perishables, including produce and dairy products. The Company's commitment to distributing perishables enables it to provide a full spectrum of quality products to customers. The Company believes that offering high quality private label products and perishables provides it with certain competitive advantages in attracting and retaining independent retailers and consumers. Private label products and perishables generally result in higher margins than branded products and other food categories. STRONG RETAIL STORE BASE. The Company's 97 retail stores serve primarily small to midsized markets and rural areas. The Company believes that approximately 70% of the Company's stores are in markets where the Company is first or second in market share. The Company believes its strong market share positions result primarily from offering a variety of store formats and retail concepts targeted to different geographical markets under several store names, including Sun Mart, Easter Foods, Food Folks, Econofoods and Food Bonanza. In addition, the Company believes its retail store base enhances the Company's wholesale operations by enabling it to (i) better understand the needs of independent retailers, thereby improving customer service; and (ii) test retail concepts and innovations, including advertising and promotional programs, in the Company's stores before they are rolled out to independent retailers. The Company's retail stores are typically located close to distribution centers, thereby creating certain operating efficiencies and logistical savings. LEADING DISTRIBUTOR TO DOMESTIC MILITARY COMMISSARIES. The Company believes that it is the largest wholesale distributor of groceries and related products to domestic military commissaries. The Company's military distribution centers also provide products for distribution to U.S. military commissaries in Europe and to ships afloat. The Company serves as a third party distributor to commissaries, contracting with a variety of food producers and other manufacturers to procure and warehouse products for distribution to commissaries. The Company's military distribution operations generally result in higher net margins than the Company's civilian distribution operations due primarily to lower operating expenses. REPUTATION FOR SUPERIOR CUSTOMER SERVICE. The Company's 113 year operating history, centered on the theme "CUSTOMER SATISFACTION IS ALWAYS FIRST!", has resulted in strong relationships with long-standing customers. To further enhance its reputation and strengthen customer relationships, the Company offers a wide range of support services to customers to help them compete more effectively in their markets, including supermarket merchandising support, accounting services, price management systems, retail technology support, advertising and promotional programs, training and human resource development services, market research and store development services. EXPERIENCED MANAGEMENT TEAM. The Company is led by a strong and experienced executive management team, the members of which have on average 20 years with the Company and 24 years of industry expertise across all facets of wholesale distribution, marketing, merchandising and retail operations. COMPANY STRATEGY Management believes that the role of the distributor will continue to change from the warehousing of goods toward a greater emphasis on the strategic facilitation of goods and services for customers in a manner that provides greater efficiencies. In addition the Company believes that food retailers will be required to offer a wider variety of goods and services at attractive prices to compete effectively. 43 Accordingly, the Company's goals are to (i) profitably build the competitive strength of the Company's wholesale customers by being a reliable cost-effective provider of superior products and services, and (ii) achieve critical mass of profitable Company retail stores in target markets. To achieve these goals, the Company has adopted the following strategic initiatives: COST SAVINGS AND VALUE ADDED INITIATIVES. The Company has implemented and will continue to focus on a wide range of cost savings and value added initiatives, including (i) maximizing the Company's substantial purchasing power through centralized buying; (ii) consolidating operations and distribution centers to achieve operating efficiencies and economies of scale; (iii) reducing the Company's investment in working capital through strategic partnerships with suppliers and more aggressive management of receivables; (iv) implementing innovations in logistics and supply chain management to reduce procurement costs, freight charges, inventory levels and delivery lead times; (v) emphasizing greater cost consciousness among the Company's workforce; and (vi) identifying under-performing assets and adopting an aggressive "fix, sell or close" approach. IMPLEMENTATION OF HORIZONS INFORMATION SYSTEM. The Company, working in conjunction with SAP America and a number of other vendors and consultants, has committed significant resources over the last two years to develop and implement HORIZONS, a client server based enterprise management and financial information system. The HORIZONS system will be a fully integrated and scalable system that management believes will provide the Company with competitive advantages that can be aggressively marketed to independent retailers. Implementation of the HORIZONS system is scheduled to be substantially completed in 1999 and is expected to provide (i) a solution to the Company's Year 2000 software issues, (ii) greater flexibility for the changing business environment, (iii) greater connectivity opportunities with customers and suppliers, (iv) the ability to integrate and standardize information systems throughout the Company, (v) timely and easy-to-use information, (vi) greater business process and workflow efficiencies, and (vii) more powerful decision-making and analysis tools. To parallel the development and implementation of the HORIZONS project, management has led a cultural change and training initiative designed to prepare the Company's workforce for changes in the industry and in the use of the HORIZONS system to address these changes. GROWTH THROUGH STRATEGIC ACQUISITIONS AND ALLIANCES. The Company has grown significantly in recent years through strategic acquisitions that have (i) enhanced the Company's purchasing power, (ii) expanded the Company's geographic scope and breadth of product offering, (iii) increased the volume and efficiency of several of the Company's distribution centers, (iv) significantly enhanced the Company's presence in the military commissary market, and (v) added retail stores in the Company's target markets. The Company will continue to strive to achieve additional synergies through further integration of recent acquisitions. In addition, the Company will continue to seek new opportunities for strategic acquisitions and alliances that will provide a superior return on investment and achieve one or more of the criteria described above. STRENGTHEN RETAIL STORE BASE. The Company will continue to focus on improving the profitability and contribution of the Company's retail store base by investing to achieve critical mass and market dominance in the Company's key retail markets, including seeking acquisition opportunities that provide synergies, constructing new stores, remodeling and expanding existing stores and remodeling, selling or closing underperforming stores. In the past two years, the Company has acquired seven stores, remodeled 16 stores, sold seven stores and closed 16 stores. In addition, the Company has and will continue to develop and utilize a number of different retail formats in its retail stores. The Company believes that multiple retail formats enable the Company to more effectively respond to competition in the varied markets in which it operates. Addressing each market individually has resulted in the strong market position the Company enjoys in the majority of the Company's retail markets. Multiple formats also allow the Company to test different concepts prior to extending such concepts to independent retail customers. 44 WHOLESALE OPERATIONS The Company distributes and sells a full line of food products, including dry groceries, fresh fruits and vegetables, frozen foods, fresh and processed meat products and dairy products, and a variety of non-food products, including health and beauty care, tobacco, paper products, cleaning supplies and small household items. The Company primarily distributes and sells nationally advertised brand products and a number of unbranded products (principally meats and produce) purchased directly from various manufacturers, processors and suppliers or through manufacturers' representatives and brokers. The Company also distributes and sells private label products using the Company's own trademarks, including principally the Our Family private label that the Company has owned and developed over many years, and the Fame private label that the Company acquired in the acquisition of Super Food. A wide variety of grocery, dairy, packaged meat, frozen foods, health and beauty care products, paper and household products, beverages, and other packaged products are manufactured or processed by others for the Company and sold under the Company's private labels. As of January 3, 1998, the Company distributed food and non-food products, on a wholesale basis, to approximately 2,250 affiliated and independent supermarkets, U.S. military commissaries and other customers. The Company's wholesale customers are primarily self-service supermarkets that carry a wide variety of grocery products, health and beauty care products and general merchandise. Many stores also have one or more specialty departments such as delicatessens, in-store bakeries, restaurants, pharmacies and flower shops. Stores served by the Company's wholesale operations range in size from small stores to large warehouse stores of over 100,000 square feet. The Company offers to affiliated independent retailers a broad range of services, including promotional, advertising and merchandising programs, the installation of computerized ordering, receiving and scanning systems, the establishment and supervision of computerized retail accounting, budgeting and payroll systems, personnel management assistance and employee training, consumer and market research, store development services and insurance programs. The Company's retail counselors and other Company personnel advise and counsel affiliated independent retailers, and directly provide many of the above services. Separate charges are made for some of these services. Other independent stores are charged for services on a negotiated basis. The Company also provides retailers with marketing and store upgrade services, many of which have been developed in connection with Company owned stores. For example, the Company assists retailers in installing and operating delicatessens and other specialty food sections. Rather than offering a single program for the services it provides, the Company has developed multiple, flexible programs to serve the needs of most affiliated independent retailers, whether rural or urban, large or small. The Company's assistance to affiliated independent retailers in store development provides a means of continued growth for the Company through the development of new retail store locations and the enlargement or remodeling of existing retail stores. Services provided include site selection, marketing studies, building design, store layout and equipment planning and procurement. The Company assists wholesale customers in securing existing supermarkets that are for sale from time to time in market areas served by the Company and, occasionally, acquires existing stores for resale to wholesale customers. The Company also provides financial assistance to its independent retailers generally in connection with new store development and the upgrading or expansion of existing stores. The Company makes secured loans to some of its independent retailers, generally repayable over a period of five or seven years, for inventories, store fixtures and equipment, working capital and store improvements. Loans are secured by liens on inventory or equipment or both, by personal guarantees and by other types of security. As of January 3, 1998, the Company had approximately $39.0 million outstanding of such secured loans to 147 independent retailers. In addition, the Company may provide such assistance to independent retailers by guarantying loans from financial institutions and leases entered into directly with lessors. The Company 45 also uses its credit strength to lease supermarket locations for sublease to independent retailers, at rates that are at least as high as the rent paid by the Company. The Company currently distributes products from 21 distribution centers located in Colorado, Georgia, Iowa, Kansas, Maryland, Michigan, Minnesota, Nebraska (2), North Carolina (2), North Dakota (2), Ohio (3), South Dakota (2), Virginia (2), and Wisconsin. The Company's distribution centers are located at strategic points to efficiently serve Company owned stores, independent customers and military commissaries. The distribution centers are equipped with modern materials handling equipment for receiving, storing and shipping goods and merchandise and are designed for high-volume operations at low unit costs. Distribution centers serve as central sources of supply for Company owned and independent stores, military commissaries and other institutional customers within their operating areas. Generally, the distribution centers maintain complete inventories containing most national brand grocery products sold in supermarkets and a wide variety of high-volume private label items. In addition, distribution centers provide full lines of perishables, including fresh meats and poultry, fresh fruits and vegetables (except Super Food distribution centers), dairy and delicatessen products and frozen foods. Health and beauty care products, general merchandise and specialty grocery products are distributed from a dedicated area of a distribution center located in Bellefontaine, Ohio, and from the distribution center located in Sioux Falls, South Dakota. Retailers order their inventory requirements at regular intervals through direct linkage with the Company's computers. Deliveries are made primarily by the Company's transportation fleet. The frequency of deliveries varies, depending upon customer needs. The Company currently has a modern fleet of approximately 500 tractors and 1,200 semi-trailers, most of which are owned by the Company. In addition, many types of meats, dairy products, bakery and other products are sold by the Company but are delivered by the suppliers directly to retail food stores. Virtually all of the Company's wholesale sales to independent retailers are made on a market price-plus-fee and freight basis, with the fee based on the type of commodity and quantity purchased. Selling prices are changed promptly, based on the latest market information. The Company distributes groceries and related products directly to military commissaries in the U.S., and distribution centers also provide products for distribution to U.S. military commissaries in Europe and to ships afloat. These distribution services are provided primarily under contractual arrangements with the manufacturers of those products. The Company provides storage, handling and transportation services for the manufacturers and, as products ordered from the Company by the commissaries are delivered to the commissaries, the Company invoices the manufacturers for the cost of the merchandise delivered plus negotiated fees. RETAIL OPERATIONS As of January 3, 1998, the Company owned and operated 97 retail outlets, including 66 supermarkets, 27 warehouse stores and four combination general merchandise/food stores. The Company has devoted considerable resources in recent years to acquire, construct, enlarge and modernize its stores. By constructing new stores or expanding existing stores, the Company seeks to add either larger conventional supermarkets (at least 30,000 square feet) or warehouse stores (at least 45,000 square feet), as appropriate. The Company's stores use a number of automated systems to provide inventory control at delivery and checkout points, reduce shrinkage and increase labor efficiency. The Company operates 66 conventional supermarkets principally under the names Sun Mart, Easter Foods and Food Folks. These stores, 12 of which the Company owns (the remainder are leased), range in size up to approximately 46,000 square feet. These stores are primarily self-service supermarkets that carry a wide variety of grocery products, health and beauty care products and general merchandise. Many stores also have one or more specialty departments such as delicatessens, in-store bakeries, restaurants, pharmacies and floral departments. 46 The Company operates 27 warehouse stores, principally under the name Econofoods. These stores, six of which the Company owns (the remainder are leased), range in size up to approximately 106,000 square feet. The Company's warehouse stores offer a wide variety of high quality groceries, fresh fruits and vegetables, dairy products, frozen foods, fresh fish, fresh and processed meat and health and beauty care products, all at lower prices. Many have specialty departments such as delicatessens, bakeries, pharmacies, banks and floral and video departments. These stores appeal to quality and price-conscious customers who want broad selection and availability of convenience foods, but are willing, in some cases, to forgo standard supermarket services. The stores offer lower prices due to increased business volume as well as the limited services available. The Company also operates four combination general merchandise/food stores under the name Family Thrift Center. These stores, two of which are owned, range in size up to approximately 60,000 square feet. In addition to traditional supermarket food departments, these stores have expanded general merchandise and health and beauty care products departments and pharmacies, and some also have sit-down restaurants, full-service floral departments and book departments. PRODUCE MARKETING OPERATIONS Through a wholly owned subsidiary, Nash-DeCamp Company ("Nash-DeCamp"), the Company grows, packs, ships and markets fresh fruits and vegetables from locations in California and the countries of Chile and Mexico to customers in the United States, Canada and overseas. For regulatory reasons, the amount of business between Nash-DeCamp and the Company is limited. The Company owns and operates three modern packing, shipping and/or cold storage facilities that ship fresh grapes, plums, peaches, nectarines, apricots, pears, persimmons, kiwi fruit and other products. The Company also acts as marketing agent for other packers of fresh produce in California and in the countries of Chile and Mexico. For the above services, the Company receives, in addition to a selling commission, a fee for packing, handling and shipping produce. The Company also owns vineyards and orchards for the production of table grapes, tree fruit, kiwi and citrus. INFORMATION SYSTEMS The Company, working in conjunction with SAP America and a number of other vendors and consultants, has committed substantial resources over the last two years to the development and implementation of HORIZONS, a client server based enterprise management and financial information system. The Company currently expects to spend approximately $76 million between 1996 and 2004 on the design and installation of, and training for, the HORIZONS project, approximately half of which has been spent through the end of fiscal 1997. The HORIZONS system will be a fully integrated and scalable system that management believes will provide the Company with competitive advantages that can be aggressively marketed to retail customers. Implementation of the HORIZONS system is scheduled to be substantially completed in 1999, and is expected to provide (i) a solution to the Company's Year 2000 software issues, (ii) greater flexibility for the changing business environment, (iii) greater connectivity opportunities with customers and suppliers; (iv) the ability to integrate and standardize information systems throughout the Company, (v) timely and easy-to-use information, (vi) greater business process and workflow efficiencies, and (vii) more powerful decision-making and analysis tools. To parallel the development and implementation of the HORIZONS project, management has led a cultural change and training initiative designed to prepare the Company's workforce for changes in the industry and in the use of the HORIZONS system to address these changes. PROPERTIES The principal executive offices of the Company are located in Edina, Minnesota, and consist of approximately 68,000 square feet of office space in a building owned by the Company. In addition to the executive offices, the Company leases an additional 15,275 square feet of office space in Edina, Minnesota. The locations and sizes of the Company's distribution centers, as of January 3, 1998, are listed below (all of 47 which are owned, except as indicated). The distribution center facilities which are leased have varying terms, all with remaining terms of less than 20 years.
APPROX. SIZE LOCATION (SQUARE FEET) - ------------------------------------------------------------------ ------------- Midwest/West: Denver, Colorado(a)............................................. 335,800 Cedar Rapids, Iowa.............................................. 351,900 Liberal, Kansas................................................. 177,000 St. Cloud, Minnesota............................................ 329,000 Grand Island, Nebraska.......................................... 177,700 Omaha, Nebraska(a).............................................. 530,000 Lincoln, Nebraska(b)............................................ 226,300 Fargo, North Dakota............................................. 288,800 Minot, North Dakota............................................. 185,200 Rapid City, South Dakota........................................ 187,100 Sioux Falls, South Dakota(c).................................... 271,100 Appleton, Wisconsin............................................. 430,900 Southeast: Statesboro, Georgia(a)(d)....................................... 287,800 Baltimore, Maryland(a).......................................... 350,500 Lumberton, North Carolina(a)(e)................................. 256,600 Rocky Mount, North Carolina(a).................................. 191,800 Bluefield, Virginia............................................. 186,400 Norfolk, Virginia(a)(f)......................................... 543,600 Super Food Services, Inc.: Bellefontaine, Ohio(g).......................................... 863,000 Cincinnati, Ohio................................................ 445,600 Bridgeport, Michigan(a)......................................... 581,300 Lexington, Kentucky(a)(h)....................................... 334,700 ------------- Total Square Footage.............................................. 7,532,100 ------------- -------------
- ------------------------ (a) Leased facility. (b) The operations of the Lincoln distribution center have been consolidated with the operations of the Company's distribution center in Omaha, Nebraska, and the Company has closed the Lincoln distribution center and intends to sell the property. (c) Includes 79,300 square feet that are leased by the Company. (d) Includes 46,400 square feet that are owned by the Company. (e) Includes 16,100 square feet of produce warehouse space located in Wilmington, North Carolina which is leased by the Company. (f) Includes 52,800 square feet that are owned by the Company. (g) Includes 197,000 square feet that are leased by the Company. General Merchandise Services, an operating unit of Super Food, utilizes approximately 487,800 square feet of the total space (owned and leased) for the distribution of health and beauty care products, general merchandise and specialty grocery products. (h) The Company closed the Lexington distribution center in March 1998, having consolidated its operations with the Cincinnati, Ohio and Bluefield, Virginia distribution centers. 48 The following table shows the number and aggregate size of Company operated conventional supermarkets and warehouse stores at January 3, 1998: Conventional Supermarkets: Number of stores............................................... 66 Total square feet.............................................. 1,459,532 Warehouse Stores: Number of stores............................................... 27 Total square feet.............................................. 1,168,875 Combination General Merchandise/Food: Number of stores............................................... 4 Total square feet.............................................. 180,399 Totals: Number of stores............................................... 97 Total square feet.............................................. 2,808,806
Nash-DeCamp has executive offices comprising approximately 11,600 square feet of leased space in an office building located in Visalia, California. Nash-DeCamp owns and operates three packing, shipping and/or cold storage facilities in California in connection with its produce marketing operations, with total space of approximately 174,000 square feet. In addition to such storage facilities, Nash-DeCamp also owns approximately 879 acres for the production of table grapes, 40 acres for the production of kiwi fruit, 796 acres for the production of peaches, plums, apricots and nectarines, 245 acres for the production of citrus, and 194 acres of open ground for future development, all in the San Joaquin Valley of California. Nash-DeCamp also leases 236 acres for the production of tree fruit located in the San Joaquin Valley and, through a 99% owned Chilean subsidiary, approximately 740 acres in Chile for the production of table grapes. COMPETITION All segments of the Company's business are highly competitive. The Company competes directly at the wholesale level with a number of wholesalers that supply independent retailers, including "cooperative" wholesalers that are owned by their retail customers and "voluntary" wholesalers who, like the Company, are not owned by their retail customers but sponsor a program under which single-unit or multi-unit independent retailers may affiliate under a common name. Certain of these competing wholesalers may also engage in distribution to military commissaries. The Company also competes indirectly with the warehouse and distribution operations of the large integrated chains, which consist of single entities owning both wholesale and retail operations. At the wholesale level, the principal methods of competition are price, quality, breadth and availability of products offered, strength of private label brands offered, schedules and reliability of deliveries and the range and quality of services offered, such as store financing and use of store names, and the services offered to manufacturers of products sold to military commissaries. The success of the Company's wholesale business also depends upon the ability of its retail store customers to compete successfully with other retail food stores. The Company competes on the retail level in a fragmented market with many organizations of various sizes, ranging from national chains and voluntary or cooperative groups to local chains and privately owned unaffiliated stores. Depending on the product and location involved, the principal methods of competition at the retail level include price, quality and assortment, store location and format, sales promotions, advertising, availability of parking, hours of operation and store appeal. The Company competes directly in its produce marketing operations with a large number of other firms that pack, ship and market produce, and competes indirectly with larger, integrated firms that grow, 49 pack, ship and market produce. The principal methods of competition in this segment are service provided to growers and the ability to sell produce at the most favorable prices. EMPLOYEES As of January 3, 1998, the Company employed approximately 12,200 persons, approximately 5,400 of which were employed on a part-time basis. All employees are non-union, except approximately 774 employees in a variety of functions who are unionized under various collective bargaining agreements. The Company considers its employee relations to be good. LEGAL PROCEEDINGS The Company is a party to various litigation, claims and disputes, some of which are for substantial amounts, arising in the ordinary course of its business. While the ultimate effect of such actions cannot be predicted with certainty, the Company expects that the outcome of these matters will not result in a material adverse effect on its consolidated financial position or results of operations. 50 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company, their ages and the offices held as of March 31, 1998 are as follows:
NAME AGE POSITION - ------------------------------------ --- ---------------------------------------- Alfred N. Flaten(1)................. 63 Director, President and Chief Executive Officer William E. May, Jr.................. 49 Executive Vice President and Chief Operating Officer David J. Richards(2)................ 49 Vice President, Corporate Retail Stores Norman R. Soland.................... 57 Vice President, Secretary and General Counsel Charles F. Ramsbacher............... 55 Vice President, Marketing Clarence T. Walters................. 61 Vice President, Management Information Systems Steven L. Lumsden................... 52 Vice President, Warehouse and Transportation Gerald D. Maurice................... 64 Vice President, Store Development Charles M. Seiler................... 50 Vice President, Corporate Retail Operations John R. Scherer..................... 47 Vice President and Chief Financial Officer Edgar F. Timberlake................. 50 Vice President, Human Resources John M. McCurry..................... 49 Vice President, Independent Store Operations Thomas W. Struck.................... 47 Vice President, Supply Chain Management Lawrence A. Wojtasiak............... 52 Controller Suzanne S. Allen.................... 33 Treasurer Carole F. Bitter.................... 52 Director Richard A. Fisher................... 68 Director Jerry L. Ford....................... 57 Director Allister P. Graham.................. 61 Director John H. Grunewald................... 61 Director Richard G. Lareau................... 69 Director Don E. Marsh........................ 60 Director Donald R. Miller.................... 70 Director; Board Chair Robert F. Nash...................... 64 Director Jerome O. Rodysill.................. 69 Director
- ------------------------ (1) Mr. Flaten has announced his retirement as a director and officer of the Company effective as of June 1, 1998. The Board of Directors has elected Mr. Ron Marshall (age 44) as President and Chief Executive Officer effective as of June 1, 1998. The Board of Directors further intends to elect Mr. Marshall to fill the vacancy on the Board of Directors following the resignation of Mr. Flaten as of June 1, 1998. (2) Mr. Richards resigned effective as of May 15, 1998. There are no family relationships between or among any of the executive officers or directors of the Company. The Company's directors are divided into three classes of as nearly equal size as possible. The term of each class of directors is three years, and the term of one class expires each year in rotation. Executive officers of the Company are elected by the Board of Directors for one-year terms, commencing with their election at the first meeting of the Board of Directors immediately following the annual meeting of stockholders and continuing until the next such meeting of the Board of Directors. Mr. Flaten has been a director of the Company since May 1990. He was elected President in November 1991 and Chief Executive Officer in November 1994. He also served as Chief Operating Officer from November 1991 to January 1998. Previously he served as Executive Vice President, Sales and 51 Operations from February 1991 to November 1991. Prior to that, Mr. Flaten was employed by the Company in a variety of functions beginning in June 1961. Mr. Marshall was elected by the Board of Directors to serve as President and Chief Executive Officer and as a director effective as of June 1, 1998. Prior to joining the Company, Mr. Marshall served as Executive Vice President and Chief Financial Officer of Pathmark Stores, Inc., a grocery retailer serving the mid-Atlantic states, since 1994. From 1991 through 1994, Mr. Marshall served as Senior Vice President and Chief Financial Officer of Dart Group Corporation, a retailer of groceries, auto parts and books. Prior to that, he was Vice President and Chief Financial Officer of Barnes & Noble Bookstores, Inc. Mr. May's election as Executive Vice President and Chief Operating Officer was effective in January 1998. He previously served as Vice President, Strategic Technology Programs and Marketing Services from July 1996 to January 1998, after joining the Company in June 1996. He was previously employed by Spartan Stores, Inc., a wholesale food distribution company, serving in various executive and officer capacities from July 1988 to June 1996. Mr. Richards was elected as Vice President, Corporate Retail Stores in July 1996. He previously served as operating Vice President, Southeast Division from December 1994 to June 1996, when he assumed his current functional responsibilities. Prior to joining the Company, he was employed by Scrivner, Inc., a wholesale and retail food distribution company, serving as its Senior Vice President, Store Development from July 1993 to August 1994 and its Executive Vice President, Corporate Stores from January 1992 to July 1993. Mr. Soland has served as Vice President, Secretary and General Counsel since May 1988, and as Secretary and General Counsel since January 1986. Mr. Ramsbacher has served as Vice President, Marketing since May 1991. Mr. Walters has served as Vice President, Management Information Systems since May 1988. Mr. Lumsden has served as Vice President, Warehouse and Transportation since May 1992. Mr. Maurice was elected Vice President, Store Development in May 1993. He previously served as operating Vice President, Central Division for more than five years. Mr. Seiler was elected as Vice President, Corporate Retail Operations effective as of October 1994. He previously served as operating Vice President, Iowa Division from May 1993 to October 1994 and Iowa Division Manager from June 1991 to May 1993. Mr. Scherer was appointed as Chief Financial Officer in November 1995. His election as Vice President was effective in December 1994, and he served as Vice President, Planning and Financial Services from December 1994 to November 1995. He previously served as Director of Strategic Planning and Financial Services from April 1994 to December 1994, and Director of Planning and Budgets from January 1988 through April 1994. Mr. Timberlake was elected as Vice President, Human Resources in November 1995. He previously served as Director of Human Resources from January 1993 to November 1995. Mr. McCurry was elected as Vice President, Independent Store Operations in May 1996. He previously served as Director of Independent Store Operations from August 1993 to May 1996 and as Distribution Center Manager, Sioux Falls, South Dakota, from January 1991 to August 1993. Mr. Struck was elected as Vice President, Supply Chain Management effective as of January 1998. He previously served as Director, Future Business Systems in the Company's HORIZONS project from March 1997 to January 1998, and as Distribution Center Manager, Cedar Rapids, Iowa from August 1988 to March 1997. Mr. Wojtasiak has served as Controller since May 1990. 52 Ms. Allen was elected as Treasurer effective as of January 1996. She previously served as Assistant Treasurer from May 1995 to January 1996 and Treasury Manager from January 1993 to May 1995. Dr. Bitter has been a director of the Company since November 1993. She is President and Chief Executive Officer of Harold Friedman, Inc., an operator of retail supermarkets, a position she has held for more than five years. Mr. Fisher has been a director of the Company since May 1984. He retired in December 1992 as Vice President--Finance and Treasurer of Network Systems Corporation, a position he had held for more than five years. Mr. Ford has been a director of the Company since May 1997. He served as an executive of Comdisco Network Services, a division of Comdisco, Inc. from June 1994 to April 1998. He previously served as Executive Director and Chief Operating Officer of Lindquist & Vennum, a law firm, for more than five years. Mr. Graham has been a director of the Company since May 1992. He is the Chairman of the Board and Chief Executive Officer of The Oshawa Group Limited, a food and pharmaceutical distributor in Canada, a position he has held for more than five years. Mr. Graham also serves as a director of Dylex Limited (Canada). Mr. Grunewald has been a director of the Company since September 1992. He retired in January 1997 as Executive Vice President, Finance and Administration of Polaris Industries, Inc., a position he had held since September 1993. He previously served as Executive Vice President, Chief Financial Officer and Secretary of Pentair, Inc. for more than five years. Mr. Grunewald also serves as a director of Advantage Learning Systems, Inc. and Kinnard Investments Inc. Mr. Lareau has been a director of the Company since May 1984. He has been a partner in the law firm of Oppenheimer Wolff & Donnelly LLP for over 30 years. Oppenheimer Wolff & Donnelly has provided and is expected to continue to provide legal services to the Company. Mr. Lareau also serves as a director of Merrill Corporation, Mesabi Trust, Northern Technologies International Corporation and Ceridian Corporation. Mr. Marsh has been a director of the Company since June 1995. He is the Chairman of the Board, President and Chief Executive Officer of Marsh Supermarkets, Inc., a supermarket and convenience store chain, positions he has held for more than five years. Mr. Marsh also serves as a director of Indiana Energy Incorporated and National City Bank, Indiana. Mr. Miller has been a director of the Company since February 1978, and has served as Board Chair since May 1995. He has been an independent management consultant for more than five years. Mr. Miller also serves as a director of Michael Anthony Jewelers, Inc. Mr. Nash has been a director of the Company since May 1968. He retired in January 1996 as Vice President and Treasurer of the Company, a position he had held for more than five years. Mr. Rodysill has been a director of the Company since May 1974. He retired in January 1994 as Senior Vice President, Store Development and Construction of the Company, a position he had held for more than five years. 53 EXECUTIVE COMPENSATION The following table sets forth the cash and non-cash compensation earned during the fiscal years ending January 3, 1998, December 28, 1996 and December 30, 1995, by the Chief Executive Officer and the four other most highly compensated executive officers of the Company whose salary and bonus exceeded $100,000 in fiscal 1997. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ------------------------------------------------------------ AWARDS ANNUAL COMPENSATION -------------------------- PAYOUTS RESTRICTED SECURITIES ----------- ---------------------- STOCK UNDERLYING LTIP ALL OTHER NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS(A) AWARDS(B) OPTIONS(C) PAYOUTS(D) COMPENSATION(E) - ------------------------------- ----------- --------- ----------- ----------- ------------- ----------- ------------------- ($) ($) ($) ($) ($) Alfred N. Flaten .............. 1997 470,091 127,187 -- -- 73,024 3,331 PRESIDENT, CHIEF EXECUTIVE 1996 368,985 114,700 69,996 48,693 165,956 5,318 OFFICER AND DIRECTOR 1995 279,232 130,000 -- -- -- 5,081 William T. Bishop(f) .......... 1997 215,408 47,216 -- -- 24,437 3,331 SENIOR VICE PRESIDENT, SALES 1996 179,506 43,200 29,998 20,868 50,478 -- AND LOGISTICS 1995 149,588 50,000 -- -- -- -- William E. May, Jr.(g) ........ 1997 1996 208,370 57,400 -- -- -- -- EXECUTIVE VICE PRESIDENT AND 1995 101,288 30,000 -- -- -- -- CHIEF OPERATING OFFICER -- -- -- -- -- -- David J. Richards ............. 1997 207,353 53,040 -- -- 20,364 3,331 VICE PRESIDENT, CORPORATE 1996 153,425 55,000 -- -- 37,836 -- RETAIL STORES 1995 124,657 25,000 -- -- -- -- Norman R. Soland .............. 1997 177,876 36,000 -- -- 17,612 3,331 VICE PRESIDENT, SECRETARY AND 1996 139,616 34,720 21,597 15,024 39,247 5,318 GENERAL COUNSEL 1995 107,704 47,000 -- -- -- 4,398
- ------------------------------ (a) Cash bonuses for services rendered have been included as compensation for the year earned, even though bonuses were actually paid in the following year. (b) These amounts reflect the value of the 25% discount related to the purchase by certain executive officers of shares of the Company's Common Stock (the "Common Stock") that are restricted and subject to a risk of forfeiture for an aggregate purchase price equal to 75% of the fair market value of the Common Stock on January 31, 1996. Pursuant to this program (the "Management Restricted Stock Purchase Program"), which was implemented under the Nash Finch 1994 Stock Incentive Plan (the "1994 Stock Incentive Plan"), 10% of the aggregate purchase price was paid by such executive officer in cash and the remainder was paid by delivery of a promissory note secured by a pledge of the shares. Interest on the promissory note, at a rate of 5.61% per annum (120% of the then applicable federal rate), is payable quarterly, with principal amounts payable commencing two years from issuance of the promissory note and due in full on February 28, 2001. The forfeiture restrictions on the shares generally will lapse on February 28, 2001, although the shares will remain pledged as collateral for the promissory note until repayment of the promissory note or the Company otherwise releases such shares. If, however, the executive officer's employment is terminated by reason of death, disability, retirement, or a change in control of the Company occurs, as defined in the 1994 Stock Incentive Plan, the forfeiture restrictions will lapse. If the executive officer's employment is terminated prior to the lapsing of forfeiture restrictions for any other reason, such restricted shares will be repurchased by the Company at the lesser of the purchase price paid or an amount equal to the then fair market value of the shares divided by 0.75. Although ordinary cash dividends on such restricted shares will be paid to such executive officers, any other dividends or distributions on such restricted shares will be subject to the same security interest and forfeiture restrictions as the shares to which they relate. As of January 3, 1998, the number and fair market value of restricted shares held by each of the named executive officers participating in the Management Restricted Stock Purchase Program was as follows: (i) Mr. Flaten's shares (16,231) had a fair market value of $312,447; and (ii) Mr. Soland's shares (5,008) had a fair market value of $96,404. (c) These amounts reflect the grant of options under the 1994 Stock Incentive Plan. (d) For fiscal 1996, these amounts reflect (i) the fair market value ($20.125 per share) of shares of Common Stock issued for performance units earned for fiscal 1996 pursuant to awards granted under the 1994 Stock Incentive Plan, and (ii) cash payments representing dividends declared on an equivalent number of shares ("dividend equivalents") from January 1, 1996 through March 1, 1997, the date the shares were issued. For fiscal 1997, the amounts reflect (i) the fair market value ($19.625 per share) of shares of Common Stock issued for performance units earned for fiscal 1995-1997 pursuant to awards granted under the 1994 Stock Incentive Plan and (ii) cash payments representing dividend equivalents from January 1, 1995 through March 1, 1998, the date the shares were issued. Fair market value of the shares was determined as of the dates that the issuance of the shares was approved by the Compensation Committee of the Board of Directors, which were February 10, 1997 and February 16, 1998, respectively. These shares have been included as payouts for the year in which they were earned, even though the shares were not issued, and dividend equivalents paid, until the following year (e.g., shares earned in fiscal 1997 were actually paid in fiscal 1998). (e) "All Other Compensation" consists of contributions by the Company in fiscal 1995, fiscal 1996 and fiscal 1997 to the Nash Finch Profit Sharing Plan. (f) Mr. Bishop resigned from the Company effective as of January 4, 1998. (g) Mr. May joined the Company in June 1996. 54 PRINCIPAL STOCKHOLDERS SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS Set forth in the following table is information, as of March 1, 1998 unless otherwise indicated, pertaining to (a) the individual ownership of the Company's Common Stock (the "Common Stock") by directors and executive officers named in the Summary Compensation Table, and (b) the ownership of Common Stock by directors and executive officers as a group.
TOTAL SHARES OF COMMON STOCK BENEFICIALLY OWNED(A)(B)(C) ------------------------ NUMBER OF NUMBER OF NUMBER OF PERCENT NAME OF BENEFICIAL OWNER SHARES(A) OPTIONS(B) SHARE UNITS(C) AMOUNT OF CLASS - ------------------------------------------------------ ----------- ------------- ----------------- ----------- ----------- Carole F. Bitter...................................... 1,000 1,000 926 2,926 * Richard A. Fisher..................................... 2,000(d) 1,000 966 3,966(d) * Alfred N. Flaten...................................... 33,030(e) 5,600 N/A 38,630(e) * Jerry L. Ford......................................... 1,000 500 197 1,697 * Allister P. Graham.................................... 1,000 1,500 1,114 3,614 * John H. Grunewald..................................... 2,500(f) 1,500 613 4,613(f) * Richard G. Lareau..................................... 3,948(g) 1,500 -0- 5,448(g) * Don E. Marsh.......................................... 640 500 627 1,767 * Donald R. Miller...................................... 2,015 1,500 -0- 3,515 * Robert F. Nash........................................ 99,800(h) 1,000 511 101,311(h) * Jerome O. Rodysill.................................... 21,015(i) 1,500 151 22,666(i) * William T. Bishop(j).................................. 1,110 -0- N/A 1,110 * William E. May, Jr.................................... -0- 1,280 N/A 1,280 * David J. Richards..................................... 4,322 -0- N/A 4,322 * Norman R. Soland...................................... 11,043(k) 2,400 N/A 13,443(k) * All Directors and Executive Officers as a Group (26 persons)............................................ 215,210(l) 36,540 5,105 256,855(l) 2.27%
- ------------------------------ * Less than 1%. (a) Unless otherwise noted, all of the shares shown are held by individuals or entities possessing sole voting and investment power with respect to such shares. (b) Includes shares of Common Stock that may be acquired upon exercise of options within 60 days of March 1, 1998 by the persons and group identified in this table under the 1994 Stock Incentive Plan and the Nash Finch 1995 Director Stock Option Plan. (c) Share Units represent shares of Common Stock payable to non-employee directors upon termination of service on the Board under the Nash Finch 1997 Non-Employee Director Stock Compensation Plan. (d) Includes 500 shares owned beneficially by Mr. Fisher's wife as to which he may be deemed to share voting and investment power, but as to which he disclaims any beneficial interest. (e) Includes 1,000 shares owned beneficially by Mr. Flaten's wife as to which he may be deemed to share voting and investment power, but as to which he disclaims any beneficial interest. (f) Includes 500 shares owned beneficially by a trust for which Mr. Grunewald's wife serves as a trustee. As a result, Mr. Grunewald may be deemed to share voting and investment power for such shares, but he disclaims any beneficial interest in such shares. (g) Includes 1,800 shares owned beneficially by Mr. Lareau's wife as to which he may be deemed to share voting and investment power, but as to which he disclaims any beneficial interest. (h) Includes 28,082 shares owned beneficially by Mr. Nash's wife as to which he may be deemed to share voting and investment power, but as to which he disclaims any beneficial interest. (i) Includes 12,860 shares held by a trust for the benefit of Mr. Rodysill's wife, of which Mr. Rodysill is a co-trustee with his son and as to which he shares voting and investment power. (j) Mr. Bishop resigned from the Company effective as of January 4, 1998. (k) Includes 3,371 shares that are owned beneficially by Mr. Soland and his wife jointly and as to which he shares voting and investment power. (l) Includes 48,413 shares as to which voting and investment power are shared or may be deemed to be shared. 55 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS Set forth in the following table is information pertaining to persons known to the Company, as of March 1, 1998, to be the beneficial owners of more than five percent of the outstanding Common Stock.
PERCENT NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT OF CLASS - ----------------------------------------------------------------------- --------- ----------- Sanford C. Bernstein & Co., Inc........................................ 620,138(a) 5.5% 767 Fifth Avenue New York, NY 10153 Franklin Resources, Inc................................................ 785,000(b) 6.9% 777 Mariners Island Blvd. San Mateo, CA 94404
- ------------------------ (a) Sanford C. Bernstein & Co., Inc. has reported in a Schedule 13G dated February 4, 1998 that, as of December 31, 1997, it was the beneficial owner of all of such shares, possessing sole investment power with respect to all such shares, sole voting power with respect to 523,100 shares and shared voting power with respect to 15,863 shares. Sanford C. Bernstein & Co., Inc. has also reported that the filing was made in its capacities as an investment adviser and broker/dealer, and that its beneficial ownership of such shares is on behalf of certain accounts of its discretionary clients. These clients have the right to receive dividends from and the proceeds of the sale of such securities. (b) Franklin Resources, Inc. has reported in a Schedule 13G dated January 30, 1998 that, as of December 31, 1997, it was the beneficial owner of all of such shares, possessing sole investment power and sole voting power with respect to all such shares. Franklin Resources, Inc. has also reported that the filing was made in its capacities as a holding company of direct and indirect investment advisory subsidiaries. Such subsidiaries advise various open or closed-end investment companies or other managed accounts pursuant to advisory contracts. The advisory contracts grant to such subsidiaries all voting and investment power over the securities owned by the advisory clients, and as a result, such subsidiaries may be deemed as the beneficial owners of such shares. These clients have the right to receive dividends from and the proceeds of the sale of such securities. 56 DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS The following summary of the instruments and agreements governing certain other indebtedness of the Company does not purport to be complete and is qualified in its entirety by reference to the agreements governing such indebtedness, certain of which have been filed by the Company with the Commission. Capitalized terms used herein are defined as specified in the agreement to which each of the following sections relate, unless the context requires otherwise. THE REVOLVING CREDIT FACILITY The Company entered into the Revolving Credit Facility as of October 8, 1996, with Harris Trust and Savings Bank, as Administrative Agent, and various other lending institutions, which originally provided for a $500.0 million revolving line of credit, the proceeds of which were available to finance and pay various transaction costs relating to the Company's acquisition of the shares of Super Food and are available to pay various other indebtedness of the Company and Super Food, and provide working capital to the Company and its subsidiaries. On March 2, 1998, the credit available under the Revolving Credit Facility was reduced to $360.0 million, and was reduced to $350.0 million upon consummation of the offering of the Series A Notes. The Revolving Credit Facility also includes a letter of credit facility of up to $25.0 million, and a $25.0 million swing line facility, each of which reduces to the extent used, the amount otherwise available under the revolving line of credit. The Revolving Credit Facility is guaranteed by all the significant operating subsidiaries of the Company. Interest on amounts outstanding under the Revolving Credit Facility may be calculated, at the Company's option, at either a base rate (i.e., the greater of the prime commercial rate or the Fed Funds rate plus 0.50%) or an Adjusted LIBOR rate plus a margin which may be adjusted depending on the rating assigned to the Company's outstanding senior unsecured non-credit enhanced long-term indebtedness by Standard & Poor's Ratings Services Group and/or Moody's Investors Services, Inc. (the "Company's Debt Rating"). The Revolving Credit Facility also provides the Company with the right to request interest on loans outstanding thereunder to be set pursuant to a bid procedure which may be responded to by the lenders thereunder, at their sole discretion. The Company is obligated to pay a facility fee ranging from 0.10% to 0.30 % of the total commitments depending on the Company's Debt Rating, certain agents' fees and other administrative fees. The Revolving Credit Facility, as amended in connection with the offering of the Series A Notes, contains numerous covenants, including: (i) the Company must maintain a Current Ratio of at least 1.25 to 1.00; (ii) the Company's Tangible Net Worth must be at least $125.0 million plus 50% of its consolidated Net Income (if positive) for the fiscal quarter ending March 23, 1997, and for each fiscal quarter thereafter; (iii) the Company's ratio of Total Funded Debt to EBITDA (excluding the effect of the Company's extraordinary charge to earnings in the third quarter of fiscal 1997) for any four quarter period on the last day of each fiscal quarter may not be more than 4.75 to 1.00 as of the end of second quarter of fiscal 1998, declining to 4.50 to 1.00 by the end of the fourth quarter of fiscal 1998, declining to 4.25 to 1.00 as of the end of the second quarter of fiscal 1999 and declining to 4.00 to 1.00 as of the end of the second quarter of fiscal 2000 and thereafter; (iv) the Company may not allow its ratio of EBITDA (excluding the effect of the Company's extraordinary charge to earnings in the third quarter of fiscal 1997) to Interest Expense for any four quarter period to be less than 2.50 to 1.00 from the first fiscal quarter of 1998 through the first quarter of fiscal 2000, increasing to 2.75 to 1.00 for each fiscal quarter thereafter; (v) the Company's ratio of Senior Funded Debt to EBITDA (excluding the effect of the Company's extraordinary charge to earnings in the third quarter of fiscal 1997) for any four quarter period may not be more than 3.50 to 1.00 as of the end of the second quarter of fiscal 1998 and decreasing to 3.25 to 1.00 as of the end of the second quarter of fiscal 1999 and further decreasing to 3.00 to 1.00 at the end of the second quarter of fiscal 2000 and thereafter; (vi) none of the Long-Term Debt of the Company or its Subsidiaries may have a Weighted Average Life to Maturity of less than seven years; (vii) the Company and each Subsidiary may not permit to exist any liens on any of their property other than certain specified permitted liens; (viii) the Company's Subsidiaries may not incur Indebtedness (other than certain intercompany Indebtedness, 57 guarantees by the Subsidiaries of the Company's obligations under the Revolving Credit Facility and the Notes, and liabilities incurred in connection with permitted securitization transactions) in excess of 5% of the Total Assets of the Company and its Subsidiaries; (ix) the Company and each Subsidiary may not make any investments or loans or advances, or acquire as an entirety the assets or business of any other Person or become liable on any Guaranty, other than with respect to investments in certain commercial paper, certificates of deposit, investments in Subsidiaries (up to $25.0 million in Foreign Subsidiaries), U.S. obligations, travel advances to employees and sales representatives, loans and advances to customers up to $135.0 million (as of January 4, 1998) in aggregate amount (such amount to increase by $10.0 million as of the first day of each fiscal year thereafter) investments in stock, obligations or securities received in settlement of ordinary course debts owing to the Company and acquisitions in lines of business the same as or similar to the Company's business, certain other minor exceptions and up to $100.0 million in other such transactions not specifically otherwise excepted; (x) the Company and each Subsidiary may not consolidate or merge into another Person or sell substantially all of its assets except for certain permitted intercompany and financing transactions, and transactions which do not exceed a certain size or are otherwise not material; (xi) the Company and the Company's subsidiaries may not make any payments of principal, interest or premium, if any, on the Notes prior to the scheduled maturity thereof or other times required for payment thereof, except that the Company may use up to 50% of the proceeds of an underwritten public offering to redeem not more than 35% of the Notes then outstanding (if at the time of such payment no default or event of default shall occur or be continuing under the Revolving Credit Facility) and the Company may redeem Notes to the extent permitted by the Indenture from the proceeds of Asset Sales (as defined herein); and (xii) the Company may not change the general nature of its business in any material respect. In addition, the definition of "change of control" will be revised to include each similar event as defined in the Indenture that will entitle holders of the Notes to accelerate the Notes. The Company is required to prepay amounts outstanding under the Revolving Credit Facility with 100% of the proceeds of (a) indebtedness for borrowed money incurred by the Company or any Subsidiary (other than such indebtedness which does not exceed $5.0 million in any calendar year or $10.0 million in the aggregate and, subject to the effectiveness of the amendment to the Revolving Credit Facility described below, other than the Notes), and (b) the sale in any securitization of accounts receivable of the Company. The Company is also required to prepay amounts outstanding under the Revolving Credit Facility, if the Required Banks so notify the Borrower within 30 days after they receive notice of a change of control (which includes the acquisition by a person or group of 25% of the Common Stock) in which case the Commitments and Swing Line Commitment under the Revolving Credit Facility terminate. The Revolving Credit Facility includes a number of events of default, including events related to payment defaults, covenant defaults, pension shortfalls, cross defaults on $10.0 million of other indebtedness, inaccurate representations and warranties, judgments in excess of $15.0 million, and certain bankruptcy events. THE OTHER BANK CREDIT FACILITIES BRINSON TRUST COMPANY NOTE AGREEMENT. The Company has entered into a Master Note Agreement (the "Brinson Agreement") dated as of May 16, 1997 pursuant to which Brinson Trust Company ("Brinson") may, in its sole discretion, offer to make demand loans to the Company of up to $150.0 million. Both principal and accrued interest on such loans are payable within five days of demand by Brinson. Interest accrues on amounts outstanding under the Brinson Agreement at weekly LIBOR plus 0.25%. The Brinson Agreement does not impose any restrictive covenants on the Company. The Brinson Agreement may be terminated at any time by either party. As of March 28, 1998, $65.0 million was outstanding under the Brinson Agreement. NORWEST BANK MINNESOTA LINE OF CREDIT. The Company has a conditional line of credit from Norwest Bank Minnesota, N.A. ("Norwest") dated as of June 24, 1997. Under this arrangement Norwest may, in its sole discretion, advance up to $10.0 million. Such borrowings are payable on demand, but in no event later 58 than 30 days after any loan is made. Interest accrues at the rate designated at the time of borrowing and is generally based on the Fed Funds rate, plus a margin. This line of credit expires May 31, 1998. As of March 28, 1998, $10.0 million was outstanding under the Norwest line of credit. WACHOVIA BANK OF GEORGIA. The Company has a $15.0 million line of credit from Wachovia Bank of Georgia, N.A. ("Wachovia") dated as of December 17, 1996. Under this line of credit Wachovia may, in its sole discretion, advance up to $15.0 million upon a request by the Company. Although the Company and Wachovia may set a payment schedule on any loan under the line of credit, all borrowings are payable on demand. Interest accrues at the rate designated at the time of borrowing and is generally based on the Fed Funds rate, plus a margin. This line of credit expires on June 9, 1998. As of March 28, 1998, $6.2 million was outstanding under the Wachovia line of credit. 59 DESCRIPTION OF THE EXCHANGE NOTES The Exchange Notes offered hereby will be issued, and the Series A Notes were issued, under an Indenture dated April 24, 1998 (the "Indenture"), by and among the Issuers and U.S. Bank Trust National Association, as trustee (the "Trustee"). For purposes of this section, references to the "Company" mean only Nash Finch Company and not any of its subsidiaries. Upon the issuance of the Exchange Notes, the Indenture will be subject to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following summary of the material provisions of the Exchange Notes and the Indenture does not purport to be complete and is subject to, and qualified by, reference to the provisions of the Indenture, including the definitions of certain terms contained therein and those terms made part of the Indenture by reference to the Trust Indenture Act, as in effect on the date of the Indenture. Copies of the Indenture are available to prospective participants in the Exchange Offer upon request to the Company. The term "Notes" as used in the following summary refers to all of the outstanding Series A Notes and the Exchange Notes. The definition of certain other terms used in the following summary are set forth below under "--Certain Definitions." GENERAL The Exchange Notes will be general unsecured senior subordinated obligations of the Company limited to $165,000,000 aggregate principal amount. The Exchange Notes will be issued only in fully registered form without coupons, in denominations of $1,000 and integral multiples thereof. Principal of, premium, if any, and interest on the Exchange Notes are payable, and the Exchange Notes are exchangeable and transferable, at the office or agency of the Company in The City of New York maintained for such purposes (which initially will be the corporate trust office of the Trustee); PROVIDED, HOWEVER, that payment of interest may be made at the option of the Company by check mailed to the Person entitled thereto as shown on the security register. No service charge will be made for any registration of transfer, exchange or redemption of the Exchange Notes, except in certain circumstances for any tax or other governmental charge that may be imposed in connection therewith. MATURITY, INTEREST AND PRINCIPAL The Exchange Notes will mature on May 1, 2008. Interest on the Exchange Notes will accrue at the rate of 8 1/2% per annum and will be payable semi-annually on each May 1 and November 1, commencing November 1, 1998, to the holders of record of Exchange Notes at the close of business on the April 15 and October 15, respectively, immediately preceding such interest payment date. Interest on the Exchange Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. As discussed under "Exchange Offer; Registration Rights," pursuant to the Registration Rights Agreement, the Company has filed with the Commission the Exchange Offer Registration Statement and has agreed to offer to the holders of Series A Notes who make certain representations the opportunity to exchange their Series A Notes for Exchange Notes. In the event that the Company is not permitted to file the Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy or, in certain other circumstances, including if for any other reason the Exchange Offer is not consummated within 120 days after the Issue Date, the Company will file with the Commission the Shelf Registration Statement with respect to resales of the Series A Notes by the holders thereof. The interest rate on the Notes is subject to increase under certain circumstances if the Company is not in compliance with its obligations under the Registration Rights Agreement. See "Exchange Offer; Registration Rights." OPTIONAL REDEMPTION OPTIONAL REDEMPTION. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after May 1, 2003, at the redemption prices (expressed as percentages of principal 60 amount) set forth below, plus accrued and unpaid interest thereon, if any, to the date of redemption, if redeemed during the 12-month period beginning on May 1 of the years indicated below:
YEAR REDEMPTION PRICE - ----------------------------------------------------------- ---------------- 2003....................................................... 104.250% 2004....................................................... 102.833 2005....................................................... 101.417 2006 and thereafter........................................ 100.000%
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING. On or prior to May 1, 2001, the Company may, at its option, use the net proceeds of a Public Equity Offering to redeem up to 35% of the originally issued aggregate principal amount of the Notes, at a redemption price in cash equal to 108.5% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; PROVIDED, HOWEVER, that at least $107.25 million in aggregate principal amount of Notes is outstanding following such redemption. Notice of any such redemption must be given not later than 60 days after the consummation of the Public Equity Offering. As used in the preceding paragraph, a "Public Equity Offering" means any underwritten public offering of Capital Stock (other than Redeemable Capital Stock) of the Company made on a primary basis by the Company pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act. SELECTION AND NOTICE. In the event that less than all of the Notes are to be redeemed at any time, selection of Notes for redemption shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange, on a PRO RATA basis, by lot or by such method as the Trustee will deem fair and appropriate; PROVIDED, HOWEVER,that no Notes of a principal amount of $1,000 or less shall be redeemed in part; PROVIDED, FURTHER, HOWEVER, that any such redemption made with the net proceeds of a Public Equity Offering shall be made on a PRO RATA basis or on as nearly a PRO RATA basis as practicable (subject to the procedures of The Depository Trust Company or any other depositary). Notice of redemption will 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 will 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 and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption so long as the Company has deposited with the paying agent for the Notes funds in satisfaction of the applicable redemption price pursuant to the Indenture. CHANGE OF CONTROL The Indenture provides that, following the occurrence of a Change of Control (the date of such occurrence being the "Change of Control Date"), the Company will be obligated, within 20 business days after the Change of Control Date, to make an offer to purchase (a "Change of Control Offer") all of the then outstanding Notes at a purchase price (the "Change of Control Purchase Price") in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the purchase date. The Company will be required to purchase all Notes properly tendered into the Change of Control Offer and not withdrawn. In order to effect such Change of Control Offer, the Company will, not later than the 20th business day after the Change of Control Date, be obligated to mail to each holder of Notes notice of the Change of Control Offer, which notice will govern the terms of the Change of Control Offer and will state, among other things, the procedures that holders must follow to accept the Change of Control Offer. The Change of Control Offer will be required to be kept open for a period of at least 20 business days. 61 If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the purchase price for all of the Notes that might be tendered by holders of Notes seeking to accept the Change of Control Offer. If the Company fails to repurchase all of the Notes tendered for purchase, such failure will constitute an Event of Default under the Indenture. See "--Events of Default" below. The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other applicable securities laws or regulations and any applicable requirements of any securities exchange on which the Notes are listed, in connection with the repurchase of Notes pursuant to a Change of Control Offer, and any violation of the provisions of the Indenture relating to such Change of Control Offer occurring as a result of such compliance shall not be deemed a Default. SUBORDINATION The payment of the principal of, premium, if any, and interest on the Notes will be subordinated in right of payment, as set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the Issue Date or incurred thereafter. The Indenture permits the Company and its Restricted Subsidiaries to incur additional Indebtedness, including Senior Indebtedness. See "--Certain Covenants--Limitation on Indebtedness." The Indenture provides that in the event of any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relating to the Company, or any liquidation, dissolution or other winding-up of the Company, whether voluntary or involuntary, or any assignment for the benefit of creditors or other marshalling of assets or liabilities of the Company, all Senior Indebtedness of the Company must be paid in full before any payment, distribution, repurchase or redemption (excluding any payment or distribution of, or repurchase or redemption in exchange for, certain permitted equity or subordinated securities) is made on account of the principal of, premium, if any, or interest on the Notes. During the continuance of any default in the payment of any Designated Senior Indebtedness pursuant to which the maturity thereof may immediately be accelerated beyond any applicable grace period and after receipt by the Trustee from representatives of holders of such Designated Senior Indebtedness of written notice of such default, no payment or distribution of any assets of the Company of any kind or character (excluding any payment or distribution of certain permitted equity or subordinated securities) shall be made on account of the principal of, premium, if any, or interest on, or the purchase, redemption or other acquisition of, the Notes unless and until such default has been cured or waived or has ceased to exist or such Designated Senior Indebtedness shall have been discharged or paid in full. During the continuance of any non-payment default with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may immediately be accelerated (a "Non-payment Default") and (x) after the receipt by the Trustee from the representatives of holders of such Designated Senior Indebtedness of a written notice of such Non-payment Default or (y) if the Non-payment Default results from the acceleration of the Notes, from the date of such acceleration, no payment or distribution of any assets of the Company of any kind or character (excluding any payment or distribution of certain permit- ted equity or subordinated securities) shall be made by the Company on account of the principal of, premium, if any, or interest on, or the purchase, redemption or other acquisition of, the Notes for the period specified below (the "Payment Blockage Period"). The Payment Blockage Period will commence upon (x) the receipt of notice of a Non-payment Default by the Trustee from the representatives of holders of Designated Senior Indebtedness or (y) if the Non-payment Default results from the acceleration of the Notes, upon such acceleration, and will end on the earliest to occur of the following events: (i) 179 days shall have elapsed (A) since the receipt of such notice of a Non-payment Default or (B) if the Non-payment Default results from the acceleration of the Notes, since such acceleration (in each case, provided that such Designated Senior Indebtedness shall not theretofore have been accelerated and the Company has not defaulted with respect to the payment of such 62 Designated Senior Indebtedness), (ii) such default is cured or waived or ceases to exist or such Designated Senior Indebtedness is discharged or (iii) such Payment Blockage Period shall have been terminated by written notice to the Company or the Trustee from the representatives of holders of Designated Senior Indebtedness initiating such Payment Blockage Period. After the end of any Payment Blockage Period the Company shall promptly resume making any and all required payments in respect of the Notes, including any missed payments. Notwithstanding anything in the subordination provisions of the Indenture or the Notes to the contrary, (x) in no event shall a Payment Blockage Period extend beyond 179 days from the date such Payment Blockage Period was commenced, (y) there shall be a period of at least 186 consecutive days in each 365-day period when no Payment Blockage Period is in effect and (z) not more than one Payment Blockage Period with respect to the Notes may be commenced within any period of 365 consecutive days. A Non-payment Default with respect to Designated Senior Indebtedness that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period cannot be made the basis for the commencement of a second Payment Blockage Period, whether or not within a period of 365 consecutive days, unless such default has been cured or waived for a period of not less than 90 consecutive days and subsequently recurs. If the Company fails to make any payment on the Notes when due or within any applicable grace period, whether or not on account of the payment blockage provisions referred to above, such failure would constitute an Event of Default under the Indenture and would enable the holders of the Notes to ac-celerate the maturity thereof. See "--Events of Default." By reason of such subordination, in the event of liquidation or insolvency, creditors of the Company who are holders of Senior Indebtedness may recover more, ratably, than the holders of the Notes and funds which would be otherwise payable to the holders of the Notes will be paid to the holders of Senior Indebtedness to the extent necessary to pay the Senior Indebtedness in full in cash or Cash Equivalents, and the Company may be unable to meet its obligations fully with respect to the Notes. As of March 28, 1998 on a PRO FORMA basis after giving effect to the Prepayments, the sale of the Notes and the application of the net proceeds therefrom, the Issuers would have had outstanding an aggregate of $221.5 million of Senior Indebtedness (without duplication as to any obligation of any such party which is a guarantor of Senior Indebtedness owed primarily by another such party). The Indenture limits, but does not prohibit, the incurrence by the Company of additional Indebtedness which is senior to the Notes, but prohibits the incurrence of any Indebtedness contractually subordinated in right of payment to any other Indebtedness of the Company and senior in right of payment to the Notes. See "Risk Factors-- Subordination of the Notes and the Guarantees; Asset Encumbrances." SUBSIDIARY GUARANTEES The Company's payment obligations under the Notes will be jointly and severally guaranteed by the Guarantors. The obligations of each Guarantor under its Guarantee will be unconditional and absolute, irrespective of any invalidity, illegality, unenforceability of any Note or the Indenture or any extension, compromise, waiver or release in respect of any obligation of the Company or any other Guarantor under any Note or the Indenture, or any modification or amendment of or supplement to the Indenture. The obligations of any Guarantor under its Guarantee will be subordinated, to the same extent as the obligations of the Company in respect of the Notes, to the prior payment in full in cash or, to the extent permitted under the agreements governing the Senior Indebtedness being prepaid, Cash Equivalents, of all Senior Indebtedness of such Guarantor, which will include any guarantee issued by such Guarantor of any Senior Indebtedness. The obligations of each Guarantor under its Guarantee will be limited to the extent necessary to provide that such Guarantee does not constitute a fraudulent conveyance under applicable law. Each Guarantor that makes a payment or distribution under its Guarantee shall be entitled to a contribution from each other Guarantor so long as the exercise of such right does not impair the rights of holders of Notes under any Guarantee. See "Risk Factors--Dependence on Operations of Subsidiaries; 63 Possible Invalidity of Guarantees; Potential Release of Guarantees." A Guarantor shall be released and discharged from its obligations under its Guarantee under certain limited circumstances. See "--Certain Covenants--Limitation on Issuances of Guarantees by Restricted Subsidiaries" and "--Consolidation, Merger, Sale of Assets, Etc." CERTAIN COVENANTS The Indenture provides that the covenants set forth herein will be applicable to the Company and the Restricted Subsidiaries; PROVIDED, HOWEVER, that if no Default or Event of Default has occurred and is continuing, after the ratings assigned to the Notes by both Rating Agencies are equal to or higher than BBB- and Baa3, or the equivalents thereof, respectively (the "Investment Grade Ratings"), and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will not be subject to the provisions of the Indenture described under "Limitation on Indebtedness," "Limitation on Restricted Payments," "Limitation on Sale of Assets," clauses (ii) and (iii) of the first and fourth paragraphs of "Limitations on Unrestricted Subsidiaries," "Limitation on Preferred Stock of Restricted Subsidiaries," "Limitation on Transactions with Affiliates," "Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries" and clauses (iii) and (iv) of the first paragraph of "Consolidation, Merger, Sale of Assets, Etc." LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume, issue, guarantee or in any manner become liable for or with respect to, contingently or otherwise (in each case, to "incur"), the payment of any Indebtedness (including any Acquired Indebtedness), PROVIDED, HOWEVER, that (i) the Company or a Guarantor may incur Indebtedness (including Acquired Indebtedness) and (ii) a Restricted Subsidiary (which is not a Guarantor) may incur Acquired Indebtedness, if, in either case, immediately after giving PRO FORMA effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to 2.00:1. Notwithstanding the foregoing, the Company and, to the extent specifically set forth below, the Guarantors and the Restricted Subsidiaries may incur each and all of the following (collectively, "Permitted Indebtedness"): (i) Indebtedness of the Company or any Guarantor (without duplication) under the Revolving Credit Facility or any other Bank Credit Facility in an aggregate principal amount at any one time outstanding not to exceed $500.0 million, less any permanent reductions made pursuant to the provision described in the second paragraph under "--Limitation on Sale of Assets"; (ii) Indebtedness of the Company pursuant to the Notes and Indebtedness of any Guarantor pursuant to a Guarantee of the Notes; (iii) Indebtedness (other than Indebtedness under the Revolving Credit Facility, the Notes and the Guarantees) of the Company or any Restricted Subsidiary outstanding on the date of the Indenture, except Indebtedness to be repaid as described under "Use of Proceeds"; (iv) Indebtedness of the Company owing to a Restricted Subsidiary; PROVIDED that any Indebtedness for borrowed money of the Company owing to a Subsidiary is made pursuant to an intercompany note in the form attached to the Indenture and is subordinated in accordance with provisions set forth in the Indenture; PROVIDED, FURTHER, that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge or transfer to a Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company not permitted by this clause (iv); (v) Indebtedness of a Guarantor owing to and held by the Company or another Guarantor; PROVIDED that any such Indebtedness for borrowed money is made pursuant to an intercompany note in the form attached to the Indenture; PROVIDED, FURTHER, that (a) any disposition, pledge or transfer of any such Indebtedness to a Person (other than the Company or a Guarantor) shall be deemed to be an incurrence of such Indebtedness by the obligor not permitted by this clause (v), and (b) any 64 transaction pursuant to which any Guarantor, which has Indebtedness owing to the Company or any other Guarantor, ceases to be a Guarantor shall be deemed to be the incurrence of Indebtedness by such Guarantor that is not permitted by this clause (v); (vi) guarantees by any Restricted Subsidiary incurred in compliance with the provisions of the covenant described under "--Limitation on Issuances of Guarantees by Restricted Subsidiaries"; (vii) Indebtedness of the Company or any Restricted Subsidiary under Interest Rate Agreements covering Indebtedness of the Company or such Restricted Subsidiary (which Indebtedness (a) bears interest at fluctuating interest rates and (b) is otherwise permitted to be incurred under this covenant) to the extent the notional principal amount of the obligations under such Interest Rate Agreements does not exceed the principal amount of the Indebtedness to which such obligations relate; (viii) Indebtedness of the Company or any Restricted Subsidiary under Currency Agreements or Commodity Price Protection Agreements relating to (a) Indebtedness of the Company or such Restricted Subsidiary and/or (b) obligations to purchase or sell assets or properties, in each case, incurred in the ordinary course of business of the Company; PROVIDED, HOWEVER, that such Currency Agreements or Commodity Price Protection Agreements, as the case may be, do not increase the Indebtedness or other obligations of the Company outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (ix) Indebtedness of the Company or any Guarantor represented by Capitalized Lease Obligations or Purchase Money Obligations or other Indebtedness incurred or assumed in connection with the acquisition or development of real or personal movable or immovable property in each case incurred for the purpose of financing or refinancing all or any part of the purchase price or cost of construction or improvement of property used in the business of the Company or such Guarantor, in an aggregate principal amount pursuant to this clause (ix) not to exceed $10.0 million per year; PROVIDED that, immediately after any such incurrence pursuant to this clause (ix), the aggregate amount of Indebtedness outstanding pursuant to this clause (ix) shall not exceed 2.0% of the Consolidated Net Sales of the Company in the most recent four full fiscal quarters for which financial statements of the Company are available; PROVIDED, FURTHER, that the principal amount of any Indebtedness permitted under this clause (ix) did not in each case at the time of incurrence exceed the Fair Market Value, as determined by the Company or such Guarantor in good faith, of the acquired or constructed asset or improvement so financed; (x) reimbursement obligations under letters of credit and letters of credit, in each case, to support (A) workers compensation obligations not to exceed $10.0 million in the aggregate at any time outstanding and (B) bankers acceptances, performance bonds, surety bonds, performance guarantees and supplier obligations not to exceed $10.0 million in the aggregate at any time outstanding, in the case of each of such clause (A) and (B) of the Company or any Guarantor, in each case, in the ordinary course of business consistent with past practice; (xi) guarantees by the Company of Indebtedness of any Guarantor; PROVIDED that such Indebtedness of such Guarantor is permitted by the terms of the Indenture; (xii) any renewals, extensions, substitutions, refundings, refinancings or replacements (collectively, a "refinancing") of any Indebtedness described in clauses (i), (ii) and (iii) of this definition of "Permitted Indebtedness," including any successive refinancings so long as the aggregate principal amount of Indebtedness represented thereby is not increased by such refinancing plus the lesser of (I) 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 (II) the amount of premium or other payment actually paid at such time to refinance the Indebtedness, plus, in either case, the amount of expenses of the Company or a Restricted Subsidiary incurred in connection with such refinancing and (A) in the case of any refinancing of Indebtedness that is Subordinated Indebtedness, such new Indebtedness is subordinated to the Notes at least to the same extent as the 65 Indebtedness being refinanced and (B) such refinancing does not reduce the Average Life to Stated Maturity or the Stated Maturity of such Indebtedness; (xiii) guarantees which are permitted under clause (ix) of paragraph (b) described under the covenant "Limitation on Restricted Payments"; and (xiv) Indebtedness of the Company or any Guarantor in addition to that described in clauses (i) through (xiii) above, and any renewals, extensions, substitutions, refinancings or replacements of such Indebtedness, so long as the aggregate principal amount of all such Indebtedness shall not exceed $35.0 million outstanding at any one time. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly: (i) declare or pay any dividend or make any other distribution or payment on or in respect of Capital Stock of the Company or any payment to the direct or indirect holders (in their capacities as such) of Capital Stock of the Company (other than dividends or distributions payable solely in shares of Qualified Capital Stock of the Company or in options, warrants or other rights to acquire shares of such Qualified Capital Stock); or (ii) purchase, redeem, defease or otherwise acquire or retire for value, directly or indirectly, any Capital Stock of the Company (other than any such Capital Stock owned by the Company or any Wholly-Owned Restricted Subsidiary) or options, warrants or other rights to acquire such Capital Stock; or (iii) make any principal payment on, or purchase, repurchase, redeem, defease, retire or otherwise acquire for value, prior to any scheduled maturity, scheduled repayment, scheduled sinking fund payment or other Stated Maturity, any Subordinated Indebtedness (other than any Subordinated Indebtedness owed to and held by the Company or a Guarantor); or (iv) make any Investment (other than any Permitted Investment) in any Person (other than in the Company, any Restricted Subsidiary or a Person that becomes a Restricted Subsidiary, or is merged with or into or consolidated with the Company or a Restricted Subsidiary (provided the Company or a Restricted Subsidiary is the survivor), as a result of or in connection with such Investment) (any of the foregoing actions described in clauses (i) through (iv), other than any such action that is a Permitted Payment (as defined below), collectively, "Restricted Payments") (the amount of any such Restricted Payment, if other than cash, shall be the Fair Market Value of the asset(s) proposed to be transferred by the Company or such Restricted Subsidiary, as the case may be, in each case, as determined by the board of directors of the Company, whose determination shall be conclusive and evidenced by a board resolution), unless (1) immediately before and immediately after giving effect to such Restricted Payment on a PRO FORMA basis, no Default or Event of Default shall have occurred and be continuing; (2) immediately before and immediately after giving effect to such Restricted Payment on a PRO FORMA basis, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions described under "--Limitation on Indebtedness," and (3) after giving effect to the proposed Restricted Payment, the aggregate amount of all such Restricted Payments declared or made after the Issue Date, does not exceed $5.0 million plus the sum of: (A) 50% of the aggregate cumulative Consolidated Net Income of the Company during the period (treated as one accounting period) beginning on the first day of the fiscal quarter beginning after the Issue Date and ending on the last day of the Company's last fiscal quarter ending prior to the date of the Restricted Payment (or, if such aggregate cumulative Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received after the Issue Date by the Company from the issuance or sale (other than to any of the Restricted Subsidiaries) of Qualified Capital Stock of the Company or from the exercise of any options, warrants or rights to purchase such Qualified Capital 66 Stock of the Company (except, in each case, to the extent such proceeds are used to purchase, redeem or otherwise retire Capital Stock or Subordinated Indebtedness as set forth in clause (ii) or (iii) of paragraph (b) below and excluding the net cash proceeds from any issuance and sale of Capital Stock or from any such exercises, in each case, financed, directly or indirectly, using funds borrowed from the Company or any Restricted Subsidiary until and to the extent such borrowing is repaid); (C) the aggregate Net Cash Proceeds received after the Issue Date by the Company from the conversion or exchange, if any, of debt securities or Redeemable Capital Stock of the Company or its Subsidiaries into or for Qualified Capital Stock of the Company plus, without duplication, the aggregate of Net Cash Proceeds from their original issuance, less any principal and sinking fund payments made thereon; (D) in the case of the disposition or repayment of any Investment (other than an Investment made pursuant to clause (viii) of paragraph (b) below) constituting a Restricted Payment made after the Issue Date, an amount (to the extent not included in Consolidated Net Income) equal to the lesser of the return of capital with respect to such Investment and the initial amount of such Investment which was treated as a Restricted Payment, in either case, less the cost of disposition of such Investment and net of taxes; and (E) so long as the Designation thereof was treated as a Restricted Payment made after the Issue Date, with respect to any Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary after the Issue Date in accordance with "--Limitations on Unrestricted Subsidiaries" below, the Fair Market Value of the interest of the Company and the Restricted Subsidiaries in such Subsidiary, provided that such amount shall not in any case exceed the Designation Amount with respect to such Restricted Subsidiary upon its Designation. (b) Notwithstanding the foregoing, and in the case of clauses (ii) through (viii) below, so long as no Default or Event of Default shall have occurred and be continuing or would arise therefrom, the foregoing provisions shall not prohibit the following actions (each of clauses (i) through (iv) being referred to as a "Permitted Payment"): (i) the payment of any dividend within 60 days after the date of declaration thereof, if (A) at such date of declaration such payment was permitted by the provisions of the Indenture and (B) such payment shall have been deemed to have been paid on such date of declaration and shall not have been deemed a "Permitted Payment" for purposes of the calculation required by paragraph (a) of this Section; (ii) the repurchase, redemption, or other acquisition or retirement of any shares of any class of Capital Stock of the Company in exchange for (including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares or scrip), or out of the Net Cash Proceeds of a substantially concurrent issue and sale for cash to any Person (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the Company; PROVIDED that the Net Cash Proceeds from the issuance of such shares of Qualified Capital Stock are excluded from clause (B) of paragraph (a) of this Section; (iii) the repurchase, redemption, defeasance, retirement or acquisition for value or payment of principal of any Subordinated Indebtedness in exchange for, or out of the Net Cash Proceeds of a substantially concurrent issuance and sale for cash to any Person (other than to any Restricted Subsidiary of the Company) of, any Qualified Capital Stock of the Company; PROVIDED that the Net Cash Proceeds from the issuance of such shares of Qualified Capital Stock are excluded from clause (B) of paragraph (a) of this Section; (iv) the repurchase, redemption, defeasance, retirement, acquisition for value or payment of principal 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 for cash to any Person (other than to a Restricted Subsidiary) of, new Subordinated Indebtedness of such person; PROVIDED 67 that any such new Subordinated Indebtedness (1) shall be in a principal amount that does not exceed the principal amount so repurchased, redeemed, defeased, retired, acquired or paid (or, if such Subordinated Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, then such lesser amount as of the date of determination), plus the lesser of (I) the stated amount of any premium or other payment required to be paid in connection with such repurchase, redemption, defeasance, retirement, acquisition or payment pursuant to the terms of the Indebtedness being repurchased, redeemed, defeased, retired, acquired or paid or (II) the amount of premium or other payment actually paid at such time to repurchase, redeem, defease, retire, acquire or pay the Indebtedness, plus, in either case, the amount of expenses of the Company incurred in connection with such repurchase, redemption, defeasance, retirement, acquisition or payment; (2) has an Average Life to Stated Maturity equal to or greater than the Average Life to Stated Maturity of the Subordinated Indebtedness being repurchased, redeemed, defeased, retired, acquired or paid; (3) has no Stated Maturity earlier than the Stated Maturity for the final scheduled principal payment of the Notes; and (4) is expressly subordinated in right of payment to the Notes at least to the same extent as the Subordinated Indebtedness to be repurchased, redeemed, defeased, retired, acquired or paid; (v) the repurchase of any Pari Passu Indebtedness (x) at a purchase price not greater than 101% of the principal amount of such Pari Passu Indebtedness in the event of a Change of Control (as defined below) pursuant to a provision similar to the provision described under "--Change of Control"; PROVIDED that prior to, or contemporaneously with, such repurchase the Company has made the Change of Control Offer if required by, and as provided under, "--Change of Control" and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer and (y) at a purchase price not greater than 100% of the principal amount of such Pari Passu Indebtedness in the event of an Asset Sale (as defined below) pursuant to a provision similar to the provision described under "--Limitation on Sale of Assets"; PROVIDED that prior to such repurchase the Company has made an Asset Sale Offer if required by, and as provided under, "--Limitation on Sale of Assets" and has repurchased all Notes validly tendered for payment in connection with such Asset Sale Offer; (vi) the purchase of restricted stock from employees of the Company upon the termination of employment of such employees, pursuant to the terms of a restricted stock plan approved by the Company's board of directors, in an amount not to exceed $1.0 million in any fiscal year; (vii) the payment of cash dividends on the Company's Common Stock of up to $3.0 million in the aggregate in any fiscal quarter; (viii) Investments by the Company or a Restricted Subsidiary in any Person established by the Company or a Restricted Subsidiary in conjunction with customers or suppliers of the Company which Person is engaged in the distribution and sale of food and related products or the facilitation of goods and services in the food industry such that, immediately after the making of any such Investment pursuant to this clause (viii), the aggregate outstanding amount of all such Investments made pursuant to this clause (viii) shall not exceed 1.0% of the Consolidated Net Sales of the Company for the most recent four fiscal quarters for which financial statements are available; and (ix) guarantees of obligations of, or loans to, customers in the ordinary course of business consistent with past practice, such that immediately after the issuing of any such guarantee or the making of any such loan pursuant to this clause (ix), the aggregate amount of all such guarantees or loans made under this clause (ix) that are outstanding would not exceed 4.0% of the Consolidated Net Sales of the Company for the most recent four full fiscal quarters for which financial statements of the Company are available; PROVIDED that renewals of loans made in compliance with this clause (ix) shall be permitted. 68 (c) In computing the amount of Restricted Payments previously made for purposes of clause (3) of paragraph (a) of this Section, Restricted Payments under clauses (i) (as described in subclause (B) of such clause), (v), (vi), (vii), (viii) and (ix) of paragraph (b) of this Section shall be included. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will not cause or permit any of the Restricted Subsidiaries to, directly or indirectly, conduct any business or enter into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with, or for the benefit of, any Affiliate of the Company or of a Restricted Subsidiary (other than the Company or a Guarantor) unless such transaction or series of related transactions is entered into in good faith and in writing and (a) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that would be available in a comparable transaction in arm's-length dealings with an unrelated third party and (b) with respect to any transaction or series of related transactions involving aggregate value in excess of $5.0 million, the Company delivers an officers' certificate to the Trustee certifying that such transaction or series of related transactions complies with clause (a) above and such transaction or series of transactions has been approved by a majority of the Board of Directors of the Company, including a majority of the Disinterested Directors of the Company or, in the event there is only one Disinterested Director, by such Disinterested Director; PROVIDED the Company or any Restricted Subsidiary need not comply with the preceding clause (b) if the Company delivers to the Trustee a written opinion of an Independent Financial Advisor stating that the transaction or series of related transactions is fair to the Company or such Restricted Subsidiary, from a financial point of view; PROVIDED, HOWEVER, that this provision shall not apply to (i) any transaction with an officer or director of the Company entered into in the ordinary course of business (including compensation and employee benefit arrangements with any officer, director or employee of the Company, including under any stock option or stock incentive plans); PROVIDED that such transaction has been approved in the manner described in clause (b) above, (ii) the payment of dividends otherwise permitted by the terms of the Indenture, (iii) indemnification agreements for the benefit of officers, directors and employees and (iv) transactions with any Securitization Subsidiary made in the ordinary course of business on terms customary for such transactions. Under Delaware law, the Disinterested Directors' fiduciary obligations require that they act in good faith in a manner which they reasonably believe to be in the best interests of the Company and its stockholders, which may not necessarily be the same as those of the holders of the Notes. LIMITATION ON LIENS. The Company will not, and will not cause or permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume, suffer to exist or affirm any Lien of any kind securing any (a) Pari Passu Indebtedness or Subordinated Indebtedness (including any assumption, guarantee or other liability with respect thereto by any Restricted Subsidiary) upon any of its property or assets (including any intercompany notes), whether owned on the Issue Date or acquired after the Issue Date, or any proceeds, income or profits therefrom, or assign or convey any right to receive proceeds, income or profits therefrom, unless the Notes are directly secured equally and ratably with (or, in the case of Subordinated Indebtedness, prior or senior thereto, with the same relative priority as the Notes shall have with respect to such Subordinated Indebtedness) the obligation or liability secured by such Lien, except for Liens (A) securing any Indebtedness which became Indebtedness pursuant to a transaction permitted under "--Consolidation, Merger, Sale of Assets, Etc." or securing Acquired Indebtedness which, in each case, were created prior to (and not created in connection with, or in contemplation of) the incurrence of such Pari Passu Indebtedness or Subordinated Indebtedness (including any assumption, guarantee or other liability with respect thereto by any Restricted Subsidiary) and which Indebtedness is permitted under the provisions of the covenant described under "--Limitation on Indebtedness" or (B) securing any Indebtedness incurred in connection with any refinancing, renewal, substitution or replacement of any such Indebtedness described in clause (A), so long as the aggregate principal amount of Indebtedness represented thereby is not increased by such refinancing by an amount greater than the lesser of (i) the stated amount of any premium or other payment required to be paid in connection with such a refinancing 69 pursuant to the terms of the Indebtedness being refinanced or (ii) the amount of premium or other payment actually paid at such time to refinance the Indebtedness, plus, in either case, the amount of expenses of the Company incurred in connection with such refinancing; PROVIDED, HOWEVER, that in the case of clauses (A) and (B) any such Lien only extends to the assets that were subject to such Lien securing such Indebtedness prior to the related acquisition by the Company or the Restricted Subsidiaries or (b) any Senior Indebtedness which is not incurred in compliance with the terms of the Indenture. LIMITATION ON INCURRENCE OF SENIOR SUBORDINATED INDEBTEDNESS. The Company will not, and will not permit any Guarantor to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise in any manner become directly or indirectly liable for or with respect to or otherwise permit to exist any Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company or such Guarantor, as the case may be, unless such Indebtedness is also PARI PASSU with the Notes or the Guarantee of such Guarantor or subordinate or junior, in right of payment to the Notes or such Guarantee at least to the same extent as the Notes or such Guarantee are subordinate or junior in right of payment to Senior Indebtedness or Senior Indebtedness of such Guarantor, as the case may be. LIMITATION ON SALE OF ASSETS. The Company will not, and will not cause or permit any Restricted Subsidiary to, directly or indirectly, consummate an Asset Sale unless (i) at least 80% of the consideration from such Asset Sale is received in cash or Cash Equivalents and (ii) the Company or such Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the shares or assets subject to such Asset Sale. Notwithstanding the foregoing, the Company need not comply with the preceding clause (i) in connection with any Asset Sale involving stores (and related fixtures and inventory) to a customer in exchange for a secured note on a basis consistent with past practice so long as the aggregate outstanding amount of all such notes does not exceed 4.0% of Consolidated Tangible Assets immediately after giving effect to any such Asset Sale. If all or a portion of the Net Cash Proceeds of any Asset Sale are not required to be applied to repay permanently any Senior Indebtedness outstanding as required by the terms thereof, or the Company determines not to apply such Net Cash Proceeds to the permanent repayment of the Senior Indebtedness which is required to be prepaid, or if no such Indebtedness under the Senior Indebtedness is then outstanding, the Company or such Restricted Subsidiary may within 365 days of such Asset Sale, invest the Net Cash Proceeds in capital expenditures, properties and other assets or inventories that (as determined by the board of directors of the Company) replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Subsidiaries existing on the Issue Date or in businesses reasonably related thereto; PROVIDED that the Net Cash Proceeds of any Asset Sale in the case of a sale of a store or stores or warehouse or warehouses shall be deemed to have been applied to the extent of any capital expenditures made to acquire or construct a replacement store or acquire, construct or expand a warehouse, in each case within 180 days preceding the date of such Asset Sale; PROVIDED FURTHER that with respect to the sale of a store or stores, the replacement store shall be in the general vicinity of the store or stores being replaced. To the extent all or part of the Net Cash Proceeds of any Asset Sale are not applied, or the Company determines not to so apply such Net Cash Proceeds, within 365 days of such Asset Sale as described in the immediately preceding paragraph (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the Company shall, within 20 days after such 365th day or at any earlier time after such Asset Sale, make an offer to purchase (the "Asset Sale Offer") all outstanding Notes and any Pari Passu Indebtedness the terms of which require such an offer to be made up to a maximum principal amount (expressed as a multiple of $1,000) of Notes and such Pari Passu Indebtedness equal to such Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date; PROVIDED, HOWEVER, that the Asset Sale Offer may be deferred until there are aggregate Unutilized Net Cash Proceeds equal to or in excess of $10.0 million, at which time the entire amount of such Unutilized Net Cash Proceeds, and not just the amount in excess of $10.0 million, 70 shall be applied as required pursuant to this paragraph. An Asset Sale Offer will be required to be kept open for a period of at least 20 business days. With respect to any Asset Sale Offer effected pursuant to this covenant, among the Notes and such Pari Passu Indebtedness, to the extent the aggregate principal amount of Notes and such Pari Passu Indebtedness tendered pursuant to such Asset Sale Offer exceeds the Unutilized Net Cash Proceeds to be applied to the repurchase thereof, such Notes and such Pari Passu Indebtedness shall be purchased PRO RATA based on the aggregate principal amount of such Notes and such Pari Passu Indebtedness tendered. To the extent the Unutilized Net Cash Proceeds exceed the aggregate amount of Notes and such Pari Passu Indebtedness tendered pursuant to such Asset Sale Offer, the Company may retain and utilize any portion of the Unutilized Net Cash Proceeds not applied to repurchase the Notes and such Pari Passu Indebtedness for any purpose consistent with the other terms of the Indenture and such excess amount of Unutilized Net Cash Proceeds shall not be included in any future determination of Unutilized Net Cash Proceeds. In the event that the Company makes an Asset Sale Offer, the Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other applicable securities laws or regulations and any applicable requirements of any securities exchange on which the Notes are listed, and any violation of the provisions of the Indenture relating to such Asset Sale Offer occurring as a result of such compliance shall not be deemed a Default. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES. (a) The Company will not cause or permit any Restricted Subsidiary, other than the Guarantors, directly or indirectly, to secure the payment of any Senior Indebtedness of the Company and the Company will not, and will not permit any Restricted Subsidiary to, pledge any intercompany notes representing obligations of any Restricted Subsidiary (other than the Guarantors) to secure the payment of any Senior Indebtedness unless in each case such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a guarantee of payment of the Notes by such Restricted Subsidiary, which guarantee shall be on the same terms as the guarantee of the Senior Indebtedness (if a guarantee of Senior Indebtedness is granted by any such Restricted Subsidiary) except that the guarantee of the Notes need not be secured and shall be subordinated to the claims against such Restricted Subsidiary in respect of Senior Indebtedness to the same extent as the Notes are subordinated to Senior Indebtedness of the Company under the Indenture. (b) The Company will not cause or permit any Restricted Subsidiary, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Indebtedness of the Company unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a Guarantee of the Notes, on the same terms as the guarantee of such Indebtedness except that (A) such guarantee need not be secured unless required pursuant to the covenant described under "--Limitation on Liens," (B) if such Indebtedness is by its terms Senior Indebtedness, any such assumption, guarantee or other liability of such Restricted Subsidiary with respect to such Indebtedness shall be senior to such Restricted Subsidiary's Guarantee of the Notes to the same extent as such Senior Indebtedness is senior to the Notes, and (C) if such Indebtedness is by its terms subordinated to the Notes any such assumption, guarantee or other liability of such Restricted Subsidiary with respect to such Indebtedness shall be subordinated to such Restricted Subsidiary's Guarantee of the Notes at least to the same extent as such Indebtedness is subordinated to the Notes. (c) Notwithstanding the foregoing, but subject to the requirements described under "--Consolidation, Merger, Sale of Assets, Etc.," any Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms that it (and all Liens securing the same) shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all of the Company's Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary, which transaction is in compliance with the terms of the Indenture (including, but not limited to, the covenant described under "--Limitation on Sale of Assets" above) and such Restricted Subsidiary is released from 71 all guarantees, if any, by it of other Indebtedness of the Company or any Restricted Subsidiaries or (ii) (with respect to any Guarantees created after the date of the Indenture) the release by the holders of the Indebtedness of the Company described in clauses (a) and (b) above of their security interest or their guarantee by such Restricted Subsidiary (including any deemed release upon payment in full of all obligations under such Indebtedness), at a time when (A) no other Indebtedness of the Company has been secured or guaranteed by such Restricted Subsidiary, as the case may be, or (B) the holders of all such other Indebtedness which is secured or guaranteed by such Restricted Subsidiary also release their security interest in, or guarantee by such Restricted Subsidiary (including any deemed release upon payment in full of all obligations under such Indebtedness). The Company may, at any time, cause a Subsidiary to become a Guarantor by executing and delivering a supplemental indenture providing for the guarantee of payment of the Notes by such Subsidiary on the basis provided in the Indenture. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell and will not cause or permit any Restricted Subsidiary of the Company to issue, sell or transfer any Preferred Stock of any Restricted Subsidiary (other than to the Company or to a Wholly-Owned Restricted Subsidiary) except for (i) Preferred Stock issued or sold to, held by or transferred to the Company or a Wholly-Owned Restricted Subsidiary and (ii) Preferred Stock issued by a Person prior to the time (A) such Person becomes a Restricted Subsidiary, (B) such Person merges with or into a Restricted Subsidiary or (C) a Restricted Subsidiary merges with or into such Person; PROVIDED that such Preferred Stock was not issued or incurred by such Person in anticipation of the type of transaction contemplated by subclause (A), (B) or (C). LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not cause or permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective or enter into any agreement with any Person that would cause to become effective, any consensual encumbrance or restriction of any kind, on the ability of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make any other distribution on or in respect of its Capital Stock or any other interest or participation in, or measured by, its profits, to the Company or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (iii) make any Investment in the Company or any other Restricted Subsidiary or (iv) transfer any of its properties or assets to the Company or any other Restricted Subsidiary, except for: (a) any encumbrance or restriction existing under any agreement in effect on the Issue Date; (b) any encumbrance or restriction, with respect to a Subsidiary that is not a Restricted Subsidiary of the Company on the Issue Date, in existence at the time such Person becomes a Restricted Subsidiary of the Company and not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary; PROVIDED, HOWEVER, that such encumbrances and restrictions are not applicable to the Company or any other Restricted Subsidiary, or the properties or assets of the Company or any other Restricted Subsidiary; (c) customary provisions restricting the subletting or assignment of any lease or the assignment of any other contract to which the Company or any Restricted Subsidiary is a party, which lease or contract is entered into in the ordinary course of business consistent with past practice; (d) any encumbrance or restriction contained in contracts for sales of assets permitted by the covenant described under "--Limitation on Sale of Assets"; PROVIDED that such encumbrance or restriction relates only to assets being sold pursuant to the contract containing such encumbrance or restriction; (e) any encumbrance or restriction customarily contained in any security agreement or mortgage which security agreement or mortgage creates a Lien permitted under the Indenture; PROVIDED that such encumbrance or restriction relates only to assets subject to such Lien; and (f) any encumbrance or restriction existing under any agreement that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in the foregoing clauses (a), (b), (c), (d) and (e), or in this clause (f), PROVIDED that the terms and conditions of any such encumbrances or restrictions are no more restrictive in any material respect than those under or pursuant to the agreement evidencing the Indebtedness so extended, renewed, refinanced or replaced. 72 LIMITATIONS ON UNRESTRICTED SUBSIDIARIES. The Company may designate after the Issue Date any Subsidiary (other than a Guarantor) as an "Unrestricted Subsidiary" under the Indenture (a "Designation") only if: (i) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (ii) the Company would be permitted to make an Investment (other than a Permitted Investment) at the time of Designation (assuming the effectiveness of such Designation) pursuant to the provision described under paragraph (a) of "--Limitation on Restricted Payments" above in an amount (the "Designation Amount") equal to the Fair Market Value of the Company's interest in such Subsidiary on such date; and (iii) the Company would be permitted under the Indenture to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the covenant described under "--Limitation on Indebtedness" at the time of such Designation (assuming the effectiveness of such Designation). In the event of any such Designation, the Company shall be deemed to have made an Investment constituting a Restricted Payment pursuant to the covenant described under "--Limitation on Restricted Payments" for all purposes of the Indenture in the Designation Amount. The Company shall not, and shall not cause or permit any Restricted Subsidiary to, at any time (x) provide credit support for or subject any of its property or assets (other than the Capital Stock of any Unrestricted Subsidiary) to the satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary), except any non-recourse guarantee given solely to support the pledge by the Company or any Restricted Subsidiary of the Capital Stock of an Unrestricted Subsidiary. No Unrestricted Subsidiary shall at any time guarantee or otherwise provide credit support for any obligation of the Company or any Restricted Subsidiary. All Subsidiaries of Unrestricted Subsidiaries shall automatically be deemed to be Unrestricted Subsidiaries. The Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if: (i) no Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred for all purposes of the Indenture; and (iii) any transaction (or series of related transactions) between such Subsidiary and any of its Affiliates that occurred while such Subsidiary was an Unrestricted Subsidiary would be permitted by the covenant described under "--Limitation on Transactions with Affiliates" above as if such transaction (or series of related transactions) had occurred at the time of such Revocation. All Designations and Revocations must be evidenced by Board Resolutions of the Company delivered to the Trustee certifying compliance with the foregoing provisions. PROVISION OF FINANCIAL STATEMENTS. The Indenture provides that for so long as the Notes are outstanding, whether or not the Company or any Guarantor is subject to Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto, the Company will, to the extent permitted by Commission practice 73 and applicable law and regulations, file with the Commission the annual reports, quarterly reports and other documents which the Company and such Guarantor would have been required to file with the Commission pursuant to such Section 13(a) or 15(d), or any successor provision thereto, if the Company and such Guarantor were so subject, such documents to be filed with the Commission on or prior to the date (the "Required Filing Dates") by which the Company and such Guarantor would have been required so to file such documents if the Company and such Guarantor were so subject. The Company and such Guarantor will also in any event (x) within 15 days of each Required Filing Date, whether or not permitted or required to be filed with the Commission, (i) transmit or cause to be transmitted by mail to all holders of Notes, as their names and addresses appear in the security register, without cost to such holders and (ii) file with the Trustee, copies of the annual reports, quarterly reports and other documents which the Company and such Guarantor would have been required to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto, if the Company and such Guarantor were subject to either of such Sections and (y) if filing such documents by the Company and such Guarantor with the Commission is not permitted under the Exchange Act, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective holder at the Company's and such Guarantor's cost. In addition, for so long as any Notes remain outstanding, the Company will furnish to the holders of Notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to any beneficial holder of Notes, if not obtainable from the Commission, information of the type that would be filed with the Commission pursuant to the foregoing provisions, upon the request of any such holder. If any Guarantor's or other Subsidiaries' financial statements would be required to be included in the financial statements filed or delivered pursuant hereto if the Company were subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall include such Guarantor's or other Subsidiaries' financial statements in any filing or delivery pursuant hereto. CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. The Indenture provides that the Company shall not, in any transaction or series of related transactions, merge or consolidate with or into, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any Person or Persons, and the Company shall not permit any of the Restricted Subsidiaries to enter into any such transaction or series of related transactions if such transaction or series of related transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and the Restricted Subsidiaries (determined on a consolidated basis for the Company and the Restricted Subsidiaries), to any Person or Persons, unless at the time and after giving effect thereto (i) either (A)(1) if the transaction or transactions is a merger or consolidation involving the Company, the Company shall be the Surviving Person of such merger or consolidation or (2) if the transaction or transactions is a merger or consolidation involving a Restricted Subsidiary, such Restricted Subsidiary shall be the Surviving Person of such merger or consolidation, or (B)(1) the Surviving Person shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and (2)(x) in the case of a transaction involving the Company, the Surviving Person shall 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 Registration Rights Agreement, and in each case, the Indenture, the Notes and the Registration Rights Agreement shall remain in full force and effect, or (y) in the case of a transaction involving a Restricted Subsidiary that is a Guarantor, the Surviving Person shall expressly assume by a supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Restricted Subsidiary under its Guarantee and the Indenture and the Registration Rights Agreement, and in each case, such Indenture, Guarantee and the Registration Rights Agreement shall remain in full force and effect; (ii) immediately after giving effect to such transaction or series of 74 related transactions on a PRO FORMA basis, no Default or Event of Default shall have occurred and be continuing; (iii) to the extent the covenant described under "--Certain Covenants--Limitation on Indebtedness" is still applicable, the Company, or the Surviving Person, as the case may be, immediately after giving effect to such transaction or series of related transactions on a PRO FORMA basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the covenant described above under "--Certain Covenants--Limitation on Indebtedness;" and (iv) at the time of the transaction 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 described under "--Certain Covenants--Limitation on Liens" are complied with. No Guarantor (other than a Guarantor whose Guarantee is to be released in accordance with the terms of its Guarantee and the Indenture as provided in paragraph (c) under "--Certain Covenants--Limitation on Issuances of Guarantees by Restricted Subsidiaries" above) shall, in any transaction or series of related transactions, consolidate with or merge with or into another Person, whether or not such Person is affiliated with such Guarantor and whether or not such Guarantor is the Surviving Person, unless (i) the Surviving Person (if other than such Guarantor) is a corporation organized and validly existing under the laws of the United States, any State thereof or the District of Columbia; (ii) the Surviving Person (if other than such Guarantor) expressly assumes by a supplemental indenture all the obligations of such Guarantor under its Guarantee and the performance and observance of every covenant of the Indenture and the Registration Rights Agreement to be performed or observed by such Guarantor; and (iii) immediately after giving effect to such transaction or series of related transactions on a PRO FORMA basis, no Default or Event of Default shall have occurred and be continuing. In connection with any consolidation, merger, transfer, lease or other disposition contemplated hereby, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, transfer, lease or other disposition and the supplemental indenture in respect thereof comply with the requirements under the Indenture. In addition, each Guarantor, in the case of a transaction described in the first paragraph hereunder, unless it is the other party to the transaction or unless its Guarantee will be released and discharged in accordance with its terms as a result of the transaction, will be required to confirm, by supplemental indenture, that its Guarantee will continue to apply to the obligations of the Company or the Surviving Person under the Indenture. Upon any consolidation or merger of the Company or any Guarantor or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, in which the Company or a Guarantor is not the Surviving Person, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture and the Notes and the Registration Rights Agreement or such Guarantor under the Indenture, the Guarantee of such Guarantor and the Registration Rights Agreement, as the case may be, with the same effect as if such successor corporation had been named as the Company or Guarantor, as the case may be, therein; and thereafter, except in the case of (a) a lease or (b) any sale, assignment, conveyance, transfer, lease or other disposition to a Restricted Subsidiary of the Company or such Guarantor, the Company shall be discharged from all obligations and covenants under the Indenture, the Notes and the Registration Rights Agreement and such Guarantor shall be discharged from all obligations and covenants under the Indenture, the Guarantee of such Guarantor and the Registration Rights Agreement, as the case may be. The Indenture provides that for all purposes of the Indenture and the Notes (including the provision of this covenant and the covenants described under "--Certain Covenants--Limitation on Indebtedness," "--Certain Covenants--Limitation on Restricted Payments" and "--Certain Covenants--Limitation on Liens"), Subsidiaries of any Surviving Person shall, upon such transaction or series of related transactions, become Restricted Subsidiaries unless and until designated as Unrestricted Subsidiaries pursuant to and in accordance with the provisions described under "--Certain Covenants--Limitations on Unrestricted 75 Subsidiaries" and all Indebtedness, and all Liens on property or assets, of the Company and the Restricted Subsidiaries in existence immediately prior to such transaction or series of related transactions will be deemed to have been incurred upon such transaction or series of related transactions. EVENTS OF DEFAULT The following are "Events of Default" under the Indenture: (i) default in the payment of the principal of or premium, if any, when due and payable, on any of the Notes (at its Stated Maturity, upon optional redemption, acceleration, required purchase, sinking fund, scheduled principal payment or otherwise); or (ii) default in the payment of an installment of interest on any of the Notes, when due and payable, continued for 30 days or more; or (iii) the Company or any Guarantor fails to comply with any of its obligations described under "--Consolidation, Merger, Sale of Assets, Etc.," "--Change of Control" or "--Certain Covenants-- Limitation on Sale of Assets"; or (iv) the Company or any Guarantor fails to perform or observe any other term, covenant or agreement contained in the Notes, the Guarantees or the Indenture (other than a default specified in (i), (ii) or (iii) above) for a period of 30 days after written notice of such failure requiring the Company to remedy the same shall have been given (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 Notes then outstanding; or (v) default or defaults under one or more agreements, indentures or instruments under which the Company, any Guarantor or any Restricted Subsidiary then has outstanding Indebtedness in excess of $17.5 million individually or in the aggregate and either (a) such Indebtedness is already due and payable in full or (b) such default or defaults result in the acceleration of the maturity of such Indebtedness; or (vi) any Guarantee ceases to be in full force and effect or is declared null and void or any Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of the Indenture or the release of any such Guarantee in accordance with "--Certain Covenants--Limitation on Issuance of Guarantees by Restricted Subsidiaries"); or (vii) one or more judgments, orders or decrees of any court or regulatory or administrative agency for the payment of money in excess of $17.5 million (in excess of the coverage under applicable insurance policies (after giving effect to any deductibles) under which a financially sound and reputable insurer has admitted liability) either individually or in the aggregate shall have been rendered against the Company, any Guarantor or any Restricted Subsidiary or any of their respective properties and shall not have been 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, order or decree, by reason of a pending appeal or otherwise, shall not be in effect; or (viii) certain events of bankruptcy, insolvency or reorganization with respect to the Company, any Guarantor or any Material Subsidiary of the Company shall have occurred; or (ix) any holder of at least $17.5 million in aggregate principal amount of Indebtedness of the Company, any Guarantor or any Restricted Subsidiary shall commence judicial proceedings to foreclose upon assets of the Company, any Guarantor or any of its Restricted Subsidiaries having a Fair Market Value, individually or in the aggregate, in excess of $17.5 million or shall have exercised 76 any right under applicable law or applicable security documents to take ownership of any such assets in lieu of foreclosure. If an Event of Default (other than as specified in clause (viii) with respect to the Company) shall occur and be continuing, the Trustee, by notice to the Company, or the holders of at least 25% in aggregate principal amount of the Notes then outstanding, by notice to the Trustee and the Company, may declare the principal of, premium, if any, and accrued interest on all of the outstanding Notes due and payable immediately, upon which declaration all such amounts payable in respect of the Notes will become and be immediately due and payable. If an Event of Default specified in clause (viii) above with respect to the Company occurs and is continuing, then the principal of, premium, if any, and accrued interest on all of the outstanding Notes will IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of 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 of the outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration if (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes, (iii) the principal of and premium, if any, on any Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes, and (b) all Events of Default, other than the non-payment of principal of, premium, if any, and interest on the Notes that has become due solely by such declaration of acceleration, have been cured or waived as provided in the Indenture. No holder of any of the Notes has any right to institute any proceeding with respect to the Indenture or any remedy thereunder, unless the holders of at least 25% in aggregate principal amount of the outstanding Notes have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as Trustee under the Notes and the Indenture, the Trustee has failed to institute such proceeding within 15 days after receipt of such notice and the Trustee, within such 15-day period, has not received directions inconsistent with such written request by holders of a majority in aggregate principal amount of the outstanding Notes. Such limitations do not apply, however, to a suit instituted by a holder of a Note for the enforcement of the payment of the principal of, premium, if any, or interest on such Note on or after the respective due dates expressed in such Note. During the existence of an Event of Default, the Trustee is required to exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise thereof as a prudent Person would exercise under the circumstances in the conduct of such Person's own affairs. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default shall occur and be continuing, the Trustee under the Indenture is not under any obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders unless such holders shall have offered to the Trustee reasonable security or indemnity. Subject to certain provisions concerning the rights of the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee under the Indenture. The Company is required to furnish to the Trustee annual and quarterly statements as to the performance by the Company and the Guarantors of their respective obligations under the Indenture and as to any default in such performance. The Company is also required to notify the Trustee within five business days of any event which is, or after notice or lapse of time or both would become, an Event of Default. 77 DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE The Company may, at its option and at any time, terminate the obligations of the Company and the Guarantors with respect to the outstanding Notes ("defeasance"). Such defeasance means that the Company will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, except for (i) the rights of holders of outstanding Notes to receive payment in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (ii) the Company's obligations to issue temporary Notes, register the transfer or exchange of any Notes, replace mutilated, destroyed, lost or stolen Notes and maintain an office or agency for payments in respect of the Notes, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and (iv) the defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to terminate the obligations of the Company and any Guarantor with respect to certain covenants that are set forth in the Indenture, some of which are described under "--Certain Covenants" above, and any omission to comply with such obligations will not constitute a Default or an Event of Default with respect to the Notes ("covenant defeasance"). In the event covenant defeasance occurs, certain events (not including non-payment, bankruptcy and insolvency events) described under "--Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either defeasance or covenant defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Notes, cash in 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 outstanding Notes at maturity; (ii) 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 defeasance or 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 defeasance or covenant defeasance had not occurred (in the case of defeasance, such opinion must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable federal income tax laws); (iii) no Default shall have occurred and be continuing on the date of such deposit or insofar as clause (viii) under the first paragraph under "--Events of Default" is concerned, at any time during the period ending on the 91st day after the date of deposit; (iv) such defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest with respect to any securities of the Company or any Guarantor; (v) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument to which the Company or any Guarantor is a party or by which it is bound; (vi) such defeasance or covenant defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be registered under such Act or exempt from registration thereunder; (vii) the Company shall have delivered to the Trustee an opinion of independent counsel in the United States to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (viii) 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 Guarantee over the other creditors of the Company or any Guarantor with the intent of defeating, hindering, delaying or defrauding creditors of the Company, any Guarantor or others; (ix) no event or condition shall exist that would prevent the Company from making payments of the principal of, premium, if any, and interest on the Notes on the date of such deposit or at any time ending on the 91st day after the date of such deposit; and (x) the Company shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent under the Indenture to either defeasance or covenant defeasance, as the case may be, have been complied with. 78 SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (i) either (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held 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 not theretofore delivered to the Trustee for cancellation have become due and payable and 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 on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) the Company or any Guarantor has paid all other sums payable under the Indenture by the Company and the Guarantors; and (iii) the Company and each of the Guarantors have delivered to the Trustee an officers' certificate and an opinion of independent counsel each stating that (a) all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with and (b) 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, any Guarantor or any Subsidiary is a party or by which the Company, any Guarantor or any Subsidiary is bound. AMENDMENTS AND WAIVERS Amendments and modifications of the Indenture or the Notes may be made by the Company, the Guarantors and the Trustee with the consent of the holders of not less than a majority of the aggregate principal amount of the outstanding Notes; PROVIDED, HOWEVER, that no such modification or amendment may, without the consent of the holder of each outstanding Note affected thereby, (i) change the maturity of the principal of, or any installment of interest on, any such Note or alter the optional redemption or repurchase provisions of any such Note or the Indenture in a manner adverse to the Holders of the Notes; (ii) reduce the principal amount of (or the premium of) any such Note; (iii) reduce the rate of or extend the time for payment of interest on any such Note; (iv) change the place or currency of payment of principal of (or premium) or interest on any such Note; (v) modify any provisions of the Indenture relating to the waiver of past defaults (other than to add sections of the Indenture or the Notes subject thereto) or the right of the holders of Notes to institute suit for the enforcement of any payment on or with respect to any such Note or any Guarantee or the modification and amendment provisions of the Indenture and the Notes (other than to add sections of the Indenture or the Notes which may not be amended, supplemented or waived without the consent of each Holder therein affected); (vi) reduce the percentage of the principal amount of outstanding Notes necessary for amendment to or waiver of compliance with any provision of the Indenture or the Notes or for waiver of any Default in respect thereof; (vii) waive a default in the payment of principal of, premium, if any, or interest on, or redemption payment with respect to, the Notes (except a rescission of acceleration of the Notes by the holders thereof as provided in the Indenture and a waiver of the payment default that resulted from such acceleration); (viii) modify the ranking or priority of any Note or the Guarantee of any Guarantor; (ix) following the occurrence of a Change of Control or Asset Sale, modify the provisions of any covenant (or the related definitions) in the Indenture requiring the Company to make and consummate a Change of Control Offer in respect of such Change of Control or Asset Sale Offer in respect of an Asset Sale or modify any of the provisions or definitions with respect thereto in a manner materially adverse to the Holders of Notes affected thereby; or (x) release any Guarantor from any of its obligations under its Guarantee or the Indenture otherwise than in accordance with the Indenture. 79 Notwithstanding the foregoing, without the consent of any holders of the Notes, the Company, the Guarantors and the Trustee may modify or amend the Indenture (a) to evidence the succession of another Person to the Company or any Guarantor, and the assumption by any such successor of the covenants of the Company or such Guarantor in the Indenture and in the Notes and in any Guarantee in accordance with "--Consolidation, Merger, Sale of Assets, Etc."; (b) to add to the covenants of the Company or any Guarantor for the benefit of the holders of the Notes, or to surrender any right or power herein conferred upon the Company or any Guarantor in the Indenture, in the Notes or in any Guarantee; (c) to cure any ambiguity, to correct or supplement any provision in the Indenture which may be defective or inconsistent with any other provision in the Indenture, in the Notes or in any Guarantee; (d) to comply with the requirements of the Commission in order to maintain the qualification of the Indenture under the Trust Indenture Act of 1939, as amended; (e) to secure the Notes or add a Guarantor under the Indenture; (f) to evidence and provide the acceptance of the appointment of a successor Trustee under the Indenture; or (g) to make any other provisions with respect to matters or questions arising under the Indenture, the Notes or any Guarantee; PROVIDED that, in the case of clause (b), (c) or (g), such provisions shall not adversely affect the interests of any of the holders of the Notes and the Company has delivered to the Trustee an Opinion of Counsel (as such term is defined in the Indenture) to such effect. The holders of a majority in aggregate principal amount of the outstanding Notes, on behalf of all holders of Notes, may waive compliance by the Company and the Guarantors with certain restrictive provisions of the Indenture. Subject to certain rights of the Trustee, as provided in the Indenture, the holders of a majority in aggregate principal amount of the Notes, on behalf of all holders of the Notes, may waive any past default under the Indenture (including any such waiver obtained in connection with a tender offer or exchange offer for the Notes), except a default in the payment of principal, premium or interest or a default arising from failure to purchase any Notes tendered pursuant to an offer to purchase pursuant thereto, or a default in respect of a provision that under the Indenture cannot be modified or amended without the consent of the Holder of each Note that is affected. GOVERNING LAW The Indenture and the Notes and the Guarantees are governed by the internal laws of the State of New York, without regard to the principles of conflicts of law. CERTAIN DEFINITIONS "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (i) assumed in connection with an Asset Acquisition from such Person or (ii) existing at the time such Person becomes a Restricted Subsidiary of any other Person (other than any Indebtedness incurred in connection with, or in contemplation of, such Asset Acquisition or such Person becoming such a Restricted Subsidiary). Acquired Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary, as the case may be. "AFFILIATE" means with respect to any specified Person: (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; (ii) any other Person that owns, directly or indirectly, 10% or more of such specified Person's Capital Stock or any officer, director or employee of any such specified Person or other Person or, with respect to any natural Person, any person having a relationship with such Person by blood, marriage or adoption no more remote than first cousin; or (iii) any other Person 10% or more of the Voting Stock of which is beneficially owned or held directly or indirectly by 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 securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. 80 "ASSET ACQUISITION" means (i) an Investment by the Company or any Restricted Subsidiary in any other Person pursuant to which such Person will become a Restricted Subsidiary or will be merged or consolidated with or into the Company or any Restricted Subsidiary or (ii) the acquisition by the Company or any Restricted Subsidiary of the assets of any Person which constitute substantially all of the assets of such Person, or any division or line of business of such Person, or which is otherwise outside of the ordinary course of business. "ASSET SALE" means any sale, issuance, conveyance, transfer, lease or other disposition (including, without limitation, by way of merger, consolidation or sale and leaseback transaction) (collectively, a "transfer"), directly or indirectly, in one or a series of related transactions, of: (i) any Capital Stock of any Subsidiary; (ii) all or substantially all of the properties and assets of any division or line of business of the Company or its Subsidiaries; or (iii) any other properties or assets of the Company or any Subsidiary other than in the ordinary course of business. For the purposes of this definition, the term "Asset Sale" shall not include any transfer of properties and assets (a) that is governed by the provisions described under "--Consolidation, Merger, Sale of Assets, Etc."; PROVIDED, HOWEVER, that any transaction consummated in compliance with "--Consolidation, Merger, Sale of Assets, Etc." above involving a transfer of less than all of the properties or assets of the Company shall be deemed to be an Asset Sale with respect to the properties or assets of the Company that are not so transferred in such transaction, (b) that is by the Company to any Guarantor, or by any Subsidiary to the Company or any Restricted Subsidiary in accordance with the terms of the Indenture, (c) that is of obsolete equipment in the ordinary course of business, (d) to any Securitization Subsidiary (on a "true sale" non-recourse basis) of any accounts receivable or customer loans receivable of the Company or any Restricted Subsidiary in the ordinary course of business on terms customary for such transactions, but only to the extent that the aggregate amount of such accounts receivable or loans held by all such Securitization Subsidiaries which remain uncollected at any one time does not exceed $125.0 million, or (e) the Fair Market Value of any such Asset Sale not otherwise described in clause (a) through (d) above which in the aggregate does not exceed $10.0 million. "ASSET SALE OFFER" has the meaning set forth under "--Limitation on Sale of Assets." "AVERAGE LIFE TO STATED MATURITY" means, with respect to any Indebtedness, as at any date of determination, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "CAPITAL STOCK" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock, whether now outstanding or issued after the date of the Indenture. "CAPITALIZED LEASE OBLIGATION" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of the Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "CASH EQUIVALENTS" means, at any time, (i) any evidence of Indebtedness with a maturity of not more than one year issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or acceptances with a maturity of not more than one year of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; (iii) commercial paper with a maturity of not more than one year issued by a corporation that is not an Affiliate of the Company organized under 81 the laws of any state of the United States or the District of Columbia and rated at least A-1 by Standard & Poor's Corporation or at least P-1 by Moody's Investors Service, Inc.; and (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i) and (ii) above entered into with any financial institution meeting the qualifications specified in clause (ii) above. "CHANGE OF CONTROL" means the occurrence of any of the following events (whether or not approved by the Board of Directors of the Company): (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities 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 35% or more of the total voting power of the then outstanding Voting Stock of the Company; (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of the Company (together with any new directors whose election to such board 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; (iii) the Company consolidates with or merges with or into any Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any corporation 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 solely 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 and 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"), (B) no "person" or "group" owns immediately after such transaction, directly or indirectly, 35% or more of the total outstanding Voting Stock of the surviving corporation and (C) the holders of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the total voting power of the then outstanding Voting Stock of the surviving or transferee corporation immediately after such transaction; or (iv) any order, judgment or decree shall be entered against the Company decreeing the dissolution or split up of the Company and such order shall remain undischarged or unstayed for a period in excess of sixty days. "CHANGE OF CONTROL OFFER" has the meaning set forth under "--Change of Control." "COMMODITY PRICE PROTECTION AGREEMENT" means any forward contract, commodity swap, commodity option or other similar financial agreement or arrangement relating to, or the value of which is dependent upon, fluctuations in commodity prices. "CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any period, (i) the sum of, without duplication, the amounts for such period, taken as a single accounting period, of (a) Consolidated Net Income, (b) to the extent reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to the extent reducing Consolidated Net Income, Consolidated Interest Expense, and (d) to the extent reducing Consolidated Net Income, Consolidated Income Tax Expense less (ii) other non-cash items increasing Consolidated Net Income for such period. "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means the ratio of the aggregate amount of Consolidated Cash Flow Available for Fixed Charges of the Company for the four full fiscal quarters immediately 82 preceding the date of the transaction (the "Transaction Date") giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which consolidated financial information of the Company is available (such four full fiscal quarter period being referred to herein as the "Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges of the Company for such Four Quarter Period. For purposes of this definition, "Consolidated Cash Flow Available for Fixed Charges" and "Consolidated Fixed Charges" will be calculated, without duplication, after giving effect on a PRO FORMA basis for the period of such calculation to (i) the incurrence of any Indebtedness of the Company or any of the Restricted Subsidiaries during the period commencing on the first day of the Four Quarter Period to and including the Transaction Date (the "Reference Period"), including, without limitation, the incurrence of the Indebtedness giving rise to the need to make such calculation, as if such incurrence occurred on the first day of the Reference Period, except that with respect to the calculation of Consolidated Interest Expense in the determination of Consolidated Fixed Charges, the Consolidated Interest Expense of such Person 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 Reference Period, (ii) an adjustment to eliminate or include, as applicable, the Consolidated Cash Flow Available for Fixed Charges and Consolidated Fixed Charges of the Company directly attributable to assets which are the subject of any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Company or one of the Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring Acquired Indebtedness) occurring during the Reference Period, as if such Asset Sale or Asset Acquisition occurred on the first day of the Reference Period and (iii) the retirement of Indebtedness during the Reference Period which cannot thereafter be reborrowed occurring as if retired on the first day of the Reference Period. In calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter will be deemed to accrue at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date shall be deemed to have been in effect during the Reference Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by Interest Rate Agreements, will be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. If the Company or any Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the above definition will give effect to the incurrence of such guaranteed Indebtedness as if the Company or any Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. "CONSOLIDATED FIXED CHARGES" means, for any period, the sum of, without duplication, the amounts for such period of (i) Consolidated Interest Expense; and (ii) the aggregate amount of cash dividends and other distributions paid or accrued during such period in respect of Redeemable Capital Stock and Preferred Stock of the Company. "CONSOLIDATED INCOME TAX EXPENSE" means, for any period, the provision for federal, state, local and foreign income taxes payable by the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, for any period, without duplication, the sum of (a) the interest expense of the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (i) any amortization of debt discount attributable to such period, (ii) the net cost under or otherwise associated with Interest Rate Agreements, Currency Agreements and Commodity Price Protection Agreements (in each case, including any amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) all commissions, 83 discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (v) all capitalized interest and all accrued interest, and (b) all but the principal component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Company and the Restricted Subsidiaries during such period and as 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 the Restricted Subsidiaries for such period on a consolidated basis as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income (or loss), by excluding, without duplication, (i) all extraordinary gains or losses (net of all fees and expenses relating thereto), (ii) the portion of net income (or loss) of the Company and its Restricted Subsidiaries on a consolidated basis allocable to minority interests in unconsolidated Persons, except to the extent that cash dividends or distributions are actually received by the Company or a Restricted Subsidiary, (iii) income of the Company and the Restricted Subsidiaries derived from or in respect of Investments in Unrestricted Subsidiaries, except to the extent that cash dividends or distributions are actually received by the Company or a Restricted Subsidiary, (iv) net income (or loss) of any Person combined with the Company or any of the Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (v) any gain or loss, net of taxes, realized upon the termination of any employee pension benefit plan, (vi) net gains (or losses), net of taxes, less all fees and expenses relating thereto, in respect of any Asset Sales by the Company or a Restricted Subsidiary, (vii) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (viii) any restoration to income of any contingency reserve except to the extent provision for such reserve was made out of income accrued at any time following the Issue Date, (ix) any gain, arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness of the Company, (x) the net gain or loss resulting from the Prepayments (as defined in the Offering Memorandum relating to the sale of the Notes) and (xi) the net non-cash compensation expense incurred in connection with the issuance or exercise of any employee stock options the issuance of which was approved by the board of directors of the Company. "CONSOLIDATED NET SALES" means, for any period, the consolidated net sales of the Company and the Restricted Subsidiaries as determined in accordance with GAAP. "CONSOLIDATED NON-CASH CHARGES" means, for any period, the aggregate depreciation, amortization and other non-cash expenses of the Company and the Restricted Subsidiaries reducing Consolidated Net Income for such period (other than any non-cash item requiring an accrual or reserve for cash disbursements in any future period), determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED TANGIBLE ASSETS" means, at any date, the total assets, less goodwill and other intangibles, of the Company and the Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP as of the most recent date for which a consolidated balance sheet of the Company is available. "COVENANT DEFEASANCE" has the meaning set forth under "--Defeasance or Covenant Defeasance of Indenture." "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or its Restricted Subsidiaries against fluctuations in currency values. "DEFAULT" means any event that is, or after notice or passage of time or both would be, an Event of Default. "DEFEASANCE" has the meaning set forth under "--Defeasance or Covenant Defeasance of Indenture." 84 "DESIGNATED SENIOR INDEBTEDNESS" means (a) all Senior Indebtedness outstanding under the Revolving Credit Facility and (b) any other Senior Indebtedness which, at the time of determination, is specifically designated in the instrument governing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company. "DESIGNATION" has the meaning set forth under "--Certain Covenants--Limitations on Unrestricted Subsidiaries." "DESIGNATION AMOUNT" has the meaning set forth under "--Certain Covenants--Limitations on Unrestricted Subsidiaries." "DISINTERESTED DIRECTOR" means, with respect to any transaction or series of related transactions, a member of the board of directors of the Company who does not have any material direct or indirect financial interest in or with respect to such transaction or series of related transactions. "EVENT OF DEFAULT" has the meaning set forth under "--Events of Default." "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission thereunder. "FAIR MARKET VALUE" means, with respect to any asset or property, the price which could be negotiated in an arm's-length transaction, for cash, between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy. Fair Market Value shall be determined by the Board of Directors of the Company acting in good faith evidenced by a board resolution thereof delivered to the Trustee. "FOUR QUARTER PERIOD" has the meaning set forth in the definition of "Consolidated Fixed Charge Coverage Ratio." "GAAP" means, at any date of determination, generally accepted accounting principles in effect in the United States which are applicable at the date of determination and which are consistently applied for all applicable periods. "GUARANTEE" means, as applied to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. A guarantee shall include, without limitation, any agreement to maintain or preserve any other Person's financial condition or to cause any other Person to achieve certain levels of operating results. "GUARANTEE" means the guarantee by any Guarantor of the Company's obligations under the Indenture and the Notes pursuant to a guarantee given in accordance with the Indenture. "GUARANTOR" means the Subsidiaries listed as guarantors in the Indenture and any other Subsidiary which is a guarantor of the Notes, including any Person that executes or is required after the date of the Indenture to execute a guarantee of the Notes pursuant to the covenant described under "--Certain Covenants--Limitations on Liens" or "--Certain Covenants--Limitation on Issuances of Guarantees by Restricted Subsidiaries" until a successor replaces such party pursuant to the applicable provisions of the Indenture and, thereafter, shall mean such successor; PROVIDED that for purposes hereof the term "Guarantor" shall not include any Unrestricted Subsidiary unless specifically provided otherwise. "INCUR" has the meaning set forth in "--Certain Covenants--Limitation on Indebtedness." "Incurrence," "incurred" and "incurring" shall have the meanings correlative to the foregoing. 85 "INDEBTEDNESS" means, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred or 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, bankers acceptance or other similar credit transaction and in connection with any agreement to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such Person, or any warrants, rights or options to acquire such Capital Stock, now or hereafter outstanding, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade payables arising in the ordinary course of business, (iv) all Capitalized Lease Obligations of such Person, (v) all Indebtedness referred to in clauses (i) through (iv) above of other persons and all dividends of other Persons, to the extent 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, (vi) all guarantees of Indebtedness by such Person, (vii) except for purposes of the covenant described under "--Certain Covenants--Limitation on Restricted Payments," all Redeemable Capital Stock issued by such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends, (viii) all obligations under Interest Rate Agreements, Currency Agreements or Commodity Price Protection Agreements of such Person (net of any payments owed to such Person thereunder to the extent such Person's obligations thereunder are subject to offset by the amount of payments owed to such Person thereunder), and (ix) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing of any liability of the types referred to in clauses (i) through (viii) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Redeemable Capital Stock, such Fair Market Value shall be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized accounting, appraisal or investment banking firm (i) which does not, and whose directors, officers and employees or Affiliates do not have, a direct or indirect financial interest in the Company and (ii) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "INTEREST RATE AGREEMENTS" means one or more of the following agreements which shall be entered into by one or more financial institutions: obligations of any Person pursuant to any arrangement with any other Person whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or a floating rate of interest on the same notional amount or any other arrangement involving payments by or to such Person based upon fluctuations in interest rates (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) and/or other types of interest rate hedging agreements from time to time. "INVESTMENT" means, with respect to any Person, any direct or indirect advance, loan or other extension of credit (including by means of a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others or otherwise), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other Person and all other items that would 86 be classified as investments on a balance sheet prepared in accordance with GAAP. Investments shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. In addition to the foregoing, any Currency Agreement, Interest Rate Agreement, Commodity Price Protection Agreement or similar agreement shall constitute an Investment in the net amount required to be set forth on such Person's balance sheet in accordance with GAAP. Upon the sale of any portion of the Capital Stock of any Restricted Subsidiary by the Company or any other Restricted Subsidiary, the Company or such other Restricted Subsidiary shall be deemed to have made an Investment in the amount of its remaining Investment, if any, in such Person. "ISSUE DATE" means the original issue date of the Notes under the Indenture. "LIEN" means any mortgage or deed of trust, charge, pledge, lien (statutory or other), privilege, security interest, hypothecation, cessation and transfer, lease of real property, assignment for security, claim, deposit arrangement, or preference or priority or other encumbrance upon or with respect to any property of any kind (including any conditional sale, capital lease or other title retention agreement, any leases in the nature thereof, and any agreement to give any security interest), whether real, personal or mixed, movable or immovable, now owned or hereafter acquired. A Person shall be deemed to own subject to a Lien any property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "MATERIAL SUBSIDIARY" means each Restricted Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act and the Exchange Act (as such regulation is in effect on the Issue Date). "NET CASH PROCEEDS" means (a) with respect to any Asset Sale by any Person, the proceeds thereof (without duplication in respect of all Asset Sales) in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed of for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary) net of (i) brokerage commissions and other reasonable fees and expenses (including fees and expenses of legal counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) payments made to retire Indebtedness where payment of such Indebtedness is secured by the assets or properties the subject of such Asset Sale, (iv) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in or having a Lien on the assets subject to the Asset Sale and (v) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale (provided that the amount of any such reserves shall be deemed to constitute Net Cash Proceeds at the time such reserves shall have been released or are not otherwise required to be retained as a reserve), all as reflected in an officers' certificate delivered to the Trustee and (b) with respect to any issuance or sale of shares of Capital Stock that have been converted into or exchanged for shares of Capital Stock as referred to under "--Certain Covenants--Limitation on Restricted Payments," the proceeds of such issuance or sale in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed of for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of attorney's fees, accountant's fees and brokerage, consultation, underwriting and other fees and expenses actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "PARI PASSU INDEBTEDNESS" means (a) any Indebtedness of the Company which ranks PARI PASSU in right of payment to the Notes and (b) with respect to any Guarantor, Indebtedness which ranks PARI PASSU in right of payment to the Guarantee of such Guarantor. 87 "PERMITTED INDEBTEDNESS" has the meaning set forth under "--Certain Covenants--Limitation on Indebtedness." "PERMITTED INVESTMENTS" means (a) Cash Equivalents; (b) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers' compensation, performance and other similar deposits; (c) loans and advances to employees and sales representatives made in the ordinary course of business not to exceed $1.0 million in the aggregate at any one time outstanding; (d) Interest Rate Agreements, Currency Agreements and Commodity Price Protection Agreements permitted under clause (vii) or (viii) of the second paragraph under "--Certain Covenants--Limitation on Indebtedness"; (e) Investments represented by accounts receivable created or acquired in the ordinary course of business; (f) loans or advances to vendors in the ordinary course of business in an amount not to exceed $10.0 million at any time; (g) Investments existing on the Issue Date and any renewal or replacement thereof on terms and conditions no less favorable in any respect than that existing on the Issue Date; (h) any Investment to the extent that the consideration therefor is Qualified Capital Stock of the Company; (i) bonds, notes, debentures or other securities or other non-cash proceeds received in connection with an Asset Sale permitted under "--Certain Covenants--Limitation on Sale of Assets," not to exceed 20% of the total consideration in such Asset Sale; (j) Investments in the form of the sale (on a "true sale" non-recourse basis) or the servicing of receivables transferred from the Company or any Guarantor, or transfer of cash, to a Securitization Subsidiary as a capital contribution or in exchange for Indebtedness of such Securitization Subsidiary in the ordinary course of business consistent with past practice on terms customary for such transactions); (k) Indebtedness permitted under clauses (iv), (v) and (vi) of the second paragraph under "--Certain Covenants--Limitation on Indebtedness"; and (l) Investments in any of the Notes or any other debt securities of the Company not otherwise prohibited by the Indenture. "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, Capital Stock of any class or, classes (however designated) of such Person which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Capital Stock of any other class of such Person. "PUBLIC EQUITY OFFERING" has the meaning set forth under "--Optional Redemption--Optional Redemption upon Public Equity Offering." "PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a Lien on assets related to the business of the Company and the Restricted Subsidiaries and any additions and accessions thereto, which are purchased by the Company or any Restricted Subsidiary at any time after the Notes are issued; PROVIDED that (i) the security agreement or conditional sales or other title retention contract pursuant to which the Lien on such assets is created (collectively, a "Purchase Money Security Agreement") shall be entered into within 180 days after the purchase or substantial completion of the construction of such assets and shall at all times be confined solely to the assets so purchased or acquired, any additions and accessions thereto and any proceeds therefrom except that, in the case of land upon which a supermarket is constructed, such Purchase Money Security Agreement may be entered into within 180 days after the substantial completion of such supermarket, (ii) at no time shall the aggregate principal amount of the outstanding Indebtedness secured thereby be increased, except in connection with the purchase of additions and accessions thereto and except in respect of fees and other obligations in respect of such Indebtedness and (iii) (A) the aggregate outstanding principal amount of Indebtedness secured thereby (determined on a per asset basis in the case of any additions and accessions) shall not at the time such Purchase Money Security Agreement is entered into exceed 90% of the purchase price to the Company and its Restricted Subsidiaries of the assets subject thereto or (B) the Indebtedness secured thereby shall be with recourse solely to the assets so purchased or acquired, any additions and accessions thereto and any proceeds therefrom. 88 "QUALIFIED CAPITAL STOCK" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock. "RATING AGENCIES" means (i) Standard & Poor's Ratings Group and (ii) Moody's Investors Service, Inc. or (iii) if Standard & Poor's Ratings Group or Moody's Investors Service, Inc. or both shall not make a rating of the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for Standard & Poor's Ratings Group, Moody's Investors Service, Inc. or both, as the case may be. "REDEEMABLE CAPITAL STOCK" means any class or series of Capital Stock to the extent that, either by its terms, by the terms of any security into which it is convertible or exchangeable, or by contract 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 such Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such Stated Maturity. "REFERENCE PERIOD" has the meaning set forth under the definition of "Consolidated Fixed Charge Coverage Ratio." "RESTRICTED PAYMENT" has the meaning set forth under "--Certain Covenants--Limitation on Restricted Payments." "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has not been designated by the Board of Directors of the Company, by a board resolution delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with the covenant described under "--Certain Covenants-- Limitations on Unrestricted Subsidiaries." Any such designation may be revoked by a board resolution of the Board of Directors of the Company delivered to the Trustee, subject to the provisions of such covenant. "REVOCATION" has the meaning set forth under "--Certain Covenants--Limitations on Unrestricted Subsidiaries." "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission thereunder. "SECURITIZATION SUBSIDIARY" means any Unrestricted Subsidiary of the Company which engages in no business, activity or transaction other than (i) acquiring accounts or customer loans receivable of the Company or any Restricted Subsidiary, (ii) incurring Indebtedness which is without credit recourse and which is secured solely by, or selling (on a "true sale" non-recourse basis) interests in, such accounts or customer loans receivable and (iii) immediately paying all of the proceeds of such Indebtedness or sale of interests to the Company or such Restricted Subsidiary as payment for accounts or customer loans receivable of the Company or such Restricted Subsidiary. "SENIOR INDEBTEDNESS" means, with respect to the Company or any Guarantor, as applicable, the principal of, premium, if any, and interest on any Indebtedness of the Company or such Guarantor, as the case may be, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to any Indebtedness of the Company or such Guarantor, as the case may be. Without limiting the generality of the foregoing, "Senior Indebtedness" will include the principal of, premium, if any, and interest (including interest that would accrue but for the filing of a petition initiating any proceeding under any state or federal bankruptcy laws, whether or not such claim is allowable in such proceeding) on all obligations of every nature of the Company or such Guarantor, as the case may be, from time to time owed to the lenders under the Revolving Credit Facility, including, without limitation, principal of and interest on, and all fees and expenses payable under the Revolving Credit Facility. Notwithstanding the foregoing, "Senior Indebtedness" shall not include, to the extent constituting Indebtedness, (i) Indebtedness evidenced by the Notes or the Guarantors, (ii) Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company or any Guarantor, (iii) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse 89 to the Company or any Guarantor, (iv) Indebtedness which is represented by Redeemable Capital Stock, (v) Indebtedness for goods, materials or services purchased in the ordinary course of business or Indebtedness consisting of trade payables or other current liabilities (other than any current liabilities owing under the Revolving Credit Facility or the current portion of any long-term Indebtedness which would constitute Senior Indebtedness but for the operation of this clause (v)), (vi) Indebtedness of or amounts owed by the Company or any Guarantor for compensation to employees or for services rendered to the Company or such Guarantor, (vii) any liability for federal, state, local or other taxes owed or owing by the Company or any Guarantor, (viii) Indebtedness of the Company or any Guarantor to a Subsidiary of the Company, and (ix) that portion of any Indebtedness which at the time of issuance is issued in violation of the Indenture. "STATED MATURITY" means, with respect to any Note or any installment of interest thereon, the dates specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable, and when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness or any installment of interest is due and payable. "SUBORDINATED INDEBTEDNESS" means, with respect to the Company, Indebtedness of the Company which is expressly subordinated in right of payment to the Notes or, with respect to any Guarantor, Indebtedness of such Guarantor which is expressly subordinated in right of payment to the Guarantee of such Guarantor. "SUBSIDIARY" means, with respect to any Person, (a) any corporation of which the outstanding shares of Voting Stock having at least a majority of the votes entitled to be cast in the election of directors shall at the time be owned, directly or indirectly, by such Person, or (b) any other Person of which at least a majority of the shares of Voting Stock are at the time, directly or indirectly, owned by such first named Person. "SURVIVING PERSON" means, with respect to any Person involved in any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of its properties and assets as an entirety, the Person formed by or surviving such merger or consolidation or the Person to which such sale, assignment, conveyance, transfer or lease is made. "TRANSACTION DATE" has the meaning set forth under the definition of "Consolidated Fixed Charge Coverage Ratio." "UNRESTRICTED SUBSIDIARY" means (i) each Securitization Subsidiary and its Subsidiaries and (ii) each Subsidiary of the Company (other than a Guarantor) designated as such pursuant to and in compliance with the covenant described under "--Certain Covenants--Limitations on Unrestricted Subsidiaries," and each Subsidiary of each such Subsidiary of the Company. Any such designation may be revoked by a board resolution of the Company delivered to the Trustee, subject to the provisions of such covenant. "UNUTILIZED NET CASH PROCEEDS" has the meaning set forth under "--Certain Covenants--Limitation on Sale of Assets." "VOTING STOCK" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors, managers or trustees of any 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 any Restricted Subsidiary of which 100% of the outstanding Capital Stock is owned by the Company and/or another Wholly-Owned Restricted Subsidiary. For purposes of this definition, any directors' qualifying shares shall be disregarded in determining the ownership of a Restricted Subsidiary. 90 DESCRIPTION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES The following is a summary of the material United States federal income tax consequences of the acquisition, ownership and disposition of the Series A Notes or the Exchange Notes by a United States Holder (as defined below). This summary deals only with United States Holders that will hold the Series A Notes or the Exchange Notes as capital assets. The discussion does not cover all aspects of federal taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of the Series A Notes or the Exchange Notes by particular investors, and does not address state, local, foreign or other tax laws. In particular, this summary does not discuss all of the tax considerations that may be relevant to certain types of investors subject to special treatment under the federal income tax laws (such as banks, insurance companies, investors liable for the alternative minimum tax, individual retirement accounts and other tax-deferred accounts, tax-exempt organizations, dealers in securities or currencies, investors that will hold the Series A Notes or the Exchange Notes as part of straddles, hedging transactions or conversion transactions for federal tax purposes or investors whose functional currency is not United States Dollars). Furthermore, the discussion below is based on provisions of the Code, and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in U.S. federal income tax consequences different from those discussed below. ANY PERSON CONSIDERING THE PURCHASE, OWNERSHIP, OR DISPOSITION OF EXCHANGE NOTES SHOULD CONSULT SUCH PERSON'S OWN TAX ADVISOR CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF SUCH PERSON'S PARTICULAR SITUATION AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION. As used herein, the term "United States Holder" means a beneficial owner of the Series A Notes or the Exchange Notes that is (i) a citizen or resident of the United States for U.S. federal income tax purposes, (ii) a corporation created or organized under the laws of the United States or any State thereof, (iii) a person or entity that is otherwise subject to U.S. federal income tax on a net income tax basis in respect of income derived from the Series A Notes or the Exchange Notes, or (iv) a partnership to the extent the interest therein is owned by a person who is described in clause (i), (ii) or (iii) of this paragraph. INTEREST Interest (including any additional interest paid because of failure to satisfy the requirements of the Registration Rights Agreement ("Additional Interest")) paid on a Series A Note or an Exchange Note will be taxable to a United States Holder as ordinary income at the time it is received or accrued, depending on the holder's method of accounting for tax purposes. PURCHASE, SALE, EXCHANGE, RETIREMENT AND REDEMPTION OF THE EXCHANGE NOTES In general (with certain exceptions described below), a United States Holder's tax basis in an Exchange Note will equal the price paid for the Series A Note for which such Exchange Note was exchanged pursuant to the Exchange Offer, subject to any tax basis adjustments required under the Code. A United States Holder generally will recognize gain or loss on the sale, exchange, retirement, redemption or other disposition of a Series A Note or an Exchange Note (or portion thereof) equal to the difference between the amount realized on such disposition and the United States Holder's adjusted tax basis in the Series A Note or the Exchange Note (or portion thereof). Except to the extent attributable to accrued but unpaid interest (which will be treated as ordinary income), gain or loss recognized on such disposition of a Series A Note or an Exchange Note will be long-term capital gain or loss if such Series A Note or Exchange Note were held for more than one year. For individual United States Holders, the most favorable tax rates on long-term capital gains will only apply if such Series A Note or Exchange Note were 91 held for more than 18 months as of the date of any sale or exchange thereof. Any such gain will generally be U.S. source gain. ORIGINAL ISSUE DISCOUNT The Series A Notes were offered and sold on April 24, 1998 at a price of $992 per $1,000 principal amount of the Series A Notes. Although issued at a discount, for federal income tax purposes the amount of "original issue discount" on the Series A Notes is considered to be DE MINIMIS and is treated as zero. These rules will find a discount on issuance to be DE MINIMIS where the discount on issuance is less than 1/4 of one percent (.25%) of the Series A Note's stated redemption price at the maturity thereof, multiplied by the number of complete years to maturity. BOND PREMIUM If a United States Holder acquires an Exchange Note (other than pursuant to this Exchange Offer) or has acquired a Series A Note, in each case, for an amount more than its redemption price, the Holder may elect to amortize and deduct from federal taxable income such "bond premium" on a yield to maturity basis. Once made, such an election applies to all bonds (other than bonds the interest on which is excludable from gross income) held by the United States Holder at the beginning of the first taxable year to which the election applies or which are thereafter acquired by the United States Holder, unless the IRS consents to a revocation of the election. The basis of a Series A Note or Exchange Note must be reduced by any amortizable bond premium taken as a deduction after the acquisition thereof. MARKET DISCOUNT The purchase of an Exchange Note or the purchase of a Series A Note other than at original issue may be affected by the market discount provisions of the Code. These rules generally provide that, subject to a statutorily defined DE MINIMIS exception, if a United States Holder purchases an Exchange Note (or purchased a Series A Note) at a "market discount," as defined below, and thereafter recognizes gain upon a disposition of the Exchange Note (including dispositions by gift or redemption), the lesser of such gain (or appreciation, in the case of a gift) or the portion of the market discount that has accrued ("accrued market discount") while the Exchange Note (or its predecessor Series A Note, if any) was held by such United States Holder will be treated as ordinary interest income at the time of disposition rather than as capital gain. For an Exchange Note or a Series A Note, "market discount" is the excess of the stated redemption price at maturity over the tax basis immediately after its acquisition by a United States Holder. Similar to the DE MINIMIS rule discussed above with respect to "original issue discount," market discount arising upon an acquisition of a Series A Note or Exchange Note will be considered to be zero if the discount upon acquisition is less than 1/4 of one percent (.25%) of the stated redemption price of the Note multiplied by the number of complete years to maturity (after the United States Holder acquired the Series A Note or Exchange Note). Market discount generally will accrue ratably during the period from the date of acquisition to the maturity date of the Series A Note or Exchange Note, unless the United States Holder elects to accrue such discount on the basis of the constant yield method. Such an election applies only to the Exchange Note (or, where applicable, a predecessor Series A Note) with respect to which it is made and is irrevocable. In lieu of including the accrued market discount in income at the time of disposition, a United States Holder of an Exchange Note acquired at a market discount (or acquired in exchange for a Series A Note acquired at a market discount) may elect to include the accrued market discount in income currently either ratably or using the constant yield method. Once made, such an election applies to all other obligations that the United States Holder purchases at a market discount during the taxable year for which the election is made to include accrued market discount during such taxable year and in all subsequent taxable 92 years of the United States Holder, unless the IRS consents to a revocation of the election. If an election is made to include accrued market discount in income currently, the adjusted tax basis of an Exchange Note (or, where applicable, a predecessor Series A Note) in the hands of the United States Holder will be increased by the accrued market discount thereon as it is includible in income. A United States Holder of a market discount Exchange Note who does not elect to include market discount in income currently will generally be required to defer deductions for interest on borrowings, if any, allocable to such Exchange Note in an amount not exceeding the accrued market discount on such Exchange Note until the maturity or disposition of such Exchange Note. BACKUP WITHHOLDING AND INFORMATION REPORTING Payments of interest (including any Additional Interest or original issue discount, if any) and principal on, and the proceeds of sale or other disposition of the Series A Notes or the Exchange Notes payable to a United States Holder may be subject to United States information reporting requirements. In addition, backup withholding at a rate of 31% may apply to such payments where a United States Holder fails (i) to provide an accurate taxpayer identification number or (ii) to report all interest and dividends required to be shown on its federal income tax returns. Certain United States Holders (including, among others, corporations) may not be subject to backup withholding. United States Holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such an exemption. EXCHANGE OFFER; REGISTRATION RIGHTS The Issuers entered into the Registration Rights Agreement with the Initial Purchasers, pursuant to which the Issuers agreed to file with the Commission the Exchange Offer Registration Statement on an appropriate form under the Securities Act with respect to the Exchange Offer for the Exchange Notes and to offer to the holders of Series A Notes who are able to make certain representations the opportunity to exchange their Notes for Exchange Notes. If (i) the Issuers are not permitted to file the Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, (ii) the Exchange Offer is not for any other reason consummated within 120 days after the Issue Date, (iii) any holder of Series A Notes notifies the Company within a specified time period that (a) due to a change in law or policy it is not entitled to participate in the Exchange Offer, (b) due to a change in law or policy it 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) it is a broker-dealer and owns Series A Notes acquired directly from the Issuers or an affiliate of an Issuer or (iv) the holders of a majority of the Series A Notes may not resell the Exchange Notes acquired by them in the Exchange Offer to the public without restriction under the Securities Act and without restriction under applicable blue sky or state securities laws, the Issuer will file with the Commission the Shelf Registration Statement to cover resales of the Transfer Restricted Notes (as defined herein) by the holders thereof. The Issuers will use their best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the Commission. For purposes of the foregoing, "Transfer Restricted Notes" means each Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a Series A Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement, (iv) the date on which such Note is distributed to the public pursuant to Rule 144(k) under the Securities Act (or any similar provision then in force, but not Rule 144A under the Securities Act), (v) such Note shall have been otherwise transferred by the holder thereof and a new Note not bearing a legend restricting further transfer shall have been delivered by the Issuers and 93 subsequent disposition of such Note shall not require registration or qualification under the Securities Act or any similar state law then in force or (vi) such Note ceases to be outstanding. Under existing Commission interpretations, the Exchange Notes would, in general, be freely transferable after the Exchange Offer without further registration under the Securities Act; PROVIDED, HOWEVER, that in the case of broker-dealers participating in the Exchange Offer, a prospectus meeting the requirements of the Securities Act must be delivered upon resale by such broker-dealers in connection with resales of the Exchange Notes. The Issuers have agreed, for a period of 180 days after consummation of the Exchange Offer, to make available a prospectus meeting the requirements of the Securities Act to any such broker-dealer for use in connection with any resale of any Exchange Notes acquired in the Exchange Offer. A broker-dealer which delivers such a prospectus to purchasers in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Registration Rights Agreement (including certain indemnification rights and obligations). Each holder of Series A Notes that wishes to exchange such Series A Notes for Exchange Notes in the Exchange Offer will be required to make certain representations, including representations that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it has no arrangement with any person to participate in the distribution of the Exchange Notes, (iii) it is not an "affiliate," as defined in Rule 405 of the Securities Act, of any Issuer, or if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable and (iv) it is not a broker-dealer tendering Series A Notes which it acquired directly from the Issuers for its own account. If the holder is not a broker-dealer, it will be required to represent that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes. If the holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities, it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Issuers have agreed to pay all expenses incident to the Exchange Offer and will indemnify the Initial Purchasers against certain liabilities, including liabilities under the Securities Act. The Registration Rights Agreement provides that: (i) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Issuers will file the Exchange Offer Registration Statement with the Commission on or prior to 30 days after the Issue Date, (ii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Issuers will use their best efforts to have the Exchange Offer Registration Statement declared effective by the Commission on or prior to 90 days after the Issue Date, (iii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Issuers will commence the Exchange Offer and use their best efforts to issue, on or prior to 30 days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission, Exchange Notes in Exchange for all Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file the Shelf Registration Statement, the Issuers will use their best efforts to file prior to the later of (a) 30 days after the Issue Date or (b) 30 days after such filing obligation arises and use their best efforts to cause the Shelf Registration Statement to be declared effective by the Commission on or prior to 60 days after such obligation arises; PROVIDED, HOWEVER, that if the Issuers have not consummated the Exchange Offer within 120 days of the Issue Date, then the Issuers will file the Shelf Registration Statement with the Commission on or prior to the 121st day after the Issue Date. The Issuers shall use their best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended until the second anniversary of the effective date of the Shelf Registration Statement or such shorter period that will terminate when all the Transfer Restricted Notes covered by the Shelf Registration Statement have been sold pursuant thereto. If (i) the Issuers fail to file any of the registration statements required by the Registration Rights Agreement on or before the date specified for such filing, (ii) any of such registration statements are not 94 declared effective by the Commission on or prior to the date specified for such effectiveness (the "Effectiveness Target Date"), subject to certain limited exceptions, (iii) the Issuers fail to consummate the Exchange Offer within 30 days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement, or (iv) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter, subject to certain limited exceptions, ceases to be effective or usable in connection with the Exchange Offer or resales of Transfer Restricted Notes, as the case may be, during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (i) through (iv) above, a "Registration Default"), then the Issuers will pay liquidated damages ("Liquidated Damages") in cash to each holder of Transfer Restricted Notes, with respect to the first 90-day period (or portion thereof) while a Registration Default is continuing immediately following the occurrence of such Registration Default in an amount equal to 0.25% per annum of the principal amount of the Series A Notes. The amount of Liquidated Damages will increase by an additional 0.25% per annum of the principal amount of the Series A Notes for each subsequent 90-day period (or portion thereof) while a Registration Default is continuing until all Registration Defaults have been cured, up to a maximum amount of 1.00% of the principal amount of the Series A Notes. Following the cure of a particular Registration Default, the accrual of Liquidated Damages with respect to such Registration Default will cease. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of which will be made available to prospective participants in the Exchange Offer upon request to the Company. 95 BOOK-ENTRY; DELIVERY AND FORM The Exchange Notes will be represented by a single, permanent global note in definitive, fully registered book-entry form (the "Global Security") which will be registered in the name of a nominee of DTC and deposited on behalf of holders of the Exchange Notes represented thereby with a custodian for DTC for credit to the respective accounts of the purchasers (or to such other accounts as they may direct) at DTC. Holders of Exchange Notes who elect to take physical delivery of their certificates instead of holding their interest through the Global Security (and which are thus ineligible to trade through DTC) (collectively referred to herein as the "Non-Global Purchasers") will be issued in registered form ("Certificated Securities"). Upon the transfer of any Certificated Security, such Certificated Security will, unless the transferee requests otherwise or the Global Security has previously been exchanged in whole for Certificated Securities, be exchanged for an interest in the Global Security upon delivery of appropriate certifications to the Trustee. THE GLOBAL SECURITY. The Company expects that pursuant to procedures established by DTC (a) upon deposit of the Global Security, DTC or its custodian will credit on its internal system portions of the Global Security which shall be comprised of the corresponding respective amount of the Global Security to the respective accounts of persons who have accounts with such depositary and (b) ownership of the Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC or its nominee (with respect to interests of Participants (as defined below) and the records of Participants (with respect to interests of persons other than Participants). Ownership of beneficial interests in the Global Security will be limited to persons who have accounts with DTC ("Participants") or persons who hold interests through Participants. Holders of Exchange Notes may hold their interests in the Global Security directly through DTC if they are Participants in such system, or indirectly through organizations which are Participants in such system. So long as DTC or its nominee is the registered owner or holder of any of the Exchange Notes, DTC or such nominee will be considered the sole owner or holder of such Exchange Notes represented by such Global Security for all purposes under the Indenture and under the Exchange Notes represented thereby. No beneficial owner of an interest in the Global Security will be able to transfer such interest except in accordance with the applicable procedures of DTC in addition to those provided for under the Indenture. Payments of the principal of or premium and interest (including Liquidated Damages) on the Exchange Notes represented by the Global Security will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of the Company, the Trustee or any paying agent under the Indenture will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company expects that DTC or its nominee, upon receipt of any payment of the principal of or premium and interest (including Liquidated Damages) on the Exchange Notes represented by the Global Security, will credit Participants' accounts with payments in amounts proportionate to their respective beneficial interests in the Global Security as shown on the records of DTC or its nominee. The Company also expects that payments by Participants to owners of beneficial interests in the Global Security held through such Participants will be governed by standing instructions and customary practice as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payment will be the responsibility of such Participants. Transfers between Participants in DTC will be effected in accordance with DTC rules and will be settled in immediately available funds. If a holder requires physical delivery of a Certificated Security for any reason, including to sell Notes to persons in states which require physical delivery of such securities or 96 to pledge such securities, such holder must transfer its interest in the Global Security in accordance with the normal procedures of DTC and in accordance with the procedures set forth in the Indenture. DTC has advised the Company that DTC will take any action permitted to be taken by a holder of Exchange Notes (including the presentation of Exchange Notes for exchange as described below) only at the direction of one or more Participants to whose account the DTC interests in the Global Security are credited and only in respect of the aggregate principal amount as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the Indenture, DTC will exchange the Global Security for Certificated Securities, which it will distribute to its Participants. DTC has advised the Company as follows: 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 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 for its Participants and facilitate the clearance and settlement of securities transactions between Participants through electronic book-entry changes in accounts of its Participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("Indirect Participants"). Although DTC is expected to follow the foregoing procedures in order to facilitate transfers of interests in the Global Security among Participants of DTC, DTC is under no obligation to perform such procedures, and such procedures may be discontinued at any time. None of the Company, the Trustee or the Paying Agent will have any responsibility for the performance by DTC or its direct or indirect Participants of their respective obligations under the rules and procedures governing their operations. CERTIFICATED SECURITIES. Interests in the Global Security will be exchanged for Certificated Securities if (i) DTC is at any time unwilling or unable to continue as depositary for the Global Security, or DTC ceases to be a "Clearing Agency" registered under the Exchange Act, and a successor depositary is not appointed by the Company within 90 days or (ii) an Event of Default has occurred and is continuing with respect to the Exchange Notes. Upon the occurrence of any of the events described in the preceding sentence, the Company will cause the appropriate Certificated Securities to be delivered to the record holders thereof. 97 PLAN OF DISTRIBUTION Each Participating 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 such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Series A Notes where such Series A Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale and Participating Broker-Dealers shall be authorized to deliver this Prospectus in connection with the sale or transfer of the Exchange Notes. In addition, until , 1998 (90 days after the date of this Prospectus), all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sales of the Exchange Notes by Participating Broker-Dealers. Exchange Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time, in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer that resells the Exchange Notes that were received by it for its own account pursuant to the Exchange Offer. Any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such 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 Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company will promptly send additional copies of this Prospectus and any amendment or supplement of this Prospectus to any Participating Broker-Dealer that requests such documents in the Letter of Transmittal. See "The Exchange Offer." LEGAL MATTERS Certain legal matters with respect to the legality of the issuance of the Exchange Notes offered hereby will be passed upon for the Company by Oppenheimer Wolff & Donnelly LLP, Minneapolis, Minnesota. Richard G. Lareau, a partner of Oppenheimer Wolff & Donnelly LLP, serves on the Board of Directors of the Company. EXPERTS The consolidated financial statements of the Company and subsidiaries for each of the three years in the period ended January 3, 1998, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 98 NASH-FINCH COMPANY INDEX TO CONSOLIDATED AND UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- CONSOLIDATED FINANCIAL STATEMENTS: Report of Independent Auditors............................................ F-2 Consolidated Statements of Earnings/Loss for the Three Years Ended January 3, 1998................................................................. F-3 Consolidated Balance Sheets as of January 3, 1998 and December 28, 1996... F-4 Consolidated Statements of Cash Flows for the Three Years Ended January 3, 1998.................................................................... F-6 Consolidated Statements of Stockholders' Equity for the Three Years Ended January 3, 1998......................................................... F-7 Notes to Consolidated Financial Statements................................ F-8 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: Condensed Consolidated Statements of Earnings (Loss) for the Twelve Weeks Ended March 28, 1998 and March 22, 1997................................. F-27 Condensed Consolidated Balance Sheets as of March 28, 1998 and March 22, 1997.................................................................... F-28 Condensed Consolidated Statements of Cash Flows for the Twelve Weeks Ended March 28, 1998 and March 22, 1997....................................... F-29 Condensed Consolidated Statements of Stockholders' Equity for the Twelve Weeks Ended March 28, 1998 and March 22, 1997........................... F-30 Notes to Condensed Consolidated Financial Statements...................... F-31
F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Nash Finch Company: We have audited the accompanying consolidated balance sheets of Nash Finch Company and subsidiaries as of January 3, 1998 and December 28, 1996, and the related consolidated statements of earnings/loss, stockholders' equity, and cash flows for each of the three years in the period ended January 3, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nash Finch Company and subsidiaries at January 3, 1998 and December 28, 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 3, 1998, in conformity with generally accepted accounting principles. [LOGO] Minneapolis, Minnesota March 26, 1998 F-2 NASH FINCH COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS/LOSS FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30, 1995. (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997 1996 1995 53 WEEKS 52 WEEKS 52 WEEKS ------------ ------------ ------------ INCOME: Net sales............................................................. $ 4,319,095 3,322,666 2,831,114 Other revenues........................................................ 72,507 52,819 57,722 ------------ ------------ ------------ Total revenues...................................................... 4,391,602 3,375,485 2,888,836 COST AND EXPENSES: Cost of sales......................................................... 3,826,377 2,932,709 2,469,841 Selling, general and administrative, and other operating expenses..... 453,645 359,456 350,201 Special charges....................................................... 31,272 -- -- Depreciation and amortization......................................... 47,697 34,759 29,406 Interest expense...................................................... 32,845 14,894 10,793 ------------ ------------ ------------ Total costs and expenses............................................ 4,391,836 3,341,818 2,860,241 Earnings (loss) before income taxes................................. (234) 33,667 28,595 Income taxes............................................................ 994 13,635 11,181 ------------ ------------ ------------ Net earnings (loss)..................................................... $ (1,228) 20,032 17,414 ------------ ------------ ------------ Basic earnings (loss) per share......................................... $ (0.11) 1.83 1.60 ------------ ------------ ------------ Diluted earnings (loss) per share....................................... $ (0.11) 1.81 1.60 ------------ ------------ ------------
See accompanying notes to consolidated financial statements. F-3 NASH FINCH COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JANUARY 3, 1998 AND DECEMBER 28, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997 1996 --------- -------- ASSETS CURRENT ASSETS: Cash...................................................... $ 933 921 Accounts and notes receivable, net........................ 173,962 206,062 Inventories............................................... 287,801 293,458 Prepaid expenses.......................................... 22,582 20,492 Deferred tax assets....................................... 9,072 4,663 --------- -------- Total current assets.................................... 494,350 525,596 Investments in affiliates................................... 7,679 10,300 Notes receivable, noncurrent................................ 23,092 21,652 PROPERTY, PLANT AND EQUIPMENT: Land...................................................... 31,229 33,753 Buildings and improvements................................ 137,070 148,227 Furniture, fixtures and equipment......................... 306,762 295,147 Leasehold improvements.................................... 60,578 54,925 Construction in progress.................................. 28,485 7,543 Assets under capitalized leases........................... 25,048 26,105 --------- -------- 589,172 565,700 Less accumulated depreciation and amortization............ (312,939) (293,845) --------- -------- Net property, plant and equipment....................... 276,233 271,855 Intangible assets, net...................................... 70,732 80,312 Investment in direct financing leases....................... 19,094 22,011 Deferred tax asset, net..................................... 2,622 4,076 Other assets................................................ 11,081 9,675 --------- -------- Total assets............................................ $ 904,883 945,477 --------- -------- --------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Outstanding checks........................................ $ 36,271 32,492 Short-term debt payable to banks.......................... 11,300 16,171 Current maturities of long-term debt and capitalized lease obligations............................................. 7,964 7,795 Accounts payable.......................................... 177,548 183,501 Accrued expenses.......................................... 60,599 54,130 Income taxes.............................................. 737 2,999 --------- -------- Total current liabilities............................... 294,419 297,088 Long-term debt.............................................. 325,489 361,819 Capitalized lease obligations............................... 38,517 41,832 Deferred compensation....................................... 6,768 7,476 Other....................................................... 14,072 4,401 STOCKHOLDERS' EQUITY: Preferred stock--no par value Authorized 500 shares; none issued...................... -- -- Common stock of $1.66 2/3 par value Authorized 25,000 shares; issued shares (1997--11,575; 1996--11,574).......................................... 19,292 19,290 Additional paid-in capital................................ 17,648 16,816 Foreign currency translation adjustment--net of a $633 deferred tax benefit.................................... -- (950) Restricted stock.......................................... (391) (500) Retained earnings......................................... 190,984 200,322 --------- -------- 227,533 234,978 Less cost of 252 shares and 307 shares of common stock in treasury, respectively.................................... (1,915) (2,117) --------- -------- Total stockholders' equity.............................. 225,618 232,861 --------- -------- Total liabilities and stockholders' equity.............. $ 904,883 945,477 --------- -------- --------- --------
See accompanying notes to consolidated financial statements. F-4 NASH FINCH COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30, 1995. (IN THOUSANDS)
1997 1996 1995 -------- -------- ------- OPERATING ACTIVITIES: Net earnings (loss)............................... $ (1,228) 20,032 17,414 Adjustments to reconcile net earnings to net cash provided by operating activities: Special charges................................. 28,749 -- -- Depreciation and amortization................... 47,697 34,759 29,406 Provision for bad debts......................... 5,055 1,893 3,997 Provision for (recovery from) losses on closed lease locations................................ 1,722 (458) 1,361 Deferred income taxes........................... (2,955) (2,278) (4,187) Deferred compensation........................... (708) (149) (901) Loss of equity investments...................... 469 616 (501) Other........................................... 2,003 326 (157) Changes in operating assets and liabilities: Accounts and notes receivable................... (3,744) (12,544) 8,115 Inventories..................................... 19,821 14,021 14,680 Prepaid expenses................................ (1,201) (349) (3,441) Accounts payable and outstanding checks......... (3,174) (24,245) 15,339 Accrued expenses................................ (2,512) 2,219 2,160 Income taxes.................................... (2,262) (967) 2,508 -------- -------- ------- Net cash provided by operating activities..... 87,732 32,876 85,793 -------- -------- ------- INVESTING ACTIVITIES: Dividends received.............................. 1,600 -- 890 Disposals of property, plant and equipment, net............................................ 16,721 9,169 14,858 Additions to property, plant and equipment, excluding capital leases....................... (67,725) (51,333) (33,264) Businesses acquired, net of cash acquired....... (17,863) (257,868) -- Investment in an affiliate...................... -- (2,500) (1,379) Loans to customers.............................. (18,816) (4,997) (9,199) Payments from customers on loans................ 14,080 4,713 8,788 Sale of receivables............................. 37,000 3,402 13,744 Other........................................... (739) (2,896) (137) -------- -------- ------- Net cash used in investing activities......... (35,742) (302,310) (5,699) -------- -------- ------- FINANCING ACTIVITIES: Proceeds from long-term debt.................... -- 30,000 352 (Payments) proceeds from revolving debt......... (30,000) 244,000 -- Dividends paid.................................. (8,110) (8,288) (8,048) Payments of short-term debt..................... (4,871) 1,171 (41,400) Payments of long-term debt...................... (6,009) (21,946) (5,568) Payments of capitalized lease obligations....... (3,467) (717) (540) Other........................................... 479 111 56 -------- -------- ------- Net cash (used in) provided by financing activities................................... (51,978) 244,331 (55,148) -------- -------- ------- Net increase (decrease) cash.................. $ 12 (25,103) 24,946 -------- -------- ------- -------- -------- -------
See accompanying notes to consolidated financial statements. F-5 NASH FINCH COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FISCAL YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30, 1995. (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOREIGN COMMON STOCK ADDITIONAL CURRENCY TREASURY STOCK TOTAL --------------- PAID-IN RETAINED TRANSLATION RESTRICTED ---------------- STOCKHOLDERS' SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT STOCK SHARES AMOUNT EQUITY ------ ------- ---------- -------- ---------- ---------- ------ ------- ------------- BALANCE AT DECEMBER 31, 1994... 11,224 $18,706 11,977 179,212 (572) -- (349) $(3,054) 206,269 Net earnings................... -- -- -- 17,414 -- -- -- -- 17,414 Dividend declared of $.74 per share........................ -- -- -- (8,048) -- -- -- -- (8,048) Treasury stock issued upon exercise of options.......... -- -- 36 -- -- -- 3 20 56 Foreign currency translation adjustment--net of a $252 deferred tax benefit......... -- -- -- -- (378) -- -- -- (378) ------ ------- ---------- -------- --- --- ------ ------- ------------- BALANCE AT DECEMBER 30, 1995... 11,224 18,706 12,013 188,578 (950) -- (346) (3,034 ) 215,313 Net earnings................... -- -- -- 20,032 -- -- -- -- 20,032 Dividend declared of $.75 per share........................ -- -- -- (8,288) -- -- -- -- (8,288) Shares issued in connection with acquisition of a business..................... 350 584 5,064 -- -- -- -- 5,648 Treasury stock issued upon exercise of options.......... -- -- 47 -- -- 6 42 89 Issuance of restricted stock... -- -- (308) -- -- (524) 40 995 163 Amortized compensation under restricted stock plan........ -- -- -- -- -- 24 -- -- 24 Treasury stock purchased....... -- -- -- -- -- -- (7) (120 ) (120) ------ ------- ---------- -------- --- --- ------ ------- ------------- BALANCE AT DECEMBER 28, 1996... 11,574 19,290 16,816 200,322 (950) (500) (307) (2,117 ) 232,861 Net earnings (loss)............ -- -- -- (1,228) -- -- -- -- (1,228) Dividend declared of $.72 per share........................ -- -- -- (8,110) -- -- -- -- (8,110) Treasury stock issued upon exercise of options.......... -- -- 354 -- -- -- 29 143 497 Amortized compensation under restricted stock plan........ -- -- -- -- -- 29 -- -- 29 Repayment of notes receivable from holders of restricted stock........................ -- -- -- -- -- 80 -- -- 80 Distribution of stock pursuant to performance awards........ -- -- 460 -- -- -- 30 148 608 Treasury stock purchased....... -- -- -- -- -- -- (4) (89 ) (89) Foreign currency translation adjustment................... -- -- -- -- 950 -- -- -- 950 Other.......................... 1 2 18 -- -- -- -- -- 20 ------ ------- ---------- -------- --- --- ------ ------- ------------- BALANCE AT JANUARY 3, 1998..... 11,575 $19,292 17,648 190,984 -- (391) (252) $(1,915) 225,618 ------ ------- ---------- -------- --- --- ------ ------- ------------- ------ ------- ---------- -------- --- --- ------ ------- -------------
See accompanying notes to consolidated financial statements. F-6 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) ACCOUNTING POLICIES FISCAL YEAR Nash Finch Company's fiscal year ends on the Saturday nearest to December 31. Fiscal year 1997 consisted of 53 weeks, while 1996 and 1995 consisted of 52 weeks. PRINCIPLES OF CONSOLIDATION The accompanying financial statements include the accounts of Nash Finch Company (the Company), its majority-owned subsidiaries and the Company's share of net earnings or losses of 50% or less owned companies. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements. Certain reclassifications were made to prior year amounts to conform with 1997 presentation. CASH AND CASH EQUIVALENTS In the accompanying financial statements, and for purposes of the statements of cash flows, cash and cash equivalents include cash on hand and short-term investments with original maturities of three months or less. INVENTORIES Inventories are stated at the lower of cost or market. At both January 3, 1998 and December 28, 1996, approximately 85% of the Company's inventories are valued on the last-in, first-out (LIFO) method. During fiscal 1997, the Company recorded a LIFO charge of $1.5 million compared to $1.6 million in 1996. The remaining inventories are valued on the first-in, first-out (FIFO) method. If the FIFO method of accounting for inventories had been used, inventories would have been $43.1 million and $41.6 million higher at January 3, 1998 and December 28, 1996, respectively. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Assets under capitalized leases are recorded at the present value of future lease payments or fair market value, whichever is lower. Expenditures which improve or extend the life of the respective assets are capitalized while maintenance and repairs are expensed as incurred. IMPAIRMENT OF LONG-LIVED ASSETS An impairment loss is recognized whenever events or changes in circumstances indicate that the carrying amount of an asset is not recoverable. In applying Statement of Financial Accounting Standards ("SFAS") No. 121, assets are grouped and evaluated at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company has generally identified this lowest level to be individual stores; however, there are limited circumstances where, for evaluation purposes, stores are considered with the distribution center they support. The Company considers historical performance and future estimated results in its evaluation of potential impairment. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of the impairment by comparing the carrying amount of the asset to its fair value, generally measured by discounting expected future cash flows at the rate the Company utilizes to evaluate potential investments. F-7 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (1) ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS Intangible assets consist primarily of covenants not to compete and goodwill, and are carried at cost less accumulated amortization. Costs are amortized over the estimated useful lives of the related assets ranging from 2-25 years. Amortization expense charged to operations for fiscal years ended January 3, 1998, December 28, 1996, and December 30, 1995 was $5.9 million, $5.2 million and $1.8 million, respectively. The accumulated amortization of intangible assets was $13.5 million and $10.1 million at January 3, 1998 and December 28, 1996, respectively. The carrying value of intangible assets is reviewed for impairment annually and/or when factors indicating impairment are present using an undiscounted cash flow assumption. DEPRECIATION AND AMORTIZATION Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets which generally range from 10-40 years for buildings and improvements and 3 to 10 years for furniture, fixtures and equipment. Leasehold improvements and capitalized leases are amortized to expense on a straight-line basis over the term of the lease. ADVERTISING Advertising costs included in selling, general and administrative, and other operating expenses, are expensed as incurred and were $5.0 million, $5.9 million and $8.5 million in 1997, 1996 and 1995, respectively. INCOME TAXES Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, EARNINGS PER SHARE. SFAS No. 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, contingent, and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where necessary, restated to conform to the SFAS No. 128 requirements. STOCK OPTION PLANS In accordance with the provisions of SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company has chosen to continue to apply Accounting Principles Board Opinion No. 25, (APB 25) ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES and related interpretations in accounting for its stock option plans, and, accordingly, does not recognize compensation costs, if the option price equals or exceeds market price at date of grant. Note (7) of Notes to Consolidated Financial Statements contains a summary F-8 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (1) ACCOUNTING POLICIES (CONTINUED) of the pro forma effects to reported net income and earnings per share had the Company elected to recognize compensation costs as encouraged by SFAS No. 123. FOREIGN CURRENCY TRANSLATION Adjustments resulting from the translation of assets and liabilities of a foreign investment are included in stockholders' equity. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. NEW ACCOUNTING STANDARDS In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME and SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 130 establishes standards for the reporting and presentation of comprehensive income and its components. SFAS No. 131 establishes standards for defining operating segments and the reporting of certain information regarding operating segments. Because these statements only impact how financial information is disclosed in interim and annual reports, the adoption will have no impact to the Company's financial condition or results of operations. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE. The SOP is effective for the Company beginning on January 1, 1999, however, early adoption is permitted. The SOP will require the capitalization of certain costs incurred after the date of adoption in connection with developing or obtaining software for internal use. Some, but not all, of the costs that are required to be capitalized by the SOP are currently being expensed by the Company. The Company has not yet assessed what the impact of the SOP will be on the Company's future earnings or financial position. (2) ACQUISITIONS The following acquisitions have been accounted for by the purchase method of accounting and accordingly, the operating results of the newly acquired businesses have been included in the consolidated operating results of the Company since their respective dates of acquisition. On June 9, 1997, the Company acquired the business and certain assets from United-A.G., a cooperative wholesale grocery distributor located in Omaha, for approximately $17.9 million in cash. Real estate which was not included in the purchase price, is being leased under a five-year agreement from a third party. This operating lease contains an option to purchase the property at fair market value, or a renewal option for an additional five years at the end of the initial lease term. In addition, the Company has guaranteed a residual value for the leased real estate. United-A.G., with pre-acquisition annual revenues of approximately $200 million, served stores in Nebraska, Kansas, Iowa, Colorado and South Dakota. F-9 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) ACQUISITIONS (CONTINUED) On November 7, 1996, the Company completed a tender offer to purchase the outstanding shares of common stock of Super Food for $15.50 per share in cash, with 10.6 million shares tendered at that date, representing approximately 96 percent of the outstanding common stock of Super Food. Super Food is a wholesale grocery distributor based in Dayton, Ohio with annual revenues of approximately $1.2 billion. The fair value of the assets acquired, including goodwill, was $321.9 million, and liabilities assumed totaled $150.0 million. Goodwill of $29.8 million and other intangibles of $7.1 million are being amortized over 25 years on a straight line basis. On August 5, 1996, the Company acquired all of the outstanding stock of T. J. Morris, a full line food wholesaler located in Statesboro, Georgia, with annual revenues of $110.0 million. In exchange for the T. J. Morris stock, the Company issued 350,764 shares of its common stock, valued at approximately $5.7 million, of which 25,002 shares are held in escrow at January 3, 1998. Such shares were issued January 8, 1998. The excess of purchase price over fair value of the assets acquired resulted in goodwill of approximately $3.1 million which is being amortized on a straight line basis over a 15-year period. On January 2, 1996, the Company acquired substantially all of the business and assets of MDV located in Norfolk, Virginia for approximately $56.0 million in cash and the assumption of certain liabilities totaling approximately $54.0 million. MDV, with revenues of approximately $350.0 million, is a major distributor of grocery products to military commissaries in the eastern United States and Europe. The purchase price exceeded the fair value of the net assets acquired by approximately $43 million. The resulting goodwill is being amortized on a straight line basis over 15 years. The following summary, prepared on a pro forma basis, combines the consolidated results of operations as if the above operations had been acquired as of the beginning of the periods presented, after including the impact of certain adjustments such as amortization of intangibles, increased interest expense on acquisition debt and related income tax effects: PRO FORMA INFORMATION (UNAUDITED)
1997 1996 1995 ---------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net revenues................................. $4,499,543 4,713,664 4,589,362 Earnings (loss) before income taxes.......... (36) 23,790 32,291 Net income (loss)............................ (247) 14,120 19,060 Basic earnings (loss) per share.............. $ (.02) 1.28 1.70 ---------- --------- --------- ---------- --------- ---------
The pro forma information is provided for informational purposes only. It is based on historical information and does not necessarily reflect results that would have occurred had the acquisitions been made as of those dates or results which may occur in the future. (3) SPECIAL CHARGES During the third quarter of 1997, the Company recorded special charges totaling $31.3 million consisting of $12.6 million in asset writedowns and $6.5 million and $9.7 million classified as accrued expenses and other noncurrent liabilities, respectively. F-10 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (3) SPECIAL CHARGES (CONTINUED) The aggregate special charges include $14.5 million for the consolidation of selected warehouses. This charge contains provisions for non-cancelable lease obligations, expected losses on disposals of tangible assets, and other continuing occupancy costs. Also included are employee severance costs consistent with existing practices and the unamortized portion of goodwill for one of the locations. Also, related to wholesale operations, the special charges include $2.5 million of integration costs, incurred in the third quarter, associated with the acquisition of the business and certain assets from United-A.G. In retail operations, the special charges relate to the closing or consolidation of fourteen, primarily leased stores. The special charges include a $5.2 million provision for continuing non-cancelable lease obligations, anticipated losses on disposals of tangible assets, abandonment of certain leaseholds and the write-off of intangibles. The time frame for individual store closings will vary but should be completed by the first quarter of fiscal 1999. For 1997, the retail units included in the provision had aggregate sales and pretax losses of $82.9 million and $2.7 million, respectively, compared with $88.3 million and $1.8 million for 1996. The aggregate special charges contain a provision of $5.4 million for asset impairment of seven retail stores. Declining market share due to increasing competition, deterioration of operating performance in the third quarter, and forecasted future results that were less than previously planned were the factors leading to the impairment determination. The impaired assets covered by the charge primarily include real estate, leasehold improvements and, to a lesser extent, goodwill related to two of the stores. An asset impairment charge of $1.0 million relating to agricultural assets was also recorded against several farming operations of Nash DeCamp, the Company's produce marketing subsidiary. The impairment determination was based on recent downturns in the market for certain varieties of fruit. The impairment resulted from anticipated future operating losses and insufficient projected cash flows from agricultural production of these products. Other special charges aggregating $2.8 million consist primarily of $.9 million related to the abandonment of current system software which is being replaced by the Company's HORIZONS project, and a loss of $.6 million realized on the sale of the Company's 22.4% equity investment in Alfa Trading Company, a Hungarian food wholesaler. The remaining special charges relate principally to the write down of idle real estate held for sale to current market values. During the fourth quarter of 1997, rents totaling $198,000 were charged to reserves established as a result of the special charges recorded in the third quarter. Reserves related to the closing or consolidation of wholesale and retail operations in the amount of $6.3 million and $9.7 million are included in accrued expense and other liabilities, respectively, on the balance sheet at January 3, 1998. F-11 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (4) ACCOUNTS AND NOTES RECEIVABLE Accounts and notes receivable at the end of fiscal years 1997 and 1996 are comprised of the following components (in thousands):
1997 1996 -------- ------- Customer notes receivable--current portion.................... $ 9,256 8,090 Customer accounts receivable.................................. 157,737 197,336 Other receivables............................................. 26,970 21,158 Allowance for doubtful accounts............................... (20,001) (20,522) -------- ------- Net current accounts and notes receivable..................... $173,962 206,062 -------- ------- -------- ------- Noncurrent customer notes receivable.......................... 29,759 29,223 Allowance for doubtful accounts............................... (6,667) (7,571) -------- ------- Net noncurrent notes receivable............................... $ 23,092 21,652 -------- ------- -------- -------
Operating results include bad debt expense totaling $5.1 million, $1.9 million and $4.0 million during fiscal years 1997, 1996 and 1995, respectively. On January 1, 1997, the Company adopted the requirements of SFAS No. 125, ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCED ASSETS AND EXTINGUISHMENTS OF LIABILITIES. SFAS No. 125 establishes accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities based on the application of a financial components approach which focuses on control of the assets and extinguishments of liabilities that exist after the transfer. The implementation of SFAS No. 125 did not have a material effect on the Company's 1997 consolidated financial statements. On December 29, 1997, a Receivables Purchase Agreement (the "Agreement") was executed by the Company, Nash Finch Funding Corporation (NFFC), a wholly-owned subsidiary of the Company, and a certain third party purchaser (the "Purchaser") pursuant to a securitization transaction. On this date the Company sold $44.6 million of accounts receivable on a non-recourse basis to NFFC. NFFC sold $37.0 million of its undivided interest in such receivables to the Purchaser, subject to specified collateral requirements. NFFC maintains a variable undivided interest in these receivables and is subject to losses on its share of the receivables and, accordingly, maintains an allowance for doubtful accounts. In applying the provisions of SFAS No. 125, no gain or loss resulted on the transaction. The Agreement is a five-year $50 million revolving receivable purchase facility allowing the Company to sell additional receivables to NFFC, and NFFC to sell, from time to time, variable undivided interests in these receivables to the Purchaser. In 1995, the Company entered into an agreement with a financial institution which allowed the Company to sell on a revolving basis customer notes receivable. Although the agreement lapsed on December 28, 1996, the notes, which have maturities through the year 2002, were sold at face value with recourse. As a result, the Company continues to be responsible for collection of the notes and remits the principal plus a floating rate of interest to the purchaser on a monthly basis. Proceeds from the sale of the notes receivable were used to fund working capital requirements. The remaining balances of such sold notes receivable totaled $9.1 million and $14.0 million at January 3, 1998 and December 28, 1996, respectively. The Company is contingently liable should these notes become uncollectible. F-12 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (4) ACCOUNTS AND NOTES RECEIVABLE (CONTINUED) Substantially all notes receivable are based on floating interest rates which adjust to changes in market rates. As a result, the carrying value of notes receivable approximates market value. (5) LONG-TERM DEBT AND CREDIT FACILITIES Long-term debt at the end of the fiscal years 1997 and 1996 is summarized as follows (in thousands):
1997 1996 -------- -------- Variable rate--revolving credit agreement.................... $214,000 244,000 Industrial development bonds, 5.4% to 7.8% due in various installments through 2009.................................. 4,370 4,885 Term loans, 7.5% to 9.9% due in various installments through 2008....................................................... 107,528 112,250 Notes payable and mortgage notes, 9.3% to 12.0% due in various installments through 2003.......................... 5,975 6,747 -------- -------- $331,873 367,882 Less current maturities...................................... 6,384 6,063 -------- -------- $325,489 361,819 -------- -------- -------- --------
During 1997, the Company entered into four swap agreements, with separate financial institutions. The agreements which are based on a notional amount of $30.0 million each, call for an exchange of interest payments with the Company receiving payments based on a London Interbank Offered Rate (LIBOR) floating rate and making payments based on a fixed rate, ranging from 6.21% to 6.54%, without an exchange of the notional amount upon which the payments are based. The differential to be paid or received from counter-parties as interest rates change is included in other liabilities or assets, with the corresponding amount accrued and recognized as an adjustment of interest expense related to the debt. The Company is exposed to credit loss in the event of non-performance by counter-parties to these financial instruments, but it does not expect any counter-party to fail to meet its obligations. The amount of such credit exposure is generally the unrealized gains in such contracts. To manage credit risks, the Company selects counter-parties based on credit ratings, limits exposure to a single counter-party and monitors the market position with each counter-party. The fair values of the swap agreements are not material and have not been recognized in the financial statements at January 3, 1998. Gains and losses on terminations of interest rate swap agreements are deferred as an adjustment to the carrying amount of the outstanding debt and amortized as an adjustment to the interest expense related to the debt over the remaining term of the original contract life of the terminated swap agreement. In the event of the early extinguishment of a designated debt obligation, any realized or unrealized gain or loss from the swap would be recognized in income coincident with the extinguishment. Any swap agreements that are not designated with outstanding debt are recorded as an asset or liability at fair value, with changes in fair value recorded in other income or expense. On October 8, 1996, the Company entered into a $500 million senior unsecured revolving credit facility (the "Revolving Credit Facility") with two lead banks. The agreement calls for a scheduled reduction of the facility within two years, to $400 million, with the remaining balance maturing five years from closing. During 1997, the Company exercised its right to reduce the Revolving Credit Facility to F-13 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (5) LONG-TERM DEBT AND CREDIT FACILITIES (CONTINUED) $360 million. Borrowings under this agreement bear interest at variable rates equal to LIBOR plus .30%. In addition, the Company pays commitment fees of .175% on the entire facility both used and unused. The average borrowing rate during the period was 6.0%. The Revolving Credit Facility contains covenants which, among other matters, limits the Company's ability to incur indebtedness, buy and sell assets, and requires compliance to predetermined ratios related to net worth, debt to equity and interest coverage. At January 3, 1998, land, buildings and other assets pledged to secure outstanding mortgage notes and obligations under industrial development bond issues have a depreciated cost of approximately $4.8 million and $4.3 million, respectively. Aggregate annual maturities of long-term debt for the five fiscal years after January 3, 1998 are as follows (in thousands): 1998................................................................... $ 6,384 1999................................................................... 1,844 2000................................................................... 33,576 2001................................................................... 240,394 2002 and thereafter.................................................... $ 49,675
Interest paid was $31.6 million, $14.3 million and $11.4 million, for the fiscal years 1997, 1996 and 1995, respectively. In addition, the Company maintains informal lines of credit at various banks. At January 3, 1998, unused uncommitted lines of credit amounted to $13.7 million. Based on borrowing rates currently available to the Company for long-term financing with similar terms and average maturities, the fair value of long-term debt, including current maturities, utilizing discounted cash flows is $340.3 million. (6) INCOME TAXES Income tax expense for fiscal years 1997, 1996 and 1995 is made up of the following components (in thousands):
1997 1996 1995 ------- ------ ------ Current: Federal............................................... $ 3,293 12,125 12,244 State................................................. 692 2,354 2,872 Deferred: Federal............................................... (2,644) (576) (3,145) State................................................. (347) (268) (790) ------- ------ ------ Total............................................... $ 994 13,635 11,181 ------- ------ ------ ------- ------ ------
F-14 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (6) INCOME TAXES (CONTINUED) Total income tax expense represents effective tax rates of 425.4%, 40.5% and 39.1% for the fiscal years 1997, 1996 and 1995, respectively. The reasons for differences compared with the U.S. federal statutory tax rate (expressed as a percentage of pretax income) are as follows:
1997 1996 1995 ------- ---- ---- Federal statutory tax rate.................................. (35.0)% 35.0% 35.0% Items affecting federal income tax rate: State taxes, net of federal income tax benefit.............. 96.0 4.3 4.9 Foreign equity earnings..................................... (27.6) -- -- Dividends received deduction on domestic stock of under 80% owned companies........................................... (191.7) -- -- Non-deductible goodwill..................................... 700.1 .2 -- Non-deductible meals and entertainment...................... 94.6 .6 .8 Adjustment to valuation allowance and other income tax accruals.................................................. (198.0) .4 (.6) Other net................................................... (13.0) -- (1.0) ------- ---- ---- Effective tax rate........................................ 425.4% 40.5% 39.1% ------- ---- ---- ------- ---- ----
Income taxes paid were $8.9 million, $12.4 million and $10.8 million during fiscal years 1997, 1996 and 1995, respectively. F-15 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (6) INCOME TAXES (CONTINUED) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at January 3, 1998, December 28, 1996, and December 30, 1995, are presented below (in thousands):
1997 1996 1995 ------- ------ ------ Deferred tax assets: Accounts and notes receivable, principally due to allowance for doubtful accounts....................... $ 5,891 7,625 1,964 Inventories, principally due to additional costs inventoried for tax purposes pursuant to the Tax Reform Act of 1986.................................... 3,405 2,956 1,654 Health care claims, principally due to accrual for financial reporting purposes.......................... 2,668 2,991 1,073 Deferred compensation, principally due to accrual for financial reporting purposes.......................... 2,546 2,376 3,173 Compensated absences, principally due to accrual for financial reporting purposes.......................... 3,086 2,286 1,379 Compensation and casualty loss, principally due to accrual for financial reporting purposes.............. 1,780 1,959 2,135 Purchased intangibles................................... -- -- 1,958 Closed locations........................................ 10,612 3,126 1,110 Other................................................... 731 2,236 1,193 ------- ------ ------ Total gross deferred tax assets......................... 30,719 25,555 15,639 Less valuation allowance................................ -- -- -- ------- ------ ------ Net deferred tax assets............................... 30,719 25,555 15,639 ------- ------ ------ Deferred tax liabilities: Purchased intangibles................................... 231 1,055 -- Plant and equipment, principally due to differences in depreciation.......................................... 9,704 6,511 5,978 Inventories, principally due to differences in LIFO basis................................................. 7,686 7,230 2,070 Other................................................... 1,404 2,020 1,082 ------- ------ ------ Total gross deferred tax liabilities.................... 19,025 16,816 9,130 ------- ------ ------ Net deferred tax asset................................ $11,694 8,739 6,509 ------- ------ ------ ------- ------ ------
Since it is more likely than not that the deferred tax asset of $30,719, $25,555 and $15,639 at January 3, 1998, December 28, 1996 and December 30, 1995, respectively, will be realized through carry back to taxable income in prior years, future reversals of existing taxable temporary differences, future taxable income and tax planning strategies, the Company has determined that there is no need to establish a valuation allowance for the deferred tax asset at January 3, 1998 and December 28, 1996 as required by SFAS No. 109, ACCOUNTING FOR INCOME TAXES. F-16 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (7) STOCK RIGHTS AND OPTIONS Under the Company's 1996 Stockholder Rights Plan, one right is attached to each outstanding share of common stock. Each right entitles the holder to purchase, under certain conditions, one-half share of common stock at a price of $30.00 ($60.00 per full share). The rights are not yet exercisable and no separate rights certificates have been distributed. All rights expire on March 31, 2006. The rights become exercisable 20 days after a "flip-in event" has occurred or 10 business days (subject to extension) after a person or group makes a tender offer for 15% or more of the Company's outstanding common stock. A flip-in event would occur if a person or group acquires (1) 15% of the Company's outstanding common stock, or (2) an ownership level set by the Board of Directors at less than 15% if the person or group is deemed by the Board of Directors to have interests adverse to those of the Company and its stockholders. The rights may be redeemed by the Company at any time prior to the occurrence of a flip-in event at $.01 per right. The power to redeem may be reinstated within 20 days after a flip-in event occurs if the cause of the occurrence is removed. Upon the rights becoming exercisable, subject to certain adjustments or alternatives, each right would entitle the holder (other than the acquiring person or group, whose rights become void) to purchase a number of shares of the Company's common stock having a market value of twice the exercise price of the right. If the Company is involved in a merger or other business combination, or certain other events occur, each right would entitle the holder to purchase common shares of the acquiring company having a market value of twice the exercise price of the right. Within 30 days after the rights become exercisable following a flip-in event, the Board of Directors may exchange shares of Company common stock or cash or other property for exercisable rights. The Company follows APB 25 and related interpretations in accounting for its employee stock options. Under APB 25, when the exercise price of employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized. Under the Company's 1994 Stock Incentive Plan, as amended (the "1994 Plan"), a total of 845,296 shares were reserved for the granting of stock options, restricted stock awards and performance unit awards. Stock options are granted at not less than 100% of fair market value at date of grant and are exercisable over a term which may not exceed 10 years from date of grant. Restricted stock awards are subject to restrictions on transferability and such conditions for vesting, including continuous employment for specified periods of time, as may be determined at the date of grant. Performance unit awards are grants of rights to receive shares of stock if certain performance goals or criteria, determined at the time of grant, are achieved in accordance with the terms of the grants. Under the 1995 Director Stock Option Plan (the "Director Plan"), for which a total of 40,000 shares were reserved, annual grants of options to purchase 500 shares are made automatically to each eligible non-employee director following each annual meeting of stockholders. The stock options are granted at 100% of fair market value at date of grant, become exercisable six months following the date of grant and may be exercised over a term of five years from the date of grant. At January 3, 1998, under the 1994 Plan, options to purchase 280,380 shares of common stock of the Company at an average price of $17.23 per share and exercisable over terms of five to seven years from the dates of grant, have been granted and are outstanding. In February 1996, certain members of management exercised rights to purchase restricted stock from the Company at a 25% discount to fair market value pursuant to grants awarded in January 1996 under the terms of the 1994 Plan. The purchase required a minimum of 10% payment in cash with the remaining balance evidenced by a five-year promissory note to F-17 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (7) STOCK RIGHTS AND OPTIONS (CONTINUED) the Company. Unearned compensation equivalent to the excess of market value of the shares purchased over the price paid by the recipient at the date of grant, and the unpaid balance of the promissory note have been charged to stockholders' equity; amortization of compensation expense was not significant. At January 3, 1998, 32,832 shares of restricted stock have been issued and are outstanding. Performance unit awards having a maximum potential payout of 340,071 shares have also been granted and are outstanding. Reserved for the granting of future stock options, restricted stock awards and performance unit awards are 120,254 shares. At January 3, 1998 under the Director Plan, options to purchase 12,000 shares of common stock of the Company, at an average price of $17.47 per share and exercisable over a term of five years from the date of grant, have been granted and are outstanding. Reserved for the granting of future stock options are 26,000 shares. Changes in outstanding options during the three fiscal years ended January 3, 1998 are summarized as follows (in thousands except per share amounts):
WEIGHTED AVERAGE OPTION PRICE PER SHARES SHARE ------ ---------------- Options outstanding December 31 1994................... 291 $16.86 Exercised............................................ (3) 16.72 Forfeited............................................ (36) 16.88 Granted.............................................. 4 16.06 ------ ------ Options outstanding December 30 1995................... 256 16.85 Exercised............................................ (4) 16.77 Forfeited............................................ (45) 17.05 Granted.............................................. 142 17.72 ------ ------ Options outstanding December 28, 1996.................. 349 17.18 Exercised............................................ (29) 16.82 Forfeited............................................ (33) 17.08 Granted.............................................. 5 18.38 ------ ------ Options outstanding January 3, 1998.................... 292(a) 17.24 ------ ------ ------ ------
- ------------------------ (a) Remaining average contractual life of options outstanding at January 3, 1998 was 2.5 years. Options exercisable at: January 3, 1998...................................... 164 $17.09 December 28, 1996.................................... 147 16.95
The weighted average fair value of options granted during 1997, 1996 and 1995 are $2.62, $2.40 and $2.26, respectively. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes single option-pricing model assuming a weighted average risk-free interest rate of 6.0%, an expected dividend yield of 4.0%, expected lives of two and one-half years and volatility of 22.1%. Had compensation expense for stock options been determined based on the fair value method (instead of intrinsic value method) at the grant dates for awards, the Company's 1997 and 1996 net earnings (loss) and F-18 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (7) STOCK RIGHTS AND OPTIONS (CONTINUED) earnings (loss) per share would have been impacted by less than 1%. The effects of applying the fair value method of measuring compensation expense for 1997 is likely not representative of the effects for future years in part because the fair value method was applied only to stock options granted after December 31, 1994. (8) EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands except per share amounts):
1997 1996 1995 ------- ------ ------ Numerator: Net earnings (loss)................................... $(1,228) 20,032 17,414 ------- ------ ------ Denominator: Denominator for basic earnings per share; weighted average shares...................................... 11,270 10,947 10,875 Effect of dilutive securities: Employee stock options................................ -- 8 20 Contingent shares..................................... 46 138 -- ------- ------ ------ Dilutive common shares.................................. 46 146 20 Denominator for diluted earnings per share; adjusted weighted average shares............................... 11,316 11,093 10,895 ------- ------ ------ ------- ------ ------ Basic earnings (loss) per share......................... $ (0.11) 1.83 1.60 ------- ------ ------ ------- ------ ------ Diluted earnings (loss) per share....................... $ (0.11) 1.81 1.60 ------- ------ ------ ------- ------ ------
(9) LEASE AND OTHER COMMITMENTS A substantial portion of the store and warehouse properties of the Company are leased. The following table summarizes assets under capitalized leases (in thousands):
1997 1996 -------- ------- Buildings and improvements.................................... $ 25,048 26,105 Less accumulated amortization................................. (10,243) (10,147) -------- ------- Net assets under capitalized leases........................... $ 14,805 15,958 -------- ------- -------- -------
F-19 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (9) LEASE AND OTHER COMMITMENTS (CONTINUED) At January 3, 1998, future minimum rental payments under non-cancelable leases and subleases are as follows (in thousands):
OPERATING CAPITAL LEASES LEASES --------- -------- 1998........................................................ $ 29,877 $ 6,006 1999........................................................ 26,186 6,168 2000........................................................ 23,488 6,035 2001........................................................ 20,548 5,934 2002 and thereafter......................................... 117,400 57,161 --------- -------- Total minimum lease payments(a)............................. $ 217,499 81,304 Less imputed interest (rates ranging from 7.8% to 16.0%).... (41,207) -------- Present value of net minimum lease payments................. 40,097 Less current maturities..................................... (1,580) -------- Capitalized lease obligations............................... $ 38,517 -------- --------
- ------------------------ (a) Future minimum payments for operating and capital leases have not been reduced by minimum sublease rentals receivable under non-cancelable subleases. Total future minimum sublease rentals related to operating and capital lease obligations as of January 3, 1998 are $91.8 million and $41.7 million, respectively. Total rental expense under operating leases for fiscal years 1997, 1996 and 1995 is as follows (in thousands):
1997 1996 1995 -------- ------ ------ Total rentals.......................................... $ 42,584 33,316 27,533 Less real estate taxes, insurance and other occupancy costs................................................ (2,731) (2,070) (2,095) -------- ------ ------ Minimum rentals........................................ 39,853 31,246 25,438 Contingent rentals..................................... 244 183 312 Sublease rentals....................................... (13,744) (9,449) (7,964) -------- ------ ------ $ 26,353 21,980 17,786 -------- ------ ------ -------- ------ ------
Most of the Company's leases provide that the Company pay real estate taxes, insurance and other occupancy costs applicable to the leased premises. Contingent rentals are determined on the basis of a percentage of sales in excess of stipulated minimums for certain store facilities. Operating leases often contain renewal options. Management expects that, in the normal course of business, leases that expire will be renewed or replaced by other leases. The Company has guaranteed certain lease and promissory note obligations of customers aggregating approximately $28.6 million. F-20 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (9) LEASE AND OTHER COMMITMENTS (CONTINUED) In addition, the Company had outstanding letters of credit in the amounts of $9.1 million and $9.0 million at January 3, 1998 and December 28, 1996, respectively, primarily supporting workers' compensation obligations. (10) CONCENTRATION OF CREDIT RISK The Company provides financial assistance in the form of secured loans to some of its independent retailers for inventories, store fixtures and equipment, working capital and store improvements. Loans are secured by liens on inventory or equipment or both, by personal guarantees and by other types of collateral. In addition, the Company may guarantee lease and promissory note obligations of customers. As of January 3, 1998, the Company has guaranteed outstanding promissory note obligations of one customer in the amount of $8.4 million and of another customer in the amount of $7.1 million. In the normal course of business, the Company's produce marketing operation in California makes cash advances to produce growers during various product growing seasons to fund production costs. Such advances are repayable at the end of the respective growing seasons. Unpaid advances are generally secured by liens on real estate and in certain instances, on crops yet to be harvested. At January 3, 1998, $9.2 million in notes and growers advances were outstanding. The Company establishes allowances for doubtful accounts based upon the credit risk of specific customers, historical trends and other information. Management believes that adequate provisions have been made for any doubtful accounts. (11) PROFIT SHARING PLAN The Company has a profit sharing plan covering substantially all employees meeting specified requirements. Contributions, determined by the Board of Directors, are made to a noncontributory profit sharing trust based on profit performances. Profit sharing expense for 1997, 1996 and 1995 was $2.5 million, $4.1 million and $3.8 million, respectively. Certain officers and key employees are participants in a deferred compensation plan providing fixed benefits payable in equal monthly installments upon retirement. Annual increments to the deferred compensation plan are charged to earnings. No annual contribution was made in 1997. (12) PENSION Super Food has a qualified noncontributory retirement plan to provide retirement income for eligible full-time employees who are not covered by union retirement plans. Pension benefits under the plan are based on length of service and compensation. The Company contributes amounts necessary to meet minimum funding requirements. During 1997, the Company formalized a curtailment plan affecting all participants under the age of 55. The plan, effective January 1, 1998, did not result in a material effect on the Company's financial position or results of operations. All employees impacted by the curtailment will be transferred into the Company's existing defined contribution plan. F-21 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (12) PENSION (CONTINUED) The plan's funded status at January 3, 1998 was (in thousands):
1997 1996 -------- ------- Actuarial present value of benefit obligation: Vested benefits............................................. $ 36,772 28,979 Nonvested benefits.......................................... -- 388 -------- ------- Accumulated benefit obligation............................ 36,772 29,367 Additional benefits based on future salary levels............. 874 3,193 -------- ------- Projected benefit obligation................................ 37,646 32,560 Plan assets at fair value, principally listed securities.... (36,261) (34,274) -------- ------- Plan assets (over) under projected benefit obligation....... 1,385 (1,714) Unrecognized net (gain) loss.................................. 2,098 (911) -------- ------- Net prepaid pension cost.................................. $ 713 (803) -------- ------- -------- -------
Assumptions used in the determination of the above amounts, in conjunction with the recording of the Super Food acquisition, include the following:
1997 1996 ---- ---- Discount rate for determining estimated obligations and interest cost............................................................... 7.25% 8.5% Expected aggregate average long-term change in compensation.......... 5.0% 4.5% Expected long-term return on assets.................................. 8.0% 8.5%
Approximately 49% of Super Food employees are covered by collectively-bargained, multi-employer pension plans. Contributions are determined in accordance with the provisions of negotiated union contracts and generally are based on the number of hours worked. The Company does not have the information available to determine its share of the accumulated plan benefits or net assets available for benefits under the multi-employer plans. Aggregate cost for the Company's retirement plans includes the following components (in thousands):
1997 1996 ------- ------ Defined benefit plan: Service cost benefits earned during the year.................. $ 660 237 Interest cost on projected benefit obligation................. 2,663 882 Return on assets.............................................. (3,587) (1,855) Net amortization and deferral................................. 730 931 ------- ------ Net pension expense............................................. 466 195 Multi-employer plans............................................ 2,166 370 ------- ------ Total pension and retirement plan expense................... $ 2,632 565 ------- ------ ------- ------
Fiscal 1996 costs reflect the two month period following the acquisition of Super Food. F-22 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (13) POSTRETIREMENT HEALTH CARE BENEFITS The Company provides certain health care benefits for retired employees. Substantially all of the Company's employees not subject to collective bargaining agreements, become eligible for those benefits when they reach normal retirement age and who meet minimum age and service requirements. Health care benefits for retirees are provided under a self-insured program administered by an insurance company. The estimated future cost of providing postretirement health costs is accrued over the active service life of the employee. The periodic postretirement benefit costs were as follows (in thousands):
1997 1996 1995 ------ ---- ---- Service costs................................................ $ 354 260 273 Interest costs............................................... 576 403 382 Amortization of unrecognized transition obligation........... 235 248 249 ------ ---- ---- Net postretirement costs..................................... $1,165 911 904 ------ ---- ---- ------ ---- ----
The actuarial present value of benefit obligations at January 3, 1998, December 28, 1996 and December 30, 1995 are as follows (in thousands):
1997 1996 1995 ------ ------ ----- Retirees eligible for benefits............................ $3,092 1,969 1,903 Active employees fully eligible........................... 617 428 493 Active employees not fully eligible....................... 4,895 3,204 3,147 ------ ------ ----- $8,604 5,601 5,543 ------ ------ ----- ------ ------ -----
The assumed annual rate of future increases in per capita cost of health care benefits was 10.5% in fiscal 1997 declining at a rate of .5% per year to 6.5% in 2005 and thereafter. Increasing the health care cost trend rate by 1% in each year would increase the accumulated benefit obligation by $475,000 at January 3, 1998 and the service and interest costs by $77,000 for fiscal 1997. The discount rate used in determining the accumulated benefit obligation was 6.75%. (14) SEGMENT INFORMATION The Company and its subsidiaries sell and distribute food and nonfood products that are typically found in supermarkets. The Company's wholesale distribution segment sells to independently owned retail food stores, institutional and military customers while the retail distribution segment sells directly to the consumer. Produce marketing includes farming, packing and marketing operations. The Company's market areas are in the Midwest, West, Mid-Atlantic and Southeastern United States. Operating profit is net sales and other revenues, less operating expenses. In computing operating profit, none of the following items have been added or deducted: general corporate expenses, interest expense, interest income, income taxes and earnings from equity investments. Wholesale distribution operating profits on sales through Company-owned stores have been allocated to the retail segment. Identifiable assets are those used exclusively by that industry segment or an allocated portion of assets used jointly by two industry segments. Corporate assets are principally cash and cash equivalents, notes receivable, corporate office facilities and equipment. F-23 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (14) SEGMENT INFORMATION (CONTINUED) MAJOR SEGMENTS OF BUSINESS
1997 1996 1995 ---------- ---------- ---------- (IN THOUSANDS) Net sales and other operating revenues: Wholesale distribution............................... $3,502,822 2,468,695 1,968,982 Retail distribution.................................. 822,178 850,404 859,956 Produce marketing and other.......................... 50,949 50,410 48,154 ---------- ---------- ---------- Total net sales and other operating revenues....... $4,375,949 3,369,509 2,877,092 ---------- ---------- ---------- ---------- ---------- ---------- Operating profit (loss): Wholesale distribution............................... $ 32,576 37,115 30,047 Retail distribution.................................. (6,041) 7,709 4,143 Produce marketing and other.......................... (303) 2,124 2,439 ---------- ---------- ---------- Total operating profit............................. 26,232 46,948 36,629 Interest income...................................... 6,379 1,613 2,759 Interest expense..................................... (32,845) (14,894) (10,793) ---------- ---------- ---------- Earnings (loss) before income taxes................ $ (234) 33,667 28,595 ---------- ---------- ---------- ---------- ---------- ---------- Identifiable assets: Wholesale distribution............................... 620,644 649,470 205,288 Retail distribution.................................. 171,326 203,217 201,493 Produce marketing and other.......................... 47,191 41,948 45,662 Corporate............................................ 65,722 50,842 61,817 ---------- ---------- ---------- $ 904,883 945,477 514,260 ---------- ---------- ---------- ---------- ---------- ---------- Capital expenditures: Wholesale distribution............................... $ 18,245 15,511 8,704 Retail distribution.................................. 23,246 19,795 15,517 Produce marketing and other.......................... 4,166 2,234 5,259 Corporate............................................ 22,068 13,793 3,784 ---------- ---------- ---------- $ 67,725 51,333 33,264 ---------- ---------- ---------- ---------- ---------- ---------- Depreciation and amortization: Wholesale distribution............................... $ 25,148 14,996 11,121 Retail distribution.................................. 16,158 15,791 14,454 Produce marketing and other.......................... 1,481 1,511 1,597 Corporate............................................ 4,910 2,461 2,234 ---------- ---------- ---------- $ 47,697 34,759 29,406 ---------- ---------- ---------- ---------- ---------- ----------
Fiscal 1997 operating profit before the effects of the special charges for the wholesale, retail and produce marketing segments would have been $50.8 million, $5.8 million and $.9 million, respectively. F-24 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (15) SUBSEQUENT EVENT During the first quarter of 1998, and in conjunction with a planned $150 million unregistered subordinated debt offering, the Company prepaid $106.3 million of senior notes and paid prepayment premiums totaling $9.4 million, all with drawings under the Revolving Credit Facility. As a result, the Company recorded an extraordinary charge of $5.5 million, net of $4.0 million in taxes, consisting of prepayment premiums and the write-off of deferred financing costs related to early extinguishment of debt. (16) SUBSIDIARY GUARANTEES The following table presents summarized combined financial information for certain wholly owned subsidiaries which guarantee on a full, unconditional and joint and several basis, $165.0 million of Senior Subordinated Notes due May 1, 2008, which were offered and sold on April 24, 1998 by the Company: CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS)
1997 1996 1995 ------------ --------- --------- Operating revenues......................................... $ 1,068,857 269,090 43,785 Operating expenses......................................... 1,058,695 266,386 45,364 ------------ --------- --------- Operating income (loss).................................. 10,162 2,703 (1,579) Other income............................................... 4,168 1,108 1,101 ------------ --------- --------- Income (loss) before income tax.......................... 14,330 3,812 (478) Income tax expense (benefit)............................... 5,621 1,524 (158) ------------ --------- --------- Net income (loss)........................................ $ 8,709 2,288 (320) ------------ --------- --------- ------------ --------- ---------
CONDENSED CONSOLIDATED BALANCE SHEET DATA
1997 1996 ---------- --------- Current assets......................................................... $ 160,125 176,813 Non-current assets..................................................... 117,698 140,613 Current liabilities.................................................... 57,862 78,670 Long-term debt and obligations......................................... 27,152 60,263 Deferred credits and other liabilities................................. $ 14,452 17,254
The following table sets forth summarized combined financial information relating to non-wholly owned subsidiaries which have on a full, unconditional and joint and several basis, guaranteed the aforementioned debt of the Company. F-25 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (16) SUBSIDIARY GUARANTEES (CONTINUED) CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS)
1997 1996 1995 --------- --------- --------- Operating revenues.............................................. $ 34,929 36,695 33,342 Operating expenses.............................................. 33,075 35,370 31,675 --------- --------- --------- Operating income.............................................. 1,854 1,325 1,667 Other income.................................................... 276 240 186 --------- --------- --------- Income before income tax...................................... 2,130 1,565 1,583 Income tax expense.............................................. 773 564 669 --------- --------- --------- Net income.................................................... $ 1,357 1,001 1,184 --------- --------- --------- --------- --------- ---------
CONDENSED CONSOLIDATED BALANCE SHEET DATA
1997 1996 --------- --------- Current assets.............................................................. $ 3,129 3,545 Non-current assets.......................................................... 3,289 3,343 Current liabilities......................................................... 2,524 2,190 Long-term debt and obligations.............................................. $ 447 621
Non-guarantor subsidiaries, all of which are wholly owned, are inconsequential. F-26 NASH FINCH COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
TWELVE WEEKS ENDED ---------------------- MARCH 28, MARCH 22, 1998 1997 ---------- ---------- Revenues: Net sales............................................................................... $ 925,958 935,997 Other revenues.......................................................................... 11,143 11,835 ---------- ---------- Total revenues........................................................................ 937,101 947,832 Cost and expenses: Cost of sales........................................................................... 820,360 825,189 Selling, general and administrative and other operating expenses........................ 94,310 99,158 Depreciation and amortization........................................................... 11,078 10,905 Interest expense........................................................................ 6,860 7,321 ---------- ---------- Total costs and expenses.............................................................. 932,608 942,573 Earnings before income taxes and extraordinary charge................................. 4,493 5,259 Income taxes.............................................................................. 1,865 2,203 ---------- ---------- Earnings before extraordinary charge.................................................. 2,628 3,056 Extraordinary charge from early extinguishment of debt, net of income tax benefit of $3,951 (5,569) -- ---------- ---------- Net earnings (loss)................................................................... $ (2,941) 3,056 ---------- ---------- ---------- ---------- Basic and diluted earnings (loss) per share: Earnings before extraordinary charge.................................................. $ .23 .27 Extraordinary charge from early extinguishment of debt................................ (.49) -- ---------- ---------- Net earnings (loss)................................................................... $ (.26) .27 ---------- ---------- ---------- ---------- Weighted average number of common and common equivalent shares outstanding Basic................................................................................. 11,301 11,193 Diluted............................................................................... 11,362 11,321
See accompanying notes to consolidated financial statements. F-27 NASH FINCH COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JANUARY 3, 1998 MARCH 28, ----------- 1998 ----------- (UNAUDITED) ASSETS Current assets: Cash................................................................................... $ 773 933 Accounts and notes receivable, net..................................................... 176,634 173,962 Inventories............................................................................ 287,991 287,801 Prepaid expenses....................................................................... 23,742 22,582 Deferred tax assets.................................................................... 12,340 9,072 ----------- ----------- Total current assets............................................................... 501,480 494,350 Investments in affiliates................................................................ 7,681 7,679 Notes receivable, noncurrent............................................................. 23,600 23,092 Property, plant and equipment: Land................................................................................... 30,548 31,229 Buildings and improvements............................................................. 136,591 137,070 Furniture, fixtures and equipment...................................................... 307,285 306,762 Leasehold improvements................................................................. 61,003 60,578 Construction in progress............................................................... 36,906 28,485 Assets under capitalized leases........................................................ 24,878 25,048 ----------- ----------- 597,211 589,172 Less accumulated depreciation and amortization......................................... (319,203) (312,939) Net property, plant and equipment.................................................. 278,008 276,233 Intangible assets, net................................................................... 69,305 70,732 Investment in direct financing leases.................................................... 18,901 19,094 Deferred tax asset--net.................................................................. 2,622 2,622 Other assets............................................................................. 10,826 11,081 ----------- ----------- Total assets....................................................................... $ 912,423 904,883 ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Outstanding checks..................................................................... $ 22,110 36,271 Short-term debt payable to banks....................................................... 16,155 11,300 Current maturities of long-term debt and capitalized lease obligations................. 2,769 7,964 Accounts payable....................................................................... 203,246 177,548 Accrued expenses....................................................................... 71,086 60,599 Income taxes........................................................................... -- 737 ----------- ----------- Total current liabilities............................................................ 315,366 294,419 Long-term debt........................................................................... 324,145 325,489 Capitalized lease obligations............................................................ 38,116 38,517 Deferred compensation.................................................................... 6,682 6,768 Other.................................................................................... 7,144 14,072 Stockholders' equity: Preferred stock--no par value Authorized 500 shares; none issued................................................... -- -- Common stock of $1.66 2/3 par value Authorized 25,000 shares, issued 11,575 shares issued in 1998 and 1997 19,292 19,292 Additional paid-in capital............................................................. 17,908 17,648 Restricted stock....................................................................... (384) (391) Retained earnings...................................................................... 186,005 190,984 ----------- ----------- 222,821 227,533 Less cost of 237 shares and 252 shares of common stock in treasury, respectively....... (1,851) (1,915) ----------- ----------- Total stockholders' equity......................................................... 220,970 225,618 ----------- ----------- Total liabilities and stockholders' equity......................................... $ 912,423 904,883 ----------- ----------- ----------- -----------
See accompanying notes to condensed consolidated financial statements. F-28 NASH FINCH COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
TWELVE WEEKS ENDED ------------------------------ MARCH 28, 1998 MARCH 22, 1997 -------------- -------------- (IN THOUSANDS) Operating activities: Net earnings (loss).............................................................. $ (2,941) 3,056 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for (use of) special charge........................................ (850) -- Depreciation and amortization................................................ 11,078 10,905 Provision for bad debts...................................................... 160 1,293 Provision for (use of) losses on closed lease locations...................... (680) (153) Extraordinary charge--write off deferred financing costs..................... 142 -- Deferred income taxes........................................................ (3,268) (1,618) Deferred compensation........................................................ (86) (311) Earnings (loss) of equity investments........................................ (220) (377) Other........................................................................ 108 773 Changes in operating assets and liabilities: Accounts and notes receivable................................................ 9,127 12,056 Inventories.................................................................. (190) 2,251 Prepaid expenses............................................................. (1,160) (5,908) Accounts payable and outstanding checks...................................... 11,537 (29,145) Accrued expenses............................................................. 5,037 8,849 Income taxes................................................................. (737) 3,311 -------------- ------- Net cash provided by operating activities.................................. 27,057 4,982 -------------- ------- Investing activities: Dividends received............................................................. -- 800 Disposals of property, plant and equipment, net................................ 2,189 1,292 Additions to property, plant and equipment excluding capital leases............ (13,474) (7,939) Loans to customers............................................................. (5,389) (4,632) Payments from customers on loans............................................... 5,035 1,485 Sale (repurchase) of receivables............................................... (11,700) -- Other.......................................................................... (30) 28 -------------- ------- Net cash used in investing activities...................................... (23,369) (8,966) -------------- ------- Financing activities: Proceeds from revolving debt................................................... 100,000 15,000 Dividends paid................................................................. (2,038) (2,015) Payments of short-term debt.................................................... 4,855 (6,550) Payments of from long-term debt................................................ (106,570) (2,264) Payments of capitalized lease obligations...................................... (370) (275) Other.......................................................................... 275 53 -------------- ------- Net cash (used in) provided by financing activities........................ (3,848) 3,949 -------------- ------- Net decrease in cash..................................................... $ (160) (35) -------------- ------- -------------- -------
See accompanying notes to consolidated financial statements. F-29 NASH FINCH COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FISCAL PERIOD ENDED MARCH 28, 1998, JANUARY 3, 1998 AND DECEMBER 28, 1996
FOREIGN COMMON STOCK ADDITIONAL CURRENCY ------------------------ PAID-IN RETAINED TRANSLATION RESTRICTED SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT STOCK ----------- ----------- ----------- ----------- --------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Balance at December 30, 1995............ 11,224 $ 18,706 12,013 188,578 (950) -- Net earnings............................ -- -- -- 20,032 -- -- Dividend declared of $.75 per share..... -- -- -- (8,288) -- -- Shares issued in connection with acquisition of a business............. 350 584 5,064 -- -- Treasury stock issued upon exercise of options............................... -- -- 47 -- -- Issuance of restricted stock............ -- -- (308) -- -- (524) Amortized compensation under restricted stock plan............................ -- -- -- -- -- 24 Treasury stock purchased................ -- -- -- -- -- -- ----------- ----------- ----------- ----------- --- --- Balance at December 28, 1996............ 11,574 19,290 16,816 200,322 (950) (500) Net earnings (loss)..................... -- -- -- (1,228) -- -- Dividend declared of $.72 per share..... -- -- -- (8,110) -- -- Treasury stock issued upon exercise of options............................... -- -- 354 -- -- -- Amortized compensation under restricted stock plan............................ -- -- -- -- -- 29 Repayment of notes receivable from holder of restricted stock............ -- -- -- -- 80 Distribution of stock pursuant to performance awards.................... -- -- 460 -- -- -- Treasury stock purchased................ -- -- -- -- -- -- Foreign currency translation adjustment............................ -- -- -- -- 950 -- Other................................... 1 2 18 -- -- -- ----------- ----------- ----------- ----------- --- --- Balance at January 3, 1998.............. 11,575 19,292 17,648 190,984 -- (391) Net earnings (loss)..................... -- -- -- (2,941) -- -- Dividend declared of $.18 per share..... -- -- -- (2,038) -- -- Treasury stock issued upon exercise of options............................... -- -- 33 -- -- -- Amortized compensation under restricted stock plan............................ -- -- -- -- -- 7 Distribution of stock pursuant to performance awards.................... -- -- 226 -- -- -- Treasury stock purchased................ -- -- -- -- -- -- Foreign currency translation adjustment............................ -- -- -- -- -- -- Other................................... -- -- -- -- -- -- -- -- 1 -- -- -- ----------- ----------- ----------- ----------- --- --- Balance at March 28, 1998 (unaudited) 11,575 $ 19,292 17,908 186,005 -- (384) ----------- ----------- ----------- ----------- --- --- ----------- ----------- ----------- ----------- --- --- TREASURY STOCK TOTAL ------------------------ STOCKHOLDERS' SHARES AMOUNT EQUITY ----------- ----------- ------------- Balance at December 30, 1995............ (346) $ (3,034) 215,313 Net earnings............................ -- -- 20,032 Dividend declared of $.75 per share..... -- -- (8,288) Shares issued in connection with acquisition of a business............. -- 5,648 Treasury stock issued upon exercise of options............................... 6 42 89 Issuance of restricted stock............ 40 995 163 Amortized compensation under restricted stock plan............................ -- -- 24 Treasury stock purchased................ (7) (120) (120) --- ----------- ------------- Balance at December 28, 1996............ (307) (2,117) 232,861 Net earnings (loss)..................... -- -- (1,228) Dividend declared of $.72 per share..... -- -- (8,110) Treasury stock issued upon exercise of options............................... 29 143 497 Amortized compensation under restricted stock plan............................ -- -- 29 Repayment of notes receivable from holder of restricted stock............ -- -- 80 Distribution of stock pursuant to performance awards.................... 30 148 608 Treasury stock purchased................ (4) (89) (89) Foreign currency translation adjustment............................ -- -- 950 Other................................... -- -- 20 --- ----------- ------------- Balance at January 3, 1998.............. (252) (1,915) 225,618 Net earnings (loss)..................... -- -- (2,941) Dividend declared of $.18 per share..... -- -- (2,038) Treasury stock issued upon exercise of options............................... 3 15 48 Amortized compensation under restricted stock plan............................ -- -- 7 Distribution of stock pursuant to performance awards.................... 13 65 291 Treasury stock purchased................ -- -- -- Foreign currency translation adjustment............................ -- -- -- Other................................... -- -- -- (1) (16) (15) --- ----------- ------------- Balance at March 28, 1998 (unaudited) (237) $ (1,851) 220,970 --- ----------- ------------- --- ----------- -------------
See accompanying notes to consolidated financial statements. F-30 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 28, 1998 NOTE 1 The accompanying financial statements include all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Company and its subsidiaries at March 28, 1998 and January 3, 1998, and the results of operations for the 12-weeks ending March 28, 1998 and March 22, 1997, and the changes in cash flows for the 12-week periods ending March 28, 1998 and March 22, 1997, respectively. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements. Results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. NOTE 2 The Company uses the LIFO method for valuation of a substantial portion of inventories. If the FIFO method had been used, inventories would have been approximately $42.6 million and $43.1 million higher at March 28, 1998 and at January 3, 1998, respectively. NOTE 3 In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE. Although the SOP is effective beginning on January 1, 1999, the Company has chosen early adoption as of January 4 1998. The SOP requires the capitalization of certain costs incurred after the date of adoption in connection with developing or obtaining software for internal use. Certain costs that are required to be capitalized by the SOP were previously being expensed as incurred by the Company. As a result of this change in accounting, during the quarter the Company capitalized $1.5 million in payroll and payroll-related costs for employees who are directly involved with and devote time to internal-use software development projects. NOTE 4 Pursuant to the provisions of Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE, the weighted average shares used in computing basic and diluted earnings per share (EPS) are as follows:
TWELVE WEEKS ENDED ------------------------ MARCH 29, MARCH 23, 1998 1997 ----------- ----------- (IN THOUSANDS OF SHARES) Shares for computation of basic EPS.................................... 11,301 11,193 Effect of assumed option exercises..................................... 35 45 Effect of contingent shares............................................ 26 83 ----------- ----------- Shares for computation of diluted EPS.................................. 11,362 11,321 ----------- ----------- ----------- -----------
F-31 NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 28, 1998 NOTE 5 On December 29, 1997, a Receivables Purchase Agreement (the "Agreement") was executed by the Company, Nash Finch Funding Corporation ("NFFC"), a wholly-owned subsidiary of the Company, and a certain third party purchaser (the "Purchaser") pursuant to a securitization transaction. On this date the Company sold $44.6 million of accounts receivable on a non-recourse basis to NFFC. NFFC sold $37.0 million of its undivided interest in such receivables to the Purchaser, subject to specified collateral requirements. NFFC maintains a variable undivided interest in these receivables and is subject to losses on its share of the receivables and, accordingly, maintains an allowance for doubtful accounts. The Agreement is a five-year $50 million revolving receivable purchase facility allowing the Company to sell additional receivables to NFFC, and NFFC to sell, from time to time, variable undivided interests in these receivables to the Purchaser. At March 28, 1998, the balance of receivables sold under the revolving agreement was $25.3 million. On September 8, 1995, the Company entered into an agreement with a financial institution which allowed the Company to sell on a revolving basis customer notes receivable. Although the agreement lapsed on December 28, 1996, the notes, which have maturities through the year 2002, were sold at face value with recourse. As a result, the Company is contingently liable should these notes become uncollectible. The remaining balances of such sold notes receivable totaled $8.4 million and $9.1 million at March 28, 1998 and January 3, 1998, respectively. NOTE 6 During the third quarter of 1997, the Company recorded special charges, totaling $31.3 million relative to asset impairment and consolidation of certain warehouses and retail stores. During the first quarter the Company closed distribution facilities in Lexington, Kentucky and Lincoln, Nebraska and closed or sold a total of four retail stores. Costs totaling $.9 million dollars incurred as a result of the shut down of these units were charged to accrued expenses. At March 28, 1998, accrued liabilities established for purposes of the special charges total $15.2 million. F-32 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS OR ANY OF THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION TO BUY, THE EXCHANGE NOTES OR GUARANTEES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, IN ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information..................................................... 3 Incorporation of Certain Documents by Reference........................... 3 Prospectus Summary........................................................ 4 Risk Factors.............................................................. 14 The Exchange Offer........................................................ 23 Use of Proceeds........................................................... 31 Capitalization............................................................ 32 Selected Consolidated Financial Data...................................... 33 Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................................. 34 Business.................................................................. 42 Management................................................................ 51 Principal Stockholders.................................................... 55 Description of Certain Other Indebtedness................................. 57 Description of the Exchange Notes......................................... 60 Description of Certain Federal Income Tax Consequences of an Investment in the Notes............................................................... 91 Exchange Offer; Registration Rights....................................... 93 Book Entry; Delivery and Form............................................. 96 Plan of Distribution...................................................... 98 Legal Matters............................................................. 98 Experts................................................................... 98 Index to Consolidated and Unaudited Condensed Consolidated Financial Statements.............................................................. F-1
[LOGO] OFFER TO EXCHANGE $165,000,000 8 1/2 SENIOR SUBORDINATED NOTES DUE 2008, SERIES B FOR 8 1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A ---------------------------- PRELIMINARY PROSPECTUS ---------------------------- , 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law ("Section 145") permits indemnification of directors, officers, agents and controlling persons of a corporation under certain conditions and subject to certain limitations. Section 145 empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation or another enterprise if serving at the request of the corporation. Depending on the character of the proceeding, a corporation may indemnify against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding if the person indemnified acted in good faith and in a manner he 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 conduct was unlawful. In the case of an action by or in the right of the corporation, no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been judged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine that, despite the adjudication of liability, such person is fairly and reasonably entitled to indemnification for such expenses which the court shall deem proper. Section 145 further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Article V of the Company's Amended and Restated Certificate of Incorporation provides for the indemnification of directors, officers and other authorized representatives of the Company to the maximum extent permitted by the Delaware General Corporation Law. The Company has entered into Indemnification Agreements with its directors and officers which may provide for indemnification against other liabilities. In addition, the Company maintains directors' and officers' liability insurance which may cover certain liabilities of directors and officers. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits
ITEM NO. ITEM METHOD OF FILING - --------- ---------------------------------------------------- ---------------------------------------------------- 3.1 Restated Certificate of Incorporation of the Company Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1985 (File No. 0-785). 3.2 Amendment to Restated Certificate of Incorporation Incorporated by reference to Exhibit 19.1 to the of the Company, effective May 29, 1986 Company's Quarterly Report on Form 10-Q for the period ended October 4, 1986 (File No. 0-785). 3.3 Amendment to Restated Certificate of Incorporation Incorporated by reference to Exhibit 4.5 to the of the Company, effective May 15, 1987 Company's Registration Statement on Form S-3 (File No. 33-14871).
II-1
ITEM NO. ITEM METHOD OF FILING - --------- ---------------------------------------------------- ---------------------------------------------------- 3.4 Bylaws of the Company as amended, effective November Incorporated by reference to Exhibit 3.4 to the 21, 1995 Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 (File No. 0-785). 4.1 Stockholder Rights Agreement, dated February 13, Incorporated by reference to Exhibit 4 to the 1996, between the Company and Norwest Bank Company's Current Report on Form 8-K dated February Minnesota, National Association 13, 1996 (File No. 0-785). 4.2 Indenture dated as of April 24, 1998 between the Filed herewith. Company, the Guarantors, and U.S. Bank Trust National Association 4.3 Form of Company's 8.5% Senior Subordinated Notes due Contained in the Indenture filed as Exhibit 4.2. 2008, Series A 4.4 Form of Company's 8.5% Senior Subordinated Notes due Contained in the Indenture filed as Exhibit 4.2. 2008, Series B 5.1 Opinion of Oppenheimer Wolff & Donnelly re: legality Filed herewith. 10.1 Credit Agreement dated as of October 8, 1996 among Incorporated by reference to Exhibit 10.2 to the the Company, NFC Acquisition Corp., Harris Trust and Company's Quarterly Report on Form 10-Q for the Savings Bank, as Administrative Agent, and Bank of period ended October 5, 1996 (File No. 0-785). Montreal and PNC Bank, N.A., as Co-Syndication Agents ('Credit Agreement') 10.2 First Amendment to Credit Agreement dated as of Incorporated by reference to Exhibit 10.15 to the December 18, 1996 Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996 (File No. 0-785). 10.3 Second Amendment to Credit Agreement dated as of Incorporated by reference to Exhibit 10.16 to the November 10, 1997 Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 10.4 Third Amendment to Credit Agreement dated as of Incorporated by reference to Exhibit 10.1 to the March 24, 1998 Company's Quarterly Report on Form 10-Q for the period ended March 28, 1998 (File No. 0-785). 10.5 Nash Finch Profit Sharing Plan - 1994 Revision and Incorporated by reference to Exhibit 10.6 to the Nash Finch Profit Sharing Trust Agreement (as Company's Annual Report on Form 10-K for the fiscal restated effective January 1, 1994) year ended January 1, 1994 (File No. 0-785). 10.6 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.7 to the Revision--First Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 0-785).
II-2
ITEM NO. ITEM METHOD OF FILING - --------- ---------------------------------------------------- ---------------------------------------------------- 10.7 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.10 to the Revision--Second Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 (File No. 0-785). 10.8 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.22 to the Revision--Third Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 10.9 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.23 to the Revision--Fourth Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 10.10 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.24 to the Revision--Fifth Declaration of Amendment Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 10.11 Nash Finch Executive Incentive Bonus and Deferred Incorporated by reference to Exhibit 10.7 to the Compensation Plan (as amended and restated effective Company's Annual Report on Form 10-K for the fiscal December 31, 1993) year ended January 1, 1994 (File No. 0-785). 10.12 Excerpts from minutes of Board of Directors Incorporated by reference to Exhibit 10.9 to the regarding Nash Finch Pension Plan, as amended Company's Annual Report on Form 10-K for the fiscal effective January 2, 1966 year ended January 3, 1987 (File No. 0-785). 10.13 Excerpts from minutes of the Board of Directors Incorporated by reference to Exhibit 10.13 to the regarding Nash Finch Pension Plan, as amended Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 (File No. 0-785). 10.14 Excerpts from minutes of the Board of Directors Incorporated by reference to Exhibit 10.22 to the regarding director compensation Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996 (File No. 0-785). 10.15 Excerpts from minutes of the Board of Directors Incorporated by reference to Exhibit 10.23 to the regarding director compensation Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996 (File No. 0-785). 10.16 Form of Letter Agreement Specifying Benefits in the Incorporated by reference to Exhibit 10.20 to the Event of Termination of Employment Following a Company's Annual Report on Form 10-K for the fiscal Change in Control of Nash Finch year ended December 29, 1990 (File No. 0-785). 10.17 Nash Finch Income Deferral Plan Incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 (File No. 0-785).
II-3
ITEM NO. ITEM METHOD OF FILING - --------- ---------------------------------------------------- ---------------------------------------------------- 10.18 Nash Finch 1994 Stock Incentive Plan, as amended Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended June 14, 1997 (File No. 0-785). 10.19 Nash Finch 1995 Director Stock Option Plan Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended June 17, 1995 (File No. 0-785). 10.20 Nash Finch 1997 Non-Employee Director Stock Incorporated by reference to Exhibit 10.1 to the Compensation Plan Company's Quarterly Report on Form 10-Q for the period ended June 14, 1997 (File No. 0-785). 10.21 Purchase Agreement dated April 20, 1998 between the Filed herewith. Company, the Guarantors, Merrill Lynch & Co., Merrill, Lynch, Pierce, Fenner & Smith, Incorporated, Nesbitt Burns Securities, Inc., and Piper Jaffray Inc. for $165,000,000 Senior Subordinated Notes due 2008 10.22 Registration Rights Agreement dated as of April 24, Filed herewith. 1998 between the Company, the Guarantors, Merrill Lynch & Co., Merrill, Lynch, Pierce, Fenner & Smith, Incorporated, Nesbitt Burns Securities, Inc., and Piper Jaffray Inc. 12.1 Statement regarding the Computation of Ratios Filed herewith. 21.1 Subsidiaries of the Company Incorporated by reference to Exhibit 21.1 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 23.1 Consent of Ernst & Young, LLP Filed herewith. 23.2 Consent of Oppenheimer Wolff & Donnelly LLP Contained in their opinion filed as Exhibit 5.1. 24.1 Powers of Attorney Included on signature pages. 25.1 Form T-1 Statement of Eligibility under the Trust Filed herewith. Indenture Act of 1939 of U.S. Bank Trust National Association 99.1 Form of Letter of Transmittal Filed herewith. 99.2 Form of Notice of Guaranteed Delivery Filed herewith. 99.3 Guidelines for Certification of Taxpayer Filed herewith. Identification Number on Substitute Form W-9
II-4 ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (a) (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 factors or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and 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 20% change in the maximum aggregate offering price set forth in "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (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) That, for purposes of determining any liability under the Securities Act of 1933, each filing of 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 full securities at that time shall be deemed to be the initial bona fide offering thereof. (c) That, insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) To respond to requests for information that is incorporated by reference into the 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 II-5 includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (e) 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-6 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on May 22, 1998. NASH-FINCH COMPANY By: /s/ ALFRED N. FLATEN ----------------------------------------- ALFRED N. FLATEN, PRESIDENT & CEO FORREST TRANSPORTATION SERVICE, INC. By: /s/ C. MICHAEL OLSEN ----------------------------------------- C. MICHAEL OLSEN, PRESIDENT GILLETTE DAIRY OF THE BLACK HILLS, INC. By: /s/ DAVID DICKSON ----------------------------------------- DAVID DICKSON, PRESIDENT GTL TRUCK LINES, INC. By: /s/ FRANCIS G. SCHNEIDER ----------------------------------------- FRANCIS G. SCHNEIDER, PRESIDENT NASH-DECAMP COMPANY By: /s/ STEPHEN C. BISWELL ----------------------------------------- STEPHEN C. BISWELL, PRESIDENT NEBRASKA DAIRIES, INC. By: /s/ DAVID DICKSON ----------------------------------------- DAVID DICKSON, PRESIDENT
II-7 PIGGLY WIGGLY NORTHLAND CORPORATION By: /s/ ALFRED N. FLATEN ----------------------------------------- ALFRED N. FLATEN, PRESIDENT SUPER FOOD SERVICES, INC. By: /s/ JAMES K. BUCHANAN ----------------------------------------- JAMES K. BUCHANAN, PRESIDENT T. J. MORRIS COMPANY By: /s/ ALFRED N. FLATEN ----------------------------------------- ALFRED N. FLATEN, PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears below hereby appoints Norman R. Soland and John R. Scherer, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue 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. /s/ ALFRED N. FLATEN ---------------------------------------------- ALFRED N. FLATEN, President, CEO & Director--Nash Finch Company Director--GTL Truck Lines, Inc. Director--Nash-DeCamp Company President & Director--Piggly Wiggly Northland Corporation Director--Super Food Services, Inc. President & Director--T. J. Morris Company May 20, 1998
II-8 /s/ JOHN R. SCHERER ---------------------------------------------- JOHN R. SCHERER Chief Financial Officer--Nash Finch Company Treasurer & Director--Gillette Dairy of the Black Hills, Inc. Treasurer & Director--GTL Truck Lines, Inc. Treasurer & Director--Nebraska Dairies, Inc. Treasurer & Director--Piggly Wiggly Northland Corporation Treasurer & Director--Super Food Services, Inc. Treasurer & Director--T. J. Morris Company May 21, 1998 /s/ LAWRENCE A. WOJTASIAK ---------------------------------------------- LAWRENCE A. WOJTASIAK Chief Accounting Officer--Nash Finch Company May 21, 1998 /s/ CAROLE F. BITTER ---------------------------------------------- CAROLE F. BITTER Director--Nash Finch Company May 20, 1998 /s/ RICHARD A. FISHER ---------------------------------------------- RICHARD A. FISHER Director--Nash Finch Company May 20, 1998 /s/ JERRY L. FORD ---------------------------------------------- JERRY L. FORD Director--Nash Finch Company May 19, 1998 /s/ ALLISTER P. GRAHAM ---------------------------------------------- ALLISTER P. GRAHAM Director--Nash Finch Company May 19, 1998
II-9 /s/ JOHN H. GRUNEWALD ---------------------------------------------- JOHN H. GRUNEWALD Director--Nash Finch Company May 19, 1998 /s/ RICHARD G. LAREAU ---------------------------------------------- RICHARD G. LAREAU Director--Nash Finch Company May 20, 1998 /s/ DON E. MARSH ---------------------------------------------- DON E. MARSH Director--Nash Finch Company May 20, 1998 /s/ DONALD R. MILLER ---------------------------------------------- DONALD R. MILLER Director--Nash Finch Company May 20, 1998 /s/ ROBERT F. NASH ---------------------------------------------- ROBERT F. NASH Director--Nash Finch Company May 20, 1998 /s/ JEROME O. RODYSILL ---------------------------------------------- JEROME O. RODYSILL Director--Nash Finch Company May 20, 1998 /s/ STEPHEN C. BISWELL ---------------------------------------------- STEPHEN C. BISWELL Director--Forrest Transportation Service, Inc. President & Director--Nash-DeCamp Company May 19, 1998
II-10 /s/ STEPHEN W. MILLER ---------------------------------------------- STEPHEN W. MILLER Treasurer & Director--Forrest Transportation Service, Inc. Treasurer & Director--Nash-DeCamp Company May 19, 1998 /s/ FRANKLIN GINDICK ---------------------------------------------- FRANKLIN GINDICK Director--Forrest Transportation Service, Inc. Director--Nash-DeCamp Company May 19, 1998 /s/ C. MICHAEL OLSEN ---------------------------------------------- C. MICHAEL OLSEN President & Director--Forrest Transportation Service, Inc. Director--Nash-DeCamp Company May 19, 1998 /s/ DAVID DICKSON ---------------------------------------------- DAVID DICKSON President & Director--Gillette Dairy of the Black Hills, Inc. President & Director--Nebraska Dairies, Inc. May 19, 1998 /s/ WILLIAM BARNHART ---------------------------------------------- WILLIAM BARNHART Director--Gillette Dairy of the Black Hills, Inc. Director--Nebraska Dairies, Inc. May 19, 1998 /s/ LESLIE K. CHAFFIN ---------------------------------------------- LESLIE K. CHAFFIN Director--Gillette Dairy of the Black Hills, Inc. Director--Nebraska Dairies, Inc. May 19, 1998
II-11 ---------------------------------------------- WILLIAM E. MAY, JR. Director--Gillette Dairy of the Black Hills, Inc. Director--Nebraska Dairies, Inc. May , 1998 ---------------------------------------------- CHARLES F. RAMSBACHER Director--Gillette Dairy of the Black Hills, Inc. Director--Nebraska Dairies, Inc. May , 1998 /s/ NORMAN R. SOLAND ---------------------------------------------- NORMAN R. SOLAND Director--Gillette Dairy of the Black Hills, Inc. Director--GTL Truck Lines, Inc. Director--Nebraska Dairies, Inc. Director--Piggly Wiggly Northland Corporation Director--Super Food Services, Inc. Director--T. J. Morris Company May 20, 1998 /s/ FRANCIS G. SCHNEIDER ---------------------------------------------- FRANCIS G. SCHNEIDER President--GTL Truck Lines, Inc. May 19, 1998 /s/ STEVEN L. LUMSDEN ---------------------------------------------- STEVEN L. LUMSDEN Director--GTL Truck Lines, Inc. May 21, 1998 /s/ THOMAS DOSS ---------------------------------------------- THOMAS DOSS Director--Nash-DeCamp Company May 19, 1998
II-12 /s/ DARRELL FULMER ---------------------------------------------- DARRELL FULMER Director--Nash-DeCamp Company May 19, 1998 /s/ JAMES K. BUCHANAN ---------------------------------------------- JAMES K. BUCHANAN President--Super Food Services, Inc. May 19, 1998
II-13 NASH FINCH COMPANY EXHIBIT INDEX TO REGISTRATION STATEMENT ON FORM S-4
SEQUENTIALLY NUMBERED ITEM NO. ITEM METHOD OF FILING PAGE - --------- --------------------------------------------- --------------------------------------------- ----------------- 3.1 Restated Certificate of Incorporation of the Incorporated by reference to Exhibit 3.1 to Company the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1985 (File No. 0-785). 3.2 Amendment to Restated Certificate of Incorporated by reference to Exhibit 19.1 to Incorporation of the Company, effective May the Company's Quarterly Report on Form 10-Q 29, 1986 for the period ended October 4, 1986 (File No. 0-785). 3.3 Amendment to Restated Certificate of Incorporated by reference to Exhibit 4.5 to Incorporation of the Company, effective May the Company's Registration Statement on Form 15, 1987 S-3 (File No. 33-14871). 3.4 Bylaws of the Company as amended, effective Incorporated by reference to Exhibit 3.4 to November 21, 1995 the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 (File No. 0-785). 4.1 Stockholder Rights Agreement, dated February Incorporated by reference to Exhibit 4 to the 13, 1996, between the Company and Norwest Company's Current Report on Form 8-K dated Bank Minnesota, National Association February 13, 1996 (File No. 0-785). 4.2 Indenture dated as of April 24, 1998 between Filed herewith. the Company, the Guarantors, and U.S. Bank Trust National Association 4.3 Form of Company's 8.5% Senior Subordinated Contained in the Indenture filed as Exhibit Notes due 2008, Series A 4.2. 4.4 Form of Company's 8.5% Senior Subordinated Contained in the Indenture filed as Exhibit Notes due 2008, Series B 4.2. 5.1 Opinion of Oppenheimer Wolff & Donnelly re: Filed herewith. legality 10.1 Credit Agreement dated as of October 8, 1996 Incorporated by reference to Exhibit 10.2 to among the Company, NFC Acquisition Corp., the Company's Quarterly Report on Form 10-Q Harris Trust and Savings Bank, as for the period ended October 5, 1996 (File Administrative Agent, and Bank of Montreal No. 0-785). and PNC Bank, N.A., as Co-Syndication Agents ('Credit Agreement')
SEQUENTIALLY NUMBERED ITEM NO. ITEM METHOD OF FILING PAGE - --------- --------------------------------------------- --------------------------------------------- ----------------- 10.2 First Amendment to Credit Agreement dated as Incorporated by reference to Exhibit 10.15 to of December 18, 1996 the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996 (File No. 0-785). 10.3 Second Amendment to Credit Agreement dated as Incorporated by reference to Exhibit 10.16 to of November 10, 1997 the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 10.4 Third Amendment to Credit Agreement dated as Incorporated by reference to Exhibit 10.1 to of March 24, 1998 the Company's Quarterly Report on Form 10-Q for the period ended March 28, 1998 (File No. 0-785). 10.5 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.6 to Revision and Nash Finch Profit Sharing Trust the Company's Annual Report on Form 10-K for Agreement (as restated effective January 1, the fiscal year ended January 1, 1994 (File 1994) No. 0-785). 10.6 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.7 to Revision--First Declaration of Amendment the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 0-785). 10.7 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.10 to Revision--Second Declaration of Amendment the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 (File No. 0-785). 10.8 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.22 to Revision--Third Declaration of Amendment the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 10.9 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.23 to Revision--Fourth Declaration of Amendment the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 10.10 Nash Finch Profit Sharing Plan - 1994 Incorporated by reference to Exhibit 10.24 to Revision--Fifth Declaration of Amendment the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 10.11 Nash Finch Executive Incentive Bonus and Incorporated by reference to Exhibit 10.7 to Deferred Compensation Plan (as amended and the Company's Annual Report on Form 10-K for restated effective December 31, 1993) the fiscal year ended January 1, 1994 (File No. 0-785). 10.12 Excerpts from minutes of Board of Directors Incorporated by reference to Exhibit 10.9 to regarding Nash Finch Pension Plan, as amended the Company's Annual Report on Form 10-K for effective January 2, 1966 the fiscal year ended January 3, 1987 (File No. 0-785).
SEQUENTIALLY NUMBERED ITEM NO. ITEM METHOD OF FILING PAGE - --------- --------------------------------------------- --------------------------------------------- ----------------- 10.13 Excerpts from minutes of the Board of Incorporated by reference to Exhibit 10.13 to Directors regarding Nash Finch Pension Plan, the Company's Annual Report on Form 10-K for as amended the fiscal year ended December 30, 1995 (File No. 0-785). 10.14 Excerpts from minutes of the Board of Incorporated by reference to Exhibit 10.22 to Directors regarding director compensation the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996 (File No. 0-785). 10.15 Excerpts from minutes of the Board of Incorporated by reference to Exhibit 10.23 to Directors regarding director compensation the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996 (File No. 0-785). 10.16 Form of Letter Agreement Specifying Benefits Incorporated by reference to Exhibit 10.20 to in the Event of Termination of Employment the Company's Annual Report on Form 10-K for Following a Change in Control of Nash Finch the fiscal year ended December 29, 1990 (File No. 0-785). 10.17 Nash Finch Income Deferral Plan Incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 (File No. 0-785). 10.18 Nash Finch 1994 Stock Incentive Plan, as Incorporated by reference to Exhibit 10.2 to amended the Company's Quarterly Report on Form 10-Q for the period ended June 14, 1997 (File No. 0-785). 10.19 Nash Finch 1995 Director Stock Option Plan Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended June 17, 1995 (File No. 0-785). 10.20 Nash Finch 1997 Non-Employee Director Stock Incorporated by reference to Exhibit 10.1 to Compensation Plan the Company's Quarterly Report on Form 10-Q for the period ended June 14, 1997 (File No. 0-785). 10.21 Purchase Agreement dated April 20, 1998 Filed herewith. between the Company, the Guarantors, Merrill Lynch & Co., Merrill, Lynch, Pierce, Fenner & Smith, Incorporated, Nesbitt Burns Securities, Inc., and Piper Jaffray Inc. for $165,000,000 Senior Subordinated Notes due 2008
SEQUENTIALLY NUMBERED ITEM NO. ITEM METHOD OF FILING PAGE - --------- --------------------------------------------- --------------------------------------------- ----------------- 10.22 Registration Rights Agreement dated as of Filed herewith. April 24, 1998 between the Company, the Guarantors, Merrill Lynch & Co., Merrill, Lynch, Pierce, Fenner & Smith, Incorporated, Nesbitt Burns Securities, Inc., and Piper Jaffray Inc. 12.1 Statement regarding the Computation of Ratios Filed herewith. 21.1 Subsidiaries of the Company Incorporated by reference to Exhibit 21.1 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 (File No. 0-785). 23.1 Consent of Ernst & Young, LLP Filed herewith. 23.2 Consent of Oppenheimer Wolff & Donnelly LLP Contained in their opinion filed as Exhibit 5. 24.1 Powers of Attorney Included on signature pages. 25.1 Form T-1 Statement of Eligibility under the Filed herewith. Trust Indenture Act of 1939 of U.S. Bank Trust National Association 99.1 Form of Letter of Transmittal Filed herewith. 99.2 Form of Notice of Guaranteed Delivery Filed herewith. 99.3 Guidelines for Certification of Taxpayer Filed herewith. Identification Number on Substitute Form W-9
EX-4.2 2 INDENTURE Exhibit 4.2 NASH-FINCH COMPANY, as Issuer THE SUBSIDIARY GUARANTORS named herein, as Guarantors and U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee --------------------- INDENTURE Dated as of April 24, 1998 -------------------- $165,000,000 8-1/2% Senior Subordinated Notes due 2008, Series A 8-1/2% Senior Subordinated Notes due 2008, Series B Reconciliation and tie between Trust Indenture Act of 1939,as amended, and Indenture, dated as of April 24, 1998
Trust Indenture Indenture Act Section Section - -------------- ---------- Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . 6.09 (a)(2) . . . . . . . . . . . . . . . . . . . 6.09 (a)(3) . . . . . . . . . . . . . . . . . . . Not Applicable (a)(4) . . . . . . . . . . . . . . . . . . . Not Applicable (b). . . . . . . . . . . . . . . . . . . . . 6.08, 6.10 Section 311 (a). . . . . . . . . . . . . . . . . . . . . 6.13 (b). . . . . . . . . . . . . . . . . . . . . 6.13 (c). . . . . . . . . . . . . . . . . . . . . Not Applicable Section 312 (a). . . . . . . . . . . . . . . . . . . . . 3.06, 7.01 (b). . . . . . . . . . . . . . . . . . . . . 7.02 (c). . . . . . . . . . . . . . . . . . . . . 7.02 Section 313 (a). . . . . . . . . . . . . . . . . . . . . 7.03 (b). . . . . . . . . . . . . . . . . . . . . 7.03 (c). . . . . . . . . . . . . . . . . . . . . 7.03 (d). . . . . . . . . . . . . . . . . . . . . 7.03 Section 314 (a). . . . . . . . . . . . . . . . . . . . . 7.04 (a)(4) . . . . . . . . . . . . . . . . . . . 10.13 (b). . . . . . . . . . . . . . . . . . . . . Not Applicable (c)(1) . . . . . . . . . . . . . . . . . . . 1.04, 4.04, 12.01(c) (c)(2) . . . . . . . . . . . . . . . . . . . 1.04, 4.04, 12.01(c) (c)(3) . . . . . . . . . . . . . . . . . . . Not Applicable (d). . . . . . . . . . . . . . . . . . . . . Not Applicable (e). . . . . . . . . . . . . . . . . . . . . 1.04 Section 315 (a). . . . . . . . . . . . . . . . . . . . . 6.01(a) (b). . . . . . . . . . . . . . . . . . . . . 6.02 (c). . . . . . . . . . . . . . . . . . . . . 6.01(b) (d). . . . . . . . . . . . . . . . . . . . . 6.01(c) (e). . . . . . . . . . . . . . . . . . . . . 5.14 Section 316 (a) (last sentence) . . . . . . . . . . . . 3.14 (a)(1)(A). . . . . . . . . . . . . . . . . . 5.12 (a)(1)(B). . . . . . . . . . . . . . . . . . 5.13 (a)(2) . . . . . . . . . . . . . . . . . . . Not Applicable (b). . . . . . . . . . . . . . . . . . . . . 5.08 (c). . . . . . . . . . . . . . . . . . . . . 9.07 Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . 5.03 (a)(2) . . . . . . . . . . . . . . . . . . . 5.04 (b). . . . . . . . . . . . . . . . . . . . . 10.03 Section 318 (a). . . . . . . . . . . . . . . . . . . . . 1.08
_________________ Note: This Cross-Reference Table shall not, for any purpose, be deemed a part of the Indenture. TABLE OF CONTENTS
Page ---- PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.02. Other Definitions. . . . . . . . . . . . . . . . . . . . . 24 Section 1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . 24 Section 1.04. Form of Documents Delivered to Trustee.. . . . . . . . . . 25 Section 1.05. Acts of Holders. . . . . . . . . . . . . . . . . . . . . . 26 Section 1.06. Notices, etc., to the Trustee, the Company and the Guarantors.. . . . . . . . . . . . . . 26 Section 1.07. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . 27 Section 1.08. Conflict with Trust Indenture Act. . . . . . . . . . . . . 27 Section 1.09. Effect of Headings and Table of Contents.. . . . . . . . . 28 Section 1.10. Successors and Assigns.. . . . . . . . . . . . . . . . . . 28 Section 1.11. Separability Clause. . . . . . . . . . . . . . . . . . . . 28 Section 1.12. Benefits of Indenture. . . . . . . . . . . . . . . . . . . 28 Section 1.13. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . 28 Section 1.14. No Recourse Against Others.. . . . . . . . . . . . . . . . 28 Section 1.15. Independence of Covenants. . . . . . . . . . . . . . . . . 29 Section 1.16. Exhibits.. . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 1.17. Counterparts.. . . . . . . . . . . . . . . . . . . . . . . 29 Section 1.18. Duplicate Originals. . . . . . . . . . . . . . . . . . . . 29 ARTICLE TWO NOTE AND GUARANTEE FORMS Section 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE THREE THE NOTES Section 3.01. Title and Terms. . . . . . . . . . . . . . . . . . . . . . 30 Section 3.02. Optional Redemption. . . . . . . . . . . . . . . . . . . . 31 Section 3.03. Registrar and Paying Agent.. . . . . . . . . . . . . . . . 31 Section 3.04. Execution and Authentication.. . . . . . . . . . . . . . . 31 Section 3.05. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . 33 -i- Page ---- Section 3.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . . 34 Section 3.07. Mutilated, Destroyed, Lost and Stolen Notes. . . . . . . . 35 Section 3.08. Payment of Interest; Interest Rights Preserved.. . . . . . 35 Section 3.09. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . 36 Section 3.10. Cancellation.. . . . . . . . . . . . . . . . . . . . . . . 37 Section 3.11. Legal Holidays.. . . . . . . . . . . . . . . . . . . . . . 37 Section 3.12. CUSIP and CINS Numbers.. . . . . . . . . . . . . . . . . . 38 Section 3.13. Paying Agent To Hold Money in Trust. . . . . . . . . . . . 38 Section 3.14. Treasury Notes.. . . . . . . . . . . . . . . . . . . . . . 38 Section 3.15. Deposits of Monies.. . . . . . . . . . . . . . . . . . . . 39 Section 3.16. Book-Entry Provisions for Global Notes.. . . . . . . . . . 39 Section 3.17. Special Transfer Provisions. . . . . . . . . . . . . . . . 40 ARTICLE FOUR DEFEASANCE OR COVENANT DEFEASANCE Section 4.01. Company's Option To Effect Defeasance or Covenant Defeasance.. . . . . . . . . . . . . . . . . . . . . . . . 43 Section 4.02. Defeasance and Discharge.. . . . . . . . . . . . . . . . . 43 Section 4.03. Covenant Defeasance. . . . . . . . . . . . . . . . . . . . 44 Section 4.04. Conditions to Defeasance or Covenant Defeasance. . . . . . 44 Section 4.05. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous Provisions.. . . . . 47 Section 4.06. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . 48 ARTICLE FIVE REMEDIES Section 5.01. Events of Default. . . . . . . . . . . . . . . . . . . . . 48 Section 5.02. Acceleration of Maturity; Rescission and Annulment.. . . . 50 Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee.. . . . . . . . . . . . . . . . . . 51 Section 5.04. Trustee May File Proofs of Claims. . . . . . . . . . . . . 52 Section 5.05. Trustee May Enforce Claims Without Possession of Notes.. . 53 Section 5.06. Application of Money Collected.. . . . . . . . . . . . . . 53 Section 5.07. Limitation on Suits. . . . . . . . . . . . . . . . . . . . 54 Section 5.08. Unconditional Right of Holders To Receive Principal, Premium and Interest.. . . . . . . . . . . . . . . . . . . 54 Section 5.09. Restoration of Rights and Remedies.. . . . . . . . . . . . 54 Section 5.10. Rights and Remedies Cumulative.. . . . . . . . . . . . . . 55 Section 5.11. Delay or Omission Not Waiver.. . . . . . . . . . . . . . . 55 Section 5.12. Control by Majority. . . . . . . . . . . . . . . . . . . . 55 Section 5.13. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . 56 Section 5.14. Undertaking for Costs. . . . . . . . . . . . . . . . . . . 56 Section 5.15. Waiver of Stay, Extension or Usury Laws. . . . . . . . . . 56 -ii- ARTICLE SIX THE TRUSTEE Page ---- Section 6.01. Certain Duties and Responsibilities. . . . . . . . . . . . 57 Section 6.02. Notice of Defaults.. . . . . . . . . . . . . . . . . . . . 58 Section 6.03. Certain Rights of Trustee. . . . . . . . . . . . . . . . . 58 Section 6.04. Trustee Not Responsible for Recitals, Dispositions of Notes or Application of Proceeds Thereof. . . . . . . . 59 Section 6.05. Trustee and Agents May Hold Notes; Collections; Etc. . . . 60 Section 6.06. Money Held in Trust. . . . . . . . . . . . . . . . . . . . 60 Section 6.07. Compensation and Indemnification of Trustee and Its Prior Claim. . . . . . . . . . . . . . . . . . . . 60 Section 6.08. Conflicting Interests. . . . . . . . . . . . . . . . . . . 61 Section 6.09. Corporate Trustee Required; Eligibility. . . . . . . . . . 61 Section 6.10. Resignation and Removal; Appointment of Successor Trustee. 61 Section 6.11. Acceptance of Appointment by Successor.. . . . . . . . . . 63 Section 6.12. Merger, Conversion, Amalgamation, Consolidation or Succession to Business.. . . . . . . . . . . . . . . . . . 64 Section 6.13. Preferential Collection of Claims Against Company and Guarantors.. . . . . . . . . . . . . . . . . . . . . . 64 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.01. Preservation of Information; Company To Furnish Trustee Names and Addresses of Holders.. . . . . . . . . . 65 Section 7.02. Communications of Holders. . . . . . . . . . . . . . . . . 65 Section 7.03. Reports by Trustee.. . . . . . . . . . . . . . . . . . . . 65 Section 7.04. Reports by Company and Each Guarantor. . . . . . . . . . . 66 ARTICLE EIGHT CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. Section 8.01. Company May Consolidate, etc., Only on Certain Terms.. . . 66 Section 8.02. Successor Substituted. . . . . . . . . . . . . . . . . . . 68 ARTICLE NINE SUPPLEMENTAL INDENTURES AND WAIVERS Section 9.01. Supplemental Indentures, Agreements and Waivers Without Consent of Holders.. . . . . . . . . . . . . . . . 69 Section 9.02. Supplemental Indentures, Agreements and Waivers with Consent of Holders.. . . . . . . . . . . . . . . . . . . . 70 Section 9.03. Execution of Supplemental Indentures, Agreements and Waivers. . . . . . . . . . . . . . . . . . . . . . . . 72 -iii- Page ---- Section 9.04. Effect of Supplemental Indentures. . . . . . . . . . . . . 72 Section 9.05. Conformity with Trust Indenture Act. . . . . . . . . . . . 72 Section 9.06. Reference in Notes to Supplemental Indentures. . . . . . . 72 Section 9.07. Record Date. . . . . . . . . . . . . . . . . . . . . . . . 73 Section 9.08. Revocation and Effect of Consents. . . . . . . . . . . . . 73 ARTICLE TEN COVENANTS Section 10.01. Payment of Principal, Premium and Interest. . . . . . . . 73 Section 10.02. Maintenance of Office or Agency.. . . . . . . . . . . . . 73 Section 10.03. Money for Note Payments To Be Held in Trust.. . . . . . . 74 Section 10.04. Corporate Existence.. . . . . . . . . . . . . . . . . . . 76 Section 10.05. Payment of Taxes and Other Claims.. . . . . . . . . . . . 76 Section 10.06. Maintenance of Properties.. . . . . . . . . . . . . . . . 76 Section 10.07. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . 77 Section 10.08. Books and Records.. . . . . . . . . . . . . . . . . . . . 77 Section 10.09. Guarantees. . . . . . . . . . . . . . . . . . . . . . . . 77 Section 10.10. Provision of Financial Statements.. . . . . . . . . . . . 77 Section 10.11. Change of Control.. . . . . . . . . . . . . . . . . . . . 78 Section 10.12. Limitation on Indebtedness. . . . . . . . . . . . . . . . 81 Section 10.13. Statement by Officers as to Default.. . . . . . . . . . . 84 Section 10.14. Limitation on Restricted Payments.. . . . . . . . . . . . 84 Section 10.15. Limitation on Transactions with Affiliates. . . . . . . . 89 Section 10.16. Limitation on Sale of Assets. . . . . . . . . . . . . . . 90 Section 10.17. Limitation on Liens.. . . . . . . . . . . . . . . . . . . 93 Section 10.18. Limitation on Issuances of Guarantees by Restricted Subsidiaries.. . . . . . . . . . . . . . . . . 94 Section 10.19. Limitation on Preferred Stock of Restricted Subsidiaries. 96 Section 10.20. Limitation on Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries. . . . . . 96 Section 10.21. Limitations on Unrestricted Subsidiaries. . . . . . . . . 97 Section 10.22. Compliance Certificates and Opinions. . . . . . . . . . . 99 Section 10.23. Limitation on Incurrence of Senior Subordinated Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 99 Section 10.24. Application of Fall-Away Covenants. . . . . . . . . . . . 100 ARTICLE ELEVEN SATISFACTION AND DISCHARGE Section 11.01. Satisfaction and Discharge of Indenture.. . . . . . . . . 100 Section 11.02. Application of Trust Money. . . . . . . . . . . . . . . . 101 -iv- ARTICLE TWELVE GUARANTEE OF NOTES Page ---- Section 12.01. Unconditional Guarantee.. . . . . . . . . . . . . . . . . 101 Section 12.02. Subordination of Guarantees.. . . . . . . . . . . . . . . 103 Section 12.03. Execution and Delivery of Guarantee.. . . . . . . . . . . 103 Section 12.04. Additional Guarantors.. . . . . . . . . . . . . . . . . . 103 Section 12.05. Release of a Guarantor. . . . . . . . . . . . . . . . . . 104 Section 12.06. Waiver of Subrogation.. . . . . . . . . . . . . . . . . . 104 Section 12.07. Reliance on Judicial Order or Certificate of Liquidating Agent Regarding Dissolution, etc. of Guarantors.. . . . . 105 Section 12.08. Article Twelve Applicable to Paying Agents. . . . . . . . 105 Section 12.09. No Suspension of Remedies.. . . . . . . . . . . . . . . . 105 Section 12.10. Limitation of Subsidiary Guarantor's Liability. . . . . . 105 Section 12.11. Contribution from Other Guarantors. . . . . . . . . . . . 106 Section 12.12. Obligations Reinstated. . . . . . . . . . . . . . . . . . 106 Section 12.13. No Obligation To Take Action Against the Company. . . . . 106 Section 12.14. Dealing with the Company and Others.. . . . . . . . . . . 106 ARTICLE THIRTEEN REDEMPTIONS AND OFFERS TO PURCHASE Section 13.01. Notice to Trustee. . . . . . . . . . . . . . . . . . . . . 107 Section 13.02. Selection of Notes to Be Redeemed or Purchased.. . . . . . 108 Section 13.03. Notice of Redemption.. . . . . . . . . . . . . . . . . . . 108 Section 13.04. Effect of Notice of Redemption.. . . . . . . . . . . . . . 109 Section 13.05. Deposit of Redemption Price. . . . . . . . . . . . . . . . 109 Section 13.06. Notes Redeemed in Part.. . . . . . . . . . . . . . . . . . 110 Section 13.07. Optional Redemption. . . . . . . . . . . . . . . . . . . . 110 Section 13.08. Procedures Relating to Mandatory Offers. . . . . . . . . . 111 ARTICLE FOURTEEN SUBORDINATION Section 14.01. Agreement to Subordinate. . . . . . . . . . . . . . . . . 112 Section 14.02. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . . 112 Section 14.03. Default on Designated Senior Indebtedness.. . . . . . . . 113 Section 14.04. Acceleration of Notes.. . . . . . . . . . . . . . . . . . 115 Section 14.05. When Distributions Must Be Paid Over. . . . . . . . . . . 115 Section 14.06. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . 115 Section 14.07. Subrogation.. . . . . . . . . . . . . . . . . . . . . . . 116 Section 14.08. Relative Rights.. . . . . . . . . . . . . . . . . . . . . 116 Section 14.09. The Company and Holders May Not Impair Subordination. . . 117 Section 14.10. Distribution or Notice to Representative. . . . . . . . . 118 -v- Page ---- Section 14.11. Rights of Trustee and Paying Agent. . . . . . . . . . . . 118 Section 14.12. Authorization to Effect Subordination.. . . . . . . . . . 118 Section 14.13. Payment.. . . . . . . . . . . . . . . . . . . . . . . . . 119
ARTICLE I TERMS OF INTERCOMPANY NOTE ARTICLE III MISCELLANEOUS -vi- Exhibit A-1 - Form of Series A Note Exhibit A-2 - Form of Series B Note Exhibit B - Form of Legend for Book-Entry Securities Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit D - Form of Guarantee Exhibit E - Form of Intercompany Note _______________ Note: This Table of Contents shall not, for any purpose, be deemed a part of the Indenture. -vii- INDENTURE, dated as of April 24, 1998, among NASH-FINCH COMPANY, a Delaware corporation (the "Company"), as issuer, the Subsidiary Guarantors named herein (the "Guarantors"), as guarantors, and U.S. BANK TRUST NATIONAL ASSOCIATION, as trustee (the "Trustee"). RECITALS The Company has duly authorized the creation of an issue of (i) 8-1/2% Senior Subordinated Notes due 2008, Series A (the "Initial Notes") and (ii) 8-1/2% Senior Subordinated Notes due 2008, Series B (the "Exchange Notes") to be issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement (as defined herein). The Initial Notes, the Exchange Notes and the Private Exchange Notes (as defined herein), if any, are collectively referred to as the "Notes" and are treated as a single class of securities under this Indenture. To provide therefor, the Company has duly authorized the execution and delivery of this Indenture. The Guarantors have duly authorized their senior subordinated guarantees of the Notes and to provide therefor, the Guarantors have duly authorized the execution and delivery of this Indenture and their Guarantees (as defined herein) under the terms set forth herein. All things necessary have been done to make the Notes and the Guarantees, when executed by the Company and the Guarantors, respectively, and authenticated and delivered hereunder and duly issued by the Company and the Guarantors, respectively, the valid obligations of the Company and the Guarantors and to make this Indenture a valid agreement of each of the Company, the Guarantors and the Trustee in accordance with the terms hereof. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Notes by the holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders (as hereinafter defined) of the Notes, as follows: -2- ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01. DEFINITIONS. "ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (i) assumed in connection with an Asset Acquisition from such Person or (ii) existing at the time such Person becomes a Restricted Subsidiary of any other Person (other than any Indebtedness incurred in connection with, or in contemplation of, such Asset Acquisition or such Person becoming such a Restricted Subsidiary). Acquired Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary, as the case may be. "AFFILIATE" means with respect to any specified Person: (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; (ii) any other Person that owns, directly or indirectly, 10% or more of such specified Person's Capital Stock or any officer, director or employee of any such specified Person or other Person or, with respect to any natural Person, any Person having a relationship with such Person by blood, marriage or adoption no more remote than first cousin; or (iii) any other Person 10% or more of the Voting Stock of which is beneficially owned or held directly or indirectly by 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 securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "ASSET ACQUISITION" means (i) an Investment by the Company or any Restricted Subsidiary in any other Person pursuant to which such Person will become a Restricted Subsidiary or will be merged or consolidated with or into the Company or any Restricted Subsidiary or (ii) the acquisition by the Company or any Restricted Subsidiary of the assets of any Person which constitute substantially all of the assets of such Person, or any division or line of business of such Person, or which is otherwise outside of the ordinary course of business. "ASSET SALE" means any sale, issuance, conveyance, transfer, lease or other disposition (including, without limitation, by way of merger, consolidation or sale and leaseback transaction) (collectively, a "transfer"), directly or indirectly, in one or a series of related transactions, of: (i) any Capital Stock of any Subsidiary; (ii) all or substantially all of the properties and assets of any division or line of business of the Company or its Subsidiaries; or (iii) any other properties or assets of the Company or any Subsidiary other than in the ordi- -3- nary course of business. For the purposes of this definition, the term "Asset Sale" shall not include any transfer of properties and assets (a) that is governed by the provisions of Section 8.01; PROVIDED, HOWEVER, that any transaction consummated in compliance with Section 8.01 involving a transfer of less than all of the properties or assets of the Company shall be deemed to be an Asset Sale with respect to the properties or assets of the Company that are not so transferred in such transaction, (b) that is by the Company to any Guarantor, or by any Subsidiary to the Company or any Restricted Subsidiary in accordance with the terms of this Indenture, (c) that is of obsolete equipment in the ordinary course of business, (d) to any Securitization Subsidiary (on a "true sale" non-recourse basis) of any accounts receivable or customer loans receivable of the Company or any Restricted Subsidiary in the ordinary course of business on terms customary for such transactions, but only to the extent that the aggregate amount of such accounts receivable or loans held by all such Securitization Subsidiaries which remain uncollected at any one time does not exceed $125,000,000, or (e) the Fair Market Value of any such Asset Sale not otherwise described in clause (a) through (d) above which in the aggregate does not exceed $10,000,000. "ASSET SALE OFFER" has the meaning set forth in Section 10.16. "ASSET SALE OFFER PURCHASE DATE" has the meaning set forth in Section 10.16. "AVERAGE LIFE TO STATED MATURITY" means, with respect to any Indebtedness, as at any date of determination, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from such date to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund requirements) of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "BANK CREDIT FACILITIES" means the following credit facilities of the Company: (i) Master Note Agreement with Brinson Trust Company dated as of May 16, 1997, (ii) a conditional line of credit from Norwest Bank Minnesota, N.A. dated as of June 24, 1997 and (iii) a line of credit from Wachovia Bank of Georgia, N.A. dated as of December 17, 1996, and, with respect to each, including related notes, guarantees and other agreements executed in connection therewith. "BANKRUPTCY LAW" means Title 11, United States Code or any similar federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or the law of any other jurisdiction 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. -4- "BANKRUPTCY ORDER" means any court order made in a proceeding pursuant to or within the meaning of any Bankruptcy Law, containing an adjudication of bankruptcy or insolvency, or providing for liquidation, receivership, winding-up, dissolution, "concordate" or reorganization, or appointing a Custodian of a debtor or of all or any substantial part of a debtor's property, or providing for the staying, arrangement, adjustment or composition of indebtedness or other relief of a debtor. "BOARD OF DIRECTORS" means the board of directors of the Company or any Guarantor, as the case may be, or any duly authorized committee of such board. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or any Guarantor, as the case may be, to have been duly adopted by its respective Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York, State of New York or Minneapolis, Minnesota are authorized or obligated by law, regulation or executive order to close. "CAPITAL STOCK" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock, whether now outstanding or issued after the date of this Indenture. "CAPITALIZED LEASE OBLIGATION" means any obligation under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "CASH EQUIVALENTS" means, at any time, (i) any evidence of Indebtedness with a maturity of not more than one year issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or acceptances with a maturity of not more than one year of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; (iii) commercial paper with a maturity of not more than one year issued by a corporation that is not an Affiliate of the Company organized under the laws of any state of the United States or the District of Columbia and rated at least -5- A-1 by Standard & Poor's Corporation or at least P-1 by Moody's Investors Service, Inc.; and (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (i) and (ii) above entered into with any financial institution meeting the qualifications specified in clause (ii) above. "CEDEL" means Cedel Bank, SOCIETE ANONYME. "CHANGE OF CONTROL" means the occurrence of any of the following events (whether or not approved by the Board of Directors of the Company): (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities 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 35% or more of the total voting power of the then outstanding Voting Stock of the Company; (ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the board of directors of the Company (together with any new directors whose election to such board 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; (iii) the Company consolidates with or merges with or into any person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person, or any corporation 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 solely 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 and 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 in Section 10.14 (and such amount shall be treated as a Restricted Payment subject to the provisions of Section 10.14), (B) no "person" or "group" owns immediately after such transaction, directly or indirectly, 35% or more of the total outstanding Voting Stock of the surviving corporation and (C) the holders of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the total voting power of the then outstanding Voting Stock of the surviving or transferee corporation immediately after such transaction; or (iv) any order, judgment or decree shall be entered against the -6- Company decreeing the dissolution or split up of the Company and such order shall remain undischarged or unstayed for a period in excess of sixty days. "CHANGE OF CONTROL OFFER" has the meaning set forth in Section 10.11. "COMMODITY PRICE PROTECTION AGREEMENT" means any forward contract, commodity swap, commodity option or other similar financial agreement or arrangement relating to, or the value of which is dependent upon, fluctuations in commodity prices. "COMMISSION" means the Securities and Exchange Commission, as from time to time constituted, or if at any time after the execution of this Indenture such Commission is not existing and performing the applicable duties now assigned to it, then the body or bodies performing such duties at such time. "COMPANY" means the Person named as the "Company" in the first paragraph of this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "COMPANY REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by any one of its Chief Executive Officer, its President or a Vice President, and by its Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer or its chief financial officer, and delivered to the Trustee. "CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any period, (i) the sum of, without duplication, the amounts for such period, taken as a single accounting period, of (a) Consolidated Net Income, (b) to the extent reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to the extent reducing Consolidated Net Income, Consolidated Interest Expense, and (d) to the extent reducing Consolidated Net Income, Consolidated Income Tax Expense less (ii) other non-cash items increasing Consolidated Net Income for such period. "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means the ratio of the aggregate amount of Consolidated Cash Flow Available for Fixed Charges of the Company for the four full fiscal quarters immediately preceding the date of the transaction (the "Transaction Date") giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which consolidated financial information of the Company is available (such four full fiscal quarter period being referred to herein as the "Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges of the Company for such Four Quarter Period. For purposes of this definition, "Consolidated Cash Flow Available for Fixed Charges" and "Consolidated Fixed Charges" will be calculated, without duplication, after giving effect on a PRO FORMA basis for the period of such calculation to (i) the incurrence of any Indebtedness of the Company or -7- any of the Restricted Subsidiaries during the period commencing on the first day of the Four Quarter Period to and including the Transaction Date (the "Reference Period"), including, without limitation, the incurrence of the Indebtedness giving rise to the need to make such calculation, as if such incurrence occurred on the first day of the Reference Period, except that with respect to the calculation of Consolidated Interest Expense in the determination of Consolidated Fixed Charges, the Consolidated Interest Expense of such Person 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 Reference Period, (ii) an adjustment to eliminate or include, as applicable, the Consolidated Cash Flow Available for Fixed Charges and Consolidated Fixed Charges of the Company directly attributable to assets which are the subject of any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Company or one of the Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring Acquired Indebtedness) occurring during the Reference Period, as if such Asset Sale or Asset Acquisition occurred on the first day of the Reference Period and (iii) the retirement of Indebtedness during the Reference Period which cannot thereafter be reborrowed occurring as if retired on the first day of the Reference Period. In calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter will be deemed to accrue at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date shall be deemed to have been in effect during the Reference Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by Interest Rate Agreements, will be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. If the Company or any Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the above definition will give effect to the incurrence of such guaranteed Indebtedness as if the Company or any Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness. "CONSOLIDATED FIXED CHARGES" means, for any period, the sum of, without duplication, the amounts for such period of (i) Consolidated Interest Expense; and (ii) the aggregate amount of cash dividends and other distributions paid or accrued during such period in respect of Redeemable Capital Stock and Preferred Stock of the Company. -8- "CONSOLIDATED INCOME TAX EXPENSE" means, for any period, the provision for federal, state, local and foreign income taxes payable by the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, for any period, without duplication, the sum of (a) the interest expense of the Company and the Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (i) any amortization of debt discount attributable to such period, (ii) the net cost under or otherwise associated with Interest Rate Agreements, Currency Agreements and Commodity Price Protection Agreements (in each case, including any amortization of discounts), (iii) the interest portion of any deferred payment obligation, (iv) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (v) all capitalized interest and all accrued interest, and (b) all but the principal component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the Company and the Restricted Subsidiaries during such period and as 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 the Restricted Subsidiaries for such period on a consolidated basis as determined in accordance with GAAP, adjusted, to the extent included in calculating such net income (or loss), by excluding, without duplication, (i) all extraordinary gains or losses (net of all fees and expenses relating thereto), (ii) the portion of net income (or loss) of the Company and its Restricted Subsidiaries on a consolidated basis allocable to minority interests in unconsolidated Persons, except to the extent that cash dividends or distributions are actually received by the Company or a Restricted Subsidiary, (iii) income of the Company and the Restricted Subsidiaries derived from or in respect of Investments in Unrestricted Subsidiaries, except to the extent that cash dividends or distributions are actually received by the Company or a Restricted Subsidiary, (iv) net income (or loss) of any Person combined with the Company or any of the Restricted Subsidiaries on a "pooling of interests" basis attributable to any period prior to the date of combination, (v) any gain or loss, net of taxes, realized upon the termination of any employee pension benefit plan, (vi) net gains (or losses), net of taxes, less all fees and expenses relating thereto, in respect of any Asset Sales by the Company or a Restricted Subsidiary, (vii) the net income of any Restricted Subsidiary to the extent that the declaration of dividends or similar distributions by that Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (viii) any restoration to income of any contingency reserve except to the extent provision for such reserve was made out of income accrued at any time following the Issue Date, (ix) any gain, arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness of the Company, -9- (x) the net gain or loss resulting from the Prepayments (as defined in the Offering Memorandum relating to the sale of the Notes) and (xi) the net non-cash compensation expense incurred in connection with the issuance or exercise of any employee stock options the issuance of which was approved by the board of directors of the Company. "CONSOLIDATED NET SALES" means, for any period, the consolidated net sales of the Company and the Restricted Subsidiaries as determined in accordance with GAAP. "CONSOLIDATED NON-CASH CHARGES" means, for any period, the aggregate depreciation, amortization and other non-cash expenses of the Company and the Restricted Subsidiaries reducing Consolidated Net Income for such period (other than any non-cash item requiring an accrual or reserve for cash disbursements in any future period), determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED TANGIBLE ASSETS" means, at any date, the total assets, less goodwill and other intangibles, of the Company and the Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP as of the most recent date for which a consolidated balance sheet of the Company is available. "CONSOLIDATION" means, with respect to any Person, the consolidation of the accounts of its Restricted Subsidiaries with those of such Person, all in accordance with GAAP; PROVIDED, HOWEVER, that "consolidation" will not include consolidation of the accounts of any Unrestricted Subsidiary with the accounts of such Person. The term "consolidated" has a correlative meaning to the foregoing. "CONTROL" means, with respect to any specified Person, the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "CORPORATE TRUST OFFICE" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at First Trust Center, 180 East Fifth Street, Saint Paul, Minnesota, Attention: Richard Prokosch/Corporate Trust Administration. "COVENANT DEFEASANCE" has the meaning set forth in Section 4.03. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or its Restricted Subsidiaries against fluctuations in currency values. -10- "CUSTODIAN" means any receiver, interim receiver, receiver and manager, receiver-manager, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law or any other law respecting secured creditors and the enforcement of their security or any other Person with like powers whether appointed judicially or out of court and whether pursuant to an interim or final appointment. "DEFAULT" means any event that is, or after notice or passage of time or both would be, an Event of Default. "DEFEASANCE" has the meaning set forth in Section 4.02. "DEPOSITORY" means The Depository Trust Company, its nominees and successors. "DESIGNATED SENIOR INDEBTEDNESS" means (a) all Senior Indebtedness outstanding under the Revolving Credit Facility and (b) any other Senior Indebtedness which, at the time of determination, is specifically designated in the instrument governing such Senior Indebtedness as "Designated Senior Indebtedness" by the Company. "DESIGNATION" has the meaning set forth in Section 10.21. "DESIGNATION AMOUNT" has the meaning set forth in Section 10.21. "DISINTERESTED DIRECTOR" means, with respect to any transaction or series of related transactions, a member of the board of directors of the Company who does not have any material direct or indirect financial interest in or with respect to such transaction or series of related transactions. "EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System. "EVENT OF DEFAULT" has the meaning set forth in Section 5.01. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission thereunder. "EXCHANGE NOTES" means the 8-1/2% Senior Subordinated Notes due 2008, Series B, to be issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. "EXCHANGE OFFER" shall have the meaning specified in the Registration Rights Agreement. -11- "FAIR MARKET VALUE" means, with respect to any asset or property, the price which could be negotiated in an arm's-length transaction, for cash, between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy. Fair Market Value shall be determined by the Board of Directors of the Company acting in good faith evidenced by a Board Resolution thereof delivered to the Trustee. "FOUR QUARTER PERIOD" has the meaning set forth in the definition of "Consolidated Fixed Charge Coverage Ratio." "GAAP" means, at any date of determination, generally accepted accounting principles in effect in the United States which are applicable at the date of determination and which are consistently applied for all applicable periods. "GLOBAL NOTES" means one or more Regulation S Global Notes and 144A Global Notes. "GUARANTEE" means, as applied to any obligation, (i) a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of all or any part of such obligation, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit. A guarantee shall include, without limitation, any agreement to maintain or preserve any other Person's financial condition or to cause any other Person to achieve certain levels of operating results. "GUARANTEE" means the guarantee by any Guarantor of both the Company's obligations under this Indenture and the Notes pursuant to a guarantee given in accordance with this Indenture. "GUARANTOR" means (i) each of Nash DeCamp Company, T.J. Morris Company, Super Food Services, Inc., Forrest Transportation Services, Inc., GTL Truck Lines, Inc., Piggly Wiggly Northland Corporation, Gillette Dairy of the Black Hills, Inc. and Nebraska Dairies, Inc. and their respective successors and (ii) any Person that executes or is required after the Issue Date to execute a guarantee of the Notes pursuant to this Indenture until a successor replaces such party pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor; PROVIDED that for purposes hereof, the term "Guarantor" shall not include any Unrestricted Subsidiary unless specifically provided otherwise. -12- "HOLDER" or "NOTEHOLDER" means a Person in whose name a Note is registered in the Note Register. "INCUR" has the meaning set forth in Section 10.12. "Incurrence," "incurred" and "incurring" shall have the meanings correlative to the foregoing. "INDEBTEDNESS" means, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, excluding any trade payables and other accrued current liabilities incurred or 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, bankers acceptance or other similar credit transaction and in connection with any agreement to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such Person, or any warrants, rights or options to acquire such Capital Stock, now or hereafter outstanding, (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade payables arising in the ordinary course of business, (iv) all Capitalized Lease Obligations of such Person, (v) all Indebtedness referred to in clauses (i) through (iv) above of other Persons and all dividends of other Persons, to the extent 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, (vi) all guarantees of Indebtedness by such Person, (vii) except for purposes of Section 10.14, all Redeemable Capital Stock issued by such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends, (viii) all obligations under Interest Rate Agreements, Currency Agreements or Commodity Price Protection Agreements of such Person (net of any payments owed to such Person thereunder to the extent such Person's obligations thereunder are subject to offset by the amount of payments owed to such Person thereunder), and (ix) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing of any liability of the types referred to in clauses (i) through (viii) above. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Redeemable Capital Stock, such -13- Fair Market Value shall be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock. "INDENTURE" means this instrument as originally executed (including all exhibits and schedules hereto) and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "INDENTURE OBLIGATIONS" means the obligations of the Company and any other obligor under this Indenture or under the Notes, to pay principal of, premium, if any, and interest on the Notes when due and payable, whether at maturity, by acceleration, call for redemption or repurchase or otherwise, and all other amounts due or to become due under or in connection with this Indenture, the Notes or the Guarantees and the performance of all other obligations to the Trustee (including, but not limited to, payment of all amounts due the Trustee under Section 6.07 hereof) and the Holders of the Notes under this Indenture, the Notes and the Guarantees, according to the terms thereof. "INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized accounting, appraisal or investment banking firm (i) which does not, and whose directors, officers and employees or Affiliates do not have, a direct or indirect financial interest in the Company and (ii) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "INITIAL NOTES" means the 8-1/2% Senior Subordinated Notes due 2008, Series A, of the Company. "INITIAL PURCHASERS" means Merrill Lynch, Pierce, Fenner & Smith Incorporated, Nesbitt Burns Securities Inc., and Piper Jaffray Inc. "INTEREST" means, when used with respect to any Note, the amount of all interest accruing on such Note, including all additional interest payable on the Notes pursuant to the Registration Rights Agreement and all interest accruing subsequent to the occurrence of any events specified in Sections 5.01(h), (i) and (j) or which would have accrued but for any such event, whether or not such claims are allowable under applicable law. "INTEREST PAYMENT DATE" means, when used with respect to any Note, the Stated Maturity of an installment of interest on such Note, as set forth in such Note. "INTEREST RATE AGREEMENTS" means one or more of the following agreements which shall be entered into by one or more financial institutions: obligations of any Person pursuant to any arrangement with any other Person whereby, directly or indirectly, such -14- Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or a floating rate of interest on the same notional amount or any other arrangement involving payments by or to such Person based upon fluctuations in interest rates (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) and/or other types of interest rate hedging agreements from time to time. "INVESTMENT" means, with respect to any Person, any direct or indirect advance, loan or other extension of credit (including by means of a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others or otherwise), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other Person and all other items that would be classified as investments on a balance sheet prepared in accordance with GAAP. Investments shall exclude extensions of trade credit on commercially reasonable terms in accordance with normal trade practices. In addition to the foregoing, any Currency Agreement, Interest Rate Agreement, Commodity Price Protection Agreement or similar agreement shall constitute an Investment in the net amount required to be set forth on such Person's balance sheet in accordance with GAAP. Upon the sale of any portion of the Capital Stock of any Restricted Subsidiary by the Company or any other Restricted Subsidiary, the Company or such other Restricted Subsidiary shall be deemed to have made an Investment in the amount of its remaining Investment, if any, in such Person. "INVESTMENT GRADE RATING" means a rating of BBB- and Baa3 or higher, in each case by the applicable Rating Agency, or the equivalents thereof. "ISSUE DATE" means the original issue date of the Notes hereunder. "LIEN" means any mortgage or deed of trust, charge, pledge, lien (statutory or other), privilege, security interest, hypothecation, cessation and transfer, lease of real property, assignment for security, claim, deposit arrangement, or preference or priority or other encumbrance upon or with respect to any property of any kind (including any conditional sale, capital lease or other title retention agreement, any leases in the nature thereof, and any agreement to give any security interest), whether real, personal or mixed, movable or immovable, now owned or hereafter acquired. A Person shall be deemed to own subject to a Lien any property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. -15- "MATERIAL SUBSIDIARY" means each Restricted Subsidiary of the Company that is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act and the Exchange Act (as such regulation is in effect on the Issue Date). "MATURITY DATE" means, with respect to any Note, the date on which any principal of such Note becomes due and payable as therein or herein provided, whether at the Stated Maturity with respect to such principal or by declaration of acceleration, call for redemption or purchase or otherwise. "NET CASH PROCEEDS" means (a) with respect to any Asset Sale by any Person, the proceeds thereof (without duplication in respect of all Asset Sales) in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed of for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary) net of (i) brokerage commissions and other reasonable fees and expenses (including fees and expenses of legal counsel and investment bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale, (iii) payments made to retire Indebtedness where payment of such Indebtedness is secured by the assets or properties the subject of such Asset Sale, (iv) amounts required to be paid to any Person (other than the Company or any Restricted Subsidiary) owning a beneficial interest in or having a Lien on the assets subject to the Asset Sale and (v) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale (provided that the amount of any such reserves shall be deemed to constitute Net Cash Proceeds at the time such reserves shall have been released or are not otherwise required to be retained as a reserve), all as reflected in an Officers' Certificate delivered to the Trustee and (b) with respect to any issuance or sale of shares of Capital Stock that have been converted into or exchanged for shares of Capital Stock as referred to Section 10.14, the proceeds of such issuance or sale in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of, or stock or other assets when disposed of for, cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), net of attorney's fees, accountant's fees and brokerage, consultation, underwriting and other fees and expenses actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "NON-U.S. PERSON" has the meaning assigned to such term in Regulation S. -16- "NOTES" shall have the meaning specified in the Recitals of this Indenture. "OFFER" means a Change of Control Offer made pursuant to Section 10.11 or an Asset Sale Offer made pursuant to Section 10.16. "OFFERING MEMORANDUM" means the Offering Memorandum dated April 20, 1998 pursuant to which the Notes and the Guarantees were offered, and any supplement thereto. "OFFICER" means, with respect to the Company or any Guarantor, the Chief Executive Officer, the President, a Vice President, the Secretary, an Assistant Secretary, the Treasurer, an Assistant Treasurer, or the Chief Financial Officer. "OFFICERS' CERTIFICATE" means a certificate signed by the Chief Executive Officer, the President, the Chief Financial Officer or a Vice President, and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of the Company or any Guarantor, as the case may be, and delivered to the Trustee. "144A GLOBAL NOTE" means a permanent global note in registered form representing the aggregate principal amount of Notes sold in reliance on Rule 144A under the Securities Act. "OPINION OF COUNSEL" means a written opinion of counsel who may be counsel for the Company, a Guarantor, or the Trustee, and who shall be reasonably acceptable to the Trustee. "OUTSTANDING" means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except: (i) Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company or any Guarantor or any Affiliate thereof) in trust or set aside and segregated in trust by the Company or any Guarantor or any Affiliate thereof (if the Company or such Guarantor or Affiliate shall act as Paying Agent) for the Holders of such Notes; PROVIDED, HOWEVER, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; -17- (iii) Notes with respect to which the Company has effected defeasance or covenant defeasance as provided in Article Four, to the extent provided in Sections 4.02 and 4.03; and (iv) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands the Notes are valid obligations of the Company; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company, any Guarantor or any other obligor upon the Notes or any Affiliate of the Company, any Guarantor or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Trustee knows to be so owned shall be so disregarded. The Company shall notify the Trustee, in writing, when it repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act as a Holder with respect to such Notes and that the pledgee is not the Company, any Guarantor or any other obligor upon the Notes or any Affiliate of the Company, any Guarantor or such other obligor. If the Paying Agent holds, in its capacity as such, on any Maturity Date or on any optional redemption date money sufficient to pay all accrued interest and principal with respect to such Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be Outstanding and interest on them ceases to accrue. Notes may also cease to be outstanding to the extent expressly provided in Article Four. "PARI PASSU INDEBTEDNESS" means (a) any Indebtedness of the Company which ranks PARI PASSU in right of payment to the Notes and (b) with respect to any Guarantor, Indebtedness which ranks PARI PASSU in right of payment to the Guarantee of such Guarantor. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 10.12. "PERMITTED INVESTMENTS" means (a) Cash Equivalents; (b) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers' compensation, performance and other similar deposits; (c) loans and advances to employees and sales representatives made in the ordinary course of business not to exceed $1,000,000 in the aggre- -18- gate at any one time outstanding; (d) Interest Rate Agreements, Currency Agreements and Commodity Price Protection Agreements permitted under clause (vii) or (viii) of the second paragraph of Section 10.12, (e) Investments represented by accounts receivable created or acquired in the ordinary course of business; (f) loans or advances to vendors in the ordinary course of business in an amount not to exceed $10,000,000 at any time; (g) Investments existing on the Issue Date and any renewal or replacement thereof on terms and conditions no less favorable in any respect than that existing on the Issue Date; (h) any Investment to the extent that the consideration therefor is Qualified Capital Stock of the Company; (i) bonds, notes, debentures or other securities or other non-cash proceeds received in connection with an Asset Sale permitted under Section 10.16 not to exceed 20% of the total consideration in such Asset Sale; (j) Investments in the form of the sale (on a "true sale" non-recourse basis) or the servicing of receivables transferred from the Company or any Guarantor, or transfer of cash, to a Securitization Subsidiary as a capital contribution or in exchange for Indebtedness of such Securitization Subsidiary in the ordinary course of business consistent with past practice on terms customary for such transactions); (k) Indebtedness permitted under clauses (iv), (v) and (vi) of the second paragraph of Section 10.12; and (l) Investments in any of the Notes or any other debt securities of the Company not otherwise prohibited by this Indenture. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PREDECESSOR NOTE" means, with respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 3.07 hereof in exchange for a mutilated Note or in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "PREFERRED STOCK" means, with respect to any Person, Capital Stock of any class or, classes (however designated) of such Person which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Capital Stock of any other class of such Person. "PRIVATE EXCHANGE SECURITIES" shall have the meaning specified in the Registration Rights Agreement. "PRIVATE PLACEMENT LEGEND" shall mean the first paragraph of the legend initially set forth in the Securities in the form set forth on Exhibit A-1. "PUBLIC EQUITY OFFERING" has the meaning set forth in Section 13.07. -19- "PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a Lien on assets related to the business of the Company and the Restricted Subsidiaries and any additions and accessions thereto, which are purchased by the Company or any Restricted Subsidiary at any time after the Notes are issued; PROVIDED that (i) the security agreement or conditional sales or other title retention contract pursuant to which the Lien on such assets is created (collectively, a "Purchase Money Security Agreement") shall be entered into within 180 days after the purchase or substantial completion of the construction of such assets and shall at all times be confined solely to the assets so purchased or acquired, any additions and accessions thereto and any proceeds therefrom except that, in the case of land upon which a supermarket is constructed, such Purchase Money Security Agreement may be entered into within 180 days after the substantial completion of such supermarket, (ii) at no time shall the aggregate principal amount of the outstanding Indebtedness secured thereby be increased, except in connection with the purchase of additions and accessions thereto and except in respect of fees and other obligations in respect of such Indebtedness and (iii) (A) the aggregate outstanding principal amount of Indebtedness secured thereby (determined on a per asset basis in the case of any additions and accessions) shall not at the time such Purchase Money Security Agreement is entered into exceed 90% of the purchase price to the Company and its Restricted Subsidiaries of the assets subject thereto or (B) the Indebtedness secured thereby shall be with recourse solely to the assets so purchased or acquired, any additions and accessions thereto and any proceeds therefrom. "QUALIFIED CAPITAL STOCK" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock. "QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "RATING AGENCIES" means (i) Standard & Poor's Ratings Group and (ii) Moody's Investors Service, Inc. or (iii) if Standard & Poor's Ratings Group or Moody's Investors Service, Inc. or both shall not make a rating of the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for Standard & Poor's Ratings Group, Moody's Investors Service, Inc. or both, as the case may be. "REDEEMABLE CAPITAL STOCK" means any class or series of Capital Stock to the extent that, either by its terms, by the terms of any security into which it is convertible or exchangeable, or by contract 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 such Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such Stated Maturity. -20- "REFERENCE PERIOD" has the meaning set forth in the definition of "Consolidated Fixed Charge Coverage Ratio." "REGISTRABLE SECURITIES" shall have the meaning specified in the Registration Rights Agreement. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated as of April 24, 1998 by and among the Company, the Guarantors and the Initial Purchasers, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "REGULAR RECORD DATE" means the Regular Record Date specified in the Notes. "REGULATION S" means Regulation S under the Securities Act. "REGULATION S GLOBAL NOTE" means a permanent global note in registered form representing the aggregate principal amount of Notes sold in reliance on Regulation S under the Securities Act. "REORGANIZATION SECURITIES" means , with respect to any insolvency or liquidation proceeding involving the Company, Capital Stock or other securities of the Company as reorganized or readjusted (or Capital Stock or any other securities of any other Person provided for by a plan of reorganization or readjustment) that are subordinated, at least to the same extent as the Notes, to the payment of all outstanding Senior Indebtedness after giving effect to such plan of reorganization or readjustment; PROVIDED, HOWEVER, that if debt securities such securities shall not provide for amortization (including sinking fund and mandatory prepayment provisions) commencing prior to three months following the final scheduled maturity of all Senior Debt of the Company (as modified by such plan of reorganization or readjustment). "RESPONSIBLE OFFICER" means, with respect to the Trustee, the chairman or vice chairman of the board of directors, the chairman or vice chairman of the executive committee of the board of directors, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller and any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. -21- "RESTRICTED NOTE" means a Note that constitutes a "restricted security" within the meaning of Rule 144(a)(3) under the Securities Act; PROVIDED, HOWEVER, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Note. "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "REVOCATION" has the meaning set forth in Section 10.21. "REVOLVING CREDIT FACILITY" means the Credit Agreement dated as of October 8, 1996, as amended, among the Company, Harris Trust and Savings Bank, as administrative agent, and the other financial institutions signatory thereto, as in effect on the Issue Date, and includes related notes, guarantees and other agreements executed in connection therewith. "RULE 144A" means Rule 144A under the Securities Act. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission thereunder. "SECURITIZATION SUBSIDIARY" means any Unrestricted Subsidiary of the Company which engages in no business, activity or transaction other than (i) acquiring accounts or customer loans receivable of the Company or any Restricted Subsidiary, (ii) incurring Indebtedness which is without credit recourse and which is secured solely by, or selling (on a "true sale" non-recourse basis) interests in, such accounts or customer loans receivable and (iii) immediately paying all of the proceeds of such Indebtedness or sale of interests to the Company or such Restricted Subsidiary as payment for accounts or customer loans receivable of the Company or such Restricted Subsidiary. "SENIOR INDEBTEDNESS" means, with respect to the Company or any Guarantor, as applicable, the principal of, premium, if any, and interest on any Indebtedness of the Company or such Guarantor, as the case may be, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to any Indebtedness of the Company or such Guarantor, as the case may be. Without limiting the generality of the foregoing, "Senior Indebtedness" will include the principal of, premium, if any, and interest (including interest that would accrue but for the filing of a petition initiating any proceeding under any state or federal bankruptcy laws, whether or not such claim is allowable in such proceeding) on all obligations of every nature of the Company or such Guarantor, as the case may be, from time to time owed to the lenders under the Revolving Credit Facility, in- -22- cluding, without limitation, principal of and interest on, and all fees and expenses payable under the Revolving Credit Facility. Notwithstanding the foregoing, "Senior Indebtedness" shall not include, to the extent constituting Indebtedness, (i) Indebtedness evidenced by the Notes or the Guarantors, (ii) Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company or any Guarantor, (iii) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company or any Guarantor, (iv) Indebtedness which is represented by Redeemable Capital Stock, (v) Indebtedness for goods, materials or services purchased in the ordinary course of business or Indebtedness consisting of trade payables or other current liabilities (other than any current liabilities owing under the Revolving Credit Facility or the current portion of any long-term Indebtedness which would constitute Senior Indebtedness but for the operation of this clause (v)), (vi) Indebtedness of or amounts owed by the Company or any Guarantor for compensation to employees or for services rendered to the Company or such Guarantor, (vii) any liability for federal, state, local or other taxes owed or owing by the Company or any Guarantor, (viii) Indebtedness of the Company or any Guarantor to a Subsidiary of the Company, and (ix) that portion of any Indebtedness which at the time of issuance is issued in violation of this Indenture. "SPECIAL RECORD DATE" means, with respect to the payment of any Defaulted Interest, a date fixed by the Trustee pursuant to Section 3.08 hereof. "STATED MATURITY" means, with respect to any Note or any installment of interest thereon, the dates specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable and, when used with respect to any other Indebtedness, means the date specified in the instrument governing such Indebtedness as the fixed date on which the principal of such Indebtedness, or any installment of interest, is due and payable. "SUBORDINATED INDEBTEDNESS" means, with respect to the Company, Indebtedness of the Company which is expressly subordinated in right of payment to the Notes or, with respect to any Guarantor, Indebtedness of such Guarantor which is expressly subordinated in right of payment to the Guarantee of such Guarantor. "SUBSIDIARY" means, with respect to any Person, (a) any corporation of which the outstanding shares of Voting Stock having at least a majority of the votes entitled to be cast in the election of directors shall at the time be owned, directly or indirectly, by such Person, or (b) any other Person of which at least a majority of the shares of Voting Stock are at the time, directly or indirectly, owned by such first named Person. "SURVIVING PERSON" means, with respect to any Person involved in any consolidation or merger, or any sale, assignment, conveyance, transfer, lease or other disposition of -23- all or substantially all of its properties and assets as an entirety, the Person formed by or surviving such merger or consolidation or the Person to which such sale, assignment, conveyance, transfer or lease is made. "TRANSACTION DATE" has the meaning set forth in the definition of "Consolidated Fixed Charge Coverage Ratio." "TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939, as amended. "TRUSTEE" means the Person named as the "Trustee" in the first paragraph of this Indenture, until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "UNRESTRICTED NOTES" means one or more Notes that do not and are not required to bear the Private Placement Legend in the form set forth in Exhibit A, including, without limitation, the Exchange Notes. "UNRESTRICTED SUBSIDIARY" means (i) each Securitization Subsidiary and its Subsidiaries and (ii) each Subsidiary of the Company (other than a Guarantor) designated as such pursuant to and in compliance with Section 10.21, and each Subsidiary of each such Subsidiary of the Company. Any such designation may be revoked by a Board Resolution of the Company delivered to the Trustee, subject to the provisions of such Section 10.21. "UNUTILIZED NET CASH PROCEEDS" has the meaning set forth in Section 10.16. "U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof at any time prior to the Stated Maturity of the Notes, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; PROVIDED, HOWEVER, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. -24- "VOTING STOCK" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors, managers or trustees of any 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 any Restricted Subsidiary of which 100% of the outstanding Capital Stock is owned by the Company and/or another Wholly-Owned Restricted Subsidiary. For purposes of this definition, any directors' qualifying shares shall be disregarded in determining the ownership of a Restricted Subsidiary. Section 1.02. OTHER DEFINITIONS.
Defined in Term Section ---- ---------- "Act" 1.05 "Affiliate Transaction" 10.15 "Agent Member" 3.16 "Change of Control Date" 10.11 "Change of Control Purchase Date" 10.11 "Change of Control Purchase Price" 10.11 "Defaulted Interest" 3.08 "Defeased Notes" 4.01 "insolvent Person" 4.04 "Non-payment Default" 14.03 "Note Register" 3.06 "Registrar" 3.03 "Paying Agent" or "Agent" 3.03 "Payment Blockage Period" 14.03 "Physical Notes" 3.04 "Required Filling Dates" 10.10 "Restricted Payments" 10.14 "Restricted Period" 3.17
Section 1.03. RULES OF CONSTRUCTION. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: -25- (a) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (e) all references to "$" or "dollars" refer to the lawful currency of the United States of America; and (f) the words "include," "included" and "including" as used herein are deemed in each case to be followed by the phrase "without limitation." Section 1.04. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company or any Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or any Guarantor stating that the information with respect to such factual matters is in the possession of the Company or any Guarantor, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this -26- Indenture, they may, but need not, be consolidated, with proper identification of each matter covered therein, and form one instrument. Section 1.05. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in Person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution (as provided below in subsection (b) of this Section 1.05) of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01 hereof) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind every future Holder of the same Note or the Holder of every Note issued upon the transfer thereof or in exchange therefor or in lieu thereof to the same extent as the original Holder, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Company or any Guarantor in reliance thereon, whether or not notation of such action is made upon such Note. Section 1.06. NOTICES, ETC., TO THE TRUSTEE, THE COMPANY AND THE GUARANTORS. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holder or by the Company or any Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed, in writing, to or with the Trustee at First Trust Center, 180 East Fifth Street, St. Paul, MN 55101, Attention: Richard Prokosch (Assistant Vice President) or at any other address previ- -27- ously furnished in writing to the Holders, the Company and the Guarantors by the Trustee; or (b) the Company or a Guarantor by the Trustee or by any Holder shall be sufficient for every purpose (except as otherwise expressly provided herein) hereunder if in writing and mailed, first-class postage prepaid, to the Company or such Guarantor addressed to it at Nash-Finch Company, P.O. Box 355, Minneapolis, MN 55440-0355, Attention: Chief Executive Officer, or at any other address previously furnished in writing to the Trustee by the Company. Section 1.07. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice when mailed to a Holder in the aforesaid manner shall be conclusively deemed to have been received by such Holder whether or not actually received by such Holder. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event as required by any provision of this Indenture, then any method of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. Section 1.08. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or conflicts with any provision of the Trust Indenture Act or another provision which is required or deemed to be included in this Indenture by any of the provisions of the Trust Indenture Act, such provision or requirement of the Trust Indenture Act shall control. -28- If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. Section 1.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.10. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company and the Guarantors, shall bind their respective successors and assigns, whether so expressed or not. Section 1.11. SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Notes or any Guarantee issued pursuant hereto 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 1.12. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Notes or in any Guarantee issued pursuant hereto, express or implied, shall give to any Person (other than the parties hereto and their successors hereunder, any Paying Agent and the Holders) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.13. GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. Section 1.14. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company or of a Guarantor shall not have any liability for any obligations of the Company or a Guarantor under the Notes, the Guarantee or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. -29- Section 1.15. INDEPENDENCE OF COVENANTS. All covenants and agreements in this Indenture shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default if such action is taken or condition exists. Section 1.16. EXHIBITS. All exhibits attached hereto are by this reference made a part hereof with the same effect as if herein set forth in full. Section 1.17. COUNTERPARTS. This Indenture may be executed in any number of counterparts and by telecopier, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. Section 1.18. DUPLICATE 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. ARTICLE TWO NOTE AND GUARANTEE FORMS Section 2.01. FORM AND DATING. The Notes and the Trustee's certificate of authentication with respect thereto and the Guarantees shall be in substantially the forms set forth, or referenced, in Exhibit A-1, Exhibit A-2 and Exhibit D, respectively, annexed hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any applicable law or with the rules of the Depository, any clearing agency or any securities exchange or as may, consistently herewith, be determined by the officers executing such Notes and Guarantees, as evidenced by their execution thereof. -30- The definitive Notes and Guarantees shall be printed, typewritten, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Notes and such Guarantees may be listed, all as determined by the officers executing such Notes and Guarantees, as evidenced by their execution of such Notes and Guarantees. Each Note shall be dated the date of its issuance and shall show the date of its authentication. The terms and provisions contained in the Notes shall constitute, and are expressly made, a part of this Indenture. ARTICLE THREE THE NOTES Section 3.01. TITLE AND TERMS. PRINCIPAL AMOUNT. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to $165,000,000 in aggregate principal amount of Notes, except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 3.04, 3.05, 3.06, 3.07, 9.06, 10.11, 10.16 or 13.06 MATURITY AND INTEREST. The Notes will mature on May 1, 2008. Interest on the Notes will accrue at the rate of 8-1/2% per annum and will be payable semi-annually on each May 1 and November 1, commencing November 1, 1998, to the holders of record of Notes at the close of business on the April 15 and October 15, respectively, immediately preceding such 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 Issue Date. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. Pursuant to the Registration Rights Agreement, the interest rate on the Notes is subject to increase under certain circumstances if the Company is not in compliance with its obligations under the Registration Rights Agreement. At the election of the Company, the entire Indebtedness on the Notes or certain of the Company's obligations and covenants and certain Events of Default thereunder may be defeased as provided in Article Four. The terms and provisions contained in the Notes annexed hereto as Exhibits A-1 and A-2 (including the Guarantees annexed hereto as Exhibit D) shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Com- -31- pany, 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. Section 3.02. OPTIONAL REDEMPTION. The Notes will be redeemable at the option of the Company as set forth in the Notes and in Article Thirteen. Section 3.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency (which shall be located in the Borough of Manhattan in The City of New York, State of New York) where Notes may be presented for registration of transfer or for exchange (the "Registrar"), an office or agency (which shall be located in the Borough of Manhattan in The City of New York, State of New York) where Notes may be presented for payment (the "Paying Agent" or "Agent") and an office or agency where notices and demands to or upon the Company in respect of the Notes, the Guarantees and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" or "Agent" includes any additional paying agent. The Company may act as its own Paying Agent, except for the purposes of payments on account of principal on the Notes pursuant to Sections 10.11 and 10.16 hereof. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the Trust Indenture Act. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 6.07 hereof. The Company initially appoints the Trustee as the Registrar and Paying Agent and agent for service of notices and demands in connection with the Notes. Section 3.04. EXECUTION AND AUTHENTICATION. The Initial Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 hereto. The Exchange Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A-2 hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall approve the form of the Notes and any notation, legend or en- -32- dorsement thereon. Each Note shall be dated the date of issuance and shall show the date of its authentication. Each Note shall have an executed Guarantee from each of the Guarantors endorsed thereon substantially in the form of Exhibit D hereto. Notes offered and sold in reliance on Rule 144A and Notes offered and sold in reliance on Regulation S shall be issued initially in the form of one or more Global Notes, substantially in the form set forth in Exhibit A-1, deposited with the Trustee, as custodian for the Depository, duly executed by the Company (and having an executed Guarantee from each of the Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in Exhibit B. The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Notes issued in exchange for interests in a Global Note pursuant to Section 3.17 may be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A-1 (the "Physical Notes"). All Notes offered and sold in reliance on Regulation S shall remain in the form of a Global Note until the consummation of the Exchange Offer pursuant to the Registration Rights Agreement; PROVIDED, HOWEVER, that all of the time periods specified in the Registration Rights Agreement to be complied with by the Company and the Guarantors have been so complied with. Two Officers shall sign, or one Officer shall sign, and one Officer (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Notes for the Company, and the Guarantees for the Guarantors, by manual or facsimile signature. If an Officer or Assistant Secretary whose signature is on a Note or a Guarantee, as the case may be, was an Officer or Assistant Secretary at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Note, the Note shall nevertheless be valid. The Trustee shall authenticate (i) Initial Notes for original issue in an aggregate principal amount not to exceed $165,000,000, (ii) Private Exchange Notes from time to time only in exchange for a like principal amount of Initial Notes and (iii) Unrestricted Notes from time to time only in exchange for (A) a like principal amount of Initial Notes or (B) a like principal amount of Private Exchange Notes, in each case upon a written order of the Company in the form of an Officers' Certificate of the Company. Each such written order shall specify the amount of Notes to be authenticated and the date on which the Notes are to be authenticated, whether the Notes are to be Initial Notes, Private Exchange Notes or Unre- -33- stricted Notes and whether (subject to this Section 3.04) the Notes are to be issued as Physical Notes or Global Notes and such other information as the Trustee may reasonably request. The aggregate principal amount of Notes outstanding at any time may not exceed $165,000,000, except as provided in Section 3.07. Notwithstanding the foregoing, all Notes issued under this Indenture shall vote and consent together on all matters (as to which any of such Notes may vote or consent) as one class and no series of Notes will have the right to vote or consent as a separate class on any matter. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate Notes. Unless otherwise provided in the appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company and Affiliates of the Company. The Notes shall be issuable in fully registered form only, without coupons, in denominations of $1,000 and any integral multiple thereof. Section 3.05. TEMPORARY NOTES. Until definitive Notes are prepared and ready for delivery, the Company may execute and upon a Company Order the Trustee shall authenticate and deliver temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes, in any authorized denominations, but may have variations that the Company reasonably considers appropriate for temporary Notes as conclusively evidenced by the Company's execution of such temporary Notes. If temporary Notes are issued, the Company will cause definitive Notes to be prepared without unreasonable delay but in no event later than the date that the Exchange Offer is consummated. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 10.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of like tenor and of authorized denominations. Until so exchanged the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes. -34- Section 3.06. TRANSFER AND EXCHANGE. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 10.02 being sometimes referred to herein as the "Note Register") in which, subject to such reasonable regulations as the Registrar may prescribe, the Company shall provide for the registration of Notes and of transfers and exchanges of Notes. The Trustee is hereby initially appointed Registrar for the purpose of registering Notes and transfers of Notes as herein provided. Subject to Sections 3.16 and 3.17, when Notes are presented to the Registrar or a co-Registrar with a request from the Holder of such Notes to register the transfer or exchange for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; PROVIDED, HOWEVER, that every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer or exchange in form satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. Whenever any Notes are so presented for exchange, the Company and any Guarantor shall execute, and the Trustee shall authenticate and deliver, the Notes and Guarantees which the Holder making the exchange is entitled to receive. No service charge shall be made to the Noteholder for any registration of transfer or exchange. The Company may require from the Noteholder payment of a sum sufficient to cover any transfer taxes or other governmental charge that may be imposed in relation to a transfer or exchange, but this provision shall not apply to any exchange pursuant to Sections 9.06, 10.11, 10.16 or 13.06 hereof (in which events the Company will be responsible for the payment of all such taxes which arise solely as a result of the transfer or exchange and do not depend on the tax status of the Holder). The Trustee shall not be required to exchange or register the transfer of any Note for a period of 15 days immediately preceding the first mailing of notice of redemption of Notes to be redeemed or of any Note selected, called or being called for redemption except, in the case of any Note where public notice has been given that such Note is to be redeemed in part, the portion thereof not to be redeemed. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company, evidencing the same Indebtedness, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Any Holder of a beneficial interest in a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Notes may be effected only through a book-entry system maintained by the Holder of such Global Note (or -35- its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book-entry system. Section 3.07. MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If a mutilated Note is surrendered to the Trustee or if the Holder of a Note of any series claims that the Note has been lost, destroyed or wrongfully taken, the Company shall execute and upon a Company Order, the Trustee shall authenticate and deliver a replacement Note of like tenor and principal amount, bearing a number not contemporaneously outstanding, and the Guarantors shall execute a replacement Guarantee, if the Holder of such Note furnishes to the Company and to the Trustee evidence reasonably acceptable to them of the ownership and the destruction, loss or theft of such Note and an indemnity bond shall be posted by such Holder, sufficient in the judgment of the Company or the Trustee, as the case may be, to protect the Company, the Trustee or any Agent from any loss that any of them may suffer if such Note is replaced. The Company may charge such Holder for the Company's and any Guarantor's expenses in replacing such Note (including (i) expenses of the Trustee charged to the Company and (ii) any tax or other governmental charge that may be imposed) and the Trustee may charge the Company for the Trustee's expenses in replacing such Note. Every replacement Note and Guarantee issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company and each Guarantor, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. Section 3.08. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date and interest on such defaulted interest at the then applicable interest rate borne by the Notes, to the extent lawful (such defaulted interest and interest thereon herein collectively called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the Regular Record Date; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in subsection (a) or (b) below: -36- (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this subsection (a). Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company in writing of such Special Record Date. In the name and at the expense of the Company, the Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at its address as it appears in the Note Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered on such Special Record Date and shall no longer be payable pursuant to the following subsection (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this subsection (b), such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. Section 3.09. PERSONS DEEMED OWNERS. Prior to and at the time of due presentment for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in -37- whose name any Note is registered in the Note Register as the owner of such Note for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 3.08) interest on such Note and for all other purposes whatsoever, whether or not such Note shall be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 3.10. CANCELLATION. All Notes surrendered for payment, redemption, registration of transfer or exchange shall be delivered to the Trustee and, if not already canceled, shall be promptly canceled by it. The Company and any Guarantor may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company or such Guarantor may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly canceled by the Trustee. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer or exchange, redemption or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 3.10, except as expressly permitted by this Indenture. All canceled Notes held by the Trustee shall be destroyed and certification of their destruction delivered to the Company unless by a Company Order the Company shall direct that the canceled Notes be returned to it. The Trustee shall provide the Company a list of all Notes that have been canceled from time to time as requested by the Company. If the Company or any Affiliate of the Company acquires any Notes (other than by redemption pursuant to Section 13.07 or an Offer pursuant to Section 10.11 or 10.16), such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until such Notes are delivered to the Trustee for cancellation. Section 3.11. LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date, date established for the payment of Defaulted Interest or Stated Maturity of any Note shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes) payment of principal, premium, if any, or interest need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date, date established for the payment of Defaulted Interest or at the Stated Maturity, as the case may be. In such event, no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, Redemption Date, date established for the payment of Defaulted Interest or Stated Maturity, as the case may be, to the next succeeding Business Day and, with respect to any Interest Pay- -38- ment Date, interest for the period from and after such Interest Payment Date shall accrue with respect to the next succeeding Interest Payment Date. Section 3.12. CUSIP AND CINS NUMBERS. The Company in issuing the Notes may use "CUSIP" and "CINS" numbers (if then generally in use), and if so, the Trustee shall use the CUSIP or CINS numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP or CINS number, as the case may be, printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee in writing of any change in the CUSIP or CINS number of any type of Notes. Section 3.13. PAYING AGENT TO HOLD MONEY IN TRUST. Each Paying Agent shall hold in trust for the benefit of the Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. Money held in trust by the Paying Agent need not be segregated except as required by law and except if the Company, any Guarantor or any of their respective Affiliates is acting as Paying Agent, and in no event shall the Paying Agent be liable for any interest on any money received by it hereunder. The Company at any time may require the Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any Event of Default, upon a Company Order to the Paying Agent, require such Paying Agent to pay forthwith all money so held by it to the Trustee and to account for any funds disbursed. Upon making such payment, the Paying Agent shall have no further liability for the money delivered to the Trustee. Section 3.14. TREASURY NOTES. In determining whether the Holders of the required aggregate principal amount of Notes have concurred in any direction, waiver, consent or notice, Notes owned by the Company or an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee actually knows are so owned shall be so considered. The Company shall notify the Trustee, in writing, when it or any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired. -39- Section 3.15. DEPOSITS OF MONIES. Prior to 11:30 a.m. New York City time on each Interest Payment Date, maturity date, Change of Control Purchase Date and Asset Sale Offer Purchase Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, maturity date, Change of Control Purchase Date and Asset Sale Offer Purchase Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, maturity date, Change of Control Purchase Date and Asset Sale Offer Purchase Date, as the case may be. Section 3.16. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES. (a) The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Exhibit B. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Note, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of Global Notes shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Sections 3.04 and 3.17. In addition, Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Notes if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for any Global Note, or that it will cease to be a "Clearing Agency" under the Exchange Act, and in either case a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository to issue Physical Notes. -40- (c) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and principal amount of authorized denominations. (d) In connection with the transfer of Global Notes as an entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Notes, an equal aggregate principal amount at maturity of Physical Notes of like tenor of authorized denominations. (e) Any Physical Note constituting a Restricted Note delivered in exchange for an interest in a Global Note pursuant to subparagraph (b), (c) or (d) of this Section 3.16 shall, except as otherwise provided by Section 3.17, bear the Private Placement Legend. (f) The Holder of any Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. Section 3.17. SPECIAL TRANSFER PROVISIONS. (a) TRANSFERS TO NON-U.S. PERSONS. The following additional provisions shall apply with respect to the registration of any proposed transfer of an Initial Note to any Non-U.S. Person: (i) the Registrar shall register the transfer of any Initial Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date; PROVIDED, HOWEVER, that neither the Company nor any Affiliate of the Company has held any beneficial interest in such Note, or portion thereof, at any time on or prior to the second anniversary of the Issue Date and such transfer can otherwise be lawfully made under the Securities Act without registering such Initial Notes thereunder or (y) the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto; (ii) if the proposed transferee is an Agent Member and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an in- -41- terest in the Regulation S Global Note upon receipt by the Registrar of (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the appropriate certificate, if any, required by clause (y) of paragraph (i) above, together with any required legal opinions and certifications, the Registrar shall register the transfer and reflect on its books and records the date and an increase in the principal amount of the Regulation S Global Note in an amount equal to the principal amount of Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred; (iii) if the proposed transferor is an Agent Member seeking to transfer an interest in a Global Note, upon receipt by the Registrar of (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the appropriate certificate, if any, required by clause (y) of paragraph (i) above, together with any required legal opinions and certifications, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the Global Note from which such interests are to be transferred in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the Regulation S Global Note in an amount equal to the principal amount of the Global Note to be transferred; and (iv) until the 41st day after the Issue Date (the "Restricted Period"), an owner of a beneficial interest in the Regulation S Global Note may not transfer such interest to a transferee that is a U.S. Person or for the account or benefit of a U.S. Person within the meaning of Rule 902(o) of the Securities Act. During the Restricted Period, all beneficial interests in the Regulation S Global Note shall be transferred only through Cedel or Euroclear, either directly if the transferor and transferee are participants in such systems, or indirectly through organizations that are participants. (b) TRANSFERS TO QIBS. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Note to a QIB (excluding Non-U.S. Persons): (i) the Registrar shall register the transfer of any Initial Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date; PROVIDED, HOWEVER, that neither the Company nor any Affiliate of the Company has held any beneficial interest in such Note, or portion thereof, at any time on or prior to the second anniversary of the Issue Date and such transfer can otherwise be lawfully made under the Securities Act without registering such Initial Note thereunder or (y) such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that the sale has -42- been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) if the proposed transferee is an Agent Member and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the 144A Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its book and records the date and an increase in the principal amount of the 144A Global Note in an amount equal to the principal amount of Physical Notes to be transferred, and the Trustee shall cancel the Physical Note so transferred; and (iii) if the proposed transferor is an Agent Member seeking to transfer an interest in a Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the Global Note from which interests are to be transferred in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the 144A Global Note in an amount equal to the principal amount of the Global Note to be transferred. (c) PRIVATE PLACEMENT LEGEND. Upon the registration of transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the registration of transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) the circumstances contemplated by paragraph (a)(i)(x) of this Section 3.17 exist, (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (iii) such Note has been sold pursuant to an effective registration statement under the Securities Act. -43- (d) OTHER TRANSFERS. If a Holder proposes to transfer a Note constituting a Restricted Note pursuant to any exemption from the registration requirements of the Securities Act other than as provided for by Section 3.17(a), (b) and (c), the Registrar shall only register such transfer or exchange if such transferor delivers an Opinion of Counsel satisfactory to the Company and the Registrar that such transfer is in compliance with the Securities Act and the terms of this Indenture; PROVIDED, HOWEVER, that the Company may, based upon the opinion of its counsel, instruct the Registrar by a Company Order not to register such transfer in any case where the proposed transferee is not a QIB or Non-U.S. Person. (e) GENERAL. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.16 or this Section 3.17. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable prior written notice to the Registrar. ARTICLE FOUR DEFEASANCE OR COVENANT DEFEASANCE Section 4.01. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at its option by Board Resolution, at any time, with respect to the Notes, elect to have either Section 4.02 or Section 4.03 be applied to all of the Outstanding Notes (the "Defeased Notes"), upon compliance with the conditions set forth below in this Article Four. Section 4.02. DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 4.01 of the option applicable to this Section 4.02, the Company and each Guarantor shall be deemed to have been discharged from their obligations with respect to the Defeased Notes and the related Guarantees on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Defeased Notes, which shall thereafter be deemed to -44- be "Outstanding" only for the purposes of Section 4.05 and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture insofar as such Notes are concerned (and the Trustee, at the expense of the Company, and, upon Company Request, shall execute proper instruments acknowledging the same), except for the following, which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Defeased Notes to receive, solely from the trust funds described in Section 4.04 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 Defeased Notes under Sections 3.05, 3.06, 3.07, 10.02 and 10.03, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder, including, without limitation, the Trustee's rights under Section 6.07, and (d) this Article Four. Subject to compliance with this Article Four, the Company may exercise its option under this Section 4.02 notwithstanding the prior exercise of its option under Section 4.03 with respect to the Notes. Section 4.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 4.01 of the option applicable to this Section 4.03, the Company and each Guarantor shall be released from their obligations under any covenant or provision contained in Sections 10.05 through 10.08 and 10.10 through 10.22 and the provisions of Article Eight and Article Fourteen shall not apply, with respect to the Defeased Notes, on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Defeased Notes shall thereafter be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the Defeased Notes, the Company and each Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in Sections 10.05 through 10.08 and 10.10 through 10.22 or Article Eight, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or Article or by reason of any reference in any such Section or Article 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 Sections 5.01(c), (d), (e) (other than a Default of Event of Default thereunder arising by reason of the covenant defeasance itself), (g), or (k), but, except as specified above, the remainder of this Indenture and such Defeased Notes shall be unaffected thereby. -45- Section 4.04. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to application of either Section 4.02 or Section 4.03 to the Defeased Notes: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 6.09 who shall agree to comply with the provisions of this Article Four applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Notes, (a) cash in United States dollars in an amount, or (b) U.S. Government Obligations which through the scheduled payment of principal, premium, if any, and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (c) a combination thereof, in any such case, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of, premium, if any, and interest on the Defeased Notes at the Stated Maturity of such principal or installment of principal, premium, if any, or interest; PROVIDED, HOWEVER, that the Company may only make such deposit if Article Fourteen does not prohibit payments on the Notes at the time of the deposit; PROVIDED FURTHER, HOWEVER, that the Trustee shall have been irrevocably instructed to apply such cash or the proceeds of such U.S. Government Obligations to said payments with respect to the Notes; (2) No Default shall have occurred and be continuing on the date of such deposit or, insofar as Sections 5.01(h), (i) or (j) are concerned, at any time during the period ending on the ninety-first day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (3) Neither the Company nor any Subsidiary of the Company is an "insolvent Person" within the meaning of any applicable Bankruptcy Law on the date of such deposit or at any time during the period ending on the ninety-first day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (4) Such defeasance or covenant defeasance shall not cause the Trustee for the Notes to have a conflicting interest in violation of Section 6.08 and for purposes of -46- the Trust Indenture Act with respect to any securities of the Company or any Guarantor; (5) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company or any Guarantor is a party or by which it is bound; (6) Such defeasance or covenant defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be registered under such Act or exempt from registration thereunder; (7) The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (8) 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 Guarantee over the other creditors of the Company or any Guarantor with the intent of defeating, hindering, delaying or defrauding creditors of the Company, any Guarantor or others; (9) No event or condition shall exist that would prevent the Company from making payments of the principal of, premium, if any, and interest on the Notes on the date of such deposit or at any time ending on the 91st day after the date of such deposit; (10) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (which counsel shall practice in the United States), each stating that (i) all conditions precedent provided for relating to either the defeasance under Section 4.02 or the covenant defeasance under Section 4.03 (as the case may be) have been complied with as contemplated by this Section 4.04 and (ii) if any other Indebtedness of the Company or any Guarantor shall then be outstanding or committed, such defeasance or covenant defeasance will not violate the provisions of the agreements or instruments evidencing such Indebtedness; (11) In the case of an election under Section 4.02, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or -47- (y) since the date hereof, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion 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; and (12) In the case of an election under Section 4.03, the Company shall have delivered to the Trustee an Opinion of Counsel 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; Opinions required to be delivered under this Section shall be delivered by independent counsel (other than as set forth above) and may have such qualifications as are customary for opinions of the type required and reasonably acceptable to the Trustee, and counsel delivering such opinion may rely on certificates of the Company or government officials customary for opinions of the type required. Section 4.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the proviso of the last paragraph of Section 10.03, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 4.05, the "Trustee") pursuant to Section 4.04 in respect of the Defeased 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 (other than the Company) 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. Money deposited with the Trustee or a Paying Agent pursuant to this Article Four shall not be subject to Article Fourteen. The Company shall pay and indemnify the Trustee and hold it harmless against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 4.04 or the principal, premium, if any, 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 Defeased Notes. -48- Anything in this Article Four to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 4.04 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 4.06. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 4.02 or 4.03, 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 obligations of the Company and of any Guarantor under this Indenture, the Notes and the Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 4.02 or 4.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money and U.S. Government Obligations in accordance with Section 4.02 or 4.03, as the case may be; PROVIDED, HOWEVER, that if the Company makes any payment of principal, 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 and U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE FIVE REMEDIES Section 5.01. EVENTS OF DEFAULT. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of the principal of or premium, if any, when due and payable, on any of the Notes (at its Stated Maturity, upon optional redemption, acceleration, required purchase, sinking fund, scheduled principal payment or otherwise); or (b) default in the payment of an installment of interest on any of the Notes, when due and payable, continued for 30 days or more; or -49- (c) the Company or any Guarantor fails to comply with any of its obligations described under Article 8 or Sections 10.11 or 10.16; or (d) the Company or any Guarantor fails to perform or observe any other term, covenant or agreement contained in the Notes, the Guarantees or this Indenture (other than a default specified in (a), (b) or (c) above) for a period of 30 days after written notice of such failure requiring the Company to remedy the same shall have been given (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 Notes then outstanding; or (e) default or defaults under one or more agreements, indentures or instruments under which the Company, any Guarantor or any Restricted Subsidiary then has outstanding Indebtedness in excess of $17,500,000 individually or in the aggregate and either (a) such Indebtedness is already due and payable in full or (b) such default or defaults result in the acceleration of the maturity of such Indebtedness; or (f) any Guarantee ceases to be in full force and effect or is declared null and void or any Guarantor denies that it has any further liability under any Guarantee, or gives notice to such effect (other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with Sections 10.18 or 12.05); or (g) one or more judgments, orders or decrees of any court or regulatory or administrative agency for the payment of money in excess of $17,500,000 (in excess of the coverage under applicable insurance policies (after giving effect to any deductibles) under which a financially sound and reputable insurer has admitted liability) either individually or in the aggregate shall have been rendered against the Company, any Guarantor or any Restricted Subsidiary or any of their respective properties and shall not have been 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, order or decree, by reason of a pending appeal or otherwise, shall not be in effect; or (h) the Company, any Guarantor or any Material Subsidiary of the Company pursuant to or under or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the making of a Bankruptcy Order in an involuntary case or proceeding or the commencement of any case against it; -50- (iii) consents to the appointment of a Custodian of it or for any substantial part of its property; (iv) makes a general assignment for the benefit of its creditors; (v) files an answer or consent seeking reorganization or relief; (vi) shall admit in writing its inability to pay its debts generally; or (vii) consents to the filing of a petition in bankruptcy; or (i) a court of competent jurisdiction in any involuntary case or proceeding enters a Bankruptcy Order against the Company, any Guarantor or any Material Subsidiary, and such Bankruptcy Order remains unstayed and in effect for 60 consecutive days; or (j) a Custodian shall be appointed out of court with respect to the Company, any Guarantor or any Material Subsidiary or with respect to all or any substantial part of the assets or properties of the Company, any Guarantor or any Material Subsidiary; or (k) any holder of at least $17,500,000 in aggregate principal amount of Indebtedness of the Company, any Guarantor or any Restricted Subsidiary shall commence judicial proceedings to foreclose upon assets of the Company, any Guarantor or any of its Restricted Subsidiaries having a Fair Market Value, individually or in the aggregate, in excess of $17,500,000 or shall have exercised any right under applicable law or applicable security documents to take ownership of any such assets in lieu of foreclosure. Section 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default (other than as specified in Sections 5.01(h), (i) or (j) with respect to the Company) shall occur and be continuing, the Trustee, by notice to the Company, or the holders of at least 25% in aggregate principal amount of the Notes then Outstanding, by notice to the Trustee and the Company, may declare the principal of, premium, if any, and accrued interest on all of the outstanding Notes due and payable immediately, upon which declaration all such amounts payable in respect of the Notes will become and be immediately due and payable. If an Event of Default specified in Sections 5.01(h), (i) or (j) with respect to the Company occurs and is continuing, then the principal of, premium, if any, and accrued interest on all of the outstanding Notes will IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of Notes. -51- At any time 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 of the Outstanding Notes, by written notice to the Company and the Trustee, may rescind such declaration if: (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Outstanding Notes, (iii) the principal of and premium, if any, on any Outstanding Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Outstanding Notes, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Outstanding Notes, and (b) all Events of Default, other than the non-payment of principal of, premium, if any, and interest on the Notes that has become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. No such rescission shall affect any subsequent Default or impair any right consequent thereon. Section 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company and each Guarantor covenant that if an Event of Default specified in Section 5.01(a) or 5.01(b) shall have occurred and be continuing, the Company and each Guarantor will, jointly and severally, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal, premium, if any, and interest, with interest upon the overdue principal, premium, if any, and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate then borne by the Notes; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company and each Guarantor fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may, but is not obligated under this paragraph to, institute a judicial proceeding for the collection of the sums so due and unpaid and may, but is not obligated under this paragraph to, prosecute such proceeding to judgment or final decree, and may, but is not obligated under this paragraph to, enforce the same against the Company, any Guarantor or any other obligor upon the Notes -52- and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any Guarantor or any other obligor upon the Notes, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion but is not obligated under this paragraph to, (i) proceed to protect and enforce its rights and the rights of the Holders under this Indenture or any Guarantee by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted herein, including, without limitation, seeking recourse against any Guarantor or (ii) proceed to protect and enforce any other proper remedy, including, without limitation, seeking recourse against any Guarantor. No recovery of any such judgment upon any property of the Company or any Guarantor shall affect or impair any rights, powers or remedies of the Trustee or the Holders. Section 5.04. TRUSTEE MAY FILE PROOFS OF CLAIMS. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Notes, including each Guarantor or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, fees, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian, in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07 hereof. -53- Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 5.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES. All rights of action and claims under this Indenture, the Notes or any Guarantee may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, fees, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered. Section 5.06. APPLICATION OF MONEY COLLECTED. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium, if any, or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: to the Trustee for amounts due under Section 6.07; Second: to the holders of Senior Indebtedness to the extent required by Article Fourteen. Third: to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; Fourth: to Holders for principal and premium, if any, amounts owing under the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and premium, if any; and Fifth: the balance, if any, to the Company. -54- The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 5.06. Section 5.07. LIMITATION ON SUITS. No holder of any of the Notes has any right to institute any proceeding with respect to this Indenture or any remedy thereunder, unless (i) the holders of at least 25% in aggregate principal amount of the Outstanding Notes have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as Trustee under the Notes and this Indenture, (ii) the Trustee has failed to institute such proceeding within 15 days after receipt of such notice and offer of indemnity, and (iii) the Trustee, within such 15-day period, has not received directions inconsistent with such written request by Holders of a majority in aggregate principal amount of the Outstanding Notes. Such limitations do not apply, however, to a suit instituted by a holder of a Note for the enforcement of the payment of the principal of, premium, if any, or interest on such Note on or after the respective due dates expressed in such Note; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing to, any provision of this Indenture, any Note or any Guarantee to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, any Note or any Guarantee, except in the manner provided in this Indenture and for the equal and ratable benefit of all the Holders. Section 5.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST. Notwithstanding any other provision in this Indenture, but subject to Article Fourteen, the Holder of any Note shall have the right, which is absolute and unconditional, to receive cash payment of the principal of, premium, if any, and (subject to Section 3.08 hereof) interest on such Note on the respective Stated Maturities expressed in such Note (or, in the case of redemption, a Change of Control Offer or Asset Sale Offer, on the Redemption Date, Change of Control Purchase Date or Asset Sale Offer Purchase Date, respectively) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. -55- Section 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture, any Note or any Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, each of the Guarantor, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article Five or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12. CONTROL BY MAJORITY. The Holders of a majority in aggregate principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, PROVIDED, HOWEVER, that: (a) such direction shall not be in conflict with any rule of law or with this Indenture, any Note or any Guarantee or expose the Trustee to personal liability; and (b) subject to Section 315 of the TIA, the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. -56- Section 5.13. WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes may on behalf of the Holders of all the Notes waive any past Default or Event of Default hereunder and its consequences, except a Default or Event of Default: (a) in the payment of the principal of, premium, if any, or interest on any Note or (b) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Note affected thereby. Upon any such waiver, such Default or Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Section 5.14. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, 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, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.14 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Notes, or to any suit instituted by any Holder for the enforcement of the payment of the principal of, premium, if any, or interest on any Note on or after the respective Stated Maturities expressed in such Note (or, in the case of redemption, on or after the respective Redemption Dates). Section 5.15. WAIVER OF STAY, EXTENSION OR USURY LAWS. Each of the Company and the Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the -57- Company or any Guarantor from paying all or any portion of the principal of, premium, if any, or interest on the Notes contemplated herein or in the Notes or which may affect the covenants or the performance of this Indenture; and each of the Company and 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 will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE Section 6.01. CERTAIN DUTIES AND RESPONSIBILITIES. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) 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; but in the case of any such certificates or opinions which by provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. -58- (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.01. Section 6.02. NOTICE OF DEFAULTS. Within 30 days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Note Register, notice of such Default hereunder known to the Trustee, unless such Default shall have been cured or waived; PROVIDED, HOWEVER, that, except in the case of a Default in the payment of the principal of, premium, if any, or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as a trust committee of Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders. Section 6.03. CERTAIN RIGHTS OF TRUSTEE. Subject to Section 6.01 hereof and the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any Board Resolution of the Company or any Guarantor may be sufficiently evidenced by a Board Resolution thereof; (c) the Trustee may consult with counsel and any written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by the Trustee in compliance with such request or direction; -59- (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture other than any liabilities arising out of its own negligence, bad faith or willful misconduct; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, appraisal, bond, debenture, note, coupon, security, other evidence of indebtedness or other paper or document unless requested in writing so to do by the Holders of not less than a majority in aggregate principal amount of the Notes then Outstanding; PROVIDED, HOWEVER, that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such investigation shall be paid by the Company or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Company upon demand; PROVIDED, FURTHER, the Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may deem fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company and its Subsidiaries, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 6.04. TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITIONS OF NOTES OR APPLICATION OF PROCEEDS THEREOF. The recitals contained herein and in the Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Company and the Guarantors, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes or of any Guarantee except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-1, if any, to be supplied to the Company are true and accurate subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company of Notes or the proceeds thereof. -60- Section 6.05. TRUSTEE AND AGENTS MAY HOLD NOTES; COLLECTIONS; ETC. The Trustee, any Paying Agent, Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Notes, with the same rights it would have if it were not the Trustee, Paying Agent, Registrar or such other agent and, subject to Sections 6.08 and 6.13 hereof and Sections 310 and 311 of the Trust Indenture Act, may otherwise deal with the Company and receive, collect, hold and retain collections from the Company with the same rights it would have if it were not the Trustee, Paying Agent, Registrar or such other agent. Section 6.06. MONEY HELD IN TRUST. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required herein or by law. Except for funds or securities deposited pursuant to Article Four, the Trustee shall be required to invest all moneys received by it, until used or applied as herein provided, in Cash Equivalents in accordance with the Company's directions. The Trustee shall not be under any liability for interest on any moneys received by it hereunder, except as otherwise agreed in writing with the Company. Section 6.07. COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS PRIOR CLAIM. The Company and each Guarantor covenant and agree: (a) to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it hereunder (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, fees, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation, fees, and the expenses and disbursements of its counsel and of all agents and other Persons not regularly in its employ), except any such expense, disbursement or advance as may arise from its negligence, bad faith or willful misconduct; and (c) to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence, bad faith -61- or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including enforcement of this Section 6.07. The obligations of the Company and each Guarantor under this Section to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, fees, disbursements and advances shall constitute an additional obligation hereunder and shall survive the satisfaction and discharge of this Indenture. Section 6.08. CONFLICTING INTERESTS. The Trustee shall be subject to and comply with the provisions of Section 310(b) of the Trust Indenture Act. Section 6.09. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under Trust Indenture Act Sections 310(a)(1) and (2) and which shall have a combined capital and surplus of at least $25,000,000, and have a Corporate Trust Office in the Borough of Manhattan in The City of New York, State of New York; provided that, to the extent such capital and surplus is not at least $100,000,000, such Trustee shall be a direct or indirect subsidiary of a bank holding company which bank holding company shall have a combined capital and surplus of at least $100,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of any Federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee, or any trustee or trustees hereinafter appointed, may at any time resign by giving written notice thereof to the Company at least 20 Business Days -62- prior to the date of such proposed resignation. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument executed by authority of the Board of Directors of the Company, a copy of which shall be delivered to the resigning Trustee and a copy to the successor Trustee. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 20 Business Days after the giving of such notice of resignation, the resigning Trustee may, or any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper, appoint a successor Trustee. (c) The Trustee may be removed at any time by an Act of the Holders of a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of Section 310(b) of the Trust Indenture Act in accordance with Section 6.08 hereof after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.09 hereof and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose or rehabilitation, conservation or liquidation, then, in any case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) the Holder of any Note who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution of its Board of Directors, shall promptly appoint a successor Trustee. If, within -63- one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders of the Notes and accepted appointment in the manner hereinafter provided, the Holder of any Note who has been a bona fide Holder for at least six months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Notes as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee as if originally named as Trustee hereunder; but, nevertheless, on the written request of the Company or the successor Trustee, upon payment of amounts due it pursuant to Section 6.07, such retiring Trustee shall duly assign, transfer and deliver to the successor Trustee all moneys and property at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor Trustee all the rights, powers, duties and obligations of the retiring Trustee. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. No successor Trustee with respect to the Notes shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor Trustee shall be eligible to act as Trustee under this Article. Upon acceptance of appointment by any successor Trustee as provided in this Section 6.11, the successor, at the expense of the Company, shall give notice thereof to the Holders of the Notes, by mailing such notice to such Holders at their addresses as they shall appear on the Note Register. If the acceptance of appointment is substantially contempora- -64- neous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 6.10. Section 6.12. MERGER, CONVERSION, AMALGAMATION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated or amalgamated, or any corporation resulting from any merger, conversion, amalgamation or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided such corporation shall be eligible under this Article Six to serve as Trustee hereunder. In case at the time such successor to the Trustee under this Section 6.12 shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Notes so authenticated; and, in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee under this Section 6.12 may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have been authenticated. Section 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY AND GUARANTORS. If and when the Trustee shall be or become a creditor of the Company or any Guarantor (or other obligor on the Notes), the Trustee shall be subject to the provisions of the TIA regarding the collection of claims against the Company or any such Guarantor (or any such other obligor). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent set forth therein. -65- ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 7.01. PRESERVATION OF INFORMATION; COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS. (a) The Trustee shall preserve the names and addresses of the Noteholders and otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish or cause the Registrar to furnish to the Trustee 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 Noteholders. Neither the Company nor the Trustee shall be under any responsibility with regard to the accuracy of such list. (b) The Company will furnish or cause to be furnished to the Trustee (i) semi-annually, not more than 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and (ii) at such other times as the Trustee may reasonably request in writing, within 30 days after receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; PROVIDED, HOWEVER, that if and so long as the Trustee shall be the Registrar, no such list need be furnished pursuant to this Subsection 7.01(b). SECTION 7.02. COMMUNICATIONS OF HOLDERS. Holders may communicate with other Holders with respect to their rights under this Indenture or under the Notes pursuant to Section 312(b) of the Trust Indenture Act. The Company and the Trustee and any and all other Persons benefited by this Indenture shall have the protection afforded by Section 312(c) of the Trust Indenture Act. Section 7.03. REPORTS BY TRUSTEE. Within 60 days after May 15 of each year commencing with the first May 15 following the date of this Indenture, the Trustee shall mail to all Holders, as their names and addresses appear in the Note Register, a brief report dated as of such May 15, in accordance with, and to the extent required under Section 313 of the Trust Indenture Act. At the time of its mailing to Holders, a copy of each such report shall be filed by the Trustee with the Com- -66- pany, the Commission and with each stock exchange on which the Notes are listed. The Company shall notify the Trustee when the Notes are listed on any stock exchange. Section 7.04. REPORTS BY COMPANY AND EACH GUARANTOR. The Company and each Guarantor shall: (a) file with the Commission, the copies of annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) required to be filed with Commission pursuant to Section 13 or Section 15 of the Exchange Act, whether or not the Company or any Guarantor has a class of securities registered under the Exchange Act; (b) file with the Trustee, within 15 days after it files or would be required to file the information specified in subsection (a) of this Section 7.04 with the Commission, copies of such information; (c) file with the Trustee and the Commission in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company and each Guarantor with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (d) transmit by mail to all Holders, as their names and addresses appear in the Note Register, concurrently with the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company and each Guarantor pursuant to subsections (a) and (c) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. Section 8.01. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company will not, in a single transaction or through a series of related transactions, merge or consolidate with or into, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any Person or Persons, and the Company will not permit any of the Restricted Subsidiaries to enter into any such transaction or series of related transactions if such transaction or series of re- -67- lated transactions, in the aggregate, would result in the sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and the Restricted Subsidiaries (determined on a consolidated basis for the Company and the Restricted Subsidiaries) to any other Person or Persons, unless at the time and after giving effect thereto: (i) either (A)(1) if the transaction or transactions is a merger or consolidation involving the Company, the Company shall be the Surviving Person of such merger or consolidation or (2) if the transaction or transactions is a merger or consolidation involving a Restricted Subsidiary, such Restricted Subsidiary shall be the Surviving Person of such merger or consolidation, or (B)(1) the Surviving Person shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and (2)(x) in the case of a transaction involving the Company, the Surviving Person shall 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 the Registration Rights Agreement and, in each case, the Notes, this Indenture and the Registration Rights Agreement shall remain in full force and effect, or (y) in the case of a transaction involving a Restricted Subsidiary that is a Guarantor, the Surviving Person shall expressly assume by a supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Restricted Subsidiary under its Guarantee and this Indenture and the Registration Rights Agreement and, in each case, such Guarantee and this Indenture and the Registration Rights Agreement shall remain in full force and effect; (ii) immediately after giving effect to such transaction or series of transactions on a PRO FORMA basis, no Default or Event of Default shall have occurred and be continuing; (iii) if the Company is then subject to Section 10.12, the Company, or the Surviving Person, as the case may be, immediately after giving effect to such transaction or series of transactions on a PRO FORMA basis (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under Section 10.12 hereof; and (iv) at the time of the transaction if any of the property or assets of the Company or any of its Restricted Subsidiaries would thereupon be become subject to any Lien, the provisions of Section 10.17 are complied with. -68- If no Default or Event of Default has occurred and is continuing, after the ratings assigned to the Notes by both Rating Agencies are equal to or higher than Investment Grade Ratings, and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will not be subject to the provisions of clauses (iii) and (iv) of this Section. No Guarantor (other than a Guarantor whose Guarantee is to be released in accordance with the terms of its Guarantee and this Indenture as provided in paragraph (c) of Section 10.18 or Section 12.05) shall, in any transaction or series of related transactions, consolidate with or merge with or into another Person, whether or not such Person is affiliated with such Guarantor and whether or not such Guarantor is the Surviving Person, unless (i) the Surviving Person (if other than such Guarantor) is a corporation organized and validly existing under the laws of the United States, any State thereof or the District of Columbia; (ii) the Surviving Person (if other than such Guarantor) expressly assumes by a supplemental indenture all the obligations of such Guarantor under its Guarantee and the performance and observance of every covenant of this Indenture and the Registration Rights Agreement to be performed or observed by such Guarantor; and (iii) immediately after giving effect to such transaction or series of related transactions on a PRO FORMA basis, no Default or Event of Default shall have occurred and be continuing. In connection with any consolidation, merger, transfer, lease or other disposition contemplated hereby, the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, transfer, lease or other disposition and the supplemental indenture in respect thereof comply with the requirements of this Indenture. In addition, each Guarantor, in the case of a transaction described in the first paragraph of this Section 8.01, unless it is the other party to the transaction or unless its Guarantee will be released and discharged in accordance with its terms as a result of the transaction, will be required to confirm, by supplemental indenture, that its Guarantee will continue to apply to the obligations of the Company or the Surviving Person under this Indenture. Section 8.02. SUCCESSOR SUBSTITUTED. Upon any consolidation, combination or merger, or any sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company or any Guarantor in accordance with Section 8.01 hereof in which the Company or a Guarantor is not the Surviving Person, such Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor, as the case may be, under this Indenture, the Notes, the Guarantee of such Guarantor and the Registration Rights Agreement with the same effect as if such successor had -69- been named as the Company or such Guarantor, as the case may be, herein, and in the Notes and, thereafter, except in the case of (a) a lease or (b) any sale, assignment, conveyance, transfer, lease or other disposition to a Restricted Subsidiary of the Company or such Guarantor, the Company or such Guarantor, as the case may be, shall be discharged from all obligations and covenants under this Indenture, the Notes, the Guarantees and the Registration Rights Agreement, as applicable. For all purposes of this Indenture and the Notes (including this Article Eight and Sections 10.12, 10.14 and 10.17 hereof), Subsidiaries of any Surviving Person will, upon such transaction or series of related transactions described in this Article Eight, become Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to Section 10.21 and all Indebtedness, and all Liens on property or assets, of the Company and the Restricted Subsidiaries in existence immediately prior to such transaction or series of related transactions will be deemed to have been incurred upon such transaction or series of related transactions. ARTICLE NINE SUPPLEMENTAL INDENTURES AND WAIVERS Section 9.01. SUPPLEMENTAL INDENTURES, AGREEMENTS AND WAIVERS WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders, the Company and the Guarantors, when authorized by a Board Resolution of the Board of Directors of the Company and each Guarantor, and the Trustee, at any time and from time to time, may amend, waive, modify or supplement this Indenture or the Notes or the Guarantees for any of the following purposes: (a) to evidence the succession of another Person to the Company or a Guarantor, and the assumption by any such successor of the covenants of the Company or such Guarantor herein and in the Notes and/or in any Guarantee, as the case may be, in accordance with Article Eight; (b) to add to the covenants of the Company or any Guarantor for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company or any Guarantor, as applicable, herein, in the Notes or in any Guarantee, as the case may be; (c) to cure any ambiguity or to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, in the Notes, or in any Guarantee; -70- (d) to comply with the requirements of the Commission in order to maintain the qualification of this Indenture under the Trust Indenture Act; (e) to secure the Notes or to add a Guarantor pursuant to the requirements of Section 10.18 hereof or otherwise; (f) to evidence and provide the acceptance of the appointment of a successor Trustee hereunder; or (g) to make any other provisions with respect to matters or questions arising under this Indenture, the Notes or any Guarantee; PROVIDED, that in the case of clause (b), (c) or (g), such provisions shall not adversely affect the interests of any of the holders of the Notes and the Company shall have delivered to the Trustee an Opinion of Counsel to such effect. Section 9.02. SUPPLEMENTAL INDENTURES, AGREEMENTS AND WAIVERS WITH CONSENT OF HOLDERS. Amendments and modifications of this Indenture or the Notes may be made by the Company, the Guarantors and the Trustee with the consent of the holders of not less than a majority of the aggregate principal amount of the outstanding Notes; PROVIDED, HOWEVER, that no such modification or amendment may, without the consent of the holder of each outstanding Note affected thereby, (a) change the maturity of the principal of, or any installment of interest on, any such Note or alter the optional redemption or repurchase provisions of any such Note or this Indenture in a manner adverse to the Holders of the Notes; (b) reduce the principal amount of (or the premium of) any such Note; (c) reduce the rate of or extend the time for payment of interest on any such Note; (d) change the place or currency of payment of principal of (or premium), or interest on, any such Note; (e) modify any provisions of this Indenture relating to the waiver of past defaults (other than to add sections of this Indenture or the Notes subject thereto) or the right of the holders of Notes to institute suit for the enforcement of any payment on or with respect to any such Note or any Guarantee or the modification and amendment provisions of this Indenture and the Notes (other than to add sections of -71- this Indenture or the Notes which may not be amended, supplemented or waived without the consent of each Holder therein affected); (f) reduce the percentage of the principal amount of outstanding Notes necessary for amendment to or waiver of compliance with any provision of this Indenture or the Notes or for waiver of any Default in respect thereof; (g) waive a default in the payment of principal of, premium, if any, or interest on, or redemption payment with respect to, the Notes (except a rescission of acceleration of the Notes by the holders thereof as provided in this Indenture and a waiver of the payment default that resulted from such acceleration); (h) modify the ranking or priority of any Note or the Guarantee of any Guarantor; (i) following the occurrence of a Change of Control or Asset Sale, modify the provisions of any covenant (or the related definitions) in this Indenture requiring the Company to make and consummate a Change of Control Offer in respect of such Change of Control or Asset Sale Offer in respect of an Asset Sale or modify any of the provisions or definitions with respect thereto in a manner materially adverse to the Holders of Notes affected thereby; (j) release any Guarantor from any of its obligations under its Guarantee or this Indenture otherwise than in accordance with this Indenture; or (k) make any change to Article Fourteen that adversely affects the Holders. Upon the written request of the Company and each Guarantor accompanied by a copy of a Board Resolution of the Board of Directors of the Company and each Guarantor authorizing the execution of any such supplemental indenture or other agreement, instrument or waiver, and upon the filing with the Trustee of evidence of the consent of Holders as aforesaid, the Trustee shall join with the Company and each Guarantor in the execution of such supplemental indenture or other agreement, instrument or waiver. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture or other agreement, instrument or waiver, but it shall be sufficient if such Act shall approve the substance thereof. -72- Section 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES, AGREEMENTS AND WAIVERS. In executing, or accepting the additional trusts created by, any supplemental indenture, agreement, instrument or waiver permitted by this Article Nine or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.01 hereof) shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate from each obligor under the Notes entering into such supplemental indenture, agreement, instrument or waiver, each stating that the execution of such supplemental indenture, agreement, instrument or waiver (a) is authorized or permitted by this Indenture and (b) does not violate the provisions of any agreement or instrument evidencing any other Indebtedness of the Company, any Guarantor or any other Subsidiary of the Company. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture, agreement, instrument or waiver which affects the Trustee's own rights, duties or immunities under this Indenture, the Notes, any Guarantee or otherwise. Section 9.04. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article Nine, this Indenture, the Notes, if applicable, and/or the applicable Guarantee shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture, the Notes, if applicable, and/or the applicable Guarantee, as the case may be, for all purposes; every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article Nine shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors of the Company, to any such supplemental indenture may be prepared and executed by the Company and each Guarantor and authenticated and delivered by the Trustee upon a Company Order in exchange for Outstanding Notes. -73- Section 9.07. RECORD DATE. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any supplemental indenture, agreement or instrument or any waiver, and shall promptly notify the Trustee of any such record date. If a record date is fixed, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such supplemental indenture, agreement or instrument or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective with respect to such supplemental indenture, agreement or instrument or waiver which is entered into more than 90 days after such record date. Section 9.08. REVOCATION AND EFFECT OF CONSENTS. Until an amendment or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder 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 a notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of a Note if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. An amendment or waiver shall become effective in accordance with its terms and thereafter bind every Holder. ARTICLE TEN COVENANTS Section 10.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. Subject to the provisions of Article Fourteen, the Company will duly and punctually pay the principal of, premium, if any, and interest on the Notes in accordance with the terms of the Notes, this Indenture and the Registration Rights Agreement. Section 10.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain, in the Borough of Manhattan in The City of New York, State of New York, an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The office of the Trustee at its Corporate Trust Office will be such office or agency of the Company, unless the Company shall designate and maintain some -74- other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York, State of New York) where the Notes may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York, State of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. Section 10.03. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST. If the Company or any of its Affiliates shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of, premium, if any, or interest on any of the Notes, segregate and hold in trust for the benefit of the Holders entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. If the Company or any of its Affiliates is not acting as Paying Agent, the Company will, on or before each due date of the principal of, premium, if any, or interest on, any Notes, deposit with a Paying Agent a sum in same day funds sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held in trust for the benefit of the Holders entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. If the Company is not acting as Paying Agent, the Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent will agree with the Trustee, subject to the provisions of this Section 10.03, that such Paying Agent will: -75- (a) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Notes in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders or otherwise disposed of as herein provided; (b) give the Trustee notice of any Default by the Company or any Guarantor (or any other obligor upon the Notes) in the making of any payment of principal of, premium, if any, or interest on the Notes; (c) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (d) acknowledge, accept and agree to comply in all aspects with the provisions of this Indenture relating to the duties, rights and liabilities of such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent will be released from all further liability with respect to such money. 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, premium, if any, or interest has become due and payable shall be paid to the Company upon receipt of a Company Request therefor, or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will 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, at the option of the Company in the New York Times or 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 publication, any unclaimed balance of such money then remaining shall be repaid to the Company. -76- Section 10.04. CORPORATE EXISTENCE. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory), licenses and franchises of the Company and each of the Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company will not be required to preserve any such right, license or franchise if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and the Restricted Subsidiaries as a whole and that the loss thereof is not adverse in any material respect to the Holders; PROVIDED FURTHER, that the foregoing will not prohibit a sale, transfer or conveyance of a Subsidiary of the Company or any of its assets in compliance with the terms of this Indenture. Section 10.05. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed (i) upon the Company or any of its Restricted Subsidiaries or (ii) upon the income, profits or property of the Company or any of the Restricted Subsidiaries and (b) all material lawful claims for labor, materials and supplies, which, if unpaid, could reasonably be expected to become a Lien upon the property of the Company or any of the Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company will not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings properly instituted and diligently conducted and for which appropriate provision has been made. Section 10.06. MAINTENANCE OF PROPERTIES. The Company will cause all material properties owned by the Company or any of the Restricted Subsidiaries or used or held for use in the conduct of their respective businesses to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in this Section 10.06 will prevent (a) the Company from discontinuing the maintenance of any of such properties if such discontinuance is, in the judgment of the Company (as evidenced, in each instance where the fair market value of such property or properties exceeds $10,000,000, by a Board Resolution of the Company), desirable in the conduct of its business or the business of any of the Restricted Subsidiaries and is not disadvantageous in any material respect to the -77- Holders or (b) a sale, transfer, merger, consolidation or conveyance of assets in compliance with Article Eight or Section 10.16. Section 10.07. INSURANCE. The Company shall maintain, and shall cause the Restricted Subsidiaries to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses of similar size, including property and casualty loss, and workers' compensation insurance. Section 10.08. BOOKS AND RECORDS. The Company will keep proper books of record and account, in which full and correct entries will be made of all financial transactions and the assets and business of the Company and each Restricted Subsidiary of the Company in material compliance with GAAP. Section 10.09. GUARANTEES. Each of the Guarantors and the Company will, and the Company will cause each of the Guarantors to, ensure at all times that, unless otherwise permitted by this Indenture, each Guarantee will remain in full force and effect. Section 10.10. PROVISION OF FINANCIAL STATEMENTS. For so long as the Notes are outstanding, whether or not the Company or any Guarantor is subject to Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto, the Company will, to the extent permitted by Commission practice and applicable law and regulations, file with the Commission the annual reports, quarterly reports and other documents which the Company and such Guarantor would have been required to file with the Commission pursuant to such Section 13(a) or 15(d), or any successor provision thereto, if the Company and such Guarantor were so subject, such documents to be filed with the Commission on or prior to the date (the "Required Filing Dates") by which the Company and such Guarantor would have been required so to file such documents if the Company and such Guarantor were so subject. The Company and such Guarantor will also in any event (x) within 15 days of each Required Filing Date, whether or not permitted or required to be filed with the Commission, (i) transmit or cause to be transmitted by mail to all Holders of Notes, as their names and addresses appear in the security register, without cost to such holders and (ii) file with the Trustee, copies of the annual reports, quarterly reports and other documents which the Company and such Guarantor would have been required to file with the Commis- -78- sion pursuant to Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto, if the Company and such Guarantor were subject to either of such Sections and (y) if filing such documents by the Company and such Guarantor with the Commission is not permitted under the Exchange Act, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective holder at the Company's and such Guarantor's cost. In addition, for so long as any Notes remain Outstanding, the Company will furnish to the Holders of Notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, and, to any beneficial Holder of Notes, if not obtainable from the Commission, information of the type that would be filed with the Commission pursuant to the foregoing provisions, upon the request of any such Holder. If any Guarantor's or other Subsidiaries' financial statements would be required to be included in the financial statements filed or delivered pursuant hereto if the Company were subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall include such Guarantor's or other Subsidiaries' financial statements in any filing or delivery pursuant hereto. Section 10.11. CHANGE OF CONTROL. Following the occurrence of a Change of Control (the date of such occurrence being the "Change of Control Date"), the Company will, within 20 Business Days after the Change of Control Date, make an offer to purchase (a "Change of Control Offer") all of the then Outstanding Notes at a purchase price (the "Change of Control Purchase Price") in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the purchase date. The Company will purchase all Notes properly tendered into the Change of Control Offer and not withdrawn. Failure of the Company to repurchase all of the Notes properly tendered for purchase and not withdrawn will constitute an Event of Default under Section 5.01(c). In order to effect such Change of Control Offer, the Company will, not later than the 20th Business Day after the Change of Control Date, mail to each Holder of Notes notice of the Change of Control Offer, which notice will govern the terms of the Change of Control Offer and will state, among other things, the procedures that holders must follow to accept the Change of Control Offer. The Change of Control Offer shall be kept open for a period of at least 20 Business Days and until 5:00 p.m., New York City time, on the last day of the period (the "Change of Control Purchase Date"). The notice, which shall govern the terms of the Change of Control Offer, shall include such disclosures as are required by law and shall state: (a) that the Change of Control Offer is being made pursuant to this Section 10.11 and that all Notes tendered into the Change of Control Offer will be ac- -79- cepted for payment; and that the Change of Control Offer shall remain open for a period of 20 Business Days or such longer period as may be required by applicable law; (b) the purchase price (including the amount of accrued interest, if any) for each Note, the Change of Control Purchase Date and the date on which the Change of Control Offer expires; (c) that any Note not tendered for payment will continue to accrue interest in accordance with the terms thereof; (d) that, unless the Company shall default in the payment of the purchase price, any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date; (e) that Holders electing to have Notes purchased pursuant to a Change of Control Offer will be required to surrender their Notes to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the Change of Control Purchase Date and must complete any form letter of transmittal proposed by the Company and acceptable to the Trustee and the Paying Agent; (f) that Holders of Notes will be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the Change of Control Purchase Date, a facsimile transmission or letter setting forth the name of the Holders, the principal amount of Notes the Holders delivered for purchase, the Note certificate number (if any) and a statement that such Holder is withdrawing his election to have such Notes purchased; (g) that Holders whose Notes are purchased only in part will be issued Notes of like tenor equal in principal amount to the unpurchased portion of the Notes surrendered; (h) the instructions that Holders must follow in order to tender their Notes; and (i) information concerning the business of the Company, the most recent annual and quarterly reports of the Company filed with the Commission pursuant to the Exchange Act (or, if the Company is not required to file any such reports with the Commission, the comparable reports prepared pursuant to Section 10.10), a description of material developments in the Company's business, information with respect to pro forma historical financial information after giving effect to such Change of Control and such other information concerning the circumstances and relevant facts re- -80- garding such Change of Control and Change of Control Offer as would, in the good faith judgment of the Company, be material to a Holder of Notes in connection with the decision of such Holder as to whether or not it should tender Notes pursuant to the Change of Control Offer. On the Change of Control Purchase Date, the Company will (i) accept for payment Notes or portions thereof in integral multiples of $1,000 tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money, in immediately available funds, sufficient to pay the purchase price of all Notes or portions thereof so tendered and accepted and (iii) deliver to the Trustee the Notes so accepted together with an Officers' Certificate setting forth the Notes or portions thereof tendered to and accepted for payment by the Company. The Paying Agent will promptly mail or deliver to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note of like tenor equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Change of Control Offer not later than the first Business Day following the Change of Control Purchase Date. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other securities laws or regulations and any applicable requirements of any securities exchange on which the Notes are listed, in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 10.11, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 10.11 by virtue thereof. Subject to applicable escheat laws, the Trustee and the Paying Agent shall return to the Company any cash that remains unclaimed, together with interest or dividends, if any, thereon, held by them for the payment of the Change of Control Purchase Price, PROVIDED, HOWEVER, that, (x) to the extent that the aggregate amount of cash deposited by the Company pursuant to clause (ii) of the third paragraph of this Section 10.11 exceeds the aggregate Change of Control Purchase Price of the Notes or portions thereof to be purchased, then the Trustee shall hold such excess for the Company and (y) unless otherwise directed by the Company in writing, promptly after the Business Day following the Change of Control Purchase Date the Trustee shall return any such excess to the Company together with interest, if any, thereon. -81- Section 10.12. LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume, issue, guarantee or in any manner become liable for or with respect to, contingently or otherwise (in each case, to "incur"), the payment of any Indebtedness (including any Acquired Indebtedness), PROVIDED, HOWEVER, that (i) the Company or a Guarantor may incur Indebtedness (including Acquired Indebtedness) and (ii) a Restricted Subsidiary (which is not a Guarantor) may incur Acquired Indebtedness, if, in either case, immediately after giving PRO FORMA effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to 2.00:1. Notwithstanding the foregoing, the Company and, to the extent specifically set forth below, the Guarantors and the Restricted Subsidiaries may incur each and all of the following (collectively, "Permitted Indebtedness"): (i) Indebtedness of the Company or any Guarantor (without duplication) under the Revolving Credit Facility or any other Bank Credit Facility in an aggregate principal amount at any one time outstanding not to exceed $500,000,000, less any permanent reductions made pursuant to the provision described in the second paragraph of Section 10.16; (ii) Indebtedness of the Company pursuant to the Notes and Indebtedness of any Guarantor pursuant to a Guarantee of the Notes; (iii) Indebtedness (other than Indebtedness under the Revolving Credit Facility, the Notes and the Guarantees) of the Company or any Restricted Subsidiary outstanding on the date of this Indenture, except Indebtedness to be repaid as described under "Use of Proceeds" in the Offering Memorandum; (iv) Indebtedness of the Company owing to a Restricted Subsidiary; PROVIDED that any Indebtedness for borrowed money of the Company owing to a Subsidiary is made pursuant to an intercompany note in the form attached hereto as Exhibit E and is subordinated in accordance with provisions set forth in this Indenture; PROVIDED, FURTHER, that any disposition, pledge or transfer of any such Indebtedness to a Person (other than a disposition, pledge or transfer to a Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness by the Company not permitted by this clause (iv); (v) Indebtedness of a Guarantor owing to and held by the Company or another Guarantor; PROVIDED, that any such Indebtedness for borrowed money is made pursuant to an intercompany note in the form attached hereto as Exhibit E; PROVIDED -82- FURTHER, that (a) any disposition, pledge or transfer of any such Indebtedness to a Person (other than the Company or a Guarantor) shall be deemed to be an incurrence of such Indebtedness by the obligor not permitted by this clause (v), and (b) any transaction pursuant to which any Guarantor, which has Indebtedness owing to the Company or any other Guarantor, ceases to be a Guarantor shall be deemed to be the incurrence of Indebtedness by such Guarantor that is not permitted by this clause (v); (vi) guarantees by any Restricted Subsidiary incurred in compliance with the provisions of the covenant described in Section 10.18; (vii) Indebtedness of the Company or any Restricted Subsidiary under Interest Rate Agreements covering Indebtedness of the Company or such Restricted Subsidiary (which Indebtedness (a) bears interest at fluctuating interest rates and (b) is otherwise permitted to be incurred under this Section 10.12) to the extent the notional principal amount of the obligations under such Interest Rate Agreements does not exceed the principal amount of the Indebtedness to which such obligations relate; (viii) Indebtedness of the Company or any Restricted Subsidiary under Currency Agreements or Commodity Price Protection Agreements relating to (a) Indebtedness of the Company or such Restricted Subsidiary and/or (b) obligations to purchase or sell assets or properties, in each case, incurred in the ordinary course of business of the Company; PROVIDED, HOWEVER, that such Currency Agreements or Commodity Price Protection Agreements, as the case may be, do not increase the Indebtedness or other obligations of the Company outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (ix) Indebtedness of the Company or any Guarantor represented by Capitalized Lease Obligations or Purchase Money Obligations or other Indebtedness incurred or assumed in connection with the acquisition or development of real or personal movable or immovable property in each case incurred for the purpose of financing or refinancing all or any part of the purchase price or cost of construction or improvement of property used in the business of the Company or such Guarantor, in an aggregate principal amount pursuant to this clause (ix) not to exceed $10,000,000 per year; PROVIDED, that immediately after any such incurrence pursuant to this clause (ix), the aggregate amount of Indebtedness outstanding pursuant to this clause (ix) shall not exceed 2.0% of the Consolidated Net Sales of the Company in the most recent four full fiscal quarters for which financial statements of the Company are available; PROVIDED FURTHER, that the principal amount of any Indebtedness permitted under this clause (ix) did not in each case at the time of incurrence exceed the Fair Market Value, -83- as determined by the Company or such Guarantor in good faith, of the acquired or constructed asset or improvement so financed; (x) reimbursement obligations under letters of credit and letters of credit, in each case, to support (A) workers compensation obligations not to exceed $10,000,000 in the aggregate at any time outstanding and (B) bankers acceptances, performance bonds, surety bonds, performance guarantees and supplier obligations not to exceed $10,000,000 in the aggregate at any time outstanding, in the case of each of such clause (A) and (B) of the Company or any Guarantor, in each case, in the ordinary course of business consistent with past practice; (xi) guarantees by the Company of Indebtedness of any Guarantor; PROVIDED that such Indebtedness of such Guarantor is permitted by the terms of this Indenture; (xii) any renewals, extensions, substitutions, refundings, refinancings or replacements (collectively, a "refinancing") of any Indebtedness described in clauses (i), (ii) and (iii) of this definition of "Permitted Indebtedness," including any successive refinancings, so long as the aggregate principal amount of Indebtedness represented thereby is not increased by such refinancing plus the lesser of (I) 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 (II) the amount of premium or other payment actually paid at such time to refinance the Indebtedness, plus, in either case, the amount of expenses of the Company or a Restricted Subsidiary incurred in connection with such refinancing and (A) in the case of any refinancing of Indebtedness that is Subordinated Indebtedness, such new Indebtedness is subordinated to the Notes at least to the same extent as the Indebtedness being refinanced and (B) such refinancing does not reduce the Average Life to Stated Maturity or the Stated Maturity of such Indebtedness; (xiii) guarantees which are permitted under clause (ix) of paragraph (b) of Section 10.14; and (xiv) Indebtedness of the Company or any Guarantor in addition to that described in clauses (i) through (xiii) above, and any renewals, extensions, substitutions, refinancings or replacements of such Indebtedness, so long as the aggregate principal amount of all such Indebtedness shall not exceed $35,000,000 outstanding at any one time. If no Default or Event of Default has occurred and is continuing, after the ratings assigned to the Notes by both Rating Agencies are equal to or higher than Investment Grade Ratings, and notwithstanding that the Notes may later cease to have an Investment -84- Grade Rating, the Company and the Restricted Subsidiaries will not be subject to the provisions of this Section 10.12. Section 10.13. STATEMENT BY OFFICERS AS TO DEFAULT. The Company will deliver to the Trustee, within 45 days after the end of the first three fiscal quarters of the Company and 90 days after the end of each fiscal year of the Company ending after the date hereof, a written statement signed by the chief executive officer and either the principal financial officer or principal accounting officer of the Company, stating (i) that a review of the activities of the Company during the preceding fiscal quarter or year, as applicable, has been made under the supervision of the signing officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and (ii) that, to the knowledge of each officer signing such certificate, the Company has kept, observed, performed and fulfilled each and every covenant and condition contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions, conditions and covenants hereof (or, if a Default shall have occurred, describing all such Defaults of which such officers may have knowledge, their status and what action the Company is taking or proposes to take with respect thereto). When any Default has occurred and is continuing, or if the Trustee or any Holder or the trustee for or the holder of any other evidence of Indebtedness of the Company or any Restricted Subsidiary gives any notice or takes any other action with respect to a claimed Default, the Company will promptly notify the Trustee of such Default, notice or action and will deliver to the Trustee by registered or certified mail or by telegram, or facsimile transmission followed by hard copy by registered or certified mail an Officers' Certificate specifying such event, notice or other action within five Business Days after the Company becomes aware of such occurrence and what action the Company is taking or proposes to take with respect thereto. Section 10.14. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly: (i) declare or pay any dividend or make any other distribution or payment on or in respect of Capital Stock of the Company or any payment to the direct or indirect holders (in their capacities as such) of Capital Stock of the Company (other than dividends or distributions payable solely in shares of Qualified Capital Stock of the Company or in options, warrants or other rights to acquire shares of such Qualified Capital Stock); or (ii) purchase, redeem, defease or otherwise acquire or retire for value, directly or indirectly, any Capital Stock of the Company (other than any such Capital -85- Stock owned by the Company or any Wholly-Owned Restricted Subsidiary) or options, warrants or other rights to acquire such Capital Stock; or (iii) make any principal payment on, or purchase, repurchase, redeem, defease, retire or otherwise acquire for value, prior to any scheduled maturity, scheduled repayment, scheduled sinking fund payment or other Stated Maturity, any Subordinated Indebtedness (other than any Subordinated Indebtedness owed to and held by the Company or a Guarantor); or (iv) make any Investment (other than any Permitted Investment) in any Person (other than in the Company, any Restricted Subsidiary or a Person that becomes a Restricted Subsidiary, or is merged with or into or consolidated with the Company or a Restricted Subsidiary (provided the Company or a Restricted Subsidiary is the survivor), as a result of or in connection with such Investment) (any of the foregoing actions described in clauses (i) through (iv), other than any such action that is a Permitted Payment (as defined below), collectively, "Restricted Payments") (the amount of any such Restricted Payment, if other than cash, shall be the Fair Market Value of the asset(s) proposed to be transferred by the Company or such Restricted Subsidiary, as the case may be, in each case, as determined by the board of directors of the Company, whose determination shall be conclusive and evidenced by a Board Resolution), unless (1) immediately before and immediately after giving effect to such Restricted Payment on a PRO FORMA basis, no Default or Event of Default shall have occurred and be continuing; (2) immediately before and immediately after giving effect to such Restricted Payment on a PRO FORMA basis, the Company could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions of Section 10.12, and (3) after giving effect to the proposed Restricted Payment, the aggregate amount of all such Restricted Payments declared or made after the Issue Date, does not exceed $5,000,000 plus the sum of: (A) 50% of the aggregate cumulative Consolidated Net Income of the Company during the period (treated as one accounting period) beginning on the first day of the fiscal quarter beginning after the Issue Date and ending on the last day of the Company's last fiscal quarter ending prior to the date of the Restricted Payment (or, if such aggregate cumulative Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received after the Issue Date by the Company from the issuance or sale (other than to any of the Restricted Subsidiaries) of Qualified Capital Stock of the Company or from the exercise of any options, warrants or rights to purchase such Qualified Capital Stock of the Company (except, in each case, to the extent such proceeds are used to purchase, redeem or otherwise retire -86- Capital Stock or Subordinated Indebtedness as set forth in clause (ii) or (iii) of paragraph (b) below and excluding the net cash proceeds from any issuance and sale of Capital Stock or from any such exercises, in each case, financed, directly or indirectly, using funds borrowed from the Company or any Restricted Subsidiary until and to the extent such borrowing is repaid); (C) the aggregate Net Cash Proceeds received after the Issue Date by the Company from the conversion or exchange, if any, of debt securities or Redeemable Capital Stock of the Company or its Subsidiaries into or for Qualified Capital Stock of the Company plus, without duplication, the aggregate of Net Cash Proceeds from their original issuance, less any principal and sinking fund payments made thereon; (D) in the case of the disposition or repayment of any Investment (other than an Investment made pursuant to clause (viii) of paragraph (b) below) constituting a Restricted Payment made after the Issue Date, an amount (to the extent not included in Consolidated Net Income) equal to the lesser of the return of capital with respect to such Investment and the initial amount of such Investment which was treated as a Restricted Payment, in either case, less the cost of disposition of such Investment and net of taxes; and (E) so long as the Designation thereof was treated as a Restricted Payment made after the Issue Date, with respect to any Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary after the Issue Date in accordance with Section 10.21, the Fair Market Value of the interest of the Company and the Restricted Subsidiaries in such Subsidiary, provided that such amount shall not in any case exceed the Designation Amount with respect to such Restricted Subsidiary upon its Designation. (b) Notwithstanding the foregoing, and in the case of clauses (ii) through (viii) below, so long as no Default or Event of Default shall have occurred and be continuing or would arise therefrom, the foregoing provisions shall not prohibit the following actions (each of clauses (i) through (iv) being referred to as a "Permitted Payment"): (i) the payment of any dividend within 60 days after the date of declaration thereof, if (A) at such date of declaration such payment was permitted by the provisions of this Indenture and (B) such payment shall have been deemed to have been paid on such date of declaration and shall not have been deemed a "Permitted Payment" for purposes of the calculation required by paragraph (a) of this Section 10.14; -87- (ii) the repurchase, redemption, or other acquisition or retirement of any shares of any class of Capital Stock of the Company in exchange for (including any such exchange pursuant to the exercise of a conversion right or privilege in connection with which cash is paid in lieu of the issuance of fractional shares or scrip), or out of the Net Cash Proceeds of a substantially concurrent issue and sale for cash to any Person (other than to a Restricted Subsidiary) of, shares of Qualified Capital Stock of the Company; PROVIDED, that the Net Cash Proceeds from the issuance of such shares of Qualified Capital Stock are excluded from clause (B) of paragraph (a) of this Section 10.14; (iii) the repurchase, redemption, defeasance, retirement or acquisition for value or payment of principal of any Subordinated Indebtedness in exchange for, or out of the Net Cash Proceeds of a substantially concurrent issuance and sale for cash to any Person (other than to any Restricted Subsidiary of the Company) of, any Qualified Capital Stock of the Company; PROVIDED, that the Net Cash Proceeds from the issuance of such shares of Qualified Capital Stock are excluded from clause (B) of paragraph (a) of this Section 10.14; (iv) the repurchase, redemption, defeasance, retirement, acquisition for value or payment of principal 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 for cash to any Person (other than to a Restricted Subsidiary) of, new Subordinated Indebtedness of such Person; PROVIDED, that any such new Subordinated Indebtedness (1) shall be in a principal amount that does not exceed the principal amount so repurchased, redeemed, defeased, retired, acquired or paid (or, if such Subordinated Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, then such lesser amount as of the date of determination), plus the lesser of (I) the stated amount of any premium or other payment required to be paid in connection with such repurchase, redemption, defeasance, retirement, acquisition or payment pursuant to the terms of the Indebtedness being repurchased, redeemed, defeased, retired, acquired or paid or (II) the amount of premium or other payment actually paid at such time to repurchase, redeem, defease, retire, acquire or pay the Indebtedness, plus, in either case, the amount of expenses of the Company incurred in connection with such repurchase, redemption, defeasance, retirement, acquisition or payment; (2) has an Average Life to Stated Maturity equal to or greater than the Average Life to Stated Maturity of the Subordinated Indebtedness being repurchased, redeemed, defeased, retired, acquired or paid; (3) has no Stated Maturity earlier than the Stated Maturity for the final scheduled principal payment of the Notes; and (4) is expressly subordinated -88- in right of payment to the Notes at least to the same extent as the Subordinated Indebtedness to be repurchased, redeemed, defeased, retired, acquired or paid; (v) the repurchase of any Pari Passu Indebtedness (x) at a purchase price not greater than 101% of the principal amount of such Pari Passu Indebtedness in the event of a Change of Control pursuant to a provision similar to Section 10.11; PROVIDED that prior to, or contemporaneously with, such repurchase the Company has made the Change of Control Offer if required by, and as provided under, Section 10.11 and has repurchased all Notes validly tendered for payment in connection with such Change of Control Offer and (y) at a purchase price not greater than 100% of the principal amount of such Pari Passu Indebtedness in the event of an Asset Sale pursuant to a provision similar to Section 10.16; PROVIDED, that prior to such repurchase the Company has made an Asset Sale Offer if required by, and as provided in Section 10.16 and has repurchased all Notes validly tendered for payment in connection with such Asset Sale Offer; (vi) the purchase of restricted stock from employees of the Company upon the termination of employment of such employees, pursuant to the terms of a restricted stock plan approved by the Company's Board of Directors, in an amount not to exceed $1,000,000 in any fiscal year; (vii) the payment of cash dividends on the Company's Common Stock of up to $3,000,000 in the aggregate in any fiscal quarter; (viii) Investments by the Company or a Restricted Subsidiary in any Person established by the Company or a Restricted Subsidiary in conjunction with customers or suppliers of the Company which Person is engaged in the distribution and sale of food and related products or the facilitation of goods and services in the food industry such that, immediately after the making of any such Investment pursuant to this clause (viii), the aggregate outstanding amount of all such Investments made pursuant to this clause (viii) shall not exceed 1.0% of the Consolidated Net Sales of the Company for the most recent four fiscal quarters for which financial statements are available; and (ix) guarantees of obligations of, or loans to, customers in the ordinary course of business consistent with past practice, such that immediately after the issuing of any such guarantee or the making of any such loan pursuant to this clause (ix), the aggregate amount of all such guarantees or loans made under this clause (ix) that are outstanding would not exceed 4.0% of the Consolidated Net Sales of the Company for the most recent four full fiscal quarters for which financial statements of the -89- Company are available; PROVIDED, that renewals of loans made in compliance with this clause (ix) shall be permitted. (c) In computing the amount of Restricted Payments previously made for purposes of clause (3) of paragraph (a) of this Section 10.14, Restricted Payments under clauses (i) (as described in subclause (B) of such clause), (v), (vi), (vii), (viii) and (ix) of paragraph (b) of this Section 10.14 shall be included. If no Default or Event of Default has occurred and is continuing, after the ratings assigned to the Notes by both Rating Agencies are equal to or higher than Investment Grade Ratings, and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will not be subject to the provisions of this Section 10.14. Section 10.15. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will not cause or permit any of the Restricted Subsidiaries to, directly or indirectly, conduct any business or enter into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with, or for the benefit of, any Affiliate of the Company or of a Restricted Subsidiary (other than the Company or a Guarantor) unless such transaction or series of related transactions is entered into in good faith and in writing and (a) such transaction is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that would be available in a comparable transaction in arm's-length dealings with an unrelated third party and (b) with respect to any transaction or series of related transactions involving aggregate value in excess of $5,000,000, the Company delivers an Officers' Certificate to the Trustee certifying that such transaction or series of related transactions complies with clause (a) above and such transaction or series of transactions has been approved by a majority of the Board of Directors of the Company, including a majority of the Disinterested Directors of the Company or, in the event there is only one Disinterested Director, by such Disinterested Director; PROVIDED the Company or any Restricted Subsidiary need not comply with the preceding clause (b) if the Company delivers to the Trustee a written opinion of an Independent Financial Advisor stating that the transaction or series of related transactions is fair to the Company or such Restricted Subsidiary, from a financial point of view; PROVIDED, HOWEVER, that this provision shall not apply to (i) any transaction with an officer or director of the Company entered into in the ordinary course of business (including compensation and employee benefit arrangements with any officer, director or employee of the Company, including under any stock option or stock incentive plans); PROVIDED that such transaction has been approved in the manner described in clause (b) above, (ii) the payment of dividends otherwise permitted by the terms of this Indenture, (iii) indemnification agreements for the benefit of officers, directors and employees -90- and (iv) transactions with any Securitization Subsidiary made in the ordinary course of business on terms customary for such transactions. If no Default or Event of Default has occurred and is continuing, after the ratings assigned to the Notes by both Rating Agencies are equal to or higher than Investment Grade Ratings, and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will not be subject to the provisions of this Section 10.15. Section 10.16. LIMITATION ON SALE OF ASSETS. The Company will not, and will not cause or permit any Restricted Subsidiary to, directly or indirectly, consummate an Asset Sale unless (i) at least 80% of the consideration from such Asset Sale is received in cash or Cash Equivalents and (ii) the Company or such Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the shares or assets subject to such Asset Sale. Notwithstanding the foregoing, the Company need not comply with the preceding clause (i) in connection with any Asset Sale involving stores (and related fixtures and inventory) to a customer in exchange for a secured note on a basis consistent with past practice so long as the aggregate outstanding amount of all such notes does not exceed 4.0% of Consolidated Tangible Assets immediately after giving effect to any such Asset Sale. If all or a portion of the Net Cash Proceeds of any Asset Sale are not required to be applied to repay permanently any Senior Indebtedness outstanding as required by the terms thereof, or the Company determines not to apply such Net Cash Proceeds to the permanent repayment of the Senior Indebtedness which is required to be prepaid, or if no such Indebtedness under the Senior Indebtedness is then outstanding, the Company or such Restricted Subsidiary may within 365 days of such Asset Sale, invest the Net Cash Proceeds in capital expenditures, properties and other assets or inventories that (as determined by the board of directors of the Company) replace the properties and assets that were the subject of the Asset Sale or in properties and assets that will be used in the businesses of the Company or its Subsidiaries existing on the Issue Date or in businesses reasonably related thereto; PROVIDED that the Net Cash Proceeds of any Asset Sale in the case of a sale of a store or stores or warehouse or warehouses shall be deemed to have been applied to the extent of any capital expenditures made to acquire or construct a replacement store or acquire, construct or expand a warehouse, in each case within 180 days preceding the date of such Asset Sale; PROVIDED FURTHER that with respect to the sale of a store or stores, the replacement store shall be in the general vicinity of the store or stores being replaced. To the extent all or part of the Net Cash Proceeds of any Asset Sale are not applied, or the Company determines not to so apply such Net Cash Proceeds, within 365 -91- days of such Asset Sale as described in the immediately preceding paragraph (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the Company shall, within 20 days after such 365th day or at any earlier time after such Asset Sale, make an offer to purchase (the "Asset Sale Offer") all outstanding Notes and any Pari Passu Indebtedness the terms of which require such an offer to be made up to a maximum principal amount (expressed as a multiple of $1,000) of Notes and such Pari Passu Indebtedness equal to such Unutilized Net Cash Proceeds, at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the Asset Sale Offer Purchase Date; PROVIDED, HOWEVER, that the Asset Sale Offer may be deferred until there are aggregate Unutilized Net Cash Proceeds equal to or in excess of $10,000,000, at which time the entire amount of such Unutilized Net Cash Proceeds, and not just the amount in excess of $10,000,000, shall be applied as required pursuant to this paragraph. An Asset Sale Offer will be required to be kept open for a period of at least 20 business days. With respect to any Asset Sale Offer effected pursuant to this Section 10.16, among the Notes and such Pari Passu Indebtedness, to the extent the aggregate principal amount of Notes and such Pari Passu Indebtedness tendered pursuant to such Asset Sale Offer exceeds the Unutilized Net Cash Proceeds to be applied to the repurchase thereof, such Notes and such Pari Passu Indebtedness shall be purchased PRO RATA based on the aggregate principal amount of such Notes and such Pari Passu Indebtedness tendered. To the extent the Unutilized Net Cash Proceeds exceed the aggregate amount of Notes and such Pari Passu Indebtedness tendered pursuant to such Asset Sale Offer, the Company may retain and utilize any portion of the Unutilized Net Cash Proceeds not applied to repurchase the Notes and such Pari Passu Indebtedness for any purpose consistent with the other terms of this Indenture and such excess amount of Unutilized Net Cash Proceeds shall not be included in any future determination of Unutilized Net Cash Proceeds. Notice of an Asset Sale Offer shall be mailed by the Company not more than 20 days after the obligation to make such Asset Sale Offer arises to the Holders of Notes at their last registered addresses with a copy to the Trustee and the Paying Agent. The Asset Sale Offer shall remain open from the time of mailing for at least 20 Business Days or such longer period as may be required by applicable law and until 5:00 p.m., New York City time, on the last day of the period (the "Asset Sale Offer Purchase Date"). The notice, which shall govern the terms of the Asset Sale Offer, shall include such disclosures as are required by law and shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 10.16 and that all Notes in integral multiples of $1,000 tendered into the Asset Sale Offer shall be accepted for payment; PROVIDED, HOWEVER, that if the aggregate principal amount of Notes and Pari Passu Indebtedness tendered in the Asset Sale Offer exceeds the Unutilized Net Cash Proceeds, the Company shall select the Notes to be pur- -92- chased on a PRO RATA basis based upon the aggregate principal amount of such Pari Passu Indebtedness and Notes tendered by each Holder; and that the Asset Sale Offer shall remain open for a period of 20 Business Days or such longer period as may be required by applicable law; (b) the purchase price (including the amount of accrued interest, if any) for each Note, the Asset Sale Offer Purchase Date and the date on which the Asset Sale Offer expires; (c) that any Note not tendered for payment shall continue to accrue interest in accordance with the terms thereof; (d) that, unless the Company shall default in the payment of the purchase price, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Offer Purchase Date; (e) that Holders electing to have Notes purchased pursuant to an Asset Sale Offer shall be required to surrender their Notes to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the Asset Sale Offer Purchase Date and must complete any form letter of transmittal proposed by the Company and acceptable to the Trustee and the Paying Agent; (f) that any Holder of Notes shall be entitled to withdraw its election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the Asset Sale Offer Purchase Date, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes the Holder delivered for purchase, the Note certificate number (if any) and a statement that such Holder is withdrawing its election to have such Notes purchased; (g) that Holders whose Notes are purchased only in part shall be issued Notes of like tenor equal in principal amount to the unpurchased portion of the Notes surrendered; (h) the instructions that Holders must follow in order to tender their Notes; and (i) information concerning the business of the Company, the most recent annual and quarterly reports of the Company filed with the Commission pursuant to the Exchange Act (or, if the Company is not permitted to file any such reports with the Commission, the comparable reports prepared pursuant to Section 10.10), a description of material developments in the Company's business, information with re- -93- spect to pro forma historical financial position and results of operations after giving effect to such Asset Sale and such other information concerning the circumstances and relevant facts regarding such Asset Sale and Asset Sale Offer as would, in the good faith judgment of the Company, be material to a Holder of Notes in connection with the decision of such Holder as to whether or not it should tender Notes pursuant to the Asset Sale Offer. On the Asset Sale Offer Purchase Date, the Company shall (i) accept for payment (subject to pro ration as described in the second preceding paragraph) Notes or portions thereof in integral multiples of $1,000 tendered pursuant to the Asset Sale Offer, (ii) deposit with the Paying Agent money, in immediately available funds, sufficient to pay the purchase price of all Notes or portions thereof so tendered and accepted and (iii) deliver to the Trustee the Notes so accepted together with an Officers' Certificate setting forth the Notes or portions thereof tendered to and accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note of like tenor equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer not later than the first Business Day following the Asset Sale Offer Purchase Date. In the event that the Company makes an Asset Sale Offer, the Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other applicable securities laws or regulations and any applicable requirements of any securities exchange on which the Notes are listed. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 10.16, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 10.16 by virtue thereof. If no Default or Event of Default has occurred and is continuing, after the ratings assigned to the Notes by both Rating Agencies are equal to or higher than Investment Grade Ratings, and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will not be subject to the provisions of this Section 10.16. Section 10.17. LIMITATION ON LIENS. The Company will not, and will not cause or permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume, suffer to exist or affirm any Lien of any kind securing any (a) Pari Passu Indebtedness or Subordinated Indebtedness (including any assump- -94- tion, guarantee or other liability with respect thereto by any Restricted Subsidiary) upon any of its property or assets (including any intercompany notes), whether owned on the Issue Date or acquired after the Issue Date, or any proceeds, income or profits therefrom, or assign or convey any right to receive proceeds, income or profits therefrom, unless the Notes are directly secured equally and ratably with (or, in the case of Subordinated Indebtedness, prior or senior thereto, with the same relative priority as the Notes shall have with respect to such Subordinated Indebtedness) the obligation or liability secured by such Lien, except for Liens (A) securing any Indebtedness which became Indebtedness pursuant to a transaction permitted under Article Eight or securing Acquired Indebtedness which, in each case, were created prior to (and not created in connection with, or in contemplation of) the incurrence of such Pari Passu Indebtedness or Subordinated Indebtedness (including any assumption, guarantee or other liability with respect thereto by any Restricted Subsidiary) and which Indebtedness is permitted under Section 10.12 or (B) securing any Indebtedness incurred in connection with any refinancing, renewal, substitution or replacement of any such Indebtedness described in clause (A), so long as the aggregate principal amount of Indebtedness represented thereby is not increased by such refinancing by an amount greater than the lesser of (i) 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 (ii) the amount of premium or other payment actually paid at such time to refinance the Indebtedness, plus, in either case, the amount of expenses of the Company incurred in connection with such refinancing; PROVIDED, HOWEVER, that in the case of clauses (A) and (B) any such Lien only extends to the assets that were subject to such Lien securing such Indebtedness prior to the related acquisition by the Company or the Restricted Subsidiaries or (b) any Senior Indebtedness which is not incurred in compliance with the terms of this Indenture. Section 10.18. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES. (a) The Company will not cause or permit any Restricted Subsidiary, other than the Guarantors, directly or indirectly, to secure the payment of any Senior Indebtedness of the Company and the Company will not, and will not permit any Restricted Subsidiary to, pledge any intercompany notes representing obligations of any Restricted Subsidiary (other than the Guarantors) to secure the payment of any Senior Indebtedness unless in each case such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a guarantee of payment of the Notes by such Restricted Subsidiary, which guarantee shall be on the same terms as the guarantee of the Senior Indebtedness (if a guarantee of Senior Indebtedness is granted by any such Restricted Subsidiary) except that the guarantee of the Notes need not be secured and shall be subordinated to the claims against such Restricted Subsidiary in respect of Senior Indebtedness to the same -95- extent as the Notes are subordinated to Senior Indebtedness of the Company under this Indenture. (b) The Company will not cause or permit any Restricted Subsidiary, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Indebtedness of the Company unless such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a Guarantee of the Notes, on the same terms as the guarantee of such Indebtedness except that (A) such guarantee need not be secured unless required pursuant Section 10.17, (B) if such Indebtedness is by its terms Senior Indebtedness, any such assumption, guarantee or other liability of such Restricted Subsidiary with respect to such Indebtedness shall be senior to such Restricted Subsidiary's Guarantee of the Notes to the same extent as such Senior Indebtedness is senior to the Notes, and (C) if such Indebtedness is by its terms subordinated to the Notes any such assumption, guarantee or other liability of such Restricted Subsidiary with respect to such Indebtedness shall be subordinated to such Restricted Subsidiary's Guarantee of the Notes at least to the same extent as such Indebtedness is subordinated to the Notes. (c) Notwithstanding the foregoing, but subject to the provisions of Section 8.01, any Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms that it (and all Liens securing the same) shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all of the Company's Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary, which transaction is in compliance with the terms of this Indenture (including, but not limited to, Section 10.16) and such Restricted Subsidiary is released from all guarantees, if any, by it of other Indebtedness of the Company or any Restricted Subsidiaries or (ii) (with respect to any Guarantees created after the date of this Indenture) the release by the holders of the Indebtedness of the Company described in clauses (a) and (b) above of their security interest or their guarantee by such Restricted Subsidiary (including any deemed release upon payment in full of all obligations under such Indebtedness), at a time when (A) no other Indebtedness of the Company has been secured or guaranteed by such Restricted Subsidiary, as the case may be, or (B) the holders of all such other Indebtedness which is secured or guaranteed by such Restricted Subsidiary also release their security interest in, or guarantee by such Restricted Subsidiary (including any deemed release upon payment in full of all obligations under such Indebtedness). The Company may, at any time, cause a Subsidiary to become a Guarantor by executing and delivering a supplemental indenture providing for the guarantee of payment of the Notes by such Subsidiary on the basis provided in this Indenture. -96- Section 10.19. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company will not sell and will not cause or permit any Restricted Subsidiary of the Company to issue, sell or transfer any Preferred Stock of any Restricted Subsidiary (other than to the Company or to a Wholly-Owned Restricted Subsidiary) except for (i) Preferred Stock issued or sold to, held by or transferred to the Company or a Wholly-Owned Restricted Subsidiary and (ii) Preferred Stock issued by a Person prior to the time (A) such Person becomes a Restricted Subsidiary, (B) such Person merges with or into a Restricted Subsidiary or (C) a Restricted Subsidiary merges with or into such Person; PROVIDED that such Preferred Stock was not issued or incurred by such Person in anticipation of the type of transaction contemplated by subclause (A), (B) or (C). If no Default or Event of Default has occurred and is continuing, after the ratings assigned to the Notes by both Rating Agencies are equal to or higher than Investment Grade Ratings, and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will not be subject to the provisions of this Section 10.19. Section 10.20. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not cause or permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective or enter into any agreement with any Person that would cause to become effective, any consensual encumbrance or restriction of any kind, on the ability of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make any other distribution on or in respect of its Capital Stock or any other interest or participation in, or measured by, its profits, to the Company or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (iii) make any Investment in the Company or any other Restricted Subsidiary or (iv) transfer any of its properties or assets to the Company or any other Restricted Subsidiary, except for: (a) any encumbrance or restriction existing under any agreement in effect on the Issue Date; (b) any encumbrance or restriction, with respect to a Subsidiary that is not a Restricted Subsidiary of the Company on the Issue Date, in existence at the time such Person becomes a Restricted Subsidiary of the Company and not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary; PROVIDED, HOWEVER, that such encumbrances and restrictions are not applicable to the Company or any other Restricted Subsidiary, or the properties or assets of the Company or any other Restricted Subsidiary; (c) customary provisions restricting the subletting or assignment of any lease or the assignment of any other contract to which the Company or any Restricted Subsidiary is a party, which lease or contract is entered into in the ordinary course of business consistent with past practice; (d) any encumbrance or restriction contained in con- -97- tracts for sales of assets permitted by Section 10.16, PROVIDED, that such encumbrance or restriction relates only to assets being sold pursuant to the contract containing such encumbrance or restriction; (e) any encumbrance or restriction customarily contained in any security agreement or mortgage which security agreement or mortgage creates a Lien permitted under this Indenture; PROVIDED, that such encumbrance or restriction relates only to assets subject to such Lien; and (f) any encumbrance or restriction existing under any agreement that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in the foregoing clauses (a), (b), (c), (d) and (e), or in this clause (f), PROVIDED that the terms and conditions of any such encumbrances or restrictions are no more restrictive in any material respect than those under or pursuant to the agreement evidencing the Indebtedness so extended, renewed, refinanced or replaced. If no Default or Event of Default has occurred and is continuing, after the ratings assigned to the Notes by both Rating Agencies are equal to or higher than Investment Grade Ratings, and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will not be subject to the provisions of this Section 10.20. Section 10.21. LIMITATIONS ON UNRESTRICTED SUBSIDIARIES. The Company may designate after the Issue Date any Subsidiary (other than a Guarantor) as an "Unrestricted Subsidiary" under this Indenture (a "Designation") only if: (i) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such Designation; (ii) the Company would be permitted to make an Investment (other than a Permitted Investment) at the time of Designation (assuming the effectiveness of such Designation) pursuant to the provision described under paragraph (a) of Section 10.14 in an amount (the "Designation Amount") equal to the Fair Market Value of the Company's interest in such Subsidiary on such date; and (iii) the Company would be permitted under this Indenture to incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 10.12 at the time of such Designation (assuming the effectiveness of such Designation). In the event of any such Designation, the Company shall be deemed to have made an Investment constituting a Restricted Payment pursuant to Section 10.14 for all purposes of this Indenture in the Designation Amount. -98- The Company shall not, and shall not cause or permit any Restricted Subsidiary to, at any time (x) provide credit support for or subject any of its property or assets (other than the Capital Stock of any Unrestricted Subsidiary) to the satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly liable for any Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its final scheduled maturity upon the occurrence of a default with respect to any Indebtedness of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary), except any non-recourse guarantee given solely to support the pledge by the Company or any Restricted Subsidiary of the Capital Stock of an Unrestricted Subsidiary. No Unrestricted Subsidiary shall at any time guarantee or otherwise provide credit support for any obligation of the Company or any Restricted Subsidiary. All Subsidiaries of Unrestricted Subsidiaries shall automatically be deemed to be Unrestricted Subsidiaries. The Company may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if: (i) no Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Revocation; (ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred for all purposes of this Indenture; and (iii) any transaction (or series of related transactions) between such Subsidiary and any of its Affiliates that occurred while such Subsidiary was an Unrestricted Subsidiary would be permitted by Section 10.15 as if such transaction (or series of related transactions) had occurred at the time of such Revocation. All Designations and Revocations must be evidenced by Board Resolutions of the Company delivered to the Trustee certifying compliance with the foregoing provisions If no Default or Event of Default has occurred and is continuing, after the ratings assigned to the Notes by both Rating Agencies are equal to or higher than Investment Grade Ratings, and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will not be subject to the provisions of clauses (ii) and (iii) of the first and fourth paragraphs of this Section 10.21. -99- Section 10.22. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company, the Guarantors and any other obligor on the Notes will furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenants compliance with which constitutes a condition precedent) relating to the proposed action have been complied with, and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents, certificates and/or opinions is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture will include: (i) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (ii) 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; (iii) a statement that, in the opinion of each such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 10.23. LIMITATION ON INCURRENCE OF SENIOR SUBORDINATED INDEBTEDNESS. The Company will not, and will not permit any Guarantor to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise in any manner become directly or indirectly liable for or with respect to or otherwise permit to exist any Indebtedness that is subordinate or junior in right of payment to any Indebtedness of the Company or such Guarantor, as the case may be, unless such Indebtedness is also PARI PASSU with the Notes or the Guarantee of such Guarantor or subordinate or junior, in right of payment to the Notes or such Guarantee at least to the same extent as the Notes or such Guarantee are subordinate -100- or junior in right of payment to Senior Indebtedness or Senior Indebtedness of such Guarantor, as the case may be. Section 10.24. APPLICATION OF FALL-AWAY COVENANTS. After the Notes have been assigned an Investment Grade Rating by both Rating Agencies and the Company and the Guarantors shall no longer be subject to the agreements and covenants contained in clauses (iii) and (iv) of the first paragraph of Section 8.01, Sections 10.12, 10.14, 10.15, 10.16, 10.19, 10.20 and clauses (ii) and (iii) of the first and fourth paragraphs of Section 10.21 as therein provided, such provisions shall no longer have application for any purpose of this Indenture (including, without limitation, for purposes of Article Five, Article Eight, Article Nine, Article Ten and Article Twelve hereof). ARTICLE ELEVEN SATISFACTION AND DISCHARGE Section 11.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall cease to be of further effect (except as to surviving rights or registration of transfer or exchange of Notes herein expressly provided for) and the Trustee, on written demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when either (a) all Notes theretofore authenticated and delivered (other than (i) Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.07 hereof and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.03) have been delivered to the Trustee for cancellation; or (b) (i) all such Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee in trust an amount of money in dollars sufficient to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for the principal of, premium, if any, and interest to the date of such deposit; (ii) the Company or any Guarantor has paid or caused to be paid all other sums payable hereunder by the Company and the Guarantor; and -101- (iii) the Company and each of the Guarantors have delivered to the Trustee (a) irrevocable instructions to apply the deposited money toward payment of the Notes at the Stated Maturities and the Redemption Dates thereof, and (b) an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and that such satisfaction and discharge will not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company, any Guarantor or any Subsidiary is a party or by which the Company, any Guarantor or any Subsidiary is bound. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.07 and, if money shall have been deposited with the Trustee pursuant to subclause (a)(ii) of this Section 11.01, the obligations of the Trustee under Section 11.02 and the last paragraph of Section 10.03 shall survive. Section 11.02. APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 10.03, all money deposited with the Trustee pursuant to Section 11.01 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 of, premium, if any, and interest on the Notes for whose payment such money has been deposited with the Trustee. ARTICLE TWELVE GUARANTEE OF NOTES Section 12.01. UNCONDITIONAL GUARANTEE. Each Guarantor hereby jointly and severally absolutely and 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 invalidity, illegality, or unenforceability of this Indenture, the Notes or any extension, compromise, waiver or release in respect of any obligation of the Company or any other Guarantor under any Note, this Indenture or any modification or amendment of or supplement to this Indenture, that: (a) the principal of, premium, if any, and interest on the Notes will be duly and punctually paid in full when due, whether at maturity, upon redemption, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the -102- Notes and all other obligations of the Company or the Guarantor to the Holders or the Trustee hereunder or thereunder (including fees, expenses or other) and all other Indenture Obligations 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 Indenture Obligations, 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. Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the Holders, for whatever reason, each Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under this Guarantee, and shall entitle the Holders of Notes to accelerate the obligations of the Guarantor hereunder in the same manner and to the same extent as the obligations of the Company. Each Guarantor hereby agrees that its 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 of the Notes with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Guarantee is affixed to any particular Note, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and this Guarantee. This Guarantee is a guarantee of payment and not of collection. If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (a) subject to this Article Twelve, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Five hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article Five hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Note Guarantor for the purpose of this Guarantee. -103- Section 12.02. SUBORDINATION OF GUARANTEES. The obligations of any Guarantor under its Guarantee will be subordinated, to the same extent as the obligations of the Company in respect of the Notes, to the prior payment in full in cash or, to the extent permitted under the agreements governing the Senior Indebtedness being prepaid, Cash Equivalents, of all Senior Indebtedness of such Guarantor, which will include any guarantee issued by such Guarantor of any Senior Indebtedness. Section 12.03. EXECUTION AND DELIVERY OF GUARANTEE. To further evidence the Guarantee set forth in Section 12.01, each Guarantor hereby agrees that a notation of such Guarantee in the form annexed hereto as Exhibit D shall be endorsed on each Note authenticated and delivered by the Trustee and executed by either manual or facsimile signature of an Officer of each Guarantor. Each of the Guarantors hereby agrees that its Guarantee set forth in Section 12.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. If an Officer of a Guarantor whose signature is on this Indenture or a Guarantee no longer holds that office at the time the Trustee authenticates such Note or at any time thereafter, such Guarantor's Guarantee of such Note shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of each Guarantor. Section 12.04. ADDITIONAL GUARANTORS. Any Person that was not a Guarantor on the date of this Indenture may become a Guarantor by executing and delivering to the Trustee (a) a supplemental indenture in form and substance satisfactory to the Trustee, which subjects such Person to the provisions (including the representations and warranties) of this Indenture as a Guarantor, (b) in the event that as of the date of such supplemental indenture any Registrable Securities are outstanding, an instrument in form and substance satisfactory to the Trustee which subjects such Person to the provisions of the Registration Rights Agreement with respect to such outstanding Registrable Securities, and (c) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Person and constitutes the legal, valid and binding obligation of such Person (subject to such customary assumptions and exceptions as may be acceptable to the Trustee in its reasonable discretion). -104- Section 12.05. RELEASE OF A GUARANTOR. Subject to Section 8.01(a), upon the sale, exchange, transfer or other disposition (by merger or otherwise), other than a lease, of a Subsidiary of the Company that is a Guarantor of all of the Capital Stock of such Subsidiary or all, or substantially all, the assets of such Subsidiary, to any Person that is not an Affiliate of the Company, and which sale or other disposition is otherwise in compliance with the terms of this Indenture (including, without limitation, Section 10.16), such Guarantor shall be deemed automatically and unconditionally released and discharged from all obligations under this Article Twelve without any further action required on the part of the Trustee or any Holder. The Trustee shall deliver an appropriate instrument evidencing such release upon receipt of a request of the Company accompanied by an Officers' Certificate certifying as to the compliance with this Section and the Company's rights of redemption in accordance with the terms of the Notes in this Section 12.05. Any Guarantor not so released will remain liable for the full amount of principal of, premium, if any, and interest on the Notes as provided in this Article Twelve. Section 12.06. WAIVER OF SUBROGATION. Until this Indenture is discharged and all of the Notes are discharged and paid in full, each Guarantor hereby irrevocably waives and agrees not to exercise any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of the Company's obligations under the Notes or this Indenture and such Guarantor's obligations under this Guarantee and this Indenture, in any such instance including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and any amounts owing to the Trustee or the Holders of Notes under the Notes, this Indenture, or any other document or instrument delivered under or in connection with such agreements or instruments, shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Notes, and shall forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied to the Notes, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 12.06 is knowingly made in contemplation of such benefits. -105- Section 12.07. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT REGARDING DISSOLUTION, ETC. OF GUARANTORS. Upon any payment or distribution of assets of any Guarantor referred to in this Article Twelve, the Trustee, subject to the provisions of Section 6.01, and the Holders, shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Twelve; PROVIDED, HOWEVER, that the foregoing shall apply only if such court has been fully apprised of the provisions of this Article Twelve. Section 12.08. ARTICLE TWELVE APPLICABLE TO PAYING AGENTS. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article Twelve shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article Twelve in addition to or in place of the Trustee. Section 12.09. NO SUSPENSION OF REMEDIES. Nothing contained in this Article Twelve shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Article Five or to pursue any rights or remedies hereunder or under applicable law. Section 12.10. LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY. Each Guarantor that is a Subsidiary of the Company, and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that the Guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the foregoing intention, the Holders and such Guarantor hereby irrevocably agree that the obligations of such Guarantor under this Guarantee shall be limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor, and -106- after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under this Article Twelve, will result in the obligations of such Guarantor under its Guarantee not constituting such fraudulent transfer or conveyance. Section 12.11. CONTRIBUTION FROM OTHER GUARANTORS. Each Guarantor that makes a payment or distribution under its Guarantee shall be entitled to a contribution from each other Guarantor in a pro rata amount based on the net assets of each Guarantor, determined in accordance with GAAP, so long as the exercise of such right does not impair the rights of holders of Notes under any Guarantee. Section 12.12. OBLIGATIONS REINSTATED. The obligations of each Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have reduced the obligations of any Guarantor hereunder (whether such payment shall have been made by or on behalf of the Company or by or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Company or any Guarantor or otherwise, all as though such payment had not been made. If demand for, or acceleration of the time for, payment by the Company is stayed upon the insolvency, bankruptcy, liquidation or reorganization of the Company, all such Indebtedness otherwise subject to demand for payment or acceleration shall nonetheless be payable by each Guarantor as provided herein. Section 12.13. NO OBLIGATION TO TAKE ACTION AGAINST THE COMPANY. Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies or to take any other steps under any security for this Indenture Obligations or against the Company or any other Person or any property of the Company or any other Person before the Trustee is entitled to demand payment and performance by any or all Guarantors of their liabilities and obligations under their Guarantees or under this Indenture. Section 12.14. DEALING WITH THE COMPANY AND OTHERS. The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in part the obligations and liabilities of any Guarantor hereunder and without the consent of or notice to any Guarantor, may -107- (a) grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person; (b) take or abstain from taking security or collateral from the Company or from perfecting security or collateral of the Company; (c) release, discharge, compromise, realize, enforce or otherwise deal with or do any act or thing in respect of (with or without consideration) any and all collateral, mortgages or other security given by the Company or any third party with respect to the obligations or matters contemplated by this Indenture or the Notes; (d) accept compromises or arrangements from the Company; (e) apply all monies at any time received from the Company or from any security upon such part of the Indenture Obligations as the Holders may see fit or change any such application in whole or in part from time to time as the Holders may see fit; and (f) otherwise deal with, or waive or modify their right to deal with, the Company and all other Persons and any security as the Holders or the Trustee may see fit. ARTICLE THIRTEEN REDEMPTIONS AND OFFERS TO PURCHASE Section 13.01. NOTICE TO TRUSTEE. If the Company elects to redeem Notes pursuant to Section 13.07 it shall furnish to the Trustee, at least 30 days but not more than 60 days before notice of any redemption is to be mailed to Holders (or such shorter times as may be satisfactory to the Trustee), an Officers' Certificate stating that the Company has elected to redeem Notes pursuant to Section 13.07, the date notice of redemption is to be mailed to Holders, the redemption date, the aggregate principal amount of Notes to be redeemed, the redemption price for such Notes, the amount of accrued and unpaid interest on such Notes as of the redemption date and the manner in which Notes are to be selected for redemption if less than all Outstanding Notes are to be redeemed. If the Trustee is not the Registrar, the Company shall, concurrently with delivery of its notice to the Trustee of a redemption, cause the Registrar to deliver to the Trustee a certificate (upon which the Trustee may rely) setting forth the name of, and the aggregate principal amount of Notes held by each Holder. -108- If the Company is required to offer to purchase Notes pursuant to Sections 10.11 or 10.16, it shall furnish to the Trustee, at least two Business Days before notice of the corresponding Offer is to be mailed to Holders, an Officers' Certificate setting forth that the Offer is being made pursuant to Sections 10.11 or 10.16, as the case may be, the Change of Control Purchase Date or the Asset Sale Offer Purchase Date, the maximum principal amount of Notes the Company is offering to purchase pursuant to such Offer, the purchase price for such Notes, and the amount of accrued and unpaid interest on such Notes as of the Change of Control Purchase Date or the Asset Sale Offer Purchase Date, as the case may be. The Company will also provide the Trustee with any additional information that the Trustee reasonably requests in connection with any redemption or Offer. Section 13.02. SELECTION OF NOTES TO BE REDEEMED OR PURCHASED. In the event that less than all of the Notes are to be redeemed at any time, selection of Notes for redemption shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange, on a PRO RATA basis, by lot or by such method as the Trustee will deem fair and appropriate; PROVIDED, HOWEVER, that no Notes of a principal amount of $1,000 or less shall be redeemed in part; PROVIDED, FURTHER, HOWEVER, that any such redemption made with the net proceeds of a Public Equity Offering shall be made on a PRO RATA basis or on as nearly a PRO RATA basis as practicable (subject to the procedures of The Depository Trust Company or any other depositary). Notice of redemption will 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 will 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. Section 13.03. NOTICE OF REDEMPTION. (a) At least 30 days but not more than 60 days before any redemption date, the Company shall mail a notice of redemption by first class mail to each Holder of Notes or portions thereof that are to be redeemed. With respect to any redemption of Notes, the notice shall identify the Notes or portions thereof to be redeemed and shall state: (1) the redemption date; (2) the redemption price for the Notes and the amount of unpaid and accrued interest on such Notes as of the date of redemption; (3) the paragraph of the Notes pursuant to which the Notes called for redemption are being redeemed; (4) if any Note is being redeemed in part, the portion of the principal -109- 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 will be issued; (5) the name and address of the Paying Agent; (6) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price for, and any accrued and unpaid interest on, such Notes; (7) 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; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number listed in such notice and printed on the Notes. (b) At the Company's request, the Trustee shall (at the Company's expense) give the notice of any redemption to Holders; PROVIDED, HOWEVER, that the Company shall deliver to the Trustee, at least 45 days prior to the date of redemption and at least 10 days prior to the date that notice of the redemption is to be mailed to Holders, an Officers' Certificate that (i) requests the Trustee to give notice of the redemption to Holders, (ii) sets forth the information to be provided to Holders in the notice of redemption, as set forth in the preceding paragraph, and (iii) sets forth the aggregate principal amount of Notes to be redeemed and the amount of accrued and unpaid interest thereon as of the redemption date. If the Trustee is not a Registrar, the Company shall, concurrently with any such request, cause the Registrar to deliver to the Trustee a certificate (upon which the Trustee may rely) setting forth the name of, the address of, and the aggregate principal amount of Notes held by, each Holder; PROVIDED FURTHER that any such Officers' Certificate may be delivered to the Trustee on a date later than permitted under this Section 13.03(b) if such later date is acceptable to the Trustee. Section 13.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed, Notes called for redemption become due and payable on the redemption date at the price set forth in the Note. Section 13.05. DEPOSIT OF REDEMPTION PRICE. (a) On or prior to any 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. After any redemption date, the Trustee or the Paying Agent shall promptly return to the Company any money that the Company deposited with the Trustee or the Paying Agent in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. (b) If the Company complies with the preceding paragraph, interest on the Notes to be redeemed will cease to accrue on such Notes on the applicable redemption date, whether or not such Notes are presented for payment. 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 -110- unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business of 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 will be paid on the unpaid principal, premium, if any, and interest from the redemption date until such principal, premium and interest is paid, at the rate of interest provided in the Notes, the Registration Rights Agreement and Section 10.01. Section 13.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the Company's expense a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 13.07. OPTIONAL REDEMPTION. Except as set forth below, the Notes are not redeemable at the Company's option. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after May 1, 2003, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the date of redemption, if redeemed during the 12-month period beginning on May 1 of the years indicated below:
Year REDEMPTION PRICE ---- ---------------- 2003..................................... 104.250% 2004..................................... 102.833% 2005..................................... 101.417% 2006 and thereafter...................... 100.000%
On or prior to May 1, 2001, the Company may, at its option, use the net proceeds of a Public Equity Offering to redeem up to 35% of the originally issued aggregate principal amount of the Notes, at a redemption price in cash equal to 108.5% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; PROVIDED, HOWEVER, that at least $107,250,000 in aggregate principal amount of Notes is outstanding following such redemption. Notice of any such redemption must be given not later than 60 days after the consummation of the Public Equity Offering. As used in the preceding paragraph, a "Public Equity Offering" means any underwritten public offering of Capital Stock (other than Redeemable Capital Stock) of the Company made on a primary basis by the Company pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act. -111- On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption so long as the Company has deposited with the Paying Agent for the Notes funds in satisfaction of the applicable redemption price pursuant to this Indenture. Section 13.08. PROCEDURES RELATING TO MANDATORY OFFERS. (a) On the Change of Control Purchase Date or the Asset Sale Offer Purchase Date, as the case may be, for any Offer the Company will (i) in the case of an Offer resulting from a Change of Control, accept for payment all Notes or portions thereof tendered pursuant to such Offer and, in the case of an Offer resulting from one or more Asset Sales, accept for payment the maximum principal amount of Notes or portions thereof tendered pursuant to such Offer that can be purchased out of Unutilized Net Cash Proceeds from such Asset Sales to the extent provided in Section 10.16, (ii) deposit with the Paying Agent the aggregate purchase price of all Notes or portions thereof accepted for payment and any accrued and unpaid interest on such Notes as of the Purchase Date, and (iii) deliver, or cause to be delivered, to the Trustee all Notes tendered pursuant to the Offer, together with an Officers' Certificate setting forth the name of each Holder that tendered Notes and the principal amount of the Notes or portions thereof tendered by each such Holder. (b) With respect to any Offer, (i) if less than all of the Notes tendered pursuant to an Offer are to be accepted for payment by the Company for any reason consistent with this Indenture, the Trustee shall select on or prior to the Change of Control Purchase Date or the Asset Sale Offer Purchase Date, as the case may be, the Notes or portions thereof to be accepted for payment pursuant to Section 13.02, and (ii) if the Company deposits with the Paying Agent on or prior to the Change of Control Purchase Date or the Asset Sale Offer Purchase Date, as the case may be, an amount sufficient to purchase all Notes accepted for payment, interest shall cease to accrue on such Notes on the Purchase Date; PROVIDED, HOWEVER, that if the Company fails to deposit an amount sufficient to purchase all Notes accepted for payment, the deposited funds shall be used to purchase on a PRO RATA basis all Notes accepted for payment and interest shall continue to accrue on all Notes not purchased. (c) Promptly after consummation of an Offer, (i) the Paying Agent shall mail to each Holder of Notes or portions thereof accepted for payment an amount equal to the purchase price for, plus any accrued and unpaid interest on, such Notes, (ii) with respect to any tendered Note not accepted for payment in whole or in part, the Trustee shall return such Note to the Holder thereof, and (iii) with respect to any Note accepted for payment in part, the Trustee shall authenticate and mail to each such Holder a new Note equal in principal amount to the unpurchased portion of the tendered Note. -112- (d) The Company will (i) publicly announce the results of the Offer to Holders not later than the first Business Day after each Change of Control Purchase Date or Asset Sale Offer Purchase Date, as the case may be, and (ii) as set forth in the penultimate paragraph of each of Section 10.11 and Section 10.16, comply with the applicable tender offer rules and all other securities laws and regulations in connection with any Offer. ARTICLE FOURTEEN SUBORDINATION Section 14.01. AGREEMENT TO SUBORDINATE. The Company agrees, and each Holder by accepting a Note agrees, any provisions of this Indenture or the Notes to the contrary notwithstanding, that all obligations owed under and in respect of the Notes are subordinated in right of payment, to the extent and in the manner provided in this Article Fourteen, to the prior payment in full of all Senior Indebtedness of the Company, and that the subordination of the Notes pursuant to this Article Fourteen is for the benefit of all holders of all Senior Indebtedness of the Company, whether outstanding on the Issue Date or incurred thereafter. Section 14.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. (a) Upon any payment or distribution of cash, securities or other property of the Company to creditors upon any insolvency or liquidation proceeding with respect to the Company or its property or securities, the holders of any Senior Indebtedness of the Company will be entitled to receive payment in full, in cash or, to the extent permitted under the agreements governing the Senior Indebtedness, Cash Equivalents, of all obligations due in respect of such Senior Indebtedness before the Holders will be entitled to receive any payment or distribution with respect to the Notes (excluding any payment or distribution of, or repurchase or redemption in exchange for, securities permitted by clause (b) of this Section 14.02), and until all obligations with respect to such Senior Indebtedness of the Company are paid in full, in cash or, to the extent permitted under the agreements governing the Senior Indebtedness, Cash Equivalents, any payment or distribution to which the Holders would be entitled shall be made to the holders of the Company's Senior Indebtedness (pro rata to such holders on the basis of the amounts of Senior Indebtedness held by them). Upon any insolvency or liquidation proceeding with respect to the Company, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (excluding any payment or distribution of, or repurchase or redemption in exchange for, securities permitted by clause (b) of this Section 14.02), to which the Holders or the Trustee -113- would be entitled to except for the provisions of this Indenture shall be paid by the Company, any Custodian or other Person making such payment or distribution, or by the Holders or by the Trustee if received by them, directly to the holders of the Company's Senior Indebtedness (pro rata to such holders on the basis of the amounts of Senior Indebtedness held by them) or their Representatives, as their interests may appear, for application to the payment of all outstanding Senior Indebtedness of the Company until all such Senior Indebtedness has been paid in full in cash, after giving effect to all other payments or distributions to, or provisions made for, holders of the Company's Senior Indebtedness. (b) A distribution may consist of cash, securities or other property, by set-off or otherwise. For purposes of this Article Fourteen, the words "cash, securities or other property" shall not include any distribution of securities of the Company or any other corporation provided for in any reorganization proceeding under any Bankruptcy Law if (i) such securities constitute Reorganization Securities, (ii) such distribution was authorized by an order or decree of a court of competent jurisdiction, and (iii) such order gives effect to (and states in such order or decree that effect has been given to) the subordination of such securities to all Senior Indebtedness of the Company not paid in full in connection with such reorganization; provided that (a) all such Senior Indebtedness is assumed by the reorganized corporation, and (b) the rights of the holders of any such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization, which consent shall be deemed to have been given if the holders of such Senior Indebtedness (or their representative), individually or as a class, shall have approved such reorganization. (c) Notwithstanding anything to the contrary in this Indenture, any disposition by or involving the Company, or the liquidation or dissolution of the Company following any disposition, shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 14.02 if such disposition is permitted under Article Eight. Section 14.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS. (a) During the continuance of any default in the payment of any Designated Senior Indebtedness pursuant to which the maturity thereof may immediately be accelerated beyond any applicable grace period and after receipt by the Trustee from representatives of holders of such Designated Senior Indebtedness of written notice of such default, no payment or distribution of any assets of the Company of any kind or character (excluding any payment or distribution of securities set forth in Section 14.02(b)) shall be made on account of the principal of, premium, if any, or interest on, or the purchase, redemption or other acquisition of, the Notes unless and until such default has been cured or waived or has ceased to exist or such Designated Senior Indebtedness shall have been discharged or paid in full. -114- (b) During the continuance of any non-payment default with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may immediately be accelerated (a "Non-payment Default") and (x) after the receipt by the Trustee from the representatives of holders of such Designated Senior Indebtedness of a written notice of such Non-payment Default or (y) if the Non-payment Default results from the acceleration of the Notes, from the date of such acceleration, no payment or distribution of any assets of the Company of any kind or character (excluding any payment or distribution of securities set forth in Section 14.02(b)) shall be made by the Company on account of the principal of, premium, if any, or interest on, or the purchase, redemption or other acquisition of, the Notes for the period specified below (the "Payment Blockage Period"). The Payment Blockage Period will commence upon (x) the receipt of notice of a Non-payment Default by the Trustee from the representatives of holders of Designated Senior Indebtedness or (y) if the Non-payment Default results from the acceleration of the Notes, upon such acceleration, and will end on the earliest to occur of the following events: (i) 179 days shall have elapsed (A) since the receipt of such notice of a Non-payment Default or (B) if the Non-payment Default results from the acceleration of the Notes, since such acceleration (in each case, provided that such Designated Senior Indebtedness shall not have been accelerated and the Company has not defaulted with respect to the payment of such Designated Senior Indebtedness), (ii) such default is cured or waived or ceases to exist or such Designated Senior Indebtedness is discharged or (iii) such Payment Blockage Period shall have been terminated by written notice to the Company or the Trustee from the representatives of holders of Designated Senior Indebtedness initiating such Payment Blockage Period. After the end of any Payment Blockage Period the Company shall promptly resume making any and all required payments in respect of the Notes, including any missed payments. Notwithstanding anything in the subordination provisions of the Indenture or the Notes to the contrary, (x) in no event shall a Payment Blockage Period extend beyond 179 days from the date such Payment Blockage Period was commenced, (y) there shall be a period of at least 186 consecutive days in each 365-day period when no Payment Blockage Period is in effect and (z) not more than one Payment Blockage Period with respect to the Notes may be commenced within any period of 365 consecutive days. A Non-payment Default with respect to Designated Senior Indebtedness that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period cannot be made the basis for the commencement of a second Payment Blockage Period, whether or not within a period of 365 consecutive days, unless such default has been cured or waived for a period of not less than 90 consecutive days and subsequently recurs. -115- Section 14.04. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify each holder of the Company's Designated Senior Indebtedness or their representatives of the acceleration and provide copies of such notice to the Trustee. Section 14.05. WHEN DISTRIBUTIONS MUST BE PAID OVER. If the Company shall make any payment to the Trustee on account of the principal of, or premium, if any, or interest on, the Notes, or any other obligation in respect to the Notes, or the Holders shall receive from any source any payment on account of the principal of, or premium, if any, or interest on, the Notes or any obligation in respect of the Notes, at a time when such payment is prohibited by this Article Fourteen, the Trustee or such Holders shall hold such payment in trust for the benefit of, and shall pay over and deliver to, the holders of the Company's Senior Indebtedness (PRO RATA as to each of such holders on the basis of the respective amounts of such Senior Indebtedness held by them) or their representative or the trustee under the indenture or other agreement (if any) pursuant to which such Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all outstanding Senior Indebtedness of the Company until all such Senior Indebtedness has been paid in full in cash, after giving effect to all other payments or distributions to, or provisions made for, the holders of the Company's Senior Indebtedness. With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform only such obligations on its part as are specifically set forth in this Article Fourteen, and no implied covenants or obligations with respect to any holders of the Company's Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of the Company's Senior Indebtedness, and shall not be liable to any holders of such Senior Indebtedness if the Trustee shall pay over or distribute to, or on behalf of, Holders or the Company or any other Person money or assets to which any holders of such Senior Indebtedness are entitled pursuant to this Article Fourteen. Section 14.06. NOTICE. Neither the Trustee nor the Paying Agent shall at any time be charged with the knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee or Paying Agent under this Article Fourteen, unless the Trustee or the requisite Holders have given notice of acceleration of the Notes or unless and until the Trustee or Paying Agent shall have received written notice thereof from the Company or one or -116- more holders of the Company's Senior Indebtedness or a representative of any holders of such Senior Indebtedness; and, prior to the receipt of any such written notice, the Trustee or Paying Agent shall be entitled to assume conclusively that no such facts exist. The Trustee shall be entitled to rely on the delivery to it of written notice by a Person representing itself to be a holder of the Company's Senior Indebtedness (or a representative thereof) to establish that such notice has been given. The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts it knows that would cause a payment of principal of, or premium, if any, or interest on, the Notes or any other obligation in respect of the Notes to violate this Article Fourteen, but failure to give such notice shall not affect the subordination of the Notes to the Senior Indebtedness of the Company provided in this Article Fourteen or the rights of holders of such Senior Indebtedness under this Article Fourteen. Section 14.07. SUBROGATION. After all Senior Indebtedness of the Company has been paid in full in cash and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Pari Passu Indebtedness) to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness to the extent that distributions otherwise payable to the Holders have been applied to the payment of such Senior Indebtedness. A distribution made under this Article Fourteen to holders of the Company's Senior Indebtedness that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on its Senior Indebtedness. Section 14.08. RELATIVE RIGHTS. The provisions of this Article Fourteen are and are intended solely for the purpose of defining the relative rights of Holders and holders of the Company's Senior Indebtedness. Nothing in this Indenture shall: (1) impair, as between the Company and Holders, the Company's Indenture Obligations, which are absolute and unconditional, to pay principal of, and premium, if any, and interest on, the Notes in accordance with their terms; (2) affect the relative rights of Holders and the Company's creditors other than their rights in relation to holders of the Company's Senior Indebtedness; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of the Company's Senior Indebtedness, if any, under this Article Fourteen. Nothing contained in this Article Fourteen or elsewhere in this Indenture or in any Note is intended to or shall impair, as between the Company and the Holders, the Indenture Obligations of the Company, which are absolute and unconditional, to pay to the -117- Holders the principal of, and premium, if any, and interest on, the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Company's Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture, subject to the rights, if any, under this Article Fourteen of the holders of such Senior Indebtedness. The failure to make a payment on account of principal of, or interest on the Notes by reason of any provision of this Article Fourteen shall not be construed as preventing the occurrence of an Event of Default under Section 5.01. Section 14.09. THE COMPANY AND HOLDERS MAY NOT IMPAIR SUBORDINATION. (a) No right of any holder of the Company's Senior Indebtedness to enforce the subordination as provided in this Article Fourteen shall at any time or in any way be prejudiced or impaired by any act or failure to act by the Company or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture or the Notes or any other agreement regardless of any knowledge thereof with which any such holder may have or be otherwise charged. (b) Without in any way limiting Section 14.09(a), the holders of any Senior Indebtedness of the Company may, at any time and from time to time, without the consent of or notice to any Holders, without incurring any liabilities to any Holder and without impairing or releasing the subordination and other benefits provided in this Indenture or the Holders' obligations to the holders of such Senior Indebtedness, even if any Holder's right of reimbursement or subrogation or other right or remedy is affected, impaired or extinguished thereby, do any one or more of the following: (i) amend, renew, exchange, extend, modify, increase or supplement in any manner such Senior Indebtedness or any instrument evidencing or guaranteeing or securing such Senior Indebtedness or any agreement under which such Senior Indebtedness is outstanding (including, but not limited to, changing the manner, place or terms of payment or changing or extending the time of payment of, or renewing, exchanging, amending, increasing or altering, (1) the terms of such Senior Indebtedness, (2) any security for, or any guarantee of, such Senior Indebtedness, (3) any liability of any obligor on such Senior Indebtedness (including any guarantor) or any liability issued in respect of such Senior Indebtedness); (ii) sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any property pledged, mortgaged or otherwise securing such Senior Indebtedness or any liability of any obligor thereon, to such holder, or any liability issued in respect thereof; (iii) settle or compromise any such Senior Indebtedness or any other liability of any obligor of such Senior Indebtedness to such holder or any security -118- therefor or any liability issued in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including, without limitation, payment of any of the Company's Senior Indebtedness) in any manner or order; and (iv) fail to take or to record or otherwise perfect, for any reason or for no reason, any lien or security interest securing such Senior Indebtedness by whomsoever granted, exercise or delay in or refrain from exercising any right or remedy against any obligor or any guarantor or any other Person, elect any remedy and otherwise deal freely with any obligor and any security for such Senior Indebtedness or any liability of any obligor to the holders of such Senior Indebtedness or any liability issued in respect of such Senior Indebtedness. Section 14.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made, or a notice given, to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their representative, if any. If any payment or distribution of the Company's assets is required to be made to holders of any of the Company's Senior Indebtedness pursuant to this Article Fourteen, the Trustee and the Holders shall be entitled to rely upon any order or decree of any court of competent jurisdiction, or upon any certificate of a representative of such Senior Indebtedness or a custodian, in ascertaining the holders of such Senior Indebtedness entitled to participate in any such payment or distribution, the amount to be paid or distributed to holders of such Senior Indebtedness and all other facts pertinent to such payment or distribution or to this Article Fourteen. Section 14.11. RIGHTS OF TRUSTEE AND PAYING AGENT. The Trustee or Paying Agent may continue to make payments on the Notes unless prior to any payment date it or the requisite Holders have given notice of acceleration of the Notes or it has received written notice of facts that would cause a payment of principal of, or premium, if any, or interest on, the Notes to violate this Article Fourteen. Only the Company, a representative of Senior Indebtedness, or a holder of Senior Indebtedness that has no representative may give such notice. To the extent permitted by the TIA, the Trustee in its individual or any other capacity may hold Indebtedness of the Company (including Senior Indebtedness) with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 14.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by its acceptance thereof authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the -119- subordination as provided in this Article Fourteen, and appoints the Trustee as such Holder's attorney-in-fact for any and all such purposes (including, without limitation, the timely filing of a claim for the unpaid balance of the Note that such Holder holds in the form required in any bankruptcy, reorganization, insolvency or receivership proceeding and causing such claim to be approved). If a proper claim or proof of debt in the form required in such proceeding is not filed by or on behalf of all Holders prior to 30 days before the expiration of the time to file such claims or proofs, then the holders or a representative of any Senior Indebtedness of the Company are hereby authorized, and shall have the right (without any duty), to file an appropriate claim for and on behalf of the Holders. Section 14.13. PAYMENT. A payment on account of or with respect to any Note shall include, without limitation, any direct or indirect payment of principal, premium or interest with respect to or in connection with any optional redemption or purchase provisions, any direct or indirect payment payable by reason of any other Indebtedness or obligation being subordinated to the Notes, and any direct or indirect payment or recovery on any claim as a Holder relating to or arising out of this Indenture or any Note, or the issuance of any Note, or the transactions contemplated by this Indenture or referred to herein. [SIGNATURE PAGES FOLLOW] IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. COMPANY: NASH-FINCH COMPANY By: /s/ Alfred N. Flaten -------------------------- Name: Alfred N. Flaten Title: President By: /s/ Norman R. Soland -------------------------- Name: Norman R. Soland Title: Vice President, Secretary & General Counsel GUARANTORS: NASH DECAMP COMPANY By: /s/ Alfred N. Flaten -------------------------- Name: Alfred N. Flaten Title: Attorney-in-fact By: /s/ Norman R. Soland -------------------------- Name: Norman R. Soland Title: Attorney-in-fact T.J. MORRIS COMPANY By: /s/ Alfred N. Flaten -------------------------- Name: Alfred N. Flaten Title: President By: /s/ Norman R. Soland -------------------------- Name: Norman R. Soland Title: Secretary [Signature page to Nash Finch Indenture] SUPER FOOD SERVICES, INC. By: /s/ Alfred N. Flaten -------------------------- Name: Alfred N. Flaten Title: Vice President By: /s/ Norman R. Soland -------------------------- Name: Norman R. Soland Title: Secretary FORREST TRANSPORTATION SERVICES, INC. By: /s/ Alfred N. Flaten -------------------------- Name: Alfred N. Flaten Title: Attorney-in-fact By: /s/ Norman R. Soland -------------------------- Name: Norman R. Soland Title: Attorney-in-fact GTL TRUCK LINES, INC. By: /s/ Alfred N. Flaten -------------------------- Name: Alfred N. Flaten Title: Vice President By: /s/ Norman R. Soland -------------------------- Name: Norman R. Soland Title: Secretary [Signature page to Nash Finch Indenture] PIGGLY WIGGLY NORTHLAND CORPORATION By: /s/ Alfred N. Flaten ---------------------------- Name: Alfred N. Flaten Title: President By: /s/ Norman R. Soland ---------------------------- Name: Norman R. Soland Title: Secretary GILLETTE DAIRY OF THE BLACK HILLS, INC. By: /s/ Charles F. Ramsbacher ---------------------------- Name: Charles F. Ramsbacher Title: Vice President By: /s/ Norman R. Soland ----------------------------- Name: Norman R. Soland Title: Secretary NEBRASKA DAIRIES, INC. By: /s/ Charles F. Ramsbacher ------------------------------ Name: Charles F. Ramsbacher Title: Vice President By: /s/ Norman R. Soland ------------------------------ Name: Norman R. Soland Title: Secretary -123- TRUSTEE: U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: /s/ K. Barrett ------------------------------- Name: Kathe Barrett Title: Trust Officer EXHIBIT A-1 [FORM OF NOTE] THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DATE ON WHICH NASH-FINCH COMPANY (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF 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 LEG- A-1-1 END; PROVIDED THAT THE COMPANY, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. A-1-2 NASH-FINCH COMPANY _________________ 8-1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A CUSIP No. __________ No. ___________ $ NASH-FINCH COMPANY, a corporation incorporated under the laws of the State of Delaware (herein called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to _______________ or registered assigns, the principal sum of _______________ Dollars on May 1, 2008, at the office or agency of the Company referred to below, and to pay interest thereon on May 1 and November 1 (each an "Interest Payment Date"), of each year, commencing on November 1, 1998, accruing from the Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 8-1/2% per annum, until the principal hereof is paid or duly provided for. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture referred to on the reverse hereof, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the April 15 and October 15 (each a "Regular Record Date"), whether or not a Business Day, as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid, or duly provided for, and interest on such defaulted interest at the then applicable interest rate borne by the Notes, to the extent lawful, shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice of which shall be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in such Indenture. Payment of the principal of, premium, if any, and interest on this Note will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan in The City of New York, State of New York, or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United A-1-3 States of America as at the time of payment is legal tender for payment of public and private debts; PROVIDED, HOWEVER, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear on the Note Register. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or any Guarantee described on the reverse side hereof, or be valid or obligatory for any purpose. [Remainder of Page Intentionally Left Blank] A-1-4 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated: NASH-FINCH COMPANY By: ----------------------------- Name: Title: By: ----------------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 8-1/2% Senior Subordinated Notes due 2008, Series A, referred to in the within-mentioned Indenture. U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: ----------------------------- Authorized Officer A-1-5 [REVERSE OF NOTE] 1. INDENTURE. This Note is one of a duly authorized issue of Notes of the Company designated as its 8-1/2% Senior Subordinated Notes due 2008, Series A (herein called the "Initial Notes"). The Notes are limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $165,000,000, which may be issued under an indenture (herein called the "Indenture") dated as of April 24, 1998, by and among the Company, each of the guarantors named in the Indenture, as guarantors (herein called the "Guarantors"), and U.S. Bank Trust National Association, as trustee (herein called the "Trustee," which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Trustee, the Guarantors and the Holders of the Notes, and of the terms upon which the Notes are, and are to be, authenticated and delivered. The Notes include the Initial Notes, the Private Exchange Securities and the Unrestricted Notes (including the Exchange Notes referred to below), issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes, the Private Exchange Securities and the Unrestricted Notes are treated as a single class of securities under the Indenture. All capitalized terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. 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 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms. No reference herein to the Indenture and no provisions of this Note or of the Indenture shall alter or impair the obligation of the Company or any Guarantor, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the times, place, and rate, and in the coin or currency, herein prescribed. 2. GUARANTEES. This Note is initially entitled to the benefits of the certain senior subordinated Guarantees of the Guarantors and may thereafter be entitled to certain other senior subordinated Guarantees made for the benefit of the Holders. Reference is hereby made to Article Twelve of the Indenture and to the Guarantees endorsed on this Note for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders. A-1-6 3. REGISTRATION RIGHTS. Pursuant to the Registration Rights Agreement by and among the Company, the Guarantors and the Initial Purchasers, the Company and the Guarantors will be obligated to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note together with the Guarantees hereof endorsed hereon for 8-1/2% Senior Subordinated Notes due 2008, Series B, of the Company (herein called the "Exchange Notes") and the Guarantees endorsed thereon, which have been registered under the Securities Act, in like principal amount and having identical terms as the Notes (other than as set forth in this paragraph) and the Guarantees endorsed hereon, respectively. The Holders of Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. 4. REDEMPTION. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after May 1, 2003, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the date of redemption, if redeemed during the 12-month period beginning on May 1 of the years indicated below:
YEAR REDEMPTION PRICE ---- ---------------- 2003 . . . . . . . . . . . . . . . . . . . 104.250% 2004 . . . . . . . . . . . . . . . . . . . 102.833% 2005 . . . . . . . . . . . . . . . . . . . 101.417% 2006 and thereafter. . . . . . . . . . . . 100.000%
On or prior to May 1, 2001, the Company may, at its option, use the net proceeds of a Public Equity Offering to redeem up to 35% of the originally issued aggregate principal amount of the Notes, at a redemption price in cash equal to 108.5% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; PROVIDED, HOWEVER, that at least $107,250,000 in aggregate principal amount of Notes is outstanding following such redemption. Notice of any such redemption must be given not later than 60 days after the consummation of the Public Equity Offering. 5. OFFERS TO PURCHASE. Sections 10.11 and 10.16 of the Indenture provide that upon the occurrence of a Change of Control and following certain Asset Sales, and subject to certain conditions and limitations contained therein, the Company shall make an offer to purchase all or a portion of the Notes in accordance with the procedures set forth in the Indenture. A-1-7 6. DEFAULTS AND REMEDIES. If an Event of Default occurs and is continuing, the principal of all of the Outstanding Notes, plus all accrued and unpaid interest, if any, to and including the date the Notes are paid, may be declared due and payable in the manner and with the effect provided in the Indenture. 7. DEFEASANCE. The Indenture contains provisions (which provisions apply to this Note) for defeasance at any time of (a) the entire indebtedness of the Company and the Guarantors on this Note and (b) certain restrictive covenants and related Defaults and Events of Default, in each case upon compliance by the Company with certain conditions set forth therein. 8. AMENDMENTS AND WAIVERS. The Indenture permits, with certain exceptions as provided therein, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past Defaults and Events of Default under the Indenture and this Note and their consequences. Any such consent or waiver by or on behalf of the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. 9. DENOMINATIONS, TRANSFER AND EXCHANGE. The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable on the Note Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose in the Borough of Manhattan in The City of New York, State of New York, or at such other office or agency of the Company as may be maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. A-1-8 No service charge shall be made for any registration of transfer or exchange or redemption of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 10. PERSONS DEEMED OWNERS. Prior to and at the time of due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note shall be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. 11. TERMINATION OF CERTAIN COVENANTS. After the Notes have been assigned an Investment Grade Rating by both Rating Agencies, and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will no longer be subject to the provisions of Sections 10.12, 10.14, 10.15, 10.16, 10.19 and 10.20, clauses (ii) and (iii) of the first and fourth paragraphs of Section 10.21 and clauses (iii) and (iv) of the first paragraph of Section 8.01 of the Indenture; PROVIDED, that no Default or Event of Default has occurred and is continuing at the time the Notes have been assigned such rating. 12. GOVERNING LAW. THE INDENTURE, THIS NOTE AND EACH NOTE GUARANTEE SET FORTH BELOW SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture. Requests may be made to: Nash-Finch Company, P.O. Box 355, Minneapolis, Minnesota 55440-0355, Attention: Secretary. A-1-9 ASSIGNMENT FORM If you, the holder, want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's social security or tax ID number) ------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint - -------------------------------------------------------------------------------- agent to transfer this Note on the books of the Company. The agent may substitute another to act for such agent. In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) the date two years (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) after the later of the original issuance date appearing on the face of this Note (or any Predecessor Note) or the last date on which the Company or any Affiliate of the Company or any Guarantor was the owner of this Note (or any Predecessor Note), the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that: [CHECK ONE] / / (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act provided by Rule 144A thereunder. OR A-1-10 / / (b) this Note is being transferred other than in accordance with (a) above and documents, including a transferor certificate substantially in the form of Exhibit C to the Indenture in the case of a transfer pursuant to Regulation S, are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. If none of the foregoing boxes is checked and, in the case of (b) above, if the appropriate document is not attached or otherwise furnished to the Trustee, the Trustee or Registrar shall not be obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 3.17 of the Indenture shall have been satisfied. - -------------------------------------------------------------------------------- Date: Your signature: ------------------ ----------------------------------- (Sign exactly as your name appears on the other side of this Note) By: ------------------------------- NOTICE: To be executed by an executive officer Signature Guarantee: ------------------------- TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A (including the information specified in Rule 144A(d)(4)) or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: By: ------------------------- -------------------------------- NOTICE: To be executed by an executive officer A-1-11 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 10.11 or 10.16 of the Indenture, check the appropriate box: Section 10.11 / / Section 10.16 / / If you wish to have a portion of this Note purchased by the Company pursuant to Section 10.11 or 10.16 of the Indenture, state the amount: $ --------------- --------------- Date: Your signature: -------------------- ---------------------------------- (Sign exactly as your name appears on the other side of this Note) By: ------------------------------ NOTICE: To be executed by an executive officer Signature Guarantee: ----------------------- A-1-12 EXHIBIT A-2 [FORM OF NOTE] NASH-FINCH COMPANY _________________ 8-1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B CUSIP No. __________ No. ___________ $ NASH-FINCH COMPANY, a corporation incorporated under the laws of the State of Delaware (herein called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to _______________ or registered assigns, the principal sum of _______________ Dollars on May 1, 2008, at the office or agency of the Company referred to below, and to pay interest thereon on May 1 and November 1 (each an "Interest Payment Date"), of each year, commencing on November 1, 1998, accruing from the Issue Date or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 8-1/2% per annum, until the principal hereof is paid or duly provided for. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture referred to on the reverse hereof, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the April 15 and October 15 (each a "Regular Record Date"), whether or not a Business Day, as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid, or duly provided for, and interest on such defaulted interest at the then applicable interest rate borne by the Notes, to the extent lawful, shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice of which shall be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in such Indenture. Payment of the principal of, premium, if any, and interest on this Note will be made at the office or agency of the Company maintained for that purpose in the Borough of A-2-1 Manhattan in The City of New York, State of New York, or at such other office or agency of the Company as may be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; PROVIDED, HOWEVER, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear on the Note Register. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or any Guarantee described on the reverse side hereof, or be valid or obligatory for any purpose. [Remainder of Page Intentionally Left Blank] A-2-2 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated: NASH-FINCH COMPANY By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 8-1/2% Senior Subordinated Notes due 2008, Series B, referred to in the within-mentioned Indenture. U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee By: ---------------------------------- Authorized Officer A-2-3 [REVERSE OF NOTE] 1. INDENTURE. This Note is one of a duly authorized issue of Notes of the Company designated as its 8-1/2% Senior Subordinated Notes due 2008 Series B (herein called the "Unrestricted Notes"). The Notes are limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $150,000,000, which may be issued under an indenture (herein called the "Indenture") dated as of April 24, 1998, by and among the Company, each of the Guarantors named in the Indenture, as guarantors (herein called the "Guarantors"), and U.S. Bank Trust National Association, as trustee (herein called the "Trustee," which term includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Trustee, the Guarantors and the Holders of the Notes, and of the terms upon which the Notes are, and are to be, authenticated and delivered. The Notes include the Initial Notes, the Private Exchange Securities and the Unrestricted Notes (including the Exchange Notes), issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes, the Private Exchange Securities and the Unrestricted Notes are treated as a single class of securities under the Indenture. All capitalized terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. 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 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms. No reference herein to the Indenture and no provisions of this Note or of the Indenture shall alter or impair the obligation of the Company or any Guarantor, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the times, place, and rate, and in the coin or currency, herein prescribed. 2. GUARANTEES. This Note is initially entitled to the benefits of the certain senior subordinated Guarantees of the Guarantors and may thereafter be entitled to certain other senior subordinated Guarantees made for the benefit of the Holders. Reference is hereby made to Article Twelve of the Indenture and to the Guarantees endorsed on this Note for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders. 3. REDEMPTION. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after May 1, 2003, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid inter- A-2-4 est thereon, if any, to the date of redemption, if redeemed during the 12-month period beginning on May 1 of the years indicated below:
Year Redemption Price ---- ---------------- 2003 . . . . . . . . . . . . . . . . . . . 104.250% 2004 . . . . . . . . . . . . . . . . . . . 102.833% 2005 . . . . . . . . . . . . . . . . . . . 101.417% 2006 and thereafter. . . . . . . . . . . . 100.000%
On or prior to May 1, 2001, the Company may, at its option, use the net proceeds of a Public Equity Offering to redeem up to 35% of the originally issued aggregate principal amount of the Notes, at a redemption price in cash equal to 108.5% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; PROVIDED, HOWEVER, that at least $107,250,000 in aggregate principal amount of Notes is outstanding following such redemption. Notice of any such redemption must be given not later than 60 days after the consummation of the Public Equity Offering. 4. OFFERS TO PURCHASE. Sections 10.11 and 10.16 of the Indenture provide that upon the occurrence of a Change of Control and following certain Asset Sales, and subject to certain conditions and limitations contained therein, the Company shall make an offer to purchase all or a portion of the Notes in accordance with the procedures set forth in the Indenture. 5. DEFAULTS AND REMEDIES. If an Event of Default occurs and is continuing, the principal of all of the Outstanding Notes, plus all accrued and unpaid interest, if any, to and including the date the Notes are paid, may be declared due and payable in the manner and with the effect provided in the Indenture. 6. DEFEASANCE. The Indenture contains provisions (which provisions apply to this Note) for defeasance at any time of (a) the entire indebtedness of the Company and the Guarantors on this Note and (b) certain restrictive covenants and related Defaults and Events of Default, in each case upon compliance by the Company with certain conditions set forth therein. 7. AMENDMENTS AND WAIVERS. The Indenture permits, with certain exceptions as provided therein, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to waive com- A-2-5 pliance by the Company with certain provisions of the Indenture and certain past Defaults and Events of Default under the Indenture and this Note and their consequences. Any such consent or waiver by or on behalf of the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. 8. DENOMINATIONS, TRANSFER AND EXCHANGE. The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable on the Note Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose in the Borough of Manhattan in The City of New York, State of New York, or at such other office or agency of the Company as may be maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any registration of transfer or exchange or redemption of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 9. PERSONS DEEMED OWNERS. Prior to and at the time of due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note shall be overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. 10. TERMINATION OF CERTAIN COVENANTS. After the Notes have been assigned an Investment Grade Rating by both Rating Agencies, and notwithstanding that the Notes may later cease to have an Investment Grade Rating, the Company and the Restricted Subsidiaries will no longer be subject to the provisions of Sections 10.12, 10.14, 10.15, 10.16, 10.19 and 10.20, clauses (ii) and (iii) of the first and fourth paragraphs of Section 10.21, and clauses (iii) and (iv) of the first paragraph of Section 8.01 of the Indenture; PROVIDED, that no Default or Event of Default has occurred and is continuing at the time the Notes have been assigned such rating. A-2-6 11. GOVERNING LAW. THE INDENTURE, THIS NOTE AND EACH NOTE GUARANTEE SET FORTH BELOW SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. The Company will furnish to any Holder of a Note upon written request and without charge a copy of this Indenture. Requests may be made to: Nash-Finch Company, P.O. Box 355, Minneapolis, Minnesota 55440-0355, Attention: Secretary. A-2-7 ASSIGNMENT FORM If you the holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's social security or tax ID number) ------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint - -------------------------------------------------------------------------------- agent to transfer this Note on the books of the Company. The agent may substitute another to act for such agent. Date: Your signature: ----------------- ----------------------------------- (Sign exactly as your name appears on the other side of this Note) By: ------------------------------ NOTICE: To be executed by an executive officer Signature Guarantee: ---------------------- A-2-8 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 10.11 or 10.16 of the Indenture, check the appropriate box: Section 10.11 / / Section 10.16 / / If you wish to have a portion of this Note purchased by the Company pursuant to Section 10.11 or 10.16 of this Indenture, state the amount: $------------- ------------- Date: Your signature: -------------------- ----------------------------------- (Sign exactly as your name appears on the other side of this Note) By: ------------------------------- NOTICE: To be executed by an executive officer Signature Guarantee: --------------------- A-2-9 EXHIBIT B FORM OF LEGEND FOR BOOK-ENTRY SECURITIES Any Global Note authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Note) in substantially the following form: THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. B-1 EXHIBIT C Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S ----------------------------------------- ______________, ____ U.S. Bank Trust National Association First Trust Center 180 East Fifth Street St. Paul, Minnesota 55101 Attention: Richard Prokosch/Assistant Vice President Re: Nash-Finch Company (the "Company") 8-1/2% Senior Subordinated Notes due 2008 (the "Securities") ------------------------------------------------------------- Ladies and Gentlemen: In connection with our proposed sale of $ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Securities was not made to a Person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any Person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any Person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; (5) we have advised the transferee of the transfer restrictions applicable to the Securities; C-1 (6) if the circumstances set forth in Rule 904(c) under the Securities Act are applicable, we have complied with the additional conditions therein, including (if applicable) sending a confirmation or other notice stating that the Securities may be offered and sold during the restricted period specified in Rule 903(c)(2) or (3), as applicable, in accordance with the provisions of Regulation S; pursuant to registration of the Securities under the Securities Act; or pursuant to an available exemption from the registration requirements under the Securities Act; and (7) if the sale is made during a restricted period and the provisions of Rule 903(c)(3) are applicable thereto, we confirm that such sale has been made in accordance with such provisions. 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. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ------------------------------- Authorized Signature C-2 EXHIBIT D FORM OF NOTE GUARANTEE For value received, the undersigned hereby fully and unconditionally guarantees to the Holder of this Note the cash payments in United States dollars of principal of, premium, if any, and interest on this Note in the amounts and at the time when due and interest on the overdue principal, premium, if any, and interest, if any, on this Note, if lawful, and the payment or performance of all other obligations of the Company under the Indenture or the Notes, to the Holder of this Note and the Trustee, all in accordance with and subject to the terms and limitations of this Note, Article Twelve of the Indenture and this Guarantee. This Guarantee will become effective in accordance with Article Twelve of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of April 24, 1998, by and among Nash-Finch Company, the undersigned and U.S. Bank Trust National Association, as Trustee, as amended or supplemented (the "Indenture"). The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to the Guarantee and the Indenture are expressly set forth in Article Twelve of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee and all of the other provisions of the Indenture to which this Guarantee relates. THIS NOTE GUARANTEE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE SUBSIDIARY GUARANTOR HEREUNDER AGREES TO SUBMIT TO THE NON- EXCLUSIVE JURISDICTION OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE, THE NOTES OR THIS NOTE GUARANTEE. This Guarantee is subject to release upon the terms set forth in the Indenture. D-1 IN WITNESS WHEREOF, the undersigned Guarantor has caused this Guarantee to be duly executed. Dated: [NAME OF GUARANTOR] By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: D-2 EXHIBIT E [FORM OF INTERCOMPANY NOTE] , Evidences of all loans or advances ("Loans") made hereunder shall be reflected on the grid attached hereto. FOR VALUE RECEIVED, ___________, a ___________ corporation (the "Maker"), HEREBY PROMISES TO PAY ON DEMAND to the order of ________ (the "Holder) the principal sum of the aggregate unpaid principal amount of all Loans (plus accrued interest thereon) at any time and from time to time made hereunder which has not been previously paid. All capitalized terms used herein that are defined in, or by reference in, the Indenture among NASH-FINCH COMPANY, a Delaware corporation (the "Company"), the Guarantors listed therein and U.S. BANK TRUST NATIONAL ASSOCIATION, as trustee, dated April 24, 1998 (the "Indenture"), have the meanings assigned to such terms therein or by reference therein, unless otherwise defined. ARTICLE I TERMS OF INTERCOMPANY NOTE SECTION 1.01. NOTE NOT FORGIVABLE. Unless the Maker of the Loan hereunder is the Company or any Guarantor, the Holder may not forgive any amounts owing under this intercompany note. SECTION 1.02. INTEREST; PREPAYMENT. (a) The interest rate ("Interest Rate") on the Loans shall be a rate per annum reflected on the grid attached hereto. (b) The interest, if any, payable on each of the Loans shall accrue from the date such Loan is made and, subject to Section 2.01, shall be payable upon demand of the Holder. E-1 (c) If the principal or accrued interest, if any, of the Loans is not paid on the date demand is made, interest on the unpaid principal and interest will accrue at a rate equal to the Interest Rate, if any, plus 100 basis points per annum from maturity until the principal and interest on such Loans are fully paid. (d) Subject to Section 2.01, any amounts hereunder may be repaid at any time by the Maker. SECTION 1.03. SUBORDINATION. All Loans made to the Company or Guarantor shall be subordinated in right of payment to the payment and performance of the obligations of the Company, the Guarantors and any Restricted Subsidiary under the Indenture, the Notes, the Guarantees or any other Indebtedness ranking senior to or pari passu with the Notes or the Guarantees as provided herein; PROVIDED, that with respect to a Subsidiary in any specific instance, such Restricted Subsidiary is also an obligor under the Indenture, the Notes, the Guarantees or such other Senior Indebtedness or Pari Passu Indebtedness, as the case may be, whether as a borrower, guarantor or pledgor of collateral. ARTICLE II EVENTS OF DEFAULT SECTION 2.01. EVENTS OF DEFAULT. If after the date of issuance of this Loan (i) an Event of Default has occurred under the Indenture, (ii) an Event of Default (as defined) has occurred under either of the Revolving Credit Facility or any refinancing of the Revolv ing Credit Facility or (iii) an "event of default" (as defined) has occurred under any other Indebtedness of the Company or any Guarantor, then (x) in the event the Maker is not either one of the Company or a Guarantor, all amounts owing under the Loans hereunder shall be immediately due and payable to the Holder, and (y) in the event the Maker is either the Company or a Guarantor, the amounts owing under the Loans hereunder shall not be due and payable; PROVIDED, HOWEVER, that if such Event of Default or event of default has been waived, cured or rescinded, such amounts will no longer be due and payable in the case of clause (x), and such amounts may be payable in the case of clause (y). If the Holder is a Subsidiary, then the Holder hereby agrees that if it receives any payments or distributions on any Loan from the Company or a Guarantor which is not payable pursuant to clause (y) of the prior sentence after any Event of Default or event of default described in clauses (i), (ii) or (iii) above has occurred, is continuing and has E-2 not been waived, cured or rescinded, it will pay over and deliver forthwith to the Company or such Guarantor, as the case may be, all such payments and distributions. ARTICLE III MISCELLANEOUS SECTION 3.01. AMENDMENTS, ETC. No amendment or waiver of any provision of this intercompany note, or consent to depart herefrom is permitted at any time for any reason, except with the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities. SECTION 3.02. ASSIGNMENT. No party to this Agreement may assign, in whole or in part, any of its rights and obligations under this intercompany note, except to its legal successor in interest. SECTION 3.03. THIRD-PARTY BENEFICIARIES. The holders of the Notes, the Guarantees or any other Indebtedness ranking pari passu with or senior to, the Notes or any Guarantees, shall be third-party beneficiaries to this intercompany note upon an Event of Default shall have the right to enforce this intercompany note against the Company or any of its Subsidiaries. SECTION 3.04. HEADINGS. Article and Section headings in this intercompany notes are included for convenience of reference only and shall not constitute a part of this intercompany note for any purpose. SECTION 3.05. ENTIRE AGREEMENT. This intercompany note sets forth the entire agreement of the parties with respect to its subject matter and supersedes all previous understandings, written or oral, in respect thereof. E-3 SECTION 3.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). SECTION 3.07. WAIVERS. The Maker hereby waives presentment, demand for payment, notice of protest and all other demands and notices in connection with the delivery, acceptance, performance or enforcement hereof. By: ---------------------------------- Amount Maturity Amount of Unpaid of Borrowing/ of Borrowing/ Principal Paid Principal Notation Date Principal Principal or Prepaid Balance Made by Interest E-4 EX-5.1 3 OPIN OF OPPEN WLF & DONLY Exhibit 5.1 [Letterhead of Oppenheimer Wolff & Donnelly LLP] May 22, 1998 Nash-Finch Company 7600 France Avenue South P.O. Box 355 Minneapolis, MN 55440-0355 Re: Registration Statement On Form S-4 Ladies and Gentlemen: We have acted as counsel to Nash-Finch Company, a Delaware corporation (the "Company"), in connection with the preparation of a Registration Statement on Form S-4 (the "Registration Statement") filed by the Company with the Securities and Exchange Commission with respect to up to $165,000,000 aggregate principal amount of the Company's 8 1/2% Senior Subordinated Notes due 2008, Series B (the "Exchange Notes") and the related guarantees (the "Guarantees") of certain of the Company's subsidiaries named in the Registration Statement (the "Guarantors"). The Exchange Notes and the Guarantees will be offered in exchange for the Company's issued and outstanding 8 1/2% Senior Subordinated Notes due 2008, Series A (the "Series A Notes") and related guarantees, all as described in the Registration Statement. The Exchange Notes are to be issued in exchange for Series A Notes pursuant to an indenture (the "Indenture") dated as of April 24, 1998 between the Company, the Guarantors and U.S. Bank Trust National Association, as Trustee (the "Trustee") and the related Registration Rights Agreement among the Company, the Guarantors, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Nesbitt Burns Securities Inc. and Piper Jaffray Inc. (the "Registration Rights Agreement"). In so acting, we have examined and relied upon such records, documents and other instruments as in our judgment are necessary or appropriate in order to express the opinion hereinafter set forth and have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or photostatic copies. Based upon and subject to the foregoing, we are of the opinion that the Exchange Notes and the Guarantees, when duly executed and authenticated in accordance with the terms of the Indenture, and delivered in exchange for Series A Notes and related guarantees in accordance with the terms of the Indenture, will have been validly issued and will be legally binding obligations of the Company and the Guarantors, respectively, subject to (a) the effect of bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance, fraudulent transfer and other similar laws relating to or affecting the rights of creditors generally and (b) general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance, injunctive relief or other equitable remedies), regardless of whether considered in a proceeding at law or in equity. We express no opinion herein other than as to the laws of the State of Minnesota, the federal laws of the United States and the Delaware General Corporation Law. We hereby consent to the reference to our law firm in the Registration Statement under the caption "Legal Matters" and to the use of this opinion as an exhibit to the Registration Statement. Sincerely, /s/ Oppenheimer Wolff & Donnelly LLP EX-10.21 4 PURCHASE AGRMNT Exhibit 10.21 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NASH-FINCH COMPANY (a Delaware corporation) Senior Subordinated Notes due 2008 PURCHASE AGREEMENT Dated: April 20, 1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1. Representations and Warranties by the Issuers. . . . . . . . 3 (a) REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 3 (i) Similar Offerings.. . . . . . . . . . . . . . . . . . . 3 (ii) Offering Memorandum.. . . . . . . . . . . . . . . . . . 3 (iii) Incorporated Documents. . . . . . . . . . . . . . . . . 4 (iv) Independent Accountants.. . . . . . . . . . . . . . . . 4 (v) Financial Statements. . . . . . . . . . . . . . . . . . 4 (vi) No Material Adverse Change in Business. . . . . . . . . 5 (vii) Good Standing of the Company. . . . . . . . . . . . . . 5 (viii) Good Standing of Subsidiaries.. . . . . . . . . . . . . 5 (ix) Capitalization. . . . . . . . . . . . . . . . . . . . . 6 (x) Authorization of Agreement. . . . . . . . . . . . . . . 6 (xi) Authorization of the Indenture and the Registration Rights Agreement.. . . . . . . . . . . . . . . . . . 6 (xii) Authorization of the Securities.. . . . . . . . . . . . 7 (xiii) Description of the Operative Documents. . . . . . . . . 8 (xiv) Absence of Defaults and Conflicts.. . . . . . . . . . . 8 (xv) Absence of Labor Dispute. . . . . . . . . . . . . . . . 9 (xvi) Absence of Proceedings. . . . . . . . . . . . . . . . . 9 (xvii) Possession of Intellectual Property.. . . . . . . . . . 10 (xviii) Absence of Further Requirements.. . . . . . . . . . . . 10 (xix) Possession of Licenses and Permits. . . . . . . . . . . 10 (xx) Title to Property.. . . . . . . . . . . . . . . . . . . 11 (xxi) Tax Returns.. . . . . . . . . . . . . . . . . . . . . . 11 (xxii) Insurance.. . . . . . . . . . . . . . . . . . . . . . . 11 (xxiii) Solvency. . . . . . . . . . . . . . . . . . . . . . . . 12 (xxiv) Related Party Transactions. . . . . . . . . . . . . . . 12 (xxv) Suppliers.. . . . . . . . . . . . . . . . . . . . . . . 12 (xxvi) Environmental Laws. . . . . . . . . . . . . . . . . . . 12 (xxvii) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 13 (xxviii) Investment Company Act. . . . . . . . . . . . . . . . . 13 (xxix) Registration Rights.. . . . . . . . . . . . . . . . . . 13 (xxx) Accounting Controls.. . . . . . . . . . . . . . . . . . 14 (xxxi) Rule 144A Eligibility.. . . . . . . . . . . . . . . . . 14 -i- Page ---- (xxxii) No General Solicitation.. . . . . . . . . . . . . . . . 14 (xxxiii) No Registration Required. . . . . . . . . . . . . . . . 14 (xxxiv) Reporting Company.. . . . . . . . . . . . . . . . . . . 14 (xxxv) No Directed Selling Efforts.. . . . . . . . . . . . . . 15 (xxxvi) Material Contracts. . . . . . . . . . . . . . . . . . . 15 (xxxvii) Regulations G, T, U and X . . . . . . . . . . . . . . . 15 (b) OFFICER'S CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . 15 SECTION 2. Sale and Delivery to Initial Purchasers; Closing . . . . . . 15 (a) SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 (b) PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 (c) QUALIFIED INSTITUTIONAL BUYER . . . . . . . . . . . . . . . . . . 16 (d) DENOMINATIONS; REGISTRATION . . . . . . . . . . . . . . . . . . . 16 SECTION 3. Covenants of the Issuers . . . . . . . . . . . . . . . . . . 17 (a) OFFERING MEMORANDUM . . . . . . . . . . . . . . . . . . . . . . . 17 (b) NOTICE AND EFFECT OF MATERIAL EVENTS. . . . . . . . . . . . . . . 17 (c) AMENDMENT TO OFFERING MEMORANDUM AND SUPPLEMENTS. . . . . . . . . 18 (d) Qualification of Securities for Offer and Sale. . . . . . . . . . 18 (e) RATING OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . 18 (f) DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (g) USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . 19 (h) RESTRICTION OF SALE OF SECURITIES . . . . . . . . . . . . . . . . 19 (i) PORTAL DESIGNATION. . . . . . . . . . . . . . . . . . . . . . . . 19 (j) PERIODIC REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 4. Payment of Expenses. . . . . . . . . . . . . . . . . . . . . 20 (a) EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 (b) TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 21 SECTION 5. Conditions of Initial Purchasers' Obligations. . . . . . . . 21 (a) OPINION OF COUNSEL FOR COMPANY. . . . . . . . . . . . . . . . . . 21 (b) OPINION OF COUNSEL FOR INITIAL PURCHASERS . . . . . . . . . . . . 22 (c) OFFICERS' CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . 23 (d) ACCOUNTANTS' COMFORT LETTER . . . . . . . . . . . . . . . . . . . 23 (e) BRING-DOWN COMFORT LETTER . . . . . . . . . . . . . . . . . . . . 23 (f) MAINTENANCE OF RATING . . . . . . . . . . . . . . . . . . . . . . 23 (g) PORTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (h) INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (i) REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . 23 (j) ADDITIONAL DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . 24 -ii- Page ---- (k) TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 24 SECTION 6. Subsequent Offers and Resales of the Securities. . . . . . . 24 (a) OFFER AND SALE PROCEDURES . . . . . . . . . . . . . . . . . . . . 24 (i) Offers and Sales only to Qualified Institutional Buyers or Non-U.S. Persons.. . . . . . . . . . . . 24 (ii) No General Solicitation.. . . . . . . . . . . . . . . . 25 (iii) Purchases by Non-Bank Fiduciaries.. . . . . . . . . . . 25 (iv) Subsequent Purchaser Notification.. . . . . . . . . . . 25 (v) Minimum Principal Amount. . . . . . . . . . . . . . . . 25 (vi) Restrictions on Transfer. . . . . . . . . . . . . . . . 25 (vii) Delivery of Offering Memorandum.. . . . . . . . . . . . 26 (b) COVENANTS OF THE ISSUERS. . . . . . . . . . . . . . . . . . . . . 26 (i) Due Diligence . . . . . . . . . . . . . . . . . . . . . 26 (ii) Integration . . . . . . . . . . . . . . . . . . . . . . 26 (iii) Rule 144A Information.. . . . . . . . . . . . . . . . . 26 (iv) Restriction on Resales. . . . . . . . . . . . . . . . . 27 (c) RESALE PURSUANT TO RULE 903 OF REGULATION S OR RULE 144A. . . . . 27 (d) REPRESENTATIONS AND WARRANTIES OF INITIAL PURCHASERS. . . . . . . 28 SECTION 7. Indemnification. . . . . . . . . . . . . . . . . . . . . . . 28 (a) INDEMNIFICATION OF INITIAL PURCHASERS . . . . . . . . . . . . . . 28 (b) INDEMNIFICATION OF ISSUERS, DIRECTORS AND OFFICERS. . . . . . . . 29 (c) ACTIONS AGAINST PARTIES; NOTIFICATION . . . . . . . . . . . . . . 30 (d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. . . . . . . . 30 SECTION 8. Contribution . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 9. Representations, Warranties and Agreements to Survive Delivery . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 10. Termination of Agreement . . . . . . . . . . . . . . . . . . 32 (a) TERMINATION; GENERAL. . . . . . . . . . . . . . . . . . . . . . . 32 (b) LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 11. Default by One or More of the Initial Purchasers . . . . . . 33 SECTION 12. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 13. Information Supplied by the Initial Purchasers . . . . . . . 34 SECTION 14. Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 -iii- Page ---- SECTION 15. GOVERNING LAW AND TIME . . . . . . . . . . . . . . . . . . . 35 SECTION 16. Effect of Headings . . . . . . . . . . . . . . . . . . . . . 35 SECTION 17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 35 SCHEDULES Schedule A - List of Guarantors Schedule B - List of Initial Purchasers Schedule C - List of Non-Guarantor Subsidiaries Schedule D - Pricing Information EXHIBITS Exhibit A-1 - Form of Opinion of Issuer's Outside Counsel Exhibit A-2 - Form of Opinion of Issuer's Internal Counsel
-iv- NASH-FINCH COMPANY (a Delaware corporation) $165,000,000 Senior Subordinated Notes due 2008 PURCHASE AGREEMENT April 20, 1998 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated Nesbitt Burns Securities Inc. Piper Jaffray Inc. as Representatives of the several Initial Purchasers c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Ladies and Gentlemen: Each of Nash-Finch Company, a Delaware corporation (the "Company"), and each of the Guarantors listed on Schedule A hereto (the "Guarantors" and together with the Company, the "Issuers") confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other Initial Purchasers named in Schedule B hereto (collectively, the "Initial Purchasers," which term shall also include any initial purchaser substituted as hereinafter provided in Section 11 hereof), for whom Merrill Lynch, Nesbitt Burns Securities Inc. and Piper Jaffray Inc. are acting as representatives (in such capacity, the "Representatives"), with respect to the issue and sale by the Company and the purchase by the Initial Purchasers, acting severally and not jointly, of the respective principal amounts set forth in said Schedule B of $165,000,000 aggregate principal amount of the Company's 8 1/2% Senior Subordinated Notes due 2008 (the "Notes"), which Notes will be unconditionally and jointly and severally guaranteed (the "Guarantees" and together with the Notes, the "Securities") on a senior subordinated basis by the Guarantors. The Securities are to be issued pursuant to an indenture dated as of April 24, 1998 (the "Indenture") among the Company, the Guarantors and U.S. Bank Trust National Association, as trustee (the "Trustee"). Securities issued in book-entry form will be issued to Cede & Co. as nominee of The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated as of the Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among the Company, the Guarantors, the Trustee and DTC. Capital- 2 ized terms used herein without definition have the respective meanings specified in the Offering Memorandum referred to below. The Issuers understand that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and agree that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers ("Subsequent Purchasers") at any time after the date of this Agreement. The Securities are to be offered and sold through the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon exemptions therefrom. Pursuant to the terms of the Securities and the Indenture, investors that acquire Securities may only resell or otherwise transfer such Securities if such Securities are hereafter registered under the 1933 Act or if an exemption from the registration requirements of the 1933 Act is available (including the exemption afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S") of the rules and regulations promulgated under the 1933 Act by the Securities and Exchange Commission (the "Commission")). The Issuers have prepared and delivered to each Initial Purchaser copies of a preliminary offering memorandum dated April 2, 1998 (the "Preliminary Offering Memorandum") and have prepared and will deliver to each Initial Purchaser, on the date hereof or the next succeeding day, copies of a final offering memorandum dated April 20, 1998 (the "Final Offering Memorandum"), each for use by such Initial Purchaser in connection with its solicitation of, purchases of, or offering of, the Securities. "Offering Memorandum" means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such document), including exhibits thereto and any documents incorporated therein by reference, which has been prepared and delivered by the Company to the Initial Purchasers in connection with their solicitation of purchases of, or offering of, the Securities. Not later than April 21, 1998, the Initial Purchasers shall have received the Final Offering Memorandum in form and substance satisfactory to them. Each of the Issuers hereby confirms that it has authorized the use of the Offering Memorandum in connection with the offer and resale of the Securities by the Initial Purchasers. All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which are incorporated by reference in the Offering Memorandum and all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the Offering Memorandum. 3 The holders of the Securities (including the Initial Purchasers and subsequent transferees) will be entitled to the benefits of the registration rights agreement (the "Registration Rights Agreement") to be dated as of the Closing Time (as defined in Section 2(b) hereof), among the Company, the Guarantors and the Initial Purchasers, pursuant to which the Issuers will agree (i) to file, within 30 days of the Closing Time, a registration statement with the Commission registering the Exchange Securities (as defined in the Registration Rights Agreement) under the 1933 Act and to use their best efforts to cause such registration statement to become effective within 90 days of the Closing Time and (ii) under certain circumstances set forth therein, to file with the Commission a shelf registration statement pursuant to Rule 415 under the 1933 Act relating to the resale of the Securities by holders thereof or, if applicable, relating to the resale of Private Exchange Securities (as defined in the Registration Rights Agreement) by the Initial Purchasers pursuant to an exchange of the Securities for Private Exchange Securities, and to use their best efforts to cause such shelf registration statement to be declared effective. This agreement (this "Agreement"), the Indenture, the Securities, the Exchange Securities, the Private Exchange Securities (as defined in the Registration Rights Agreement), the DTC Agreement and the Registration Rights Agreement are referred to collectively as the "Operative Documents." SECTION 1. REPRESENTATIONS AND WARRANTIES BY THE ISSUERS. (a) REPRESENTATIONS AND WARRANTIES. Each of the Issuers, jointly and severally, represents and warrants to each Initial Purchaser as of the date hereof and as of the Closing Time referred to in Section 2(b) hereof, and agrees with each Initial Purchaser, as follows: (i) SIMILAR OFFERINGS. Neither the Issuers nor any of their respective affiliates, as such term is defined in Rule 501(b) under the 1933 Act (each, an "Affiliate"), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy or offer to sell or otherwise negotiate in respect of, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the 1933 Act. (ii) OFFERING MEMORANDUM. The Preliminary Offering Memorandum as of its date did not, and the Final Offering Memorandum as of the date hereof does not, and at the Closing Time will not, include 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; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in con- 4 formity with information furnished to the Company in writing by any Initial Purchaser through Merrill Lynch expressly for use in the Offering Memorandum. (iii) INCORPORATED DOCUMENTS. The Offering Memorandum as delivered from time to time shall incorporate by reference the most recent Annual Report of the Company on Form 10-K filed with the Commission and each Quarterly Report of the Company on Form 10-Q and each Current Report of the Company on Form 8-K filed with the Commission since the filing of the end of the fiscal year to which such Annual Report relates. The documents incorporated or deemed to be incorporated by reference in the Offering Memorandum at the time they were or hereafter are filed with the Commission complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Offering Memorandum, at the date of the Offering Memorandum and at the Closing Time, do not and will not include 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 the light of the circumstances under which they were made, not misleading. (iv) INDEPENDENT ACCOUNTANTS. The accountants who certified the financial statements and supporting schedules included in the Offering Memorandum are independent public accountants with respect to the Issuers and their respective subsidiaries within the meaning of Regulation S-X under the 1933 Act. (v) FINANCIAL STATEMENTS. The financial statements, together with the related schedules and notes, included in the Offering Memorandum presents fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved (except, with respect to such consistent basis, as may be otherwise indicated in the notes to such financial statements). The supporting schedules, if any, included in the Offering Memorandum present fairly, in accordance with GAAP, the information required to be stated therein. The selected financial data and the summary financial information included in the Offering Memorandum present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Offering Memorandum. The pro forma financial information included in the Offering Memorandum presents fairly the information shown therein, has been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial information and has been 5 properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. (vi) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein, (A) there has been no material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its Subsidiaries (as defined below) considered as one enterprise, whether or not arising in the ordinary course of business, (B) there have been no transactions entered into by the Company or any of its Subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its Subsidiaries considered as one enterprise, and (C) except for regular quarterly dividends on the common stock, par value $1.66-2/3 per share, of the Company (the "Common Stock") in amounts per share that are consistent with past practice, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (vii) GOOD STANDING OF THE COMPANY. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under the Operative Documents; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing, individually or in the aggregate, would not result in a material adverse effect on the condition, financial or otherwise, or on the earnings, business affairs or business prospects of the Company and its Subsidiaries considered as one enterprise (a "Material Adverse Effect"). (viii) GOOD STANDING OF SUBSIDIARIES. The entities listed on Schedule A hereto and the entities listed on Schedule C hereto are the only subsidiaries, direct or indirect, of the Company (collectively, the "Subsidiaries"). Each Subsidiary has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is 6 required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing, individually or in the aggregate, would not result in a Material Adverse Effect; except as otherwise disclosed in the Offering Memorandum or on Schedule A or Schedule C, all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through Subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of the Subsidiaries was issued in violation of any preemptive or similar rights of any securityholder of such Subsidiary. No Subsidiary of the Company which is not a Guarantor is a guarantor or other otherwise obligated under the Revolving Credit Facility (as defined in the Offering Memorandum). The Subsidiaries of the Company which are not Guarantors, considered in the aggregate as a single subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X. (ix) CAPITALIZATION. The authorized, issued and outstanding capital stock of the Company is as set forth in the financial statements, including the notes thereto, included in the Offering Memorandum (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to employee or director benefit plans referred to in the Offering Memorandum or pursuant to the exercise of convertible securities or options referred to in the Offering Memorandum). All of the shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company. (x) AUTHORIZATION OF AGREEMENT. This Agreement has been duly authorized, executed and delivered by each of the Issuers. (xi) AUTHORIZATION OF THE INDENTURE, THE REGISTRATION RIGHTS AGREEMENT AND THE DTC AGREEMENT. Each of the Indenture, the Registration Rights Agreement and the DTC Agreement has been duly authorized by each of the Issuers, will have been duly executed and delivered by each of the Issuers at the Closing Time and, when executed and delivered by each of the Issuers and, with respect to the Indenture, by the Trustee and, with respect to the Registration Rights Agreement, by the Initial Purchasers, will constitute a valid and binding agreement of each of the Issuers, enforceable against each of the Issuers in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and 7 except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). (xii) AUTHORIZATION OF THE SECURITIES. The Notes, the Exchange Securities and the Private Exchange Securities have been duly authorized by the Company and the Company has all requisite corporate power and authority to execute, issue and deliver the Notes, the Exchange Securities and the Private Exchange Securities and to incur and perform its respective obligations provided for therein; the Guarantees have been duly authorized by each of the Guarantors and each of the Guarantors has all requisite corporate power and authority to execute, issue and deliver the Guarantees and to incur and perform their respective obligations provided for therein. At the Closing Time, the Notes will have been duly executed by the Company and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price therefor as provided in this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture. At the Closing Time, the Guarantees of each Guarantor will have been duly endorsed on the Notes by each such Guarantor and, when the Notes are authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price therefor as provided in this Agreement, upon such endorsement, the Guarantees will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture. The Exchange Securities and the Private Exchange Securities have been duly authorized and when executed, authenticated, issued and delivered by the Company and each of the Guarantors in exchange for the Securities pursuant to the Exchange Offer (as defined in the Registration Rights Agreement), will constitute valid and binding obligations of each of the Issuers, enforceable against the Issuers in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at 8 law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture. (xiii) DESCRIPTION OF THE OPERATIVE DOCUMENTS. The Securities, the Registration Rights Agreement and the Indenture will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum and will be in the respective forms previously delivered to the Initial Purchasers. The Exchange Securities and the Private Exchange Securities (if issued) will conform in all material respects to the statements relating thereto contained in the Offering Memorandum at the time it becomes effective. (xiv) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company nor any of its Subsidiaries is (a) in violation of its charter or by-laws or (b) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which or any or them may be bound, or to which any of the property or assets of the Company or any of its Subsidiaries is subject (collectively, "Agreements and Instruments") except, with respect to this clause (b), for such defaults that, individually or in the aggregate, would not result in a Material Adverse Effect; and the execution, delivery and performance of each of the Operative Documents and any other agreement or instrument entered into or issued or to be entered into or issued by the Company or the Guarantors in connection with the transactions contemplated hereby or thereby or in the Offering Memorandum and the consummation of the transactions contemplated herein and in the Offering Memorandum (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use of Proceeds" and the issuance and delivery of the Exchange Securities and the Private Exchange Securities, if any) and compliance by each of the Issuers with its respective obligations hereunder and thereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or a Repayment Event (as defined below) under, or a violation of or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its Subsidiaries pursuant to, the Agreements and Instruments, nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any of its Subsidiaries or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its Subsidiaries or any of their respective assets or properties. As used herein, a "Repayment Event" means any event or condition 9 which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its Subsidiaries. (xv) ABSENCE OF LABOR DISPUTE. No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of any of the Issuers, is imminent, and none of the Issuers is aware of any existing or imminent labor disturbance by the employees or any of its of any of its Subsidiaries' principal suppliers, manufacturers, customers or contractors, which, in either case, individually or in the aggregate, would result in a Material Adverse Effect. (xvi) ABSENCE OF PROCEEDINGS. Except as disclosed in the Offering Memorandum, there is no action, suit, proceeding, inquiry or investigation before or by any court or government agency or body, domestic or foreign, now pending, or, to the knowledge of any of the Issuers, threatened, against or affecting the Company or any of its Subsidiaries which, individually or in the aggregate, would result in a Material Adverse Effect, or which, individually or in the aggregate, would materially and adversely affect the properties or assets of the Company or any of its Subsidiaries or the consummation of the transactions contemplated by this Agreement or the performance by the Issuers of their respective obligations under the Operative Documents. The aggregate of all pending legal or governmental proceedings to which the Company or any of its Subsidiaries is a party or of which any of their respective property or assets is the subject which are not described in the Offering Memorandum, including ordinary routine litigation incidental to the business, individually or in the aggregate, would not result in a Material Adverse Effect. (xvii) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its Subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them, and neither the Company nor any of its Subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its Subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, individually or in the aggregate, would result in a Material Adverse Effect. 10 (xviii) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required in connection with the offering, issuance or sale of the Securities, the Exchange Securities or the Private Exchange Securities, for the performance by the Issuers of their respective obligations under the Operative Documents, or the consummation of the transactions contemplated hereby or thereby or for the due execution or delivery by the Issuers of the Operative Documents, except as may be required (A) in connection with the registration of the Exchange Securities or the Private Exchange Securities under the 1933 Act or the qualification of the Indenture under the 1939 Act (as defined below) in each case pursuant to the Registration Rights Agreement or (B) pursuant to state securities or "blue sky" laws. (xix) POSSESSION OF LICENSES AND PERMITS. The Company and its Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them; the Company and its Subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply, individually or in the aggregate, would not have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect, individually or in the aggregate, would not have a Material Adverse Effect; and neither the Company nor any of its Subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xx) TITLE TO PROPERTY. The Company and its Subsidiaries have good and marketable title to all real property owned by the Company and its Subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Offering Memorandum or (b) do not, individually or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries; and all of the leases and subleases material to the business of the Company and its Subsidiaries, considered as one enterprise, and under which the Company or any of its Subsidiaries holds properties described in the Offering Memorandum, are in full force and effect, and neither the Company 11 nor any of its Subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its Subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or any Subsidiary thereof to the continued possession of the leased or subleased premises under any such lease or sublease. (xxi) TAX RETURNS. The Company and its Subsidiaries have filed all federal, state, local and foreign tax returns that are required to be filed or have duly requested extensions thereof and have paid all taxes required to be paid by any of them and any related assessments, fines or penalties, except for any such tax, assessment, fine or penalty that is being contested in good faith and by appropriate proceedings and for which adequate reserves have been made in accordance with GAAP; and adequate charges, accruals and reserves have been provided for in the financial statements included in the Offering Memorandum in respect of all federal, state, local and foreign taxes for all periods as to which the tax liability of the Company or any of its Subsidiaries has not been finally determined or remains open to examination by applicable taxing authorities. (xxii) INSURANCE. The Company and its Subsidiaries carry or are entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is generally maintained by companies of established repute engaged in the same or similar business, and all such insurance is in full force and effect. (xxiii) SOLVENCY. Each of the Issuers is, and immediately after the Closing Time will be, Solvent. As used herein, the term "Solvent" means, with respect to each Issuer, as the case may be, on a particular date, that on such date (A) the fair market value of the assets of each Issuer is greater than the total amount of liabilities (including contingent liabilities) of such Issuer, (B) the present fair salable value of the assets of each Issuer is greater than the amount that will be required to pay the probable liabilities of such Issuer on its debts as they become absolute and mature, (C) each Issuer is able to realize upon its assets and pay its debts and other liabilities, including contingent obligations, as they mature, and (D) each Issuer does not have unreasonably small capital. (xxiv) RELATED PARTY TRANSACTIONS. No relationship, direct or indirect, exists between or among any of the Issuers or any Affiliates of the Issuers, on the one hand, and any director, officer, stockholder, customer or supplier of any of them, on the other hand, which is required by the 1933 Act or by the rules and regulations enacted thereunder to be described in a registration statement on Form S-1 which is not so described or is not described as required in the Offering Memorandum. 12 (xxv) SUPPLIERS. No supplier of merchandise to the Company or any of its Subsidiaries has ceased shipments of merchandise to the Company or any of its Subsidiaries, other than in the normal and ordinary course of business consistent with past practices, which cessation, individually or in the aggregate, would result in a Material Adverse Effect. (xxvi) ENVIRONMENTAL LAWS. Except as described in the Offering Memorandum and except such matters as, individually or in the aggregate, would not result in a Material Adverse Effect, (A) neither the Company nor any of its Subsidiaries is in violation of, or has received any notice that it is subject to liability under, any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, or rule of common law or any judicial or administrative interpretation thereof including any judicial or administrative order, decree, judgment or injunction, relating to pollution or protection of human health or the environment (including, without limitation, ambient air, indoor air, surface water, groundwater, land surface or subsurface strata and natural resources) or wildlife, including, without limitation, those relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances or constituents, petroleum or petroleum products or any other substances or materials subject to regulation under Environmental Laws (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and its Subsidiaries have, or have filed timely application for, all permits, licenses, authorizations and approvals required under any applicable Environmental Laws, all of which are in full force and effect, and are each in compliance with their requirements, (C) there are no pending or, to the knowledge of the Company, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance, violation or potential responsibility or liability, investigation or proceedings pursuant to any Environmental Law against the Company or any of its Subsidiaries, or to the knowledge of the Company, any of their respective predecessors-in-interest for which the Company or any of its Subsidiaries is liable and (D) there are no past or present events, conditions or circumstances which would reasonably be expected to form the basis of an order to conduct response or corrective action, or an action, suit or proceeding by any private party or governmental agency, against or affecting, or requiring capital or operating expenditures by, the Company or any of the Subsidiaries pursuant to any Environmental Laws. (xxvii) ERISA. Except as described in the Offering Memorandum, neither the Company nor any of its Subsidiaries has incurred any liability for any prohibited transaction or funding deficiency or any complete or partial withdrawal liability with 13 respect to any pension, profit sharing or other plan which is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to which the Company or any of its Subsidiaries makes or ever has made a contribution and in which any employee of the Company or any such Subsidiary is or has ever been a participant, which in the aggregate would have a Material Adverse Effect. With respect to such plans, each of the Company and its Subsidiaries is in compliance in all respects with all applicable provisions of ERISA, except where the failure to so comply, individually or in the aggregate, would not have a Material Adverse Effect. (xxviii) INVESTMENT COMPANY ACT. None of the Issuers is, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Offering Memorandum, none will be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (xxix) REGISTRATION RIGHTS. There are no holders of securities (debt or equity) of any of the Issuers, or holders of rights including, without limitation, preemptive rights, warrants or options to obtain securities of any of the Issuers, who in connection with the issuance, sale and delivery of the Securities and the Exchange Securities and the Private Exchange Securities, if any, and the execution, delivery and performance of this Agreement and the Registration Rights Agreement, have the right to request any of the Issuers to register securities held by them under the 1933 Act. (xxx) ACCOUNTING CONTROLS. The Company and its consolidated Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xxxi) RULE 144A ELIGIBILITY. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Time, of the same class as securities listed on a national securities exchange registered under Section 6 of the 1934 Act, or quoted in a U.S. automated interdealer quotation system. 14 (xxxii) NO GENERAL SOLICITATION. None of the Issuers, any of their respective Affiliates or any person acting on its or any of their behalf (other than the Initial Purchasers, as to whom the Issuers make no representation) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the 1933 Act. (xxxiii) NO REGISTRATION REQUIRED. Subject to compliance by the Initial Purchasers with the representations and warranties set forth in Section 2 and the procedures set forth in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the 1933 Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "1939 Act"). (xxxiv) REPORTING COMPANY. The Company is subject to the reporting requirements of Section 13 or Section 15(d) of the 1934 Act. (xxxv) NO DIRECTED SELLING EFFORTS. With respect to those Securities sold in reliance on Regulation S, (A) none of the Issuers, any of their respective Affiliates or any person acting on their behalf (other than the Initial Purchasers, as to whom the Issuers make no representation) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (B) each of the Issuers, any of their respective Affiliates and any person acting on their behalf (other than the Initial Purchasers, as to whom the Issuers make no representation) has complied and will comply with the offering restrictions requirement of Regulation S. (xxxvi) MATERIAL CONTRACTS. Except for the contracts listed as Exhibit 10 to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998, and the contracts disclosed in the Offering Memorandum, neither the Company nor any of its Subsidiaries is party to any contract, agreement or understanding that is material to the business of the Company or its Subsidiaries, considered as one enterprise. (xxxvii) REGULATIONS G, T, U AND X. Neither the consummation of the transactions contemplated hereby nor the sale, issuance, execution or delivery of the Securities, nor the application of the proceeds therefrom (if applied as described in the Offering Memorandum under the caption "Use of Proceeds"), will violate Regulation G (12 C.F.R. Part 207), T (12 C.F.R. Part 220), U (12 C.F.R. Part 221) or X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. 15 (xxxviii) Neither the Company nor any of its Subsidiaries nor any of their respective directors, officers or controlling persons has taken, directly or indirectly, any action designed, or which might reasonably be expected to cause or result, under the 1934 Act, in, or which has constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities, the Exchange Securities or the Private Exchange Securities. (b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of the Company or any of its Subsidiaries delivered to the Representatives or to counsel for the Initial Purchasers shall be deemed a representation and warranty by each of the Issuers to each Initial Purchaser as to the matters covered thereby. SECTION 2. SALE AND DELIVERY TO INITIAL PURCHASERS; CLOSING. (a) SECURITIES. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Issuers, jointly and severally, agree to sell to each Initial Purchaser, severally and not jointly, and each Initial Purchaser, severally and not jointly, agrees to purchase from the Issuers, at the price set forth in Schedule D, the aggregate principal amount of Securities set forth in Schedule B opposite the name of such Initial Purchaser, plus any additional principal amount of Securities which such Initial Purchaser may become obligated to purchase pursuant to the provisions of Section 11 hereof. (b) PAYMENT. Payment of the purchase price for, and delivery of certificates for, the Securities shall be made at the office of Cahill Gordon & Reindel, 80 Pine Street, New York, New York, or at such other place as shall be agreed upon by Merrill Lynch and the Issuers, at 9:00 A.M. (eastern time) on the fourth business day after the date hereof (unless postponed in accordance with the provisions of Section 11), or such other time not later than ten business days after such date as shall be agreed upon by Merrill Lynch and the Issuers (such time and date of payment and delivery being herein called the "Closing Time"). Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to Merrill Lynch for the respective accounts of the Initial Purchasers of certificates for the Securities to be purchased by them. It is understood that each Initial Purchaser has authorized Merrill Lynch, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Securities which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Initial Purchasers, may (but shall not be obligated to) make payment of the purchase price for the Securities to be purchased by any Initial Purchaser 16 whose funds have not been received by the Closing Time, but such payment shall not relieve such Initial Purchaser from its obligations hereunder. (c) QUALIFIED INSTITUTIONAL BUYER. Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Issuers that it is a "qualified institutional buyer" within the meaning of Rule 144A under the 1933 Act (a "Qualified Institutional Buyer") and an "accredited investor" within the meaning of Rule 501(a) under the 1933 Act (an "Accredited Investor"). (d) DENOMINATIONS; REGISTRATION. Certificates for the Securities shall be in such denominations ($1,000 or integral multiples thereof) and registered in such names as the Representatives may request in writing at least one full business day before the Closing Time. The certificates representing the Securities shall be registered in the name of Cede & Co. pursuant to the DTC Agreement and shall be made available for inspection, checking and packaging by the Initial Purchasers in The City of New York not later than 10:00 A.M. on the last business day prior to the Closing Time. SECTION 3. COVENANTS OF THE ISSUERS. Each of the Issuers, jointly and severally, covenants with each Initial Purchaser as follows: (a) OFFERING MEMORANDUM. The Issuers, as promptly as possible, will furnish to each Initial Purchaser, without charge, such number of copies of the Preliminary Offering Memorandum, the Final Offering Memorandum and any amendments and supplements thereto and documents incorporated by reference therein as such Initial Purchaser may reasonably request. (b) NOTICE AND EFFECT OF MATERIAL EVENTS. The Issuers will immediately notify each Initial Purchaser, and confirm such notice in writing, of (x) any filing made by any of the Issuers of information relating to the offering of the Securities with any securities exchange or any other regulatory body in the United States or any other jurisdiction, and (y), prior to the completion of the placement of the Securities by the Initial Purchasers as evidenced by a notice in writing from the Initial Purchasers to the Company (from the date hereof to such completion, the "Offering Period"), any material changes in or affecting the conditions, financial or otherwise, or the earnings, business affairs or business prospects of the Company and its Subsidiaries which (i) make any statement in the Offering Memorandum false or misleading or (ii) are not disclosed in the Offering Memorandum. In such event or if during the Offering Period any event shall occur or condition shall exist as a result of which it is necessary, in the reasonable opinion of any of the Issuers, their counsel, the Initial Purchasers or counsel for the Initial Purchasers, to amend or supplement the Offering Memorandum in order that the Offering Memorandum, as then amended or supplemented, not include any untrue statement of a material fact or omit to state a material fact 17 necessary in order to make the statements therein not misleading in the light of the circumstances then existing or to comply with applicable law, the Issuers will (subject to Section 3(c) hereof) forthwith amend or supplement the Offering Memorandum by preparing and furnishing, at the expense of the Issuers, to each Initial Purchaser an amendment or amendments of, or a supplement or supplements to, the Offering Memorandum (in form and substance reasonably satisfactory to the Representatives and to counsel for the Initial Purchasers) so that, as so amended or supplemented, the Offering Memorandum will not include 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 existing at the time it is delivered to a Subsequent Purchaser, not misleading or to comply with applicable law, as the case may be. The Issuers will furnish to the Initial Purchasers such number of copies of such amendment or supplement as the Initial Purchasers may reasonably request. Each of the Issuers agrees to notify the Initial Purchasers in writing to suspend use of the Offering Memorandum as promptly as practicable after the occurrence of an event specified in this paragraph (b), and the Initial Purchasers hereby agree upon receipt of such notice from the Issuers to suspend use of the Offering Memorandum until the Issuers have amended or supplemented the Offering Memorandum to correct such misstatement or omission or to effect such compliance. (c) AMENDMENT TO OFFERING MEMORANDUM AND SUPPLEMENTS. The Issuers will advise each Initial Purchaser promptly of any proposal to amend or supplement the Offering Memorandum and will not effect such amendment or supplement without the prior written consent of the Initial Purchasers. Neither the consent of the Initial Purchasers, nor the Initial Purchaser's delivery of any such amendment or supplement, shall constitute a waiver of any of the conditions set forth in Section 5 hereof. (d) QUALIFICATION OF SECURITIES FOR OFFER AND SALE. The Issuers will use their best efforts, in cooperation with the Initial Purchasers, to qualify the Securities for offering and sale under the applicable securities laws of such jurisdictions as the Representatives may designate and will maintain such qualifications in effect as long as required for the sale of the Securities; PROVIDED, HOWEVER, that the Issuers shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Issuers will file such statements and reports as may be required by the laws of each jurisdiction in which the Securities have been qualified as above provided. The Issuers shall promptly advise the Initial Purchasers of the receipt by any of the Issuers of any notification with respect to the suspension of the qualification or exemption from qualification of the Securities for offering or sale in any jurisdiction or the institution, threatening or contemplation of any proceeding for such purpose. 18 (e) RATING OF SECURITIES. The Issuers shall take all reasonable action necessary to enable Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P"), and Moody's Investors Service, Inc. ("Moody's") to provide their respective credit ratings of the Securities. (f) DTC. The Issuers will cooperate with the Representatives and use their respective best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of DTC. (g) USE OF PROCEEDS. The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Offering Memorandum under "Use of Proceeds". (h) RESTRICTION OF SALE OF SECURITIES. During a period of 180 days from the date of the Offering Memorandum, the Issuers will not, and will not permit their respective Subsidiaries to, without the prior written consent of Merrill Lynch, directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of, any other debt securities of the Company or securities of the Company that are convertible into, or exchangeable for, the Securities or such other debt securities, other than the Exchange Securities referred to in the Registration Rights Agreement, or file a registration statement with respect to the foregoing. (i) PORTAL DESIGNATION. The Company will use its best efforts to permit the Securities to be designated PORTAL securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL Market. (j) PERIODIC REPORTS. The Issuers will, so long as the Securities or Exchange Securities or Private Exchange Securities are outstanding, furnish to the Trustee on a timely basis, pursuant to the Indenture, whether or not the Company has a class of securities registered under the 1934 Act (i) audited year-end consolidated financial statements of the Company (including a balance sheet, income statement and statement of changes of cash flow) prepared in accordance with GAAP and substantially in the form required under Regulation S-X under the 1933 Act and the information described in Item 303 of Regulation S-K under the 1933 Act with respect to such period and (ii) unaudited quarterly consolidated financial statements of the Company (including a balance sheet, income statement and statement of cash flows) prepared in accordance with GAAP and substantially in the form required by Regulation S-X under the 1933 Act and the information described in Item 303 of Regulation S-K under the 1933 Act with respect to such period and will furnish to the Initial Purchasers copies of all such reports and information, together with such other 19 documents, reports and information as shall be furnished by the Company to the holders of the Securities or to the Trustee. In the event the Company is not subject to Section 13 or 15(d) of the 1934 Act, the Company will furnish to holders of Securities and prospective purchasers of Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the 1933 Act to permit compliance with Rule 144A in connection with resales of the Securities. For so long as the Securities or Exchange Securities or Private Exchange Securities are outstanding, the Issuers will furnish to the Initial Purchasers copies of all annual reports, quarterly reports or current reports filed with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, and such other documents, reports and information as shall be furnished by the Issuers generally to the holders of the Securities or to securityholders of their publicly issued securities generally. (k) INTERIM REPORTS. Prior to the Closing Time, the Company will furnish on a confidential basis to the Initial Purchasers, if and promptly after they have been prepared, a copy of any unaudited interim consolidated financial statements of the Company for any period subsequent to the period covered by the most recent financial statements of the Company appearing in the Offering Memorandum which have been prepared in the ordinary course of business. SECTION 4. PAYMENT OF EXPENSES. (a) EXPENSES. Whether or not the transactions contemplated by this Agreement are consummated, the Issuers agree, jointly and severally, to pay and bear all costs and expenses incident to the performance of their respective obligations under this Agreement, including (i) the preparation, printing and any filing of the Preliminary Offering Memorandum and the Final Offering Memorandum (including financial statements and any schedules or exhibits and any document incorporated therein by reference) and of each amendment or supplement thereto and the cost of furnishing copies thereof to the Initial Purchasers and their counsel, (ii) the preparation, printing and delivery to the Initial Purchasers of this Agreement, any Agreement among Initial Purchasers, the Indenture, the Registration Rights Agreement, the DTC Agreement and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, printing, issuance and delivery of the certificates for the Securities, the Exchange Securities and the Private Exchange Securities to the Initial Purchasers, including any charges of DTC in connection therewith, (iv) the fees and disbursements of the Issuers' counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(d) hereof and any filing for review of the offering, if requested, with the National Association of Securities Dealers, Inc., including filing fees and the reasonable fees and disbursements of counsel for the Ini- 20 tial Purchasers in connection therewith and in connection with the preparation of the Blue Sky Survey, any supplement thereto and any Legal Investment Survey, (vi) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture, the Securities, the Exchange Securities and the Private Exchange Securities, (vii) any fees payable in connection with the rating of the Securities, the Exchange Securities and the Private Exchange Securities, (viii) any fees and expenses payable in connection with the initial and continued designation of the Securities, the Exchange Securities and the Private Exchange Securities as PORTAL securities and to permit the Securities, the Exchange Securities and the Private Exchange Securities to be eligible for clearance through DTC all expenses (including travel expenses) of the Issuers in connection with any meetings with prospective investors in the Securities, and (ix) one-half of the expenses related to the charter or use of any aircraft used in connection with any meetings with prospective investors in the Securities. Except as expressly provided in this Section 4, the Issuers shall not be responsible for the out-of-pocket expenses of the Initial Purchasers, including the fees and disbursements of counsel for the Initial Purchasers. (b) TERMINATION OF AGREEMENT. If this Agreement is terminated by Merrill Lynch in accordance with the provisions of Section 5 or Section 10(a)(i) hereof, the Issuers, jointly and severally, shall reimburse the Initial Purchasers for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Initial Purchasers. SECTION 5. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of the several Initial Purchasers hereunder are subject to the accuracy of the representations and warranties of the Issuers contained in Section 1 hereof or in certificates of any officer of the Company or any of its Subsidiaries delivered pursuant to the provisions hereof, to the performance by the Issuers of their covenants and other obligations hereunder, and to the following further conditions. (a) OPINIONS OF COUNSEL FOR COMPANY. At the Closing Time, the Representatives shall have received the favorable opinions, dated as of the Closing Time, of each of Oppenheimer Wolff & Donnelly LLP, counsel for the Issuers and Norman R. Soland, Vice President, Secretary and General Counsel of the Company, in each case in form and substance satisfactory to counsel for the Initial Purchasers, together with signed or reproduced copies of such letter for each of the other Initial Purchasers, to the effect set forth in Exhibits A-1 and A-2 hereto, respectively, and to such further effect as counsel to the Initial Purchasers may reasonably request. (b) OPINION OF COUNSEL FOR INITIAL PURCHASERS. At the Closing Time, the Representatives shall have received the favorable opinion, dated as of the Closing Time, of Cahill Gordon & Reindel, counsel for the Initial Purchasers, together with signed or repro- 21 duced copies of such letter for each of the other Initial Purchasers with respect to the matters set forth in paragraphs (iii), (iv), (v), (vi), (vii), (viii) and (xii) of Exhibit A-1 hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Representatives. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its Subsidiaries and certificates of public officials. In addition, such counsel for the Initial Purchasers shall additionally state that such counsel has participated in conferences with officers and other representatives of the Issuers and representatives of the independent accountants for the Issuers at which conferences the contents of the Offering Memorandum and related matters were discussed and, although given the limitations inherent in the role of outside counsel and the character of determinations involved in the preparation of the Offering Memorandum, such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum and has made no independent check or verification thereof, on the basis of the foregoing, no facts have come to the attention of such counsel which would lead such counsel to believe that the Offering Memorandum, at the date thereof or as of the Closing Time, contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief with respect to the financial statements, including the notes thereto, or any other financial or statistical data found in or derived from the internal accounting and other records of the Company and its Subsidiaries set forth or referred to in the Offering Memorandum). (c) OFFICERS' CERTIFICATE. At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Offering Memorandum, any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its Subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Representatives shall have received a certificate of the President or a Vice President of the Company and of the chief financial or chief accounting officer of the Company, and equivalent officials of each Guarantor, dated as of the Closing Time, to the effect that (i) there has been no such material adverse change or development, (ii) the representations and warranties in Section 1 hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Time, and (iii) each of the Company and each of the 22 Guarantors, as the case may be, has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time. (d) ACCOUNTANTS' COMFORT LETTER. At the time of the execution of this Agreement, the Representatives shall have received from Ernst & Young LLP a letter dated such date, in form and substance satisfactory to the Representatives and counsel to the Initial Purchasers, together with signed or reproduced copies of such letter for each of the Initial Purchasers, containing statements and information of the type ordinarily included in accountants' "comfort letters" to Initial Purchasers with respect to the financial statements and certain financial information contained in the Offering Memorandum. Ernst & Young LLP shall provide in a separate writing a consent to inclusion of its report in the Offering Memorandum and to the reference to it under the caption "Independent Auditors" in the Offering Memorandum. (e) BRING-DOWN COMFORT LETTER. At the Closing Time, the Representatives shall have received from Ernst & Young LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time. (f) MAINTENANCE OF RATING. At the Closing Time, the Securities and the Guarantees shall be rated at least B1 by Moody's, BB+ by S&P, and BB by Duff & Phelps, and the Issuers shall have delivered to the Representatives a letter dated the Closing Time, from each such rating agency, or other evidence satisfactory to the Representatives, confirming that the Securities have such ratings; and since the date of this Agreement, there shall not have occurred a downgrading in the rating assigned to the Securities or any of the other debt securities of any of the Issuers by any "nationally recognized statistical rating agency," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such securities rating agency shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of the Securities or any of the other securities of any of the Issuers. (g) PORTAL. At the Closing Time, the Securities shall have been designated for trading on PORTAL. (h) INDENTURE. Each of the Issuers and the Trustee shall have entered into the Indenture, in form and substance satisfactory to the Representatives and counsel to the Initial Purchasers. 23 (i) REGISTRATION RIGHTS AGREEMENT. Each of the Issuers and the Initial Purchasers shall have entered into the Registration Rights Agreement, in form and substance satisfactory to the Representatives and counsel to the Initial Purchasers. (j) ADDITIONAL DOCUMENTS. At the Closing Time, counsel for the Initial Purchasers shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Issuers in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Representatives and counsel for the Initial Purchasers. (k) TERMINATION OF AGREEMENT. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by Merrill Lynch by notice to the Company at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 7, 8, 9 and 12 through 17, inclusive, shall survive any such termination and remain in full force and effect. SECTION 6. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES. (a) OFFER AND SALE PROCEDURES. Each of the Initial Purchasers and each of the Issuers hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities: (i) OFFERS AND SALES ONLY TO QUALIFIED INSTITUTIONAL BUYERS OR NON-U.S. PERSONS. Offers and sales of the Securities shall only be made to (A) persons whom the offeror or seller reasonably believes to be Qualified Institutional Buyers and (B) non-U.S. persons outside the United States, as defined in Regulation S under the 1933 Act, to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S under the 1933 Act. Each Initial Purchaser agrees that it will not offer, sell or deliver any of the Securities in any jurisdiction outside the United States except under circumstances that will result in compliance with the applicable laws thereof, and that it will take at its own expense (except as otherwise provided herein) whatever action is required to permit its purchase and resale of the Securities in such jurisdictions. (ii) NO GENERAL SOLICITATION. No general solicitation or general advertising (within the meaning of Rule 502(c) under the 1933 Act) will be used in the United States in connection with the offering or sale of the Securities. 24 (iii) PURCHASES BY NON-BANK FIDUCIARIES. In the case of a non-bank Subsequent Purchaser of any of the Securities acting as a fiduciary for one or more third parties, each third party shall, in the judgment of the applicable Initial Purchaser, be a Qualified Institutional Buyer or a non-U.S. person outside the United States. (iv) SUBSEQUENT PURCHASER NOTIFICATION. Each Initial Purchaser will take reasonable steps to inform, and cause each of its U.S. Affiliates to take reasonable steps to inform, persons acquiring Securities from such Initial Purchaser or affiliate, as the case may be, in the United States that the Securities (A) have not been and will not be registered under the 1933 Act, (B) are being sold to them without registration under the 1933 Act in reliance on Rule 144A or in accordance with another exemption from registration under the 1933 Act, as the case may be, and (C) may not be offered, sold or otherwise transferred except (1) to the Company, (2) outside the United States in accordance with Regulation S, or (3) inside the United States in accordance with (x) Rule 144A to a person whom the seller reasonably believes is a Qualified Institutional Buyer that is purchasing such Securities for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the offer, sale or transfer is being made in reliance on Rule 144A or (y) pursuant to another available exemption from registration under the 1933 Act. (v) MINIMUM PRINCIPAL AMOUNT. No sale of the Securities to any one Subsequent Purchaser will be for less than U.S. $100,000 principal amount and none of the Securities will be issued in a smaller principal amount. If the Subsequent Purchaser is a non-bank fiduciary acting on behalf of others, each person for whom it is acting must purchase at least U.S. $100,000 principal amount of the Securities. (vi) RESTRICTIONS ON TRANSFER. The transfer restrictions and the other provisions set forth in the Offering Memorandum under the heading "Notice to Investors", including the legend required thereby, shall apply to the Securities except as otherwise agreed by the Company and the Initial Purchasers. Following the sale of the Securities by the Initial Purchasers to Subsequent Purchasers pursuant to and in compliance with the terms hereof, the Initial Purchasers shall not be liable or responsible to the Issuers for any losses, damages or liabilities suffered or incurred by the Issuers, including any losses, damages or liabilities under the 1933 Act, arising from or relating to any resale or transfer of any Security occurring after such sale by the Initial Purchasers. (vii) DELIVERY OF OFFERING MEMORANDUM. Each Initial Purchaser will deliver to each purchaser of the Securities from such Initial Purchaser, in connection 25 with its original distribution of the Securities, a copy of the Offering Memorandum, as amended and supplemented at the date of such delivery. (b) COVENANTS OF THE ISSUERS. Each of the Issuers, jointly and severally, covenants with each Initial Purchaser as follows: (i) DUE DILIGENCE. In connection with the original distribution of the Securities, the Issuers, jointly and severally, agree that, prior to any offer or resale of the Securities by the Initial Purchasers, the Initial Purchasers and counsel for the Initial Purchasers shall have the right to make reasonable inquiries into the business of the Company and its Subsidiaries. The Issuers, jointly and severally, also agree to provide answers to each prospective Subsequent Purchaser of Securities who so requests concerning the Company and its Subsidiaries (to the extent that such information is available or can be acquired and made available to prospective Subsequent Purchasers without unreasonable effort or expense and to the extent the provision thereof is not prohibited by applicable law) and the terms and conditions of the offering of the Securities, as provided in the Offering Memorandum. (ii) INTEGRATION. The Issuers, jointly and severally, agree that they will not and will cause their respective Affiliates not to solicit any offer to buy or make any offer or sale of, or otherwise negotiate in respect of, securities of the Company of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the 1933 Act, such offer or sale would render invalid (for the purpose of (i) the sale of the Securities by the Issuers to the Initial Purchasers, (ii) the resale of the Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the 1933 Act provided by Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or otherwise. (iii) RULE 144A INFORMATION. The Issuers, jointly and severally, agree that, in order to render the Securities eligible for resale pursuant to Rule 144A under the 1933 Act, while any of the Securities remain outstanding, they will make available, upon request, to any holder of Securities or prospective purchasers of Securities the information specified in Rule 144A(d)(4), unless the Issuers furnish information to the Commission pursuant to Section 13 or 15(d) of the 1934 Act (such information, whether made available to holders or prospective purchasers or furnished to the Commission, is herein referred to as "Additional Information"). (iv) RESTRICTION ON RESALES. Until the expiration of two years after the original issuance of the Securities, the Issuers will not, and will cause their Affiliates not to, resell any Securities which are "restricted securities" (as such term is de- 26 fined under Rule 144(a)(3) under the 1933 Act), that have been acquired by any of them, whether as beneficial owner or otherwise (except as agent acting as a securities broker on behalf of and for the account of customers in the ordinary course of business in unsolicited broker's transactions). (c) RESALE PURSUANT TO RULE 903 OF REGULATION S OR RULE 144A. Each Initial Purchaser understands that the Securities have not been and will not be registered under the 1933 Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the 1933 Act or pursuant to an exemption from the registration requirements of the 1933 Act. Each Initial Purchaser severally represents and agrees that, except as permitted by Section 6(a) above, it has offered and sold Securities and will offer and sell Securities (i) as part of their distribution at any time and (ii) otherwise until forty days after the later of the date upon which the offering of the Securities commences and the Closing Time, only in accordance with Rule 903 of Regulation S, Rule 144A under the 1933 Act or another applicable exemption from the registration provisions of the 1933 Act. Accordingly, neither the Initial Purchasers, their affiliates nor any persons acting on their behalf have engaged or will engage in any directed selling efforts with respect to Securities, and the Initial Purchasers, their affiliates and any person acting on their behalf have complied and will comply with the offering restriction requirements of Regulation S. Each Initial Purchaser agrees that, at or prior to confirmation of a sale of Securities (other than a sale of Securities pursuant to Rule 144A) it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it or through it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the United States Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to or for the account or benefit of U.S. persons (i) as part of their distribution at any time and (ii) otherwise until forty days after the later of the date upon which the offering of the Securities commenced and the date of closing, except in either case in accordance with Regulation S, Rule 144A under the Securities Act or another exemption from the registration requirements of the 1933 Act. Terms used above have the meaning given to them by Regulation S." Terms used in the above paragraph have the meanings given to them by Regulation S. (d) REPRESENTATIONS AND WARRANTIES OF INITIAL PURCHASERS. Each Initial Purchaser severally represents and agrees that it has not entered and will not enter into any 27 contractual arrangements with respect to the distribution of the Securities, except with its affiliates or with the prior written consent of the Company. SECTION 7. INDEMNIFICATION. (a) INDEMNIFICATION OF INITIAL PURCHASERS. The Issuers agree, jointly and severally, to indemnify and hold harmless each Initial Purchaser, its Affiliates and each person, if any, who controls any Initial Purchaser or any of its Affiliates within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 7(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch (in addition to any local counsel)), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser through Merrill Lynch expressly for use in the Offering Memorandum (or any amendment thereto); PROVIDED, FURTHER, that the Issuers will not be liable to any Initial Purchaser, its Affiliates or any person controlling such Initial Purchaser with respect to any such untrue statement or alleged un- 28 true statement or omission or alleged omission made in any Preliminary Offering Memorandum to the extent that the Issuers shall sustain the burden of proving that any such loss, liability, claim, damage or expense resulted from (A) the fact that such Initial Purchaser, in contravention of a requirement of this Agreement or applicable law, sold Notes to a person to whom such Initial Purchaser failed to send or give, at or prior to the Closing Time, a copy of the Final Offering Memorandum as then amended or supplemented if (i) the Issuers have previously furnished copies thereof (sufficiently in advance of the Closing Time to allow for distribution by the Closing Time) to the Initial Purchasers and the loss, liability, claim, damage or expense of such Initial Purchaser, Affiliate or person controlling such Initial Purchaser resulted from an untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in or omitted from the Preliminary Offering Memorandum which was corrected in the Final Offering Memorandum as, if applicable, amended or supplemented prior to the Closing Time, and such Offering Memorandum was required by law to be delivered at or prior to the written confirmation of sale to such person, and (ii) such failure to give or send such Final Offering Memorandum by the Closing Time to such person would have constituted the sole defense to the claim asserted by such person and the claims asserted by such person do not include allegations of any other untrue statement or omission made in the Preliminary Offering Memorandum which was not corrected in the Final Offering Memorandum, which allegation is upheld by a final judgment or (B) the use of the Offering Memorandum during a period when the use of the Offering Memorandum has been suspended in accordance with Section 3(b) hereof (provided that the Initial Purchasers received prior notice of such suspension). (b) INDEMNIFICATION OF ISSUERS, DIRECTORS AND OFFICERS. Each Initial Purchaser, severally and not jointly, agrees to indemnify and hold harmless the Issuers, their directors and each person, if any, who controls the Issuers within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section 7, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Offering Memorandum in reliance upon and in conformity with written information furnished to the Company by such Initial Purchaser through Merrill Lynch expressly for use in the Offering Memorandum. (c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 7(a) above, 29 counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 7(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; PROVIDED, HOWEVER, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 7 or Section 8 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 7(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. SECTION 8. CONTRIBUTION. If the indemnification provided for in Section 7 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuers on the one hand and the Initial Purchasers on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuers on the one hand and of 30 the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Issuers on the one hand and the Initial Purchasers on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total underwriting discount received by the Initial Purchasers, bear to the aggregate initial offering price of the Securities. The relative fault of the Issuers on the one hand and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Issuers or by the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Each of the Issuers and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 8. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 8, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased by it were offered to the Subsequent Purchasers exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 31 For purposes of this Section 8, each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser, and each person, if any, who controls the Issuers within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Issuers. The Initial Purchasers' respective obligations to contribute pursuant to this Section 8 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule B hereto and not joint. SECTION 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or any of its Subsidiaries submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or controlling person, or by or on behalf of the Company or any Guarantor, and shall survive delivery of the Securities to the Initial Purchasers and the payment therefor by the Initial Purchasers. SECTION 10. TERMINATION OF AGREEMENT. (a) TERMINATION; GENERAL. Merrill Lynch may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its Subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of Merrill Lynch, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the Nasdaq National Market, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal or New York authorities. 32 (b) LIABILITIES. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 7, 8, 9 and 12 through 17, inclusive, shall survive such termination and remain in full force and effect. SECTION 11. DEFAULT BY ONE OR MORE OF THE INITIAL PURCHASERS. If one or more of the Initial Purchasers shall fail at the Closing Time to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), Merrill Lynch shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Initial Purchasers, or any other Initial Purchasers, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, Merrill Lynch shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the aggregate principal amount of the Securities to be purchased hereunder, each of the non-defaulting Initial Purchasers shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Initial Purchasers, or (b) if the number of Defaulted Securities exceeds 10% of the aggregate principal amount of the Securities to be purchased hereunder, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser. No action taken pursuant to this Section shall relieve any defaulting Initial Purchaser from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either Merrill Lynch or the Issuers shall have the right to postpone the Closing Time for a period not exceeding seven days in order to effect any required changes in the Offering Memorandum or in any other documents or arrangements. As used herein, the term "Initial Purchaser" includes any person substituted for an Initial Purchaser under this Section 11. SECTION 12. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchasers shall be directed to Merrill Lynch at North Tower, World Financial Center, New York, New York 10281-1201, attention: High Yield Corporate Finance; notices to the Issuers shall be directed to them at Nash-Finch Company, 7600 France Avenue South, P.O. Box 355, Minneapolis, 33 Minnesota 55440-0355, attention: Norman R. Soland, Vice President, Secretary and General Counsel. SECTION 13. INFORMATION SUPPLIED BY THE INITIAL PURCHASERS. The statements set forth in the last paragraph on the front cover page and in the second paragraph (other than the first sentence thereof) and the fifth paragraph, the last sentence of the sixth paragraph, and the ninth paragraph under the heading "Plan of Distribution" in the Offering Memorandum (in each case, to the extent such statements relate to the Initial Purchasers) constitute the only information furnished by the Initial Purchasers to the Issuers for use in the Offering Memorandum for the purposes of Sections 1, 7 and 8 hereof. SECTION 14. PARTIES. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers and the Issuers and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation other than the Initial Purchasers and the Issuers and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchasers and Issuers and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase. SECTION 15. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 16. EFFECT OF HEADINGS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts and, when each party has executed a counterpart, all such counterparts taken together shall constitute one and the same agreement. [Signature Pages Follow] If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Initial Purchasers, the Company and the Guarantors in accordance with its terms. Very truly yours, NASH-FINCH COMPANY By: /s/ Alfred N. Flaten ----------------------------------- Name: Alfred N. Flaten Title: President NASH DECAMP COMPANY By: /s/ Alfred N. Flaten ----------------------------------- Name: Alfred N. Flaten Title: Attorney-in-fact T.J. MORRIS COMPANY By: /s/ Alfred N. Flaten ----------------------------------- Name: Alfred N. Flaten Title: President SUPER FOOD SERVICES, INC. By: /s/ Alfred N. Flaten ----------------------------------- Name: Alfred N. Flaten Title: Vice President FORREST TRANSPORTATION SERVICES, INC. By: /s/ Alfred N. Flaten ----------------------------------- Name: Alfred N. Flaten Title: Attorney-in-fact GTL TRUCK LINES, INC. By: /s/ Alfred N. Flaten ----------------------------------- Name: Alfred N. Flaten Title: Vice President PIGGLY WIGGLY NORTHLAND CORPORATION By: /s/ Alfred N. Flaten ----------------------------------- Name: Alfred N. Flaten Title: President GILLETTE DAIRY OF THE BLACK HILLS, INC. By: /s/ Charles F. Ramsbacher ----------------------------------- Name: Charles F. Ramsbacher Title: Vice President NEBRASKA DAIRIES, INC. By: /s/ Charles F. Ramsbacher ----------------------------------- Name: Charles F. Ramsbacher Title: Vice President CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED NESBITT BURNS SECURITIES INC. PIPER JAFFRAY INC. By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: /s/ [ILLEGIBLE] --------------------------------- Authorized Signatory For themselves and as Representatives of the other Initial Purchasers named in Schedule B hereto. SCHEDULE A
Guarantors Ownership Percentage ---------- -------------------- Nash DeCamp Company 100% T.J. Morris Company 100% Super Food Services, Inc. 100% Forrest Transportation Services, Inc. 100% GTL Truck Lines, Inc. 100% Piggly Wiggly Northland Corporation 100% Gillette Dairy of the Black Hills, Inc. 66.7% Nebraska Dairies, Inc. 66.7%
SCHEDULE B
Principal Amount of Name of Initial Purchaser Securities ------------------------- ---------- Merrill Lynch, Pierce, Fenner & Smith Incorporated . . . . . . . . . . . . . . . . . . . . . . $115,500,000 Nesbitt Burns Securities Inc. . . . . . . . . . . . . . . . . $ 24,750,000 Piper Jaffray Inc. . . . . . . . . . . . . . . . . . . . . . $ 24,750,000 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $165,000,000 ------------ ------------
SCHEDULE C
Non-Guarantor Subsidiary Ownership Percentage ------------------------ -------------------- Fame Marketing Corp. 100% Gray Bear, Inc. 100% Kentucky Food Stores, Inc. 100% Super Foods, Inc. 100% Nash Finch Funding Corp. 100% Agricola Nadco Limitada 99% Monroeville Foods, Inc. 59% New Castle Foods, Inc. 90% Whitton Enterprises, Inc. 66.67%
SCHEDULE D NASH-FINCH COMPANY $165,000,000 Senior Subordinated Notes Due 2008 1. The initial offering price of the Securities shall be 99.20% of the principal amount thereof, plus accrued interest, if any, from the date of issuance. 2. The purchase price to be paid by the Initial Purchasers for the Securities shall be 97.075% of the principal amount thereof. 3. The interest rate on the Securities shall be 8 1/2% per annum. 4. The Securities will mature on May 1, 2008. Interest on the Notes will be payable semi-annually on each May 1 and November 1, commencing November 1, 1998. 5. The Securities will be redeemable at the option of the Company, in whole or in part, at any time on or after May 1, 2003, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest thereon, if any, to the date of redemption, if redeemed during the 12-month period beginning on May 1 of the years indicated below:
REDEMPTION YEAR PRICE ---- ---------- 2003 . . . . . . . . . . . . . . . . . . . . . . . . 104.250% 2004 . . . . . . . . . . . . . . . . . . . . . . . . 102.833% 2005 . . . . . . . . . . . . . . . . . . . . . . . . 101.417% 2006 and thereafter . . . . . . . . . . . . . . . . . 100.000%
6. On or prior to May 1, 2001, the Company may, at its option, use the net proceeds of a Public Equity Offering (as defined in the Offering Memorandum) to redeem up to 35% of the originally issued aggregate principal amount of the Securities, at a redemption price in cash equal to 108.5% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; PROVIDED, HOWEVER, that not less than $107.25 million in aggregate principal amount of Securities is outstanding following such redemption. EXHIBIT A-1 FORM OF OPINION OF OPPENHEIMER WOLFF & DONNELLY LLP TO BE DELIVERED PURSUANT TO SECTION 5(a) April __, 1998 Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Nesbitt Burns Securities Inc. Piper Jaffray Inc. As Representatives of the several Initial Purchasers c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Ladies and Gentlemen: We have acted as counsel to Nash-Finch Company, a Delaware corporation (the "Company"), and the Guarantors (as defined below) in connection with the sale of $165,000,000 in principal amount of the Company's 8-1/2% Senior Subordinated Notes due 2008 to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Nesbitt Burns Securities Inc. and Piper Jaffray Inc. (the "Initial Purchasers"), pursuant to the Purchase Agreement, dated as of April 20, 1998 by and among the Company, the guarantors listed on Schedule A thereto (the "Guarantors") and the Initial Purchasers (the "Purchase Agreement"). This opinion is furnished to you pursuant to Section 5(a) of the Purchase Agreement. Capitalized terms used in this opinion that are not otherwise defined herein shall have the meaning given to such terms in the Purchase Agreement. In acting as counsel for the Company and the Guarantors and arriving at the opinions expressed below, we have reviewed, among other documents, the following agreements and instruments: (a) the Offering Memorandum; (b) the Purchase Agreement; (c) the Registration Rights Agreement; (d) the DTC Agreement; Merrill Lynch & Co. April 24, 1998 Page 2 (e) the Indenture; (f) the Notes; (g) the Guarantees; (h) the form of Exchange Securities; and (i) the form of Private Exchange Securities. We have also examined and relied upon originals or copies of such other documents and records of the Company and the Guarantors, certificates of officers and representatives of the Company, certificates of public officials and other documents we have deemed necessary or appropriate as a basis for the opinions expressed below. As to various questions of fact material to such opinions, we have, when relevant facts were not independently established, relied upon certificates of officers of the Company and the Guarantors and upon representations of the Company and the Guarantors contained in the Purchase Agreement, without independent verification or investigation. With regard to documents executed by parties other than the Company or the Guarantors, we have assumed that such documents have been duly executed and delivered by such other parties and are the valid and binding obligations of and enforceable against such other parties. We have also assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures, the conformity to authentic original documents of all documents submitted to us as certified, conformed or photostatic copies and the legal capacity of all natural persons. Based on the foregoing, and subject to the qualifications and limitations stated herein, it is our opinion that: (i) The Purchase Agreement has been duly authorized, executed and delivered by each of the Issuers. (ii) The DTC Agreement has been duly authorized, executed and delivered by each of the Issuers and is a valid and binding agreement of each of the Issuers, enforceable against each of the Issuers in accordance with its terms. (iii) The Indenture has been duly authorized, executed and delivered by each of the Issuers and constitutes a valid and binding agreement of each of the Issuers, enforceable against each of the Issuers in accordance with its terms. (iv) The Notes are in the form contemplated by the Indenture, have been duly authorized by each of the Issuers and, when executed by each of the Issuers and Merrill Lynch & Co. April 24, 1998 Page 3 authenticated by the Trustee in the manner provided in the Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of each of the Issuers, enforceable against each of the Issuers in accordance with their terms and entitled to the benefits of the Indenture. (v) The Guarantees have been duly authorized by each of the Guarantors and when executed and delivered by each of the Guarantors in accordance with the provisions of the Indenture (assuming the due authorization, execution and delivery of the Indenture, and the due authentication of the Notes, in each case by the Trustee), will constitute valid and binding obligations of each of the Guarantors, enforceable against each of the Guarantors in accordance with their terms and entitled to the benefits of the Indenture. (vi) The Registration Rights Agreement has been duly authorized, executed and delivered by each of the Issuers and constitutes a valid and binding agreement of each of the Issuers, enforceable against each of the Issuers in accordance with its terms. (vii) The Exchange Securities and the Private Exchange Securities have been duly authorized by each of the Issuers and, when executed by each of the Issuers and authenticated in the manner provided for in the Indenture and delivered in exchange for the Securities in accordance with the terms of the Registration Rights Agreement, will constitute valid and binding obligations of each of the Issuers, enforceable against each of the Issuers in accordance with their terms and entitled to the benefits of the Indenture. (viii) The Securities, the Exchange Securities, the Registration Rights Agreement and the Indenture conform in all material respects to the descriptions thereof contained in the Offering Memorandum. (ix) The information in the Offering Memorandum under "Offering Memorandum Summary - The Offering," "Description of Certain Other Indebtedness," "Description of the Notes" and "Exchange Offer; Registration Rights," to the extent that it constitutes matters of law, summaries of legal matters or legal conclusions, has been reviewed and fairly and accurately summarizes such matters in all material respects. (x) All descriptions in the Offering Memorandum of contracts and other documents to which the Company or any of its Subsidiaries are a party are accurate in all material respects; to our knowledge, there are no franchises, contracts, indentures, mortgages, loan agreements, notes, leases or other instruments that would be required to be described in a registration statement on Form S-1 under the 1933 Act that are not described or referred to in the Offering Memorandum other than those described or referred to therein or incorporated by reference therein, and the descriptions thereof or Merrill Lynch & Co. April 24, 1998 Page 4 references thereto are correct and fairly and accurately summarize such agreements and instruments in all material respects. (xi) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required in connection with the offering, issuance or sale of the Securities, the Exchange Securities or the Private Exchange Securities, if any, the resale of the Securities by the Initial Purchasers in accordance with the Purchase Agreement, the authorization, execution or delivery of the Operative Documents, the performance by the Company of its obligations under the Operative Documents or the consummation of the transactions contemplated thereby, except as may be required (A) in connection with the registration of the Exchange Securities or the Private Exchange Securities, if any, under the 1933 Act or the qualification of the Indenture under the 1939 Act pursuant to the Registration Rights Agreement or (B) pursuant to state securities or "blue sky" laws (as to which we express no opinion). (xii) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in the Purchase Agreement, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers under, or in connection with the initial resale of such Securities by the Initial Purchasers to each Subsequent Purchaser, in each case, in the manner contemplated by the Purchase Agreement and the Offering Memorandum, to register the Securities under the 1933 Act or to qualify the Indenture under the 1939 Act. (xiii) The issuance, sale and delivery of the Securities, the Exchange Securities and the Private Exchange Securities, if any, the execution, delivery and performance of the Purchase Agreement, the Registration Rights Agreement, the Indenture and the Securities and the consummation of the transactions contemplated in the Operative Documents and in the Offering Memorandum (including the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use Of Proceeds") and compliance by the Issuers with their obligations under the Operative Documents do not, and at the Closing Time will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default or Repayment Event under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its Subsidiaries pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, limited in each case to those filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998 or which, after inquiry, the Company has informed us will be filed as Merrill Lynch & Co. April 24, 1998 Page 5 exhibits to its Quarterly Report on Form 10-Q for the quarter ended March 28, 1998, to which the Company or any of its Subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any of its Subsidiaries is subject, nor will such action result in any violation of the provisions of (i) the charter or by-laws of the Company or any of its Subsidiaries, (ii) any applicable law, statute, rule or regulation, in each case of the United States, the State of Minnesota, the State of New York or the General Corporate Laws of the State of Delaware or (iii) any judgment, order, writ or decree known to us of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of the Guarantors or any of their respective properties, assets or operations. (xiv) None of the Issuers is an "investment company" or an entity " controlled" by an "investment company," as such terms are defined in the 1940 Act. (xv) When the Securities are issued and delivered pursuant to the Purchase Agreement, such Securities will not be of the same class (within the meaning of Rule 144A) as securities of any of the Issuers which are listed on a national securities exchange registered under Section 6 of the 1934 Act or quoted in a U.S. automated inter-dealer quotation system. (xvi) Neither the consummation of the transactions contemplated hereby nor the sale, issuance, execution or delivery of the Securities will violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. We have participated in conferences with representatives of the Initial Purchasers, officers and other representatives of the Company and the Guarantors and representatives of Ernst & Young LLP, independent certified public accountants for the Company, at which the contents of the Offering Memorandum and related matters were discussed, and although we do not pass upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum (other than as set out in our opinions above), on the basis of the foregoing, no facts have come to our attention that would lead us to believe that the Offering Memorandum (except for financial statements and schedules and other financial data included or incorporated by reference therein, as to which we make no statement), at the time the Offering Memorandum was issued, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Offering Memorandum, as amended or supplemented (except for financial statements and schedules and other financial data included or incorporated by reference therein, as to which we make no statement), at the time any such amended or supplemented Offering Memorandum was issued or at the Closing Time, contained Merrill Lynch & Co. April 24, 1998 Page 6 or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In addition to the qualifications and limitations set forth above, the opinions expressed herein are subject to the following qualifications and limitations: (1) We express no opinion with respect to laws other than those of the State of Minnesota, the State of New York, the General Corporate Laws of the State of Delaware and the federal laws of the United States of America, and we assume no responsibility as to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction. (2) To the extent that the opinions given above relate to the enforceability of any agreement or other document referred to herein, the opinions are subject to the effect of applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or transfer and other laws affecting the rights of creditors generally or the availability of specific performance, injunctive relief and other equitable remedies, and to general principles of equity (regardless of whether such principles are considered in a proceeding in equity or at law). (3) Where we render an opinion based upon factual matters "known to us," or "to our knowledge," it is based solely upon inquiries of this firm's attorneys who have worked on matters involving the Company or the Guarantors, an examination of our files and of documents made available to us by the Company or the Guarantors, and inquiries of officers of the Company or the Guarantors. We have relied on certificates executed by officers of the Company or the Guarantors covering certain of such matters. (4) In giving the opinions expressed above, we have assumed that any party seeking to enforce the obligations under the Registration Rights Agreement, the DTC Agreement, the Indenture, the Notes, the Guarantees and the Exchange Securities in a Minnesota State court has at all times been, and will continue at all times to be, exempt from the filing requirements of Minnesota Statutes, Section 290.371 as it relates to the filing of a Notice of Business Activities Report or, if not exempt, has duly filed, and will continue to duly file, all such Notice of Business Activities Reports. Merrill Lynch & Co. April 24, 1998 Page 7 We are furnishing this opinion to you solely for your benefit in connection with the above-described transaction. It is not to be used, circulated, quoted or otherwise referred to for any other purpose, and no one other than you is entitled to rely on this opinion. This opinion speaks only as of the date above written, and we hereby expressly disclaim any duty to update any of the statements made herein. Very truly yours, EXHIBIT A-2 FORM OF OPINION OF NORMAN R. SOLAND TO BE DELIVERED PURSUANT TO SECTION 5(a) April ___, 1998 Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Nesbitt Burns Securities Inc. Piper Jaffray Inc. As Representatives of the several Initial Purchasers c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Ladies and Gentlemen: I have acted as counsel to Nash-Finch Company, a Delaware corporation (the "Company"), and the Guarantors (as defined below) in connection with the sale of $165,000,000 in principal amount of the Company's 8-1/2% Senior Subordinated Notes due 2008 to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Nesbitt Burns Securities Inc. and Piper Jaffray Inc. (the "Initial Purchasers"), pursuant to the Purchase Agreement, dated as of April 20, 1998 by and among the Company, the guarantors listed on Schedule A thereto (the "Guarantors") and the Initial Purchasers (the "Purchase Agreement"). This opinion is furnished to you pursuant to Section 5(a) of the Purchase Agreement. Capitalized terms used in this opinion that are not otherwise defined herein shall have the meaning given to such terms in the Purchase Agreement. In acting as counsel for the Company and the Guarantors and arriving at the opinions expressed below, I have reviewed, among other documents, the following agreements and instruments: (a) the Offering Memorandum; (b) the Purchase Agreement; (c) the Registration Rights Agreement; (d) the DTC Agreement; (e) the Indenture; (f) the Notes; Merrill Lynch & Co. April ___, 1998 Page 2 (g) the Guarantees; (h) the form of Exchange Securities; and (i) the form of Private Exchange Securities. I have also examined and relied upon originals or copies of such other documents and records of the Company and the Guarantors, certificates of officers and representatives of the Company, certificates of public officials and other documents I have deemed necessary or appropriate as a basis for the opinions expressed below. As to various questions of fact material to such opinions, I have, when relevant facts were not independently established, relied upon certificates of officers of the Company and the Guarantors and upon representations of the Company and the Guarantors contained in the Purchase Agreement, without independent verification or investigation. With regard to documents executed by parties other than the Company or the Guarantors, I have assumed that such documents have been duly executed and delivered by such other parties and are the valid and binding obligations of and enforceable against such other parties. I have also assumed the authenticity of all documents submitted to me as originals, the genuineness of all signatures, the conformity to authentic original documents of all documents submitted to me as certified, conformed or photostatic copies and the legal capacity of all natural persons. Based on the foregoing, and subject to the qualifications and limitations stated herein, it is my opinion that: (i) Each of the Issuers has been duly incorporated and is validly existing as a corporation in good standing under the laws of its respective state of incorporation. (ii) Each of the Issuers has the corporate power and authority to own, lease and operate its assets and properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under each of the Operative Documents. Each of the Operative Documents has been duly authorized by each Issuer that is a party thereto. (iii) Each of the Issuers is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect. Merrill Lynch & Co. April ___, 1998 Page 3 (iv) The authorized, issued and outstanding capital stock of the Company is as set forth in the financial statements, including the schedules and notes, included in the Offering Memorandum (except for subsequent issuances, if any, pursuant to the Purchase Agreement or pursuant to reservations, agreements, employee or director benefit plans or the exercise of options referred to in the Offering Memorandum); the shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable; and none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company. (v) Each Subsidiary which is not a Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and, to my knowledge, except as set forth in the Offering Memorandum or as disclosed in the Purchase Agreement, is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (vi) There is not pending or, to my knowledge, threatened, any action, suit, proceeding, inquiry or investigation, to which the Company or any Subsidiary is a party, or to which the property of the Company or any Subsidiary thereof is subject, before or brought by any court or governmental agency or body, which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or which, individually or in the aggregate, might reasonably be expected to materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in any Operative Documents or the performance by the Issuers of their obligations thereunder or the transactions contemplated by the Offering Memorandum or that would be required to be described in a registration statement on Form S-1 under the 1933 Act. Merrill Lynch & Co. April ___, 1998 Page 4 (iv) The information in the Offering Memorandum under "Risk Factors - Risk of Environmental Liability" and "Business - Legal Proceedings," to the extent that it constitutes matters of law, summaries of legal matters or legal proceedings, or legal conclusions, has been reviewed by me and fairly and accurately summarizes such matters in all material respects. (viii) All descriptions in the Offering Memorandum of contracts and other documents to which the Company or any of its Subsidiaries are a party are accurate in all material respects; to my knowledge, there are no franchises, contracts, indentures, mortgages, loan agreements, notes, leases or other instruments that would be required to be described in a registration statement on Form S-1 under the 1933 Act that are not described or referred to in the Offering Memorandum other than those described or referred to therein or incorporated by reference therein, and the descriptions thereof or references thereto are correct and fairly and accurately summarize such agreements and instruments in all material respects. (ix) Neither the Company nor any of its Subsidiaries is in violation of its charter or by-laws and, to my knowledge, no default by any of the Issuers exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which it is a party or by which any of them may be bound or to which any of their respective properties or assets is subject; and, to my knowledge, none of the Issuers is in breach or violation of any law, statute, rule or regulation, or any judgment, decree or order or governmental or regulatory agency or other body having jurisdiction over any of the Issuers or any of their respective property or assets. (x) The issuance, sale and delivery of the Securities, the Exchange Securities and the Private Exchange Securities, if any, the execution, delivery and performance of the Purchase Agreement, the Registration Rights Agreement, the Indenture and the Securities and the consummation of the transactions contemplated in the Operative Documents and in the Offering Memorandum (including the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use Of Proceeds") and compliance by the Issuers with their obligations under the Operative Documents do not, and at the Closing Time will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default or Repayment Event under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its Subsidiaries pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, Merrill Lynch & Co. April ___, 1998 Page 5 note, lease or any other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any of its Subsidiaries is subject, nor will such action result in any violation of the provisions of (i) the charter or by-laws of the Company or any of its Subsidiaries, (ii) any applicable law, statute, rule or regulation, in each case of the United States, the State of Minnesota or the General Corporate Laws of the State of Delaware or (iii) any judgment, order, writ or decree known to us of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of the Guarantors or any of their respective properties, assets or operations. I have participated in conferences with representatives of the Initial Purchasers, officers and other representatives of the Company and the Guarantors and representatives of Ernst & Young LLP, independent certified public accountants for the Company, at which the contents of the Offering Memorandum and related matters were discussed, and although I do not pass upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum (other than as set out in my opinions above), on the basis of the foregoing, no facts have come to my attention that would lead me to believe that the Offering Memorandum (except for financial statements and schedules and other financial data included or incorporated by reference therein, as to which I make no statement), at the time the Offering Memorandum was issued, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Offering Memorandum, as amended or supplemented (except for financial statements and schedules and other financial data included or incorporated by reference therein, as to which I make no statement), at the time any such amended or supplemented Offering Memorandum was issued or at the Closing Time, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In addition to the qualifications and limitations set forth above, the opinions expressed herein are subject to the following qualifications and limitations: (1) I express no opinion with respect to laws other than those of the State of Minnesota, the General Corporate Laws of the State of Delaware and the federal laws of the United States of America, and I assume no responsibility as to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction. Merrill Lynch & Co. April ___, 1998 Page 6 (2) To the extent that the opinions given above relate to the enforceability of any agreement or other document referred to herein, the opinions are subject to the effect of applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or transfer and other laws affecting the rights of creditors generally or the availability of specific performance, injunctive relief and other equitable remedies, and to general principles of equity (regardless of whether such principles are considered in a proceeding in equity or at law). (3) Where I render an opinion based upon factual matters "known to me," or "to my knowledge," it is based solely upon inquiries of officers of the Company or the Guarantors and an examination of my files and of documents made available to me by the Company or the Guarantors. I have relied on certificates executed by officers of the Company or the Guarantors covering certain of such matters. I am furnishing this opinion to you solely for your benefit in connection with the above-described transaction. It is not to be used, circulated, quoted or otherwise referred to for any other purpose, and no one other than you is entitled to rely on this opinion. This opinion speaks only as of the date above written, and I hereby expressly disclaim any duty to update any of the statements made herein. Very truly yours, EX-10.22 5 REGIST RGTS AGREMNT Exhibit 10.22 REGISTRATION RIGHTS AGREEMENT Dated as of April 24, 1998 by and among NASH-FINCH COMPANY, THE SUBSIDIARY GUARANTORS named herein and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, NESBITT BURNS SECURITIES INC. and PIPER JAFFRAY INC., as Initial Purchasers ______________________________ $165,000,000 8 1/2% SENIOR SUBORDINATED NOTES DUE 2008 TABLE OF CONTENTS PAGE 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Registration Under the Securities Act.. . . . . . . . . . . . . . . . . 6 3. Registration Procedures.. . . . . . . . . . . . . . . . . . . . . . . . 12 4. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 24 5. Indemnification and Contribution. . . . . . . . . . . . . . . . . . . . 25 6. Rules 144 and 144A. . . . . . . . . . . . . . . . . . . . . . . . . . . 30 7. Underwritten Registrations. . . . . . . . . . . . . . . . . . . . . . . 31 8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 (a) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 (b) No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . 32 (c) Adjustments Affecting Registrable Securities . . . . . . . . . . 32 (d) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 32 (e) Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 (f) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 34 (g) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 34 (h) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 (i) Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 35 (j) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 35 (k) Securities Held by the Company or Its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 (l) Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . 35 (m) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 36 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "AGREEMENT") is made and entered into as of April 24, 1998 by and among NASH-FINCH COMPANY, a Delaware corporation (the "COMPANY"), each of the Company's subsidiaries listed on the signature pages hereto (collectively, the "SUBSIDIARY GUARANTORS"), and MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MERRILL LYNCH"), NESBITT BURNS SECURITIES INC. and PIPER JAFFRAY INC. (collectively, the "INITIAL PURCHASERS"). This Agreement is entered into in connection with the Purchase Agreement, dated April 20, 1998, by and among the Company, the Subsidiary Guarantors and the Initial Purchasers (the "PURCHASE AGREEMENT") relating to the sale by the Company to the Initial Purchaser of $165,000,000 aggregate principal amount of the Company's 8 1/2% Senior Subordinated Notes due 2008 (the "NOTES") and the guarantees thereof of the Subsidiary Guarantors (the "GUARANTEES," and together with the Notes, the "SECURITIES"). The Company and the Subsidiary Guarantors are collectively referred to herein as the "ISSUERS." In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company and the Subsidiary Guarantors have agreed to provide the registration rights set forth in this Agreement for the benefit of the holders of Registrable Securities (as defined), including, without limitation, the Initial Purchasers. 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: ADVICE: See the last paragraph of Section 3. AGREEMENT: See the first introductory paragraph to this Agreement. APPLICABLE PERIOD: See Section 3(v). -2- BUSINESS DAY: A day that is not a Saturday, a Sunday, or a day on which banking institutions in New York, New York are required to be closed. CLOSING DATE: The Closing Time as defined in the Purchase Agreement. COMPANY: See the first introductory paragraph to this Agreement. EFFECTIVENESS DATE: The 60th day after the Filing Date. EFFECTIVENESS PERIOD: See Section 2(b). EVENT DATE: See Section 2(d). EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. EXCHANGE SECURITIES: Shall mean the 8 1/2% Series B Senior Subordinated Notes due 2008 of the Company, and the guarantees thereon of the Subsidiary Guarantors, issued pursuant to, and entitled to the benefits of, the Indenture (which shall be qualified under the TIA) and registered pursuant to an effective Registration Statement under the Securities Act, containing terms identical to the Securities (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Securities or, if no such interest has been paid, from the Issue Date and (ii) the transfer restrictions therein shall be eliminated) to be offered to Holders of Securities in exchange for Securities in the Exchange Offer. EXCHANGE OFFER: See Section 2(a). EXCHANGE REGISTRATION STATEMENT: See Section 2(a). FILING DATE: The 30th day after the Issue Date. HOLDER: Any registered holder of Registrable Securities. INDEMNIFIED PERSON and INDEMNIFIED PERSONS: See Section 5(a). INDENTURE: The Indenture, dated as of April 24, 1998, by and among the Issuers and U.S. Bank Trust National As- -3- sociation, as trustee, pursuant to which the Securities are being issued, as amended or supplemented from time to time in accordance with the terms thereof. INITIAL PURCHASERS: See the first introductory paragraph to this Agreement. INSPECTORS: See Section 3(o). ISSUE DATE: The date on which the Securities were sold to the Initial Purchasers pursuant to the Purchase Agreement. ISSUERS: See the second introductory paragraph to this Agreement. LIQUIDATED DAMAGES: See Section 2(d). MAJORITY HOLDERS: shall mean the Holders of a majority of the aggregate principal amount of outstanding (as determined under the Indenture) Registrable Securities. NASD: National Association of Securities Dealers, Inc. NOTES: See the second introductory paragraph to this Agreement. PARTICIPATING BROKER-DEALER: See Section 3(v). 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(a). PRIVATE EXCHANGE SECURITIES: See Section 2(a). 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), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amend- -4- ments 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 second introductory paragraph to this Agreement. RECORDS: See Section 3(o). REGISTRABLE SECURITIES: Each Security upon original issuance thereof and at all times subsequent thereto, each Exchange Security as to which Section 2(b)(iv) hereof is applicable upon original issuance thereof and at all times subsequent thereto and each Private Exchange Security upon original issuance thereof and at all times subsequent thereto, until, in the case of any such Security, Exchange Security or Private Exchange Security, as the case may be, the earliest to occur of (i) a Registration Statement (other than, with respect to any Exchange Security as to which Section 2(b)(iv) hereof is applicable, the Exchange Registration Statement) covering such Security, Exchange Security or Private Exchange Security, as the case may be, has been declared effective by the SEC and such Security, Exchange Security or Private Exchange Security, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Security, Exchange Security or Private Exchange Security, as the case may be, is sold in compliance with Rule 144(k), (iii) in the case of any Security, such Security has been exchanged by any Person (other than an exchange by a Participating Broker-Dealer pursuant to the Exchange Offer) for an Exchange Security or Exchange Securities which may be resold without restriction under state and federal securities laws,(iv) following the exchange by a Participating Broker-Dealer in the Exchange Offer of a Security for an Exchange Security, the date on which such Exchange Security is sold to a purchaser who receives from such Participating Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement, as amended or supplemented, (v) in the case of any Security or Private Exchange Security, the date such Security or Private Exchange Security, as the case may be, shall have been otherwise transferred by the holder thereof and a new Security not bearing a legend restricting further transfer shall have been delivered by the Issuers and subsequent disposition of such Security shall not require registration or qualification under the Securities Act or any similar state law then in force or (vi) such Security, Exchange Security or Private Ex- -5- change Security, as the case may be, ceases to be outstanding for purposes of the Indenture. REGISTRATION STATEMENT: Any registration statement of the Issuers, including, but not limited to, the Exchange Registration Statement, that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference therein. RULE 144(K): Rule 144(k) 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 an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. RULE 144A: Rule 144A 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 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 ACT: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. SHELF REGISTRATION STATEMENT: See Section 2(b). SUBSIDIARY GUARANTORS: See the first introductory paragraph to this Agreement. TIA: The Trust Indenture Act of 1939, as amended. TRUSTEE: The trustee under the Indenture. -6- 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. REGISTRATION UNDER THE SECURITIES ACT. (a) EXCHANGE OFFER. Each of the Issuers agrees to file with the SEC no later than the Filing Date a registration statement filed under the Securities Act on the appropriate form (the "EXCHANGE REGISTRATION STATEMENT") with respect to an offer to exchange (the "EXCHANGE OFFER") any and all of the Registrable Securities (other than Private Exchange Securities, if any) for a like aggregate principal amount of Exchange Securities. The Exchange Offer shall comply with all applicable tender offer rules and regulations under the Exchange Act. Each of the Issuers agrees to use its best efforts to (x) cause the Exchange Registration Statement to be declared effective under the Securities Act as promptly as possible and in any event on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20 Business Days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) unless the Exchange Offer would not be permitted by applicable law or SEC policy, consummate the Exchange Offer on or prior to the 30th day following the Effectiveness Date. If after such Exchange Registration Statement is initially declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Exchange Registration Statement shall be deemed not to have become effective for purposes of this Agreement. Each Holder who participates in the Exchange Offer will be required to represent that any Exchange Securities received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Securities, that such Holder is not an affiliate of any of the Issuers within the meaning of Rule 405 of the Securities Act (or that if it is an affiliate that it will comply with applicable registration and prospectus delivery requirements of the Securities Act), and that such Holder is not a broker-dealer tendering Registrable Securities for Exchange Securities acquired directly from any of the Issuers for its own account. Upon consummation of the Exchange Offer in accordance with this Section 2(a), the provisions of this Agreement shall continue to apply, MUTATIS MUTANDIS, solely with respect to Registrable Securities that are Private Exchange Securities or -7- as to which clause 2(b)(iv) hereof applies and Exchange Securities held by Participating Broker-Dealers, and the Issuers shall have no further obligation to register Registrable Securities (other than Private Exchange Securities and other than in respect of any Securities or Exchange Securities as to which clause 2(b)(iv) hereof applies) pursuant to Section 2(b) of this Agreement. If, upon consummation of the Exchange Offer, any Initial Purchaser holds any Securities acquired by it and having the status of an unsold allotment in the initial distribution, the Issuers, upon the request of such Initial Purchaser, shall, simultaneously with the delivery of each such Exchange Securities in the Exchange Offer, issue and deliver to each such Initial Purchaser, in exchange (the "PRIVATE EXCHANGE") for the Securities held by each such Initial Purchaser, a like principal amount of debt securities of the Company, guaranteed by the Subsidiary Guarantors, that are issued pursuant to, and entitled to the benefits of, the Indenture and are identical in all material respects to the Exchange Securities, except for (i) the existence of restrictions on transfer thereof under the Securities Act and securities laws of the several states of the United States and (ii) the registration rights in respect thereof shall continue to apply (the "PRIVATE EXCHANGE SECURITIES"). The Private Exchange Securities shall be of the same series as and bear the same CUSIP number as the Exchange Securities. Interest on the Private Exchange Securities will accrue from the last interest payment date on which interest was paid on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date. In connection with the Exchange Offer, the Issuers shall: (1) mail to each Holder a copy of the Prospectus forming part of the Exchange Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of The Depository Trust Company or any other depositary appointed by the Company and which may be the Trustee or an affiliate thereof; PROVIDED, HOWEVER, that such depositary must have an address in the Borough of Manhattan, the City of New York; (3) permit Holders to withdraw tendered Registrable Securities at any time prior to the close of business, New -8- York time, on the last business day on which the Exchange Offer shall remain open by sending to the institution specified in the notice, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for exchange, and a statement that such Holder is withdrawing his election to have a certain amount of or all of such Securities exchanged; and (4) otherwise comply in all respects with all applicable laws. The Exchange Securities and the Private Exchange Securities shall be issued under the Indenture which, shall have been qualified under the TIA and shall provide that the Exchange Securities shall not be subject to the transfer restrictions set forth in the Indenture. The Indenture shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter. The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than (i) that the Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable policy of the SEC, and (ii) the due tendering of Registrable Securities in accordance with the terms of the Exchange Offer or Private Exchange, as the case may be. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Issuers shall: (1) accept for exchange all Registrable Securities or portions thereof validly tendered and not validly withdrawn pursuant to the Exchange Offer or the Private Exchange; (2) deliver to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange; and (3) issue and cause the Trustee to authenticate and deliver promptly to each Holder tendering such Registrable Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. -9- To the extent not prohibited by any law or applicable policy of the SEC, the Issuers shall use their best efforts to complete the Exchange Offer as provided above, and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws in connection with the Exchange Offer. The Issuers shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer. (b) SHELF REGISTRATION. In the event that (i) the Issuers are not permitted to file the Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or SEC policy, (ii) the Exchange Offer is not for any other reason consummated within 120 days after the Issue Date, (iii) any holder of Private Exchange Notes so requests or (iv) (A) any holder of Securities notifies the Issuers within 20 Business Days after the commencement of the Exchange Offer that (a) due to a change in applicable law or SEC policy it is not entitled to participate in the Exchange Offer, (b) due to a change in applicable law or SEC policy it may not resell the Exchange Securities to be 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) it is a broker-dealer and owns Securities acquired directly from the Issuers or affiliates of the Issuers for its own account or (B) the holders of a majority in aggregate principal amount of the Securities may not resell the Exchange Securities to be acquired by them in the Exchange Offer to the public without restriction under the Securities Act and without restriction under applicable blue sky or state securities laws, then the Issuers shall, at their cost, file promptly after such determination or date, as the case may be, and, in any event, prior to the later of (A) 30 days after the Issue Date or (B) 30 days after such filing obligation arises and use its best efforts to cause a shelf registration statement (the "SHELF REGISTRATION STATEMENT") to be declared effective by the SEC on or prior to 60 days after such obligation arises; PROVIDED, HOWEVER, that if the Company has not consummated the Exchange Offer within 120 days of the Issue Date, then the Company will file with the SEC on or prior to the 121st day after the Issue Date, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities, and shall use its best efforts to have such Shelf Registration Statement declared effective by the SEC as soon as practicable and in any event, no later than 60 days -10- after the earlier of 180 days after the Issue Date and 60 days after such Shelf Registration Statement was first filed (or, if earlier, required to be filed) with the SEC. No Holder of Registrable Securities may include any of its Registrable Securities in any Shelf Registration pursuant to this Agreement unless and until such Holder furnishes to the Issuers, in writing, within 15 days after receipt of a request therefor, such information as the Issuers may, after conferring with counsel with regard to information relating to Holders that would be required by the SEC to be included in such Shelf Registration Statement or Prospectus included therein, reasonably request for inclusion in any Shelf Registration Statement or Prospectus included therein. Each Holder as to which any Shelf Registration is being effected agrees to furnish to the Issuers all information with respect to such Holder necessary to make any information previously furnished to the Issuers by such Holder not materially misleading. The Issuers agree to use their best efforts to keep the Shelf Registration Statement continuously effective for a period of two years from the effective date of such Shelf Registration Statement (subject to extension pursuant to the last paragraph of Section 3 hereof) or such shorter period that will terminate when all of the Registrable Securities covered by such Shelf Registration Statement have been sold pursuant thereto or cease to be outstanding or otherwise cease to be Registrable Securities (the "EFFECTIVENESS PERIOD"). The Issuers shall not permit any securities other than Registrable Securities to be included in the Shelf Registration. The Issuers further agree, if necessary, to supplement or amend the Shelf Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Issuers for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder for shelf registrations, and the Issuers agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) EFFECTIVE REGISTRATION STATEMENT. An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; PROVIDED, HOWEVER, that if, after it has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, -11- such Registration Statement will be deemed not to have been effective during the period of such interference, until the offering of Registrable Securities may legally resume. The Issuers will be deemed not to have used their best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if they voluntarily take any action that would result in any such Registration Statement not being declared effective or in the Holders of Registrable Securities covered thereby not being able to exchange or offer and sell such Registrable Securities during that period, unless such action is required by applicable law. (d) LIQUIDATED DAMAGES. In the event that (i) the applicable Registration Statement is not filed with the SEC on or prior to the date specified herein for such filing, (ii) the applicable Registration Statement is not declared effective on or prior to the date specified herein for such effectiveness after such obligation arises (the "EFFECTIVENESS TARGET DATE"), (iii) the Exchange Offer is required to be consummated hereunder and the Issuers fail to consummate the Exchange Offer within 30 days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) the applicable Registration Statement is filed and declared effective prior to the Effectiveness Target Date but shall thereafter cease to be effective or usable without being succeeded immediately by an additional Registration Statement covering the Registrable Securities which has been filed and declared effective (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Issuers will pay liquidated damages in cash on the Registrable Securities as to which such Registration Default relates ("LIQUIDATED DAMAGES"), with respect to the first 90-day period (or portion thereof) while a Registration Default is continuing immediately following the occurrence of such Registration Default, in an amount equal to 0.25% per annum of the principal amount of the Securities for each Registration Default. The amount of Liquidated Damages will increase by an additional 0.25% per annum of the principal amount of the Securities for each subsequent 90-day period (or portion thereof) while a Registration Default is continuing until all Registration Defaults have been cured, up to an aggregate maximum increase in the interest rate of 1.00% per annum of the principal amount of the Securities. Liquidated Damages shall be computed based on the actual number of days elapsed during which any such Registration Defaults exist and a 360-day year. Following the cure of a Registration Default, the accrual of Liquidated Damages with respect to such Registration -12- Default will cease and the interest will revert to the original rate. The Issuers shall notify the Trustee within one Business Day after each and every date on which an event occurs in respect of which Liquidated Damages is required to be paid (an "EVENT DATE"). Liquidated Damages shall be paid in arrears by depositing with the Trustee, in trust, for the benefit of the Holders of Registrable Securities, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Liquidated Damages then due. The Liquidated Damages due shall be payable in arrears on each interest payment date to the record Holder of Securities entitled to receive the interest payment to be paid on such date as set forth in the Indenture. Each obligation to pay Liquidated Damages shall be deemed to accrue from and including the day following the applicable Event Date. (e) SPECIFIC ENFORCEMENT. Without limiting the remedies available to the Initial Purchasers and the Holders, the Issuers acknowledge that any failure by the Issuers to comply with their obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuers' obligations under Section 2(a) and Section 2(b) hereof. 3. REGISTRATION PROCEDURES. In connection with the obligations of the Company with respect to the Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Issuers shall: (a) prepare and file with the SEC a Registration Statement or Registration Statements as prescribed by Sections 2(a) and 2(b) hereof within the relevant time period specified in Section 2 hereof on the appropriate form under the Securities Act, which form (i) shall be selected by the Company, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof and (iii) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; and use its best efforts to cause such Registration Statement to become effective and remain effective in accor- -13- dance with Section 2 hereof; PROVIDED that if (1) such filing is pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities, 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 Securities and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, 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 (at least 5 Business Days prior to such filing). The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must provide information for inclusion therein without the Holders being afforded an opportunity to review such documentation a reasonable time prior to the filing of such document or if the Majority Holders or such Participating Broker-Dealer, as the case may be, their counsel or the managing underwriters, if any, shall reasonably object by written notice to the Company within three Business Days after receipt of such documentation; (b) prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration or Exchange 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) under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to it 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; (c) if (1) a Shelf Registration is filed pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period from whom the Issuers have received written notice that it will be a Participating Broker-Dealer in the Ex- -14- change Offer, notify the selling Holders of Registrable Securities, 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 a Registration Statement or any post-effective amendment, when the same has become effective (including in such notice a written statement that any Holder may, upon request, obtain, without charge, 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 any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement or Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority 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, (iv) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Securities the representations and warranties of the Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 3(n) hereof cease to be true and correct, (v) of the receipt by the Issuers of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Securities or the Exchange Securities 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, (vi) of the happening of any event or the failure of any event to occur, 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 any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which -15- they were made, not misleading, and (vii) of any of the Issuers' reasonable determination that a post-effective amendment to a Registration Statement would be appropriate; (d) if (1) a Shelf Registration is filed pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, use its best 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 Securities or the Exchange Securities to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use its best efforts to obtain the withdrawal of any such order at the earliest possible date; (e) if a Shelf Registration is filed pursuant to Section 2(b) and if requested by the managing underwriters, if any, or the Holders of a majority in aggregate principal amount of the Registrable Securities being sold in connection with an underwritten offering, (i) promptly as practicable incorporate in a prospectus supplement or post-effective amendment such information or revisions to information therein relating to such underwriters or selling Holders as the managing underwriters, if any, or such Holders or their counsel reasonably request to be included or made therein, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Issuers have 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 2(b), or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, furnish to each selling Holder of Registrable Securities and to each such Participating Broker-Dealer who so requests and to counsel and each managing underwriter, if any, without charge, one conformed copy of the Registration Statement or Registration Statements and each amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits; -16- (g) if (1) a Shelf Registration is filed pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, deliver to each selling Holder of Registrable Securities or each such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 3, each Issuer hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Securities 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 Securities covered by, or the sale by Participating Broker-Dealers of the Exchange Securities pursuant to, such Prospectus and any amendment or supplement thereto; (h) prior to any public offering of Registrable Securities or any delivery of a Prospectus contained in the Exchange Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, to use its best efforts to register or qualify, and to cooperate with the selling Holders of Registrable Securities or each such Participating Broker-Dealer, as the case may be, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities or Exchange Securities, as the case may be, for offer and sale under the securities or blue sky laws of such jurisdictions as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters, if any, reasonably request (PROVIDED that where Exchange Securities held by Participating Broker-Dealers or Registrable Securities are offered pursuant to an underwritten offering, counsel to the underwriters shall, at the cost and expense of the Issuers, perform the blue sky investigations and file registrations and qualifications required to be filed pursuant to this Section 3(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 -17- Securities held by Participating Broker-Dealers or the Registrable Securities covered by the applicable Registration Statement (PROVIDED that nothing contained in this Section 3(h) shall be construed to require the Issuers 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 excess of a nominal dollar amount in any such jurisdiction where it is not then so subject); (i) if a Shelf Registration is filed pursuant to Section 2(b), 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 Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request; (j) use its best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by such governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case each of the Issuers will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals; (k) if (1) a Shelf Registration is filed pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, upon the occurrence of any event contemplated by paragraph 3(c)(iii), 3(c)(v), 3(c)(vi) or 3(c)(vii) hereof, as promptly as practicable prepare and (subject to Section 3(a) hereof) file with the SEC, at the joint and several expense of each 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 Securities being sold thereunder or to the pur- -18- chasers of the Exchange Securities 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; (l) use its best efforts to cause the Registrable Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement or the managing underwriter or underwriters, if any; (m) prior to the effective date of the first Registration Statement relating to the Registrable Securities, (i) provide the Trustee with printed certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Securities; (n) in connection with an underwritten offering of Registrable Securities pursuant to a Shelf Registration, enter into an underwriting agreement and such other agreements as are customary in underwritten offerings of debt securities similar to the Securities 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 Securities and, in such connection, (i) make such representations and warranties to the underwriters, with respect to the business of the Issuers and their respective subsidiaries 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; (ii) obtain opinions of counsel to the Issuers and updates thereof in form and substance reasonably satisfactory to the managing underwriter or underwriters and the Majority Holders, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings of debt securities similar to the Securities and such other matters as may be reasonably requested by underwriters; (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriter or underwriters and the Majority Holders from the independent certified public accountants of the Issuers (and, if necessary, any other independent certi- -19- fied public accountants of any subsidiary of any of the Issuers or of any business acquired by any of the Issuers for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters and the selling Holders, 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; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 5 hereof (or such other provisions and procedures acceptable to the Majority Holders and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. In the case of a Shelf Registration Statement which is not underwritten, the Issuers shall take the actions set forth above to the extent reasonably requested; (o) if (1) a Shelf Registration is filed pursuant to Section 2(b), or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2(a) is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, make available for inspection by any selling Holder of such Registrable Securities being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Securities, 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 properties of the Issuers and their respective subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Issuers and their respective subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement. Records which the Issuers determine, in good faith, to be confidential and any Records which they notify the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in -20- such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) the information in such Records has been made generally available to the public other than as a result of a disclosure or failure to safeguard by such Inspector or (iv) disclosure of such information is, in the opinion of counsel for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, related to, or involving this Agreement, or any transactions contemplated hereby or arising hereunder. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Issuers unless and until such is made generally available to the public. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Issuers and allow the Issuers to undertake appropriate action to prevent disclosure of the Records deemed confidential at the expense of such Issuers; (p) provide an indenture trustee for the Registrable Securities or the Exchange Securities, as the case may be, and cause the Indenture to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Securities; and in connection therewith, cooperate with the Trustee under 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 its best 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; (q) comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earnings statements 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 45 days after the end of any 12-month period (or 90 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 Regis- -21- trable Securities 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; (r) upon consummation of the Exchange Offer or a Private Exchange, 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 Securities participating in the Exchange Offer or the Private Exchange, as the case may be, that (i) the Issuers have duly authorized, executed and delivered the Exchange Securities and Private Exchange Securities and the Indenture, and (ii) each of the Exchange Securities or the Private Exchange Securities, as the case may be, and the Indenture constitute a legal, valid and binding obligation of the Issuers, enforceable against the Issuers in accordance with its respective terms (in each case, with customary exceptions); (s) if the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Securities by Holders to the Issuers (or to such other Person as directed by the Issuers) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Issuers shall mark, or caused to be marked, on such Registrable Securities that such Registrable Securities are being cancelled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall such Registrable Securities be marked as paid or otherwise satisfied; (t) cooperate with each seller of Registrable Securities covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; (u) use its best efforts to take all other steps reasonably necessary to effect the registration of the Registrable Securities covered by a Registration Statement contemplated hereby; (v) (A) in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," which section shall be reasonably acceptable to the Initial Purchasers, and which shall contain a summary statement of the positions -22- taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer (a "PARTICIPATING BROKER-DEALER") that holds Registrable Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of the Initial Purchasers, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Registrable Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has delivered to the Issuers the notice referred to in Section 3(c), without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the Securities Act, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, (iv) use their respective best 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 such Persons must comply with such requirements in order to resell the Exchange Securities; PROVIDED that such period shall not be required to exceed 180 days (or such longer period if extended pursuant to Section 3 hereof) (the "APPLICABLE PERIOD"), and (v) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision: "If the exchange offeree is a broker-dealer holding Registrable Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Securities re- -23- ceived in respect of such Registrable Securities pursuant to the Exchange Offer"; and (y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Registrable Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act; and (B) in the case of any Exchange Offer Registration Statement, the Issuers agree to deliver to the Initial Purchasers on behalf of the Initial Purchasers and the Participating Broker-Dealers upon consummation of the Exchange Offer (i) an opinion of counsel substantially in the form attached hereto as Exhibit A, (ii) an officers' certificate containing certifications substantially similar to those set forth in Section 5(c) of the Purchase Agreement and such additional certifications as are customarily delivered in a public offering of debt securities and (iii) as well as upon the effectiveness of the Exchange Offer Registration Statement, a comfort letter, in each case, in customary form if permitted by Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accountants; and (w) In the case of a Shelf Registration, on or prior to the filing of any document which is to be incorporated by reference into a Registration Statement or a Prospectus after the initial filing of a Registration Statement, provide a reasonable number of copies of such document to the Holders. The Issuers may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Issuers such information regarding such seller and the distribution of such Registrable Securities as the Issuers may, from time to time, reasonably request in writing. The Issuers may exclude from such registration the Registrable Securities of any seller who fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such seller not materially misleading. Each Holder of Registrable Securities and each Participating Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, that, upon re- -24- ceipt of any notice from the Issuers of the happening of any event of the kind described in Section 3(c)(iii), 3(c)(v), (with respect to sales in such jurisdictions), 3(c)(vi) or 3(c)(vii), such Holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus or Exchange Securities to be sold by such Holder or Participating Broker-Dealer, as the case may be, and, in each case, dissemination of such Prospectus until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k), 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 the Issuers shall give any such notice, each of the Effectiveness Period and 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 Securities covered by such Registration Statement or Exchange Securities 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 3(k) or (y) the Advice. 4. REGISTRATION EXPENSES (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers shall be borne by the Issuers, jointly and severally, whether or not the Exchange Offer or a Shelf Registration is filed or becomes effective, 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, the SEC and any stock exchange and (B) fees and expenses of compliance with state securities or blue sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities or Exchange Securities and determination of the eligibility of the Registrable Securities or Exchange Securities for investment under the laws of such jurisdictions), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Securities or Exchange Securities 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, or by the Holders of a majority in aggregate principal amount of the Registrable Securities included in any Registration Statement or by any Participating Broker-Dealer, as the -25- case may be, (iii) messenger, telephone and delivery expenses incurred in connection with the Exchange Registration Statement and any Shelf Registration, (iv) fees and disbursements of counsel for the Issuers and fees and disbursements of special counsel for the sellers of Registrable Securities (subject to the provisions of Section 4(b)), (v) fees and disbursements of all independent certified public accountants referred to in Section 3(n)(iii) (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) rating agency fees, (vii) fees and expenses of the Trustee and any exchange agent or custodian, (viii) Securities Act liability insurance, if the Issuers desire such insurance, (ix) fees and expenses of all other Persons retained by the Issuers, (x) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Issuers performing legal or accounting duties), (xi) the expense of any annual audit, (xii) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange (xiii) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement, and (xiv) any fees and disbursements of any underwriter customarily required to be paid by issuers or sellers of securities and the reasonable fees and expenses of any special experts retained by the Issuers in connection with any Registration Statement, but excluding fees of counsel to the underwriters or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder. (b) In connection with any Shelf Registration hereunder, the Issuers, jointly and severally, shall reimburse the Holders of the Registrable Securities being registered in such registration for the 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 Securities to be included in such Shelf Registration and other out-of-pocket expenses of Holders of Registrable Securities incurred in connection with the registration and sale of Registrable Securities. 5. INDEMNIFICATION AND CONTRIBUTION (a) Each of the Issuers, jointly and severally, agrees to indemnify and hold harmless each Initial Purchaser, each Holder, each Participating Broker-Dealer, each underwriter -26- who participates in an offering of Registrable Securities, their respective affiliates, each Person, if any, who controls any of such parties within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each of their respective directors, officers, employees and agents (each, an "Indemnified Person," and collectively, the "Indemnified Persons"), as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) covering Registrable Securities or Exchange Securities, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, joint or several, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any court or governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; PROVIDED that (subject to Section 5(c) below) any such settlement is effected with the prior written consent of the Company; and (iii) against any and all expenses whatsoever, as incurred (including reasonable fees and disbursements of counsel chosen by such Purchaser, such Holder, such Participating Broker-Dealer or any underwriter (except to the extent otherwise expressly provided in Section 5(c) hereof)), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any court or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that -27- any such expense is not paid under subparagraph (i) or (ii) of this Section 5(a); PROVIDED that this indemnity does not apply to any loss, liability, claim, damage or expense to the extent arising out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Issuers by such Initial Purchaser, such Holder, such Participating Broker-Dealer or any underwriter in writing expressly for use in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto); PROVIDED, FURTHER, that the Issuers will not be liable to any Indemnified Person with respect to any such untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary Prospectus to the extent that the Issuers shall sustain the burden of proving that any such loss, liability, claim, damage or expense resulted from (A) the fact that such Indemnified Person, in contravention of a requirement of this Agreement or applicable law, sold Notes to a Person to whom such Indemnified Person failed to send or give, at or prior to the closing of such sale, a copy of the final Prospectus as then amended or supplemented if (i) the Issuers have previously furnished copies thereof (sufficiently in advance of such closing to allow for distribution in a timely manner) to the Indemnified Persons and the loss, liability, claim, damage or expense of such Indemnified Persons resulted from an untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in or omitted from the preliminary Prospectus which was corrected in the final Prospectus as, if applicable, amended or supplemented prior to such closing, and such Prospectus was required by law to be delivered at or prior to the written confirmation of sale to such Person, and (ii) such failure to give or send such final Prospectus by such closing to such Person would have constituted the sole defense to the claim asserted by such Person and the claims asserted by such person do not include allegations of any other untrue statement or omission made in the preliminary Prospectus which was not corrected in the final Prospectus, which allegation is upheld by a final judgment or (B) the use of the Prospectus during a period when the use of the Prospectus has been suspended in accordance with Section 3(c) hereof (provided that the Indemnified Persons received prior notice of such suspension). Any amounts advanced by an indemnifying party to an indemnified party pursuant to this Section 5 as a result of such losses shall be returned to such indemnifying party if it shall be finally determined by such a court in a judgment not subject to -28- appeal or final review that such indemnified party was not entitled to indemnification by such indemnifying party. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Issuers, the Initial Purchasers, each underwriter who participates in an offering of Registrable Securities and the other selling Holders and each of their respective directors, officers (including each officer of each of the Issuers who signed the Registration Statement), employees and agents and each Person, if any, who controls each of the Issuers, the Initial Purchasers, any underwriter or any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all loss, liability, claim, damage and expense whatsoever described in the indemnity contained in Section 5(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Issuers by such selling Holder expressly for use in the Registration Statement (or any amendment thereto), or any such Prospectus (or any amendment or supplement thereto); PROVIDED, HOWEVER, that, in the case of a Shelf Registration Statement, no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Shelf Registration Statement. (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 5(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 5(b) above, counsel to the indemnified parties shall be selected by the Issuers. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in -29- addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 5 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 5(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (e) In order to provide for just and equitable contribution in circumstances under which any of the indemnity provisions set forth in this Section 5 is for any reason held to be unavailable to the indemnified parties although applicable in accordance with its terms, the Issuers, the Initial Purchasers and the Holders shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Issuers, the Initial Purchasers and the Holders, as incurred; PROVIDED that 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 that was not guilty of such fraudulent misrepresentation. As between the Issuers, the Initial Purchasers and the Holders, such parties shall contribute to such aggregate losses, liabilities, claims, -30- damages and expenses of the nature contemplated by such indemnity agreement in such proportion as shall be appropriate to reflect the relative fault of the Issuers, on the one hand, and the Initial Purchasers and the Holders, on the other hand, with respect to the statements or omissions which resulted in such loss, liability, claim, damage or expense, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault of the Issuers, on the one hand, and of the Initial Purchasers and the Holders, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers, on the one hand, or by or on behalf of the Initial Purchasers or the Holders, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuers, the Initial Purchasers and the Holders of the Registrable Securities agree that it would not be just and equitable if contribution pursuant to this Section 5 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the relevant equitable considerations. For purposes of this Section 5, each affiliate of the Initial Purchasers or Holder, and each director, officer, employee, agent and Person, if any, who controls a Initial Purchasers or Holder or such affiliate within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each director of each of the Issuers, each officer of each of the Issuers who signed the Registration Statement, and each Person, if any, who controls each of the Issuers within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as each of the Issuers. (f) The indemnity and contribution agreements contained in this Section 5 will be in addition to any liability which the indemnifying persons may otherwise have to the indemnified persons referred to above. 6. RULES 144 AND 144A For so long as the Issuers are subject to the reporting requirements of Section 13 or 15 of the Exchange Act and any Registrable Securities remain outstanding, the Issuers covenant that they will file the reports required to be filed by it under the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the SEC thereunder, that if they cease to be so required to file -31- such reports, they will upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the Securities Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the Securities Act and they will take such further action as any Holder of Registrable Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time, (ii) Rule 144A under the Securities Act, as such rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, the Issuers will deliver to such Holder a written statement as to whether it has complied with such requirements. 7. UNDERWRITTEN REGISTRATIONS If any of the Registrable Securities covered by any Shelf Registration are to be sold in an underwritten offering, the underwriter or underwriters 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 Securities included in such offering; PROVIDED, HOWEVER, that such selection is 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 Securities 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. 8. MISCELLANEOUS (a) REMEDIES. In the event of a breach by any Issuer of any of its obligations under this Agreement, each Holder of Registrable Securities and each Participating Broker-Dealer holding Exchange Securities, in addition to being entitled to exercise all rights provided herein, in the Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement, or granted by law, including recovery of damages, -32- will be entitled to specific performance of its rights under this Agreement. Each Issuer agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) NO INCONSISTENT AGREEMENTS. None of the Issuers has entered, as of the date hereof, and none of the Issuers shall enter, after the date of this Agreement, into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Securities 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 any of the Issuers' other issued and outstanding securities under any such agreements. None of the Issuers has entered and none of the Issuers will enter into any agreement with respect to any of its securities which will grant to any Person piggy-back rights with respect to a Registration Statement. (c) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. Neither the Company nor the Subsidiary Guarantors shall, directly or indirectly, take any action with respect to the Registrable Securities as a class that would adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement. (d) 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 (A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Securities and (B) in circumstances that would adversely affect Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Securities held by all Participating Broker-Dealers; PROVIDED, HOWEVER, that Section 5 and this Section 8(d) may not be amended, modified or supplemented without the prior written consent of each Initial Purchaser, each Holder and each Participating Broker-Dealer (including any person who was a Holder or Participating Broker-Dealer of Registrable Securities or Exchange Securities, as the case may be, disposed of pursuant to any Registration Statement). Notwithstanding the foregoing, a -33- waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being tendered pursuant to the Exchange Offer or 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 Securities may be given by Holders of at least a majority in aggregate principal amount of the Registrable Securities being tendered or being sold by such Holders pursuant to such Registration Statement. (e) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier: 1. if to a Holder of Registrable Securities 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, with a copy in like manner to the Initial Purchasers as follows: Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower 250 Vesey Street World Financial Center New York, New York 10281-1329 Facsimile No.: (212) 449-8635 Attention: Edmond Moriarty with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Facsimile No.: (212) 269-5420 Attention: Jonathan A. Schaffzin, Esq. 2. if to the Initial Purchasers, at the address specified in Section 8(e)(1); 3. if to an Issuer, as follows: c/o Nash Finch Company -34- 7600 France Avenue South Edina, MN 55435 Facsimile No.: (612) 844-1235 Attention: Norman R. Soland, Esq. with copies to: Oppenheimer Wolff & Donnelley Plaza VII 45 South 7th Street Suite 3400 Minneapolis, MN 55402-1609 Facsimile No.: (612) 607-7100 Attention: Mark A. Kimball, 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 guaranteeing overnight delivery; and when receipt is acknowledged by the addressee, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee under the Indenture at the address specified in such Indenture. (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of the Initial Purchasers, including, without limitation and without the need for an express assignment, subsequent Holders; PROVIDED that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be -35- deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED 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. SPECIFIED DATES AND TIMES OF DAY REFER TO NEW YORK CITY TIME. (j) 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 their best 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. (k) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its 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. (l) THIRD PARTY BENEFICIARIES. Holders of Registrable Securities and Participating Broker-Dealers are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. In addition, the Initial Purchasers shall have the right to enforce any obligation of any or all of the Issuers directly to the extent they deem such enforcement necessary or advisable to protect their rights or the -36- rights of any Person referred to in the preceding sentence or the heirs and legal representatives of any such persons hereunder. Except as expressly set forth in this Section 8(l), nothing contained in this Agreement is intended or shall be construed to give any person, firm, or corporation, other than the parties to this Agreement, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole benefit of the Initial Purchasers, the Holders, the Company and the other persons referenced by the preceding sentences of this Section 8(l) and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. (m) 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 Initial Purchasers 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. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Very truly yours, NASH-FINCH COMPANY By: /s/ Alfred N. Flaten ------------------------------- Name: Alfred N. Flaten Title: President NASH DECAMP COMPANY By: /s/ Alfred N. Flaten ------------------------------- Name: Alfred N. Flaten Title: Attorney-in-fact T.J. MORRIS COMPANY By: /s/ Alfred N. Flaten ------------------------------- Name: Alfred N. Flaten Title: President SUPER FOOD SERVICES, INC. By: /s/ Alfred N. Flaten ------------------------------- Name: Alfred N. Flaten Title: Vice President FORREST TRANSPORTATION SERVICES, INC. By: /s/ Alfred N. Flaten ------------------------------- Name: Alfred N. Flaten Title: Attorney-in-fact [Registration Rights signature page] GTL TRUCK LINES, INC. By: /s/ Alfred N. Flaten ------------------------------- Name: Alfred N. Flaten Title: Vice President PIGGLY WIGGLY NORTHLAND CORPORATION By: /s/ Alfred N. Flaten ------------------------------- Name: Alfred N. Flaten Title: President GILLETTE DAIRY OF THE BLACK HILLS, INC. By: /s/ Charles F. Ramsbacher ------------------------------- Name: Charles F. Ramsbacher Title: Vice President NEBRASKA DAIRIES, INC. By: /s/ Charles F. Ramsbacher ------------------------------- Name: Charles F. Ramsbacher Title: Vice President MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED NESBITT BURNS SECURITIES INC. PIPER JAFFRAY INC. By: Merrill Lynch, Pierce, Fenner & Smith Incorporated By: /s/ Lisa Craig ------------------------------- Name: Lisa Craig Title: Authorized Signatory EXHIBIT A FORM OF OPINION OF COUNSEL 1. Each of the Exchange Offer Registration Statement and the Prospectus (other than the financial statements, notes or schedules thereto and other financial information and supplemental schedules included or incorporated by reference therein or omitted therefrom and the Form T-1, as to which such counsel need express no opinion), complies as to form in all material respects with the applicable requirements of the Securities Act and the applicable rules and regulations promulgated under the Securities Act. 2. In the course of such counsel's review and discussion of the contents of the Exchange Offer Registration Statement and the Prospectus with certain officers and other representatives of the Issuers and representatives of the independent certified public accountants of the Issuers, but without independent check or verification or responsibility for the accuracy, completeness or fairness of the statements contained therein, on the basis of the foregoing (relying as to materiality to a large extent upon representations and opinions of officers and other representatives of the Issuers), no facts have come to such counsel's attention which cause such counsel to believe that the Exchange Offer Registration Statement (other than the financial statements, notes and schedules thereto and other financial information contained or incorporated by reference therein and the Form T-1, as to which such counsel need express no belief), at the time the Exchange Offer Registration Statement became effective and at the time of the consummation of the Exchange Offer, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading, or that the Prospectus (other than the financial statements, notes and schedules thereto and other financial information contained or incorporated by reference therein, as to which such counsel need express no belief) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. EX-12.1 6 COMPUTATION OF RATIOS Exhibit 12.1
NASH FINCH COMPANY Computation of Earnings to Fixed Charges for the twelve weeks ended March 28, 1998 and March 22, 1997 and for the five years ended January 3, 1998 Ratio of Earnings to Fixed Charges Twelve weeks ended Fiscal Year Ended ---------------------- --------------------------------------------------------------- March 28, March 22, January 3, December 28, December 30, December 31, January 1, Earnings: 1998 1997 1998 1996 1995 1994 1994 ---- ---- ---- ---- ---- ---- ---- Earnings before Income Tax and Extraordinary Charge $ 4,493 $ 5,259 $ (234) $ 33,667 $ 28,595 $ 25,810 $ 26,678 Fixed Charges Interest Expense $ 6,860 $ 7,321 $ 32,845 $ 14,894 $ 10,793 $ 11,384 $ 10,114 Interest Portion of Rent Expense $ 2,855 $ 2,562 $ 13,151 $ 10,311 $ 8,395 $ 8,761 $ 8,380 Total Fixed Charges $ 9,715 $ 9,883 $ 45,996 $ 25,205 $ 19,188 $ 20,145 $ 18,494 Earnings Available for Fixed Charges $ 14,208 $ 15,142 $ 45,762 $ 58,872 $ 47,783 $ 45,955 $ 45,172 Ratio of Earnings to fixed charges 1.46 1.53 1.00 2.34 2.49 2.28 2.44
Page 1 EX-23.1 7 CONSENT OF ERNST & YOUNG Exhibit 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" and to the use of our report dated March 26, 1998, in the Registration Statement on Form S-4 and related Prospectus of Nash Finch Company for the registration of $165,000,000 of it's Senior Subordinated Notes. We also consent to the incorporation by reference therein of our report dated March 26, 1998 with respect to the financial statement schedule of Nash Finch Company for the years ended January 3, 1998, December 28, 1996, and December 30, 1995 included in the Annual Report (Form 10-K) for 1997 filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Minneapolis, Minnesota March 26, 1998 EX-25.1 8 FORM T-1 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 U.S. BANK TRUST NATIONAL ASSOCIATION FORMERLY KNOWN AS FIRST TRUST NATIONAL ASSOCIATION (Exact name of Trustee as specified in its charter) United States 41-0257700 (State of Incorporation) (I.R.S. Employer Identification No.) U.S. Bank Trust Center 180 East Fifth Street St. Paul, Minnesota 55101 (Address of Principal Executive Offices) (Zip Code) NASH-FINCH COMPANY (Exact name of Registrant as specified in its charter) Delaware 41-0431960 (State of Incorporation) (I.R.S. Employer Identification No.) 7600 France Avenue South P.O. Box 355 Minneapolis, MN 55440-0355 (Address of Principal Executive Offices) (Zip Code) 8 1/2% SENIOR SUBORDINATED NOTES, SERIES B (Title of the Indenture Securities) GENERAL 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. Comptroller of the Currency Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any underwriter for the obligor is an affiliate of the Trustee, describe each such affiliation. None See Note following Item 16. Items 3-15 are not applicable because to the best of the Trustee's knowledge the obligor is not in default under any Indenture for which the Trustee acts as Trustee. 16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement of eligibility and qualification. 1. Copy of Articles of Association.* 2. Copy of Certificate of Authority to Commence Business.* 3. Authorization of the Trustee to exercise corporate trust powers (included in Exhibits 1 and 2; no separate instrument).* 4. Copy of existing By-Laws.* 5. Copy of each Indenture referred to in Item 4. N/A. 6. The consents of the Trustee required by Section 321(b) of the act. 7. Copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining is incorporated by reference to Registration Number 333-42147. * Incorporated by reference to Registration Number 22-27000. NOTE The answers to this statement insofar as such answers relate to what persons have been underwriters for any securities of the obligors within three years prior to the date of filing this statement, or what persons are owners of 10% or more of the voting securities of the obligors, or affiliates, are based upon information furnished to the Trustee by the obligors. While the Trustee has no reason to doubt the accuracy of any such information, it cannot accept any responsibility therefor. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, U.S. Bank Trust National Association f/k/a First Trust National Association, an Association organized and existing under the laws of the United States, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Saint Paul and State of Minnesota on the 15th day of May, 1998. U.S. BANK TRUST NATIONAL ASSOCIATION f/k/a FIRST TRUST NATIONAL ASSOCIATION /s/ Richard H. Prokosch -------------------------------- Richard H. Prokosch Assistant Vice President /s/ Kathe M. Barrett - --------------------------- Kathe M. Barrett Assistant Secretary EXHIBIT 6 CONSENT In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK TRUST NATIONAL ASSOCIATION f/k/a FIRST TRUST NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Dated: May 15, 1998 U.S. BANK TRUST NATIONAL ASSOCIATION f/k/a FIRST TRUST NATIONAL ASSOCIATION /s/ Richard H. Prokosch ---------------------------------- Richard H. Prokosch Assistant Vice President EX-99.1 9 LOT EXHIBIT 99.1 LETTER OF TRANSMITTAL NASH FINCH COMPANY OFFER TO EXCHANGE 8 1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B FOR ANY AND ALL OF THE OUTSTANDING 8 1/2% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS THE OFFER IS EXTENDED U.S. BANK TRUST NATIONAL ASSOCIATION (THE "EXCHANGE AGENT") BY MAIL BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER (registered or certified mail (612) 244-1537 recommended): U.S. Bank Trust Confirm by Telephone U.S. Bank Trust National Association or for Information Call: National Association 180 East 5th Street ( ) 180 East 5th Street Saint Paul, MN 55101 Saint Paul, MN 55101 Attention:Specialized Finance Attention:Specialized Finance Fourth Floor Fourth Floor
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONES LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned hereby acknowledges receipt of the Prospectus dated , 1998 (the "Prospectus") of Nash Finch Company (the "Company") and this Letter of Transmittal, which together constitute the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 8 1/2% Senior Subordinated Notes due 2008, Series B (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, for each $1,000 principal amount of its outstanding 8 1/2% Senior Subordinated Notes due 2008, Series A (the "Series A Notes") . The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1998, unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. List on the next page the Series A Notes to which this Letter of Transmittal relates. If the space indicated is inadequate, the Certificate or Registration Numbers and the Principal Amounts should be listed on a separately signed schedule affixed hereto. DESCRIPTION OF SENIOR SUBORDINATED NOTES TENDERED HEREBY
NAME(S) AND AGGREGATE ADDRESS(ES) OF CERTIFICATE OR PRINCIPAL AMOUNT PRINCIPAL REGISTERED OWNER(S) REGISTRATION REPRESENTED BY AMOUNT (PLEASE FILL IN) NUMBERS* SERIES A NOTES TENDERED** TOTAL * Need not be completed by Book-Entry Holders. ** Unless otherwise indicated, the Holder will be deemed to have tendered the full aggregate principal amount represented by such Series A Notes. All tenders must be in integral multiples of $1,000.
This Letter of Transmittal is to be used (i) if certificates of Series A Notes are to be forwarded herewith, (ii) if delivery of Series A Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company (the "Depository" or "DTC"), pursuant to the procedures set forth in the "The Exchange Offer -- Procedures for Tendering" in the Prospectus or (iii) if tender of the Series A Notes is to be made according to the guaranteed delivery procedures described in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2. Delivery of documents to a book-entry transfer facility does not constitute delivery to the Exchange Agent. The term "Holder" with respect to the Exchange Offer means any person in whose name Series A Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Series A Notes must complete this letter in its entirety. / / CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DEPOSITORY AND COMPLETE THE FOLLOWING: NAME OF TENDERING INSTITUTION ............................................ ACCOUNT NUMBER ............................................................ TRANSACTION CODE NUMBER ................................................... HOLDERS WHOSE SERIES A NOTES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT DELIVER THEIR SERIES A NOTES AND ALL OTHER DOCUMENTS REQUIRED HEREBY TO THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE MUST TENDER THEIR SERIES A NOTES ACCORDING TO THE GUARANTEED DELIVERY PROCEDURE SET FORTH IN THE PROSPECTUS UNDER THE CAPTION "THE EXCHANGE OFFER -- GUARANTEED DELIVERY PROCEDURES." SEE INSTRUCTION 2. / / CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: NAME OF REGISTERED HOLDER(S) .............................................. NAME OF ELIGIBLE INSTITUTION THAT GUARANTEED DELIVERY ..................... IF DELIVERY BY BOOK-ENTRY TRANSFER: ACCOUNT NUMBER ............................................................ TRANSFER CODE NUMBER ...................................................... / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. NAME ...................................................................... ADDRESS ................................................................... PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of the Series A Notes indicated above. Subject to, and effective upon, the acceptance for exchange of such Series A Notes tendered hereby, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company, all right, title and interest in and to such Series A Notes as are being tendered hereby, including all rights to accrued and unpaid interest thereon as of the Expiration Date. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent acts as the agent of the Company in connection with the Exchange Offer) to cause the Series A Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Series A Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Series A Notes, and that when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Series A Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned represents to the Company that (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned; (ii) neither the undersigned nor any such other person has an arrangement or understanding with any person to participate in a distribution of such Exchange Notes; and (iii) the undersigned and any such other person acknowledge that, if they are participating in the Exchange Offer for the purpose of distributing the Exchange Notes, (a) they cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in Exxon Capital Holdings Corporation (available April 13, 1989), Morgan Stanley & Co., Inc. (available June 5, 1991) or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale transaction and (b) failure to comply with such requirements in such instance could result in the undersigned or any such other person incurring liability under the Securities Act for which such persons are not indemnified by the Company. If the undersigned or the person receiving the Exchange Notes covered by this letter is an affiliate (as defined under Rule 405 of the Securities Act) of the Company, the Exchange Notes may not be offered for resale, resold or otherwise transferred by the undersigned or such other person without registration under the Securities Act or an exemption therefrom. If the exchange offeree is a broker-dealer holding Series A Notes acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Exchange Notes received in respect of such Series A Notes pursuant to the Exchange Offer; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned also 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 tendered Series A Notes or transfer ownership of such Series A Notes on the account books maintained by a book-entry transfer facility. The undersigned further agrees that acceptance of any tendered Series A 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 and that the Company shall have no further obligations or liabilities thereunder for the registration of the Series A Notes or the Exchange Notes. The Exchange Offer is subject to certain conditions set forth in the Prospectus under the caption "The Exchange Offer -- Conditions." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Series A Notes tendered hereby and, in such event, the Series A Notes not exchanged will be returned to the undersigned at the address shown below the signature of the undersigned. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Series A Notes may be withdrawn at any time prior to the Expiration Date. Unless otherwise indicated in the box entitled "Special Registration Instructions" or the box entitled "Special Delivery Instructions" in this Letter of Transmittal, certificates for all Exchange Notes delivered in exchange for tendered Series A Notes, and any Series A Notes delivered herewith but not exchanged, will be registered in the name of the undersigned and shall be delivered to the undersigned at the address shown below the signature of the undersigned. If an Exchange Note is to be issued to a person other than the person(s) signing this Letter of Transmittal, or if the Exchange Note is to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address different than the address shown on this Letter of Transmittal, the appropriate boxes of this Letter of Transmittal should be completed. If Series A Notes are surrendered by Holder(s) that have completed either the box entitled "Special Registration Instructions" or the box entitled "Special Delivery Instructions" in this Letter of Transmittal, signature(s) on this Letter of Transmittal must be guaranteed by an Eligible Institution (as defined in Instruction 2). SPECIAL REGISTRATION INSTRUCTIONS To be completed ONLY if the Exchange Notes are to be issued in the name of someone other than the undersigned. Name ...................................................................... Address ...................................................................... Book-Entry Transfer Facility Account: .............................................................. Employer Identification or Social Security Number: ........................................................ (Please print or type) SPECIAL DELIVERY INSTRUCTIONS To be completed ONLY if the Exchange Notes are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above under "Description of Senior Subordinated Notes Tendered Hereby." Name ...................................................................... Address ...................................................................... ...................................................................... (Please print or type) REGISTERED HOLDER(S) OF SERIES A NOTES SIGN HERE (IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW) X ............................................................................ X ............................................................................ (Signature(s) of Registered Holder(s)) Must be signed by registered holder(s) exactly as name(s) appear(s) on the Series A Notes or on a security position listing as the owner of the Series A Notes or by person(s) authorized to become registered holder(s) by properly completed bond powers transmitted herewith. If signature is by attorney-in-fact, trustee, executor, administrator, guardian, officer of a corporation or other person acting in a fiduciary capacity, please provide the following information. (Please print or type): Name and Capacity (full title): .............................................. Address (including zip code): ................................................ Area Code and Telephone Number: .............................................. Taxpayer Identification or Social Security Number: ........................... Dated: ....................................................................... SIGNATURE GUARANTEE (If Required -- See Instruction 4) Authorized Signature: ........................................................ (Signature of Representative of Signature Guarantor) Name and Title: .............................................................. Name of Plan: ................................................................ Area Code and Telephone Number: .............................................. (Please print or type) Dated: ....................................................................... THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION NUMBER ON THE FOLLOWING SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING. PAYOR'S NAME: NASH FINCH COMPANY SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE ------------------------------ FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND SOCIAL SECURITY NUMBER DATING BELOW. OR ------------------------------ EMPLOYER IDENTIFICATION NUMBER DEPARTMENT OF THE TREASURY PART 2 -- CHECK THE BOX IF YOU ARE NOT PART 3 -- INTERNAL REVENUE SERVICE SUBJECT TO BACKUP WITHHOLDING UNDER THE PROVISIONS OF SECTION 3406(A)(1)(C) OF THE PAYOR'S REQUEST FOR TAXPAYER INTERNAL REVENUE CODE BECAUSE (1) YOU ARE AWAITING IDENTIFICATION NUMBER ("TIN") EXEMPT FROM BACKUP WITHHOLDING, (2) YOU TIN / / HAVE NOT BEEN NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL INTEREST OR DIVIDENDS OR (3) THE INTERNAL REVENUE SERVICE HAS NOTIFIED YOU THAT YOU ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING. / / CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY THIS FORM IS TRUE, CORRECT AND COMPLETE. SIGNATURE: ------------------------------------------ DATE: ----------------------
NOTE: ANY FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY CASH PAYMENTS IN EXCESS OF $10.00 MADE TO YOU. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAX 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 60 DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD, UNTIL I PROVIDE A NUMBER. --------------------------------------------------------- --------------------------------------------------------- SIGNATURE DATE INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. All physically delivered Series A Notes or confirmation of any book-entry transfer to the Exchange Agent's account at a book-entry transfer facility of Series A Notes tendered by book-entry transfer, as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile thereof, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addresses set forth herein on or prior to the Expiration Date. The method of delivery of this Letter of Transmittal, the Series A Notes and all other required documents is at the election and risk of the Holder. Instead of delivery by mail, it is recommended that Holders use an overnight or hand delivery service. Except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Series A Notes for exchange. Delivery to an address other than as set forth herein, or instructions via a facsimile number other than the ones set forth herein, will not constitute a valid delivery. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Series A Notes, and (i) whose Notes are not immediately available, or (ii) who cannot deliver their Series A Notes, the Letter of Transmittal or any other required documents to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date, may effect a tender if: a. the tender is made through 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 (an "Eligible Institution"); b. prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder of the Series A Notes, the certificate or registration number(s) of such Series A Notes and the principal amount of Series A Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five (5) business days after the Expiration Date, the Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing the Series A Notes to be tendered in proper form for transfer (or a confirmation of book-entry transfer of such Series A Notes into the Exchange Agent's account at the Depository) and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and c. such properly completed and executed Letter of Transmittal (or facsimile thereof), as well as all tendered Series A Notes in proper form for transfer (or a confirmation of book-entry transfer of such Series A Notes into the Exchange Agent's account at the Depository) and all other documents required by the Letter of Transmittal, are received by the Exchange Agent within five business days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their Series A Notes according to the guaranteed delivery procedures set forth above. Any Holder who wishes to tender Series A Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such Series A Notes prior to the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by a Holder who attempted to use the guaranteed delivery procedures. 3. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of Series A Notes evidenced by a submitted certificate is tendered, the tendering Holder should fill in the principal amount tendered in the column entitled "Principal Amount Tendered" of the box entitled "Description of Senior Subordinated Notes Tendered Hereby." A newly issued Series A Note for the principal amount of Series A Notes submitted but not tendered will be sent to such Holder as soon as practicable after the Expiration Date. All Series A Notes delivered to the Exchange Agent will be deemed to have been tendered in full unless otherwise indicated. Any Series A Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date, after which tenders of Series A Notes are irrevocable. To withdraw a tender of Series A Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent by 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Series A Notes to be withdrawn (the "Depositor"), (ii) identify the Series A Notes to be withdrawn (including the certificate or registration number(s) and principal amount of such Series A Notes, or, in the case of Series A Notes transferred by book-entry transfer, the name and number of the account at the DTC to be credited), (iii) be signed by the Depositor in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Series A Notes register the transfer of such Series A Notes into the name of the Depositor withdrawing the tender, (iv) specify the name in which such Series A Notes are to be registered, if different from that of the Depositor and (v) include a statement that such holder is withdrawing his election to have such Series A Notes exchanged. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Series A Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Series A Notes so withdrawn are validly rendered. Any Series A Notes which have been tendered but which are not accepted for exchange, will be returned to the Holder thereof without cost to such Holder as soon as practicable after withdrawal, rejection of tender or termination of Exchange Offer. 4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered Holder(s) of the Series A Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration or enlargement or any change whatsoever. If this Letter of Transmittal is signed by a participant in the Depository, the signature must correspond with the name as it appears on the security position listing as the owner of the Series A Notes. If any of the Series A Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Series A Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Series A Notes. Signatures on this Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution unless the Series A Notes tendered hereby are tendered (i) by a registered Holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If this Letter of Transmittal is signed by the registered Holder or Holders of Series A Notes (which term, for the purposes described herein, shall include a participant in the Depository whose name appears on a security listing as the owner of the Series A Notes) listed and tendered hereby, no endorsements of the tendered Series A Notes or separate written instruments of transfer or exchange are required. In any other case, the registered Holder (or acting Holder) must either properly endorse the Series A Notes or transmit properly completed bond powers with this Letter of Transmittal (in either case, executed exactly as the name(s) of the registered Holder(s) appear(s) on the Series A Notes, and, with respect to a participant in the Depository whose name appears on a security position listing as the owner of Series A Notes, exactly as the name of the participant appears on such security position listing), with the signature on the Series A Notes or bond power guaranteed by an Eligible Institution (except where the Series A Notes are tendered for the account of an Eligible Institution). If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. 5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering Holders should indicate, in the applicable box, the name and address (or account at the Depository) in which the Exchange Notes or substitute Series A Notes for principal amounts not tendered or not accepted for exchange are to be issued (or deposited), if different from the names and addresses or accounts of the person signing this Letter of Transmittal. In the case of issuance in a different name, the employer identification number or social security number of the person named must also be indicated and the tendering Holder should complete the applicable box. If no instructions are given, the Exchange Notes (and any Series A Notes not tendered or not accepted) will be issued in the name of and sent to the acting Holder of the Series A Notes or deposited at such Holder's account at the Depository. 6. TRANSFER TAXES. The Company shall pay all transfer taxes, if any, applicable to the exchange of Series A Notes pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes or Series A Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered Holder of the Series A Notes tendered, or if tendered Series A Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Series A Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Holder. Except as provided in this Instruction 6, it will not be necessary for transfer stamps to be affixed to the Series A Notes listed in the Letter of Transmittal. 7. WAIVER OF CONDITIONS. The Company reserves the right, in its reasonable judgment, to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any Holder whose Series A Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to Norman R. Soland, Vice President, Secretary and General Counsel, Nash Finch Company, 7600 France Avenue South, P.O. Box 355, Minneapolis, Minnesota 55440-0355. 10. VALIDITY AND FORM. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Series A Notes and withdrawal of tendered Series A Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Series A Notes not properly tendered or any Series A 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 irregularities or conditions of tender as to particular Series A Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Series A Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Series A Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Series A Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Series A 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 without cost to such holder by the Exchange Agent to the tendering Holders of Series A Notes, unless otherwise provided herein, as soon as practicable following the Expiration Date. IMPORTANT TAX INFORMATION Under federal income tax law, a Holder tendering Series A Notes is required to provide the Exchange Agent with such Holder's correct TIN on Substitute Form W-9 above. If such Holder is an individual, the TIN is the Holder's social security number. The Certificate of Awaiting Taxpayer Identification Number should be completed if the tendering Holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the Exchange Agent is not provided with the correct TIN, the Holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such Holder with respect to tendered Series A Notes may be subject to backup withholding. Certain Holders (including, among others, all domestic corporations and certain foreign individuals and foreign entities) are not subject to these backup withholding and reporting requirements. Such a Holder, who satisfies one or more of the conditions set forth in Part 2 of the Substitute Form W-9, should execute the certification following such Part 2. In order for a foreign Holder to qualify as an exempt recipient, that Holder must submit to the Exchange Agent a properly completed Internal Revenue Service Form W-9, signed under penalties of perjury, attesting to that Holder's exempt status. Such forms can be obtained from the Exchange Agent. If backup withholding applies, the Exchange Agent is required to withhold 31% of any amounts otherwise payable to the Holder. Backup withholding is not an additional tax. Rather, the 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. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a Holder with respect to Series A Notes tendered for exchange, the Holder is required to notify the Exchange Agent of his or her correct TIN by completing the form herein certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (i) such Holder is exempt, (ii) such Holder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of failure to report all interest or dividends or (iii) the Internal Revenue Service has notified such Holder that he or she is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE EXCHANGE AGENT Each Holder is required to give the Exchange Agent the social security number or employer identification number of the record Holder(s) of the Series A Notes. If Series A Notes are in more than one name or are not in the name of the actual Holder, consult the instructions on Internal Revenue Service Form W-9, which may be obtained from the Exchange Agent, for additional guidance on which number to report. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER If the tendering Holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, write "Applied For" in the space for the TIN on Substitute Form W-9, sign and date the form and the Certificate of Awaiting Taxpayer Identification Number and return them to the Exchange Agent. If such certificate is completed and the Exchange Agent is not provided with the TIN within 60 days, the Exchange Agent will withhold 31% of all payments made thereafter until a TIN is provided to the Exchange Agent. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH SERIES A NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. EX-99.2 10 NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY 8 1/2% SENIOR SUBORDINATED NOTES DUE 2008 (INCLUDING THOSE IN BOOK-ENTRY FORM) OF NASH FINCH COMPANY This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Nash Finch Company (the "Company") made pursuant to the Prospectus, dated , 1998 (the "Prospectus"), if certificates for the outstanding 8 1/2% Senior Subordinated Notes due 2008, Series A, of the Company (the "Series A Notes") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Exchange Agent prior to 5:00 p.m., New York time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by telegram, telex, facsimile transmission, mail or hand delivery to U.S. Bank Trust National Association (the "Exchange Agent") as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Series A Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized terms not defined herein are defined in the Prospectus. U.S. BANK TRUST NATIONAL ASSOCIATION, EXCHANGE AGENT ------------------------ BY MAIL BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER (registered or certified mail (612) 244-1537 recommended): U.S. Bank Trust U.S. Bank Trust National Association National Association 180 East 5th Street 180 East 5th Street Saint Paul, MN 55101 Saint Paul, MN 55101 Attention:Specialized Finance Confirm by Telephone Attention:Specialized Finance Fourth Floor or for Information Call: Fourth Floor
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Series A Notes set forth below, pursuant to the guaranteed delivery procedure described in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Principal Amount of Series A Notes Tendered:* $ -------------------------------- Certificate No(s). (if available): -------------------------------------------- Total Principal Amount Represented by Certificate(s): $ ------------------------- *Must be in denominations of principal amount of $1,000 and any integral multiple thereof. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. PLEASE SIGN HERE X ------------------------------------------ ------------------------------------------- X ------------------------------------------ ------------------------------------------- Signature(s) of Owner(s) Date or Authorized Signatory
Area Code and Telephone Number: ---------------------------------------------- Must be signed by the holder(s) of Series A Notes as their name(s) appear(s) on certificates for Series A Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. If Series A Notes will be delivered by book-entry transfer to The Depository Trust Company, provide account number. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capacity: - -------------------------------------------------------------------------------- Address(es): - -------------------------------------------------------------------------------- Account Number: - --------------------------------------------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program, hereby guarantees that the undersigned will deliver to the Exchange Agent the certificates representing the Series A Notes being tendered hereby or confirmation of book-entry transfer of such Series A Notes into the Exchange Agent's account at The Depository Trust Company, in proper form for transfer, together with any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date. Name of Firm - ------------------------------------------------------------------------------ Address - -------------------------------------------------------------------------------- Area Code and Telephone No. - ----------------------------------------------------------------------------- Authorized Signature - -------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Title - -------------------------------------------------------------------------------- Dated: - -------------------------------------------------------------------------------- NOTE: DO NOT SEND CERTIFICATES OF SERIES A NOTES WITH THIS FORM. CERTIFICATES OF SERIES A NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. EX-99.3 11 FORM W-9 EXHIBIT 99.3 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.
-------------------------------------------- -------------------------------------------- GIVE THE SOCIAL GIVE THE SOCIAL SECURITY OR SECURITY OR TAXPAYER TAXPAYER INDENTIFICATION INDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ----------------------------------------------------- ----------------------------------------------------- 1. An individual's The individual 7. Corporate account The corporation 2. account. The actual owner of Two or more the account or, if individuals (joint combined funds, the account) first individual on the account(1) 3. Custodian account of The minor(2) 8. Partnership account The partnership a minor (Uniform Gift held in the name of to Minors Act) the business 4. a. The usual The 9. Association, club or The organization revocable savings grantor-trustee(1) other tax exempt trust account organization (grantor is also trustee) b. So-called trust The actual owner(l) 10. A broker or The broker or account that is not a registered nominee nominee legal or valid trust under state law 5. Sole proprietorship The owner(3) 11. Account with the The public entity account 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 6. A valid trust, estate Legal entity or pension trust (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title)(4) - ----------------------------------------------------- -----------------------------------------------------
(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) Show the name of the owner. The name of the business or the "doing business as" name may also be entered. Either the social security number or the employer identification number may be used. (4) 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. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number ("TIN") or you don't know your number, obtain Form SS-5, Application for a 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 and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on all interest, dividends and broker transactions payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501 (a), or an individual retirement plan, or a custodial account under Section 403(b) (7). - 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 exempt charitable remainder trust, or a non-exempt trust described in section 4947 (a) (1) . - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. 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 organizations. - Payments made to a nominee. EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. COMPLETE THIS SUBSTITUTE FORM W-9 AS FOLLOWS: ENTER YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN, DATE AND RETURN THE FORM TO THE PAYER. Certain payments other than interest, dividends and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the sections 6041, 604lA(a), 6044, 6045, 6049, 6050A and 6050N and the regulations thereunder. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends, 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 and to help verify the accuracy of tax returns. Payers must be given the numbers whether or not recipients are required to file tax returns. 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 correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure which is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE STATEMENTS 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. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying certifications or affirmations, may subject you to criminal penalties including fines and/or imprisonment. (4) MISUSE OF TAXPAYER IDENTIFICATION NUMBERS. If the payer discloses or uses taxpayer identification numbers in violation of Federal law, the payer may be subject to civil and criminal penalties. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. -----END PRIVACY-ENHANCED MESSAGE-----